STBA

Overall Financial Results

• Net income reached $36.6 million, or $1.02 per diluted share, up 8.5% from Q1 2026 and 22.9% year-over-year. Return metrics were solid: ROE of 10.375%, and ROTCE of over 14%.
• Net interest margin expanded 7 basis points to 399 basis points from the previous quarter, supported by higher loan yields and an improved funding mix. Net interest income increased to $90.4 million, up from $88.4 million in Q1 and $86.6 million in Q2 2025.
• Positive year-to-date operating leverage: Revenue growth has meaningfully outpaced expense growth, and the efficiency ratio improved to 55.38% from 57% in the first half of 2025.
• Asset quality improved: Net charge-offs totaled just $1 million, and non-performing assets fell by almost $10 million to 0.5% of total loans plus OREO. The allowance for credit losses remained nearly unchanged at 1.16% of total loans, with a modest $1.1 million provision expense in the quarter.

Capital Management

• Over the past three quarters, the bank repurchased almost 3.2 million shares (8% of outstanding shares) for a total of $133 million. The board recently approved a new $100 million share repurchase authorization.
• Regulatory capital ratios remain strong with significant excess capital, providing flexibility to support organic growth, return capital to shareholders, and evaluate strategic opportunities.

Strategic Business Initiatives

• The bank is strategically expanding its C&I capabilities, and has increased the size of its commercial banking team by approximately 20% year-to-date, targeting 30% growth by the end of 2026. New hires are focused on expanding market presence and deepening customer relationships to drive long-term loan and deposit growth.
• S&T was named to the Forbes America's Best In-State Banks 2026 list, a recognition based on customer feedback across trust, service, and satisfaction metrics. The bank is celebrating its 125th year of operation.

• The bank maintains guidance of mid-single-digit annualized total loan growth for the remainder of 2026.
• Net interest margin is expected to remain stable around the current high 390 basis points level for the next several quarters, with tailwinds from maturing received fixed swaps and ongoing back-book repricing supporting stability amid industry competition.
• Non-interest income (fee income) is expected to run at approximately $14 million per quarter in the second half of 2026.
• Full-year 2026 non-interest expense is expected to increase approximately 3% year-over-year, implying a quarterly run rate of around $58 million for the remainder of the year.
• Based on current loan growth trajectory, the bank expects to cross the $10 billion asset threshold in the second half of 2026, with Durbin amendment impact starting in the second half of 2027. Management is confident it can offset the expected ~$6 million annualized incremental cost through existing operating leverage and operational levers.
• Share repurchase activity is expected to slow at current stock price levels, with the newly authorized $100 million program likely to be utilized over the next 12 months at a slower pace than prior repurchase activity.

S&T Bancorp is a commercial bank with three core loan segments: Commercial & Industrial (C&I), Commercial Real Estate (CRE), and Commercial Construction. The overall loan portfolio grew $99 million (5% annualized) in the second quarter of 2026, reaching a total balance of over $8 billion:

• C&I: Segment balances increased $79 million, contributing 79.8% of the quarter's net loan growth. Total C&I revolving commitments grew at 6% annualized, with revolving line utilization increasing from 41% to 44% quarter-over-quarter.
• Permanent Commercial Real Estate: Segment balances declined $46 million, driven by payoffs from non-bank lenders, resulting in a 46.5% headwind to total net loan growth.
• Commercial Construction: Segment balances increased $71 million, contributing 71.7% of the quarter's net loan growth. Total construction commitments increased $65 million, and the number of commitments rose nearly 19% quarter-over-quarter. Overall deposit performance: Customer deposits were stable quarter-over-quarter after strong first-quarter 2026 growth, with year-to-date deposits up 8% annualized. Broker deposits were reduced by $100 million in the quarter and $180 million year-to-date. DDA balances make up 28% of total deposits, an industry-leading core deposit mix.

• Increased competition for deposit pricing, particularly from smaller regional banks that are offering more aggressive rates on CDs and money market accounts, which could pressure future deposit costs.
• Persistent headwinds from payoffs of permanent commercial real estate loans by non-bank lenders, which is expected to continue through the end of 2026 and into 2027, constraining overall CRE portfolio growth.
• Heightened loan and deposit pricing competition across the industry, which could pressure net interest margins even as the bank expects current margin levels to remain stable.
• Crossing the $10 billion asset threshold will bring incremental annualized costs of approximately $6 million due to the Durbin amendment, requiring the bank to offset this impact through expense savings and additional revenue growth.

Q: Can you confirm your loan growth guidance for the remainder of 2026, clarify that deposits will fund this growth, and share your outlook for utilizing the new $100 million share repurchase authorization at current stock prices? / A: Management confirmed guidance of mid-single-digit annualized loan growth for the rest of 2026, and expects existing deposit growth momentum to fully fund this loan growth. With recent stock price increases, the incremental return benefit from additional buybacks has become more constrained, so the bank expects to step back repurchase activity somewhat at current levels and will use the new authorization gradually over the next year. Any unused capital will be directed toward organic growth initiatives and evaluating potential M&A opportunities.

Q: When will the current tailwind of declining CD costs level off, and when is the bank expected to cross the $10 billion asset threshold, and can it offset the associated incremental Durbin costs? / A: Management noted the CD repricing benefit will continue for a couple more months, with a small additional benefit in Q3 2026, after which deposit costs will level off with only modest potential upside. Based on current loan growth trajectory, the bank will cross the $10 billion threshold in the second half of 2026, with costs starting in the second half of 2027. Management is confident the $6 million annualized cost can be offset through existing operating leverage, expense saving initiatives and incremental fee income growth, without taking on undue additional risk.

Q: How competitive are pricing dynamics in your end markets, what is the yield on new loan pipelines, and how active are M&A discussions currently? / A: Management reported pipelines are modestly higher quarter-over-quarter, with solid activity across most segments, and pricing on new originations is holding up, with new loan yields averaging just over 6%. Deposit pricing competition has intensified from smaller peer banks, but core deposit mix remains strong. M&A conversations continue at a steady pace for strategic partnership opportunities, particularly for targets that add core deposit franchise and expand into attractive contiguous geographies, and management has passed on a number of assets that do not fit these strategic criteria.

Q: What geographies and business lines are driving C&I growth, and what is the bank's target for capital levels? / A: Most new C&I hires have been made in western Pennsylvania, with additional hires in northeast Ohio and eastern Pennsylvania, and the bank's asset-based lending vertical is seeing particularly strong pipeline growth. Capital planning starts with minimum regulatory requirements, adds a cushion for stress testing against extreme market events to set a floor, and the bank currently holds capital above this target range, giving it flexibility to deploy capital through buybacks, organic growth or M&A.