S&T Bancorp, Inc. Announces Third Quarter 2021 Net Income

INDIANA, Pa., Oct. 21, 2021 /PRNewswire/ -- S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Bank, with operations in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio and Upstate New York, announced net income of $27.6 million, or $0.70 per diluted share, for the third quarter of 2021 compared to net income of $28.4 million, or $0.72 per diluted share, for the second quarter of 2021, and net income of $16.7 million, or $0.43 per diluted share, for the third quarter of 2020.

"We are pleased to announce solid performance for this quarter," said Chris McComish, chief executive officer. "Both earnings and loan growth are a direct reflection of our talented team and the impact we are having in our markets."

Third Quarter of 2021 Highlights:

• Return on average assets (ROA) of 1.15%, return on average equity (ROE) of 9.13%, return on average tangible equity (ROTE) (non-GAAP) of 13.53% and pre-tax pre-provision income to average assets (PTPP) (non-GAAP) of 1.56%.
• Total portfolio loans excluding PPP increased $117.8 million, or 7.0% annualized, compared to June 30, 2021.
• Solid C&I growth excluding PPP loans of $79.5 million, or 21.9% annualized, compared to June 30, 2021 driven by improved utilization and strong new customer activity.
• The allowance for credit losses to total portfolio loans was 1.55% at September 30, 2021 compared to 1.56% at June 30, 2021.
• S&T's Board of Directors approved a $0.01 per share, or 3.6%, increase in the quarterly cash dividend to $0.29 per share compared to $0.28 per share dividend declared in the same period in the prior year.

"It has been an exciting and productive first 60 days for me as the new CEO of S&T," said Chris McComish, "I am impressed with our employee and marketplace engagement, both of which represent the foundation for future growth. My confidence is further reflected in our Board of Directors' recent approval of a 3.6% increase in our quarterly dividend."

Net Interest Income

Net interest income increased $0.4 million to $68.7 million for the third quarter of 2021 compared to $68.3 million for the second quarter of 2021. Net interest income related to PPP loans was relatively unchanged at $4.2 million for the third quarter of 2021 compared to $4.1 million in the second quarter of 2021. Average PPP loans decreased by $192.7 million compared to the second quarter of 2021. Average loans excluding PPP increased $95.3 million compared to the prior quarter. Net interest margin on a fully taxable equivalent basis (NIM) (FTE) (non-GAAP) decreased 2 basis points to 3.14% compared to 3.16% in the prior quarter. The decline in NIM (FTE) (non-GAAP) was due to lower loan yields (7 basis points) and a higher average cash balance (4 basis points). Partially offsetting these declines was a higher relative PPP contribution (8 basis points) and lower costing liabilities (1 basis point).

Asset Quality

The provision for credit losses increased $0.8 million to $3.4 million for the third quarter of 2021 compared to $2.6 million in the second quarter of 2021. Net loan charge-offs were $3.6 million for the third quarter of 2021 compared to $7.5 million in the second quarter of 2021. During the third quarter of 2021, two relationships moved from nonperforming loans to OREO totaling $12.2 million. Total nonperforming assets increased $10.9 million to $124.7 million, or 1.78% of total loans plus OREO, at September 30, 2021 compared to $113.8 million, or 1.62% of total loans plus other real estate owned (OREO) at June 30, 2021. The increase in nonperforming assets related to the addition of a $21.7 million commercial and industrial (C&I) loan which required a $9.3 million specific reserve at September 30, 2021. Offsetting this increase in nonperforming assets was $11.8 million of hotel loans that returned to performing status during the third quarter of 2021. Specific reserves on hotels decreased $6.0 million due to updated valuations. The allowance for credit losses was 1.55% of total portfolio loans as of September 30, 2021 compared to 1.56% at June 30, 2021.

Noninterest Income and Expense

Noninterest income increased $0.4 million to $15.8 million in the third quarter of 2021 compared to $15.4 million in the second quarter of 2021. Mortgage banking income increased $0.4 million mainly due to an improved mortgage servicing rights valuation. Noninterest expense increased $1.4 million to $47.2 million for the third quarter of 2021 compared to $45.8 million in the second quarter of 2021. Salaries and employee benefits increased $0.7 million due to higher incentives and new hires.

Financial Condition

Total assets were $9.4 billion at September 30, 2021 compared to $9.5 billion at June 30, 2021. Cash remains elevated at $934.4 million at September 30, 2021 compared to $985.3 million at June 30, 2021. Loan demand improved in the third quarter with portfolio loan growth excluding PPP loans of $117.8 million, or 7.0% annualized, compared to June 30, 2021. Loan growth was in almost all categories with C&I growth of $79.5 million, or 21.9% annualized, residential real estate growth of $28.6 million, or 13.2% annualized, construction growth of $21.2 million, or 17.6% annualized, and installment growth of $9.4 million, or 42.3% annualized. PPP loans were $181.0 million at September 30, 2021 with $155.0 million of forgiveness during the third quarter of 2021. Deposits decreased $70.1 million mainly in certificates of deposits. S&T continues to maintain a strong capital position with all capital ratios above the well-capitalized thresholds of federal bank regulatory agencies.

Dividend

S&T's Board of Directors approved a $0.01 per share, or 3.6%, increase in the quarterly cash dividend to $0.29 per share on October 18, 2021. This dividend compares to $0.28 per share dividend declared in the same period in the prior year. The dividend is payable November 18, 2021 to shareholders of record on November 4, 2021.

Conference Call

S&T will host its third quarter 2021 earnings conference call live over the Internet at 1:00 p.m. ET on Thursday, October 21, 2021. To access the webcast, go to S&T's webpage at www.stbancorp.com and click on "Events & Presentations." Select "3rd Quarter 2021 Earnings Conference Call" and follow the instructions. After the live presentation, the webcast will be archived on this website for at least 90 days. A replay of the call will also be available until October 28, 2021, by dialing 1.877.481.4010; the Conference ID is 42885.

About S&T Bancorp, Inc. and S&T Bank

S&T Bancorp, Inc. is a $9.4 billion bank holding company that is headquartered in Indiana, Pennsylvania and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank was established in 1902 and operates in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio, and Upstate New York. For more information visit stbancorp.com or stbank.com. Follow us on Facebook, Instagram, and LinkedIn.

This information contains or incorporates statements that we believe are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting S&T and its future business and operations. Forward-looking statements are typically identified by words or phrases such as "will likely result", "expect", "anticipate", "estimate", "forecast", "project", "intend", " believe", "assume", "strategy", "trend", "plan", "outlook", "outcome", "continue", "remain", "potential", "opportunity", "comfortable", "current", "position", "maintain", "sustain", "seek", "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses; cyber-security concerns; rapid technological developments and changes; operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our reputational risks; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; the transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those requirements; unanticipated changes in our liquidity position; changes in accounting policies, practices, or guidance, for example, our adoption of CECL; legislation affecting the financial services industry as a whole, and S&T, in particular; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions, including DNB, cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party provider; our ability to attract and retain talented executives and employees; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; the duration and severity of the coronavirus ("COVID-19") pandemic, both in our principal area of operations and nationally, including the ultimate impact of the pandemic on the economy generally and on our operations; our participation in the Paycheck Protection Program; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described in our Annual Report on Form 10-K for the year ended December 31, 2020, including Part I, Item 1A-"Risk Factors" and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.