S & T Bancorp (STBA) Q2 Earnings call transcript Jul 18, 2024

In a recent earnings call, S&T Bancorp showcased a robust performance for the second quarter of 2024, with net income of $34 million, translating to $0.89 per share, marking an improvement from the previous quarter. The financial institution highlighted a 15% return on tangible common equity (ROTCE) and a solid profitability ratio, underscoring its financial health and growth prospects.

Customer Deposits and Mix Shift

S&T Bancorp reported a significant growth in customer deposits, with over $150 million in Q2 and a 8.5% annualized growth rate. The focus on deposit growth allowed for a reduction in wholesale deposits and borrowings by $85 million, positively impacting the net interest margin. The company's strategy to shift deposit mix towards demand deposits (DDA) has resulted in strong performance and a reduction in wholesale deposits.

Credit Quality and Asset Management

The company's credit quality remains stable to improving, with a decline in criticized and classified assets by 12% quarter-over-quarter and 29% year-over-year. This reduction, totaling $107 million over the past 4 quarters, is a testament to the company's proactive approach towards managing risk and enhancing asset quality. The multifamily and office commercial real estate (CRE) portfolios also showed positive signs, with a net recovery of $400,000 in Q2 and a reduction in balances by $20 million in the office portfolio.

Loan Growth and Outlook

Despite a modest loan growth rate in line with previous guidance, the company has seen meaningful deposit growth. The loan pipelines are expected to grow in the low single digits in Q3, driven primarily by consumer and retail mortgage activities. The focus on improving asset quality, coupled with the anticipation of rate cuts, is expected to lead to increased loan growth in Q4.

Regulatory Compliance and M&A

S&T Bancorp is preparing for asset size growth through a focus on organic expansion. The company is strategically positioning itself for potential inorganic growth opportunities, particularly in the contiguous states of Maryland, Ohio, Virginia, and Pennsylvania, where it currently operates. The goal is to expand market presence while ensuring regulatory compliance and aligning with the company's growth strategy.

Investor Questions and Analyst Insights

The earnings call was marked by insightful questions from key shareholders and investors, providing valuable insights into their concerns and expectations. Analysts probed into topics such as net interest margin, deposit pipelines, and loan growth prospects, offering a comprehensive analysis of the company's financial health and future outlook.

Conclusion

S&T Bancorp's second quarter earnings call painted a picture of a financially robust and strategically focused organization, with a strong emphasis on customer deposits, credit quality, and asset management. The company's commitment to organic growth, coupled with a proactive approach to risk management and regulatory compliance, positions it well for future growth opportunities. The positive outlook for the company's loan pipelines, coupled with the anticipation of rate cuts, indicates a promising trajectory for S&T Bancorp in the coming quarters.