S&T Bancorp, Inc. Q2 FY2025 earnings call

Key Points

• Strategically repositioned balance sheet to reduce asset sensitivity for consistent net interest income growth.
• Focus on asset quality laid foundation for growth.
• Continued investment in deposit franchise resulted in 8 straight quarters of deposit growth with noninterest-bearing deposits at 28% of total deposits.
• Loan growth of 5% drove total assets to over $9.8 billion.
• Commercial real estate balances increased by $58 million, mortgage and home equity combined for $26 million in net growth.
• Allowance for credit losses declined to 1.24% of total loans, with charges modest and in line with expectations.
• Net interest margin improvement from earning asset repricing in loans and securities, stable cost of funds.
• Noninterest income rebounded from seasonal lows.
• Expenses increased due to salary increases, incentives, and medical costs.

In Q2 2025, net interest income improved by $3.3 million (3.9% QoQ). The net interest margin expanded by 7 basis points to 3.88%. Noninterest income increased by $3.1 million. Expenses rose by $3 million. Loans grew by 5%, while deposits grew by $28 million, with noninterest-bearing DDA balances representing 28% of total deposits and contributing almost 2/3 of deposit growth in the quarter.

• Net interest margin expected to stay fairly stable if Fed cuts rates twice this year as expected, with limited upside in a higher for longer scenario.
• Expect loan growth in the high mid-single-digit range for the second half of 2025 by maintaining CRE, mortgage, and home equity activities and executing on C&I opportunities.
• Expect quarterly noninterest income to remain at approximately $13 million to $14 million.

• Potential impact of tariffs and changing economic landscape, but to date, no impact on growth, including pull-through rates from pipelines and customer concerns have quieted.

Q: Justin Crowley asked about margin inputs and loan growth funding costs.

A: Mark Kochvar responded on potential margin pressure with loan growth and mentioned upside in higher for longer.

Q: Daniel Tamayo asked about credit and $10 billion crossing.

A: Christopher J. McComish, David G. Antolik, and Mark Kochvar discussed credit reserves stabilizing and Durbin hit around $6-7 million.

Q: Kelly Motta asked about loan growth and M&A.

A: David G. Antolik and Christopher J. McComish talked about loan growth drivers and M&A focus on $1-5 billion size.

Q: Sharanjit Cheema asked about deposit growth and competitive landscape.

A: David G. Antolik discussed deposit pipeline and competitive balance.

Q: Matthew Breese asked about NIM, securities, excess capital.

A: Mark Kochvar and David G. Antolik responded on NIM expectations, securities yields, and excess capital for M&A.

Q: David Bishop asked about loan originations.

A: David G. Antolik discussed loan production and payoff trends.