S&T BANCORP INC Q4 FY2024 earnings call

• 2024 Overview: S&T navigated a dynamic environment well, producing $3.41 per share in earnings, with record capital levels, excellent returns, and progress on asset quality and deposit franchise.
• Fourth Quarter Details: Net income $33M ($0.86 per share), net interest margin 3.77% (slight decline), loan growth ~3%, deposit growth >$75M, asset quality improved with ACL decline, NPAs low, criticized/classified loans down.
• Balance Sheet: Solid loan growth in commercial and consumer, Q4 was strongest loan production quarter in 3 years, pipeline doubled year-over-year, residential mortgage strategy refined, allowance for credit losses declined, net recovery in Q4.

In the fourth quarter, net income was $33 million, equating to $0.86 per share, up slightly from Q3. Return metrics were strong: ROTCE at 13.25%, ROA at 1.37%, and PPNR at 1.72%. Net interest income showed slight contraction, with the net interest margin at 3.77% (slightly down but still strong). Loan growth was just under 3% for the quarter, with 2.8% annualized loan growth in commercial and consumer loans. Customer deposit growth exceeded $75 million, a 4% annualized increase, marking the sixth consecutive quarter of meaningful deposit growth, with DDA balances at 29% of total balances. Asset quality improved: allowance for credit losses declined almost $3 million, NPAs were at 36 basis points of total loans, and criticized and classified loans decreased 16% for the quarter.

• Anticipate mid-single-digit loan growth in the first half of 2025 and high mid-single-digit for the full year 2025.
• Expect expenses to increase ~3% in 2025 compared to 2024, with quarterly run rates from $55-56M in the first half to ~$57M in the back half.
• Net interest margin expected to remain relatively stable even with rate cuts, and NII expected to pick up in Q2 2025 with low single-digit year-over-year growth.

• Difficulty in forecasting net charge-offs, need to ensure not giving back asset quality improvements while accelerating growth.
• Impact of additional rate cuts on net interest margin and deposit costs, needing to effectively manage deposit repricing.

Q: On the loan growth outlook and credit.

A: Dave and Chris discussed a bullish loan growth outlook due to pipeline, hiring, and customer demand; credit metrics improving, with criticized and classified loans down, but charge-offs hard to forecast.

Q: On M&A and teams.

A: Planning to recruit through 2025, adding customer-facing staff, with M&A conversations active and well-positioned for growth.

Q: On net interest margin and rate cuts.

A: Margin expected to stay stable with rate cuts, able to reprice deposits to match Fed cuts, with December cut and first quarter deposit cost cuts discussed.

Q: On NII growth in 2025.

A: NII expected to be relatively modest, flat in Q1, with a pickup in Q2 and low single-digit year-over-year growth.