S&T Bancorp, Inc. Q4 FY2025 earnings call

2025 Overview

• Produced strong returns, built record capital, had loan growth over 4%, customer deposit growth just under 3%, controlled expenses, and had good asset quality with 18 basis points of net charge-offs and ACL declining 16 basis points year-over-year.

Q4 Specifics

• Net income $34 million, 89¢ per share, down slightly from Q3. ROA 1.37%, NIM 3.99% (up 6bps QoQ), PPNR 1.95% (up 6bps QoQ).
• Loan growth led by commercial banking (C&I and CRE), with C&I growth from revolving balances and new customer acquisition, CRE growth from construction funding. Unused commercial construction commitments increased $78M QoQ.

Asset Quality

• Allowance for credit losses reduced from 1.23% to 1.15% QoQ, due to specific reserves reduction and criticized/classified loans down $30M (13%) in Q4. Third consecutive year of reducing criticized/classified loans, reducing total CNC loans by 50% over three years. Resolved $29M in loans during Q4, charged $11M, NPLs increased but remained manageable.

Net Interest Income

• Q4 net interest income up $1.8M, margin expansion due to 11 basis points decrease in cost of funds offsetting 3 basis points decrease in earning asset yields.

Noninterest Income

• Q4 noninterest income up $500k, small improvements in major customer fee categories, other income timing-related (letter of credit activity). Fees expected ~$13-$14M quarterly.

Expenses

• Q4 expenses up $800k, largest variance in salaries/benefits (medical costs higher, salaries due to hiring, marketing impacted by promotion timing). Expected 2026 noninterest expense ~3% year-over-year, quarterly run rate ~$58M.

Capital

• TCE ratio down 29bps Q4 due to share repurchases (948k shares repurchased at avg $33.82, $36.2M). Regulatory ratios strong, $100M share repurchase authorization approved.

For 2025, S&T Bancorp produced $135 million in net income ($3.49 a share) with a 3.9% net interest margin. Loan growth was over 4%, customer deposit growth was just under 3%, expenses were controlled, and asset quality was well managed with 18 basis points of net charge-offs and ACL declining 16 basis points year-over-year. For Q4, net income was $34 million (89¢ per share), ROA was 1.37%, NIM rose to 3.99% (up 6 basis points QoQ), PPNR was 1.95% (up 6 basis points QoQ). Loan growth for the quarter was just under $100 million (4.5%), led by commercial banking (C&I and CRE). Customer deposit growth was just under $60 million (2.9%), with DDAs representing 27% of total balances.

• Loan growth: Mid-single-digit growth achievable in 2026, primarily from C&I and CRE.
• NIM: Expected to be mid to high 3.9% range in 2026, stable.
• Asset quality: Anticipate 2026 results similar to 2025, focus on reducing NPLs.
• Expenses: Expect 2026 noninterest expense ~3% year-over-year, quarterly run rate ~$58M.
• Share repurchase: $100M authorization approved for potential share repurchases if market warrants.

• Competitive pressures on deposit costs, with competitors reacting slower than expected to rate cuts.
• Economic factors affecting loan demand and asset quality, including potential impact on NPLs.
• Risks associated with AI implementation, including data protection and risk management challenges.

Q: Justin Crowley on loan growth and factors holding back growth A: David Antolik and Chris McComish discuss it's not demand side, but ensuring asset quality of new customers meets criteria, adding staff, and considering economy; focus on growing teams and bankers Q: Justin Crowley on margin and deposit costs trend A: David Antolik and Chris McComish discuss Fed rate cuts affecting deposit costs, competitors reacting slower, but confident in holding NIM levels Q: Daniel Tamayo on loan deposit ratio, cost side, M&A A: David Antolik and Chris McComish discuss funding loan growth through internal deposit growth, implied deposit betas in margin guide, and M&A still in active dialogue across geographies Q: Charlie on asset quality charge-offs and expenses efficiency ratio A: David Antolik discusses charge-off resolution related to previously identified credits, and expects efficiency ratio mid-50s with 3% year-over-year expense growth Q: Matthew Breese on loan roll-on yields, CD costs, AI impact A: David Antolik discusses roll-on yields and received swap book impact, CD cost expectations, and Chris McComish talks about AI use in BSA, AML, compliance, and potential savings though early days Q: David Bishop on loan origination vs payoffs, banker assets A: David Antolik discusses robust Q4 origination, elevated payoffs in construction cycle, and hiring bankers across C&I, CRE, ABL groups to enhance growth Q: Daniel Karthaus on competitive deposit factors A: Chris McComish discusses competitive deposit market behavior early in Q4, rationality in second half, and responsive exception pricing process for deposits