Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- S&T Bancorp Inc (STBA, Financial) reported strong customer deposit growth of over $100 million in the quarter, producing more than 5% growth annualized.
- The company demonstrated excellent return metrics with a 13.5% ROTE and 1.35% ROA.
- Asset quality continues to improve with a decline in non-performing assets and a reduction in criticized and classified loans.
- The company has built a significant amount of capital, providing optimism for future growth and stability.
- S&T Bancorp Inc (STBA) has a strong pipeline for loan growth in Q4, with an increase of over 50% quarter over quarter, particularly in commercial and consumer segments.
Negative Points
- Net income of $33 million, equating to $0.85 per share, was down slightly from the previous quarter.
- Net interest margin declined slightly to 3.82%, impacted by securities losses and a changing rate environment.
- Loan balances reduced by nearly $25 million, primarily due to reduced commercial loan balances and increased payoffs.
- Non-interest income declined by $1.4 million quarter-over-quarter, partly due to securities repositioning losses.
- The company anticipates further net interest margin compression of 10 to 12 basis points due to expected rate cuts.
Q & A Highlights
Q: With non-performing assets (NPAs) down and net charge-offs slowing, what are your updated thoughts on a normalized cadence for net charge-offs or provisions going forward?
A: David Antolik, President: The current quarter's charge-off levels are closer to what we consider normalized. As we return to loan growth, we expect to maintain provisions to support that growth. There's still room for improvement in criticized and classified assets, which may affect the allowance for credit losses (ACL) levels.
Q: Regarding interest margin guidance, if rate cuts don't occur as expected, how would that impact your margin stabilization forecast?
A: Mark Kochvar, CFO: If the Fed moves slower than anticipated, it might take longer to reach stabilization, potentially resulting in a slightly higher margin than the low 370s we currently project with deeper cuts.
Q: What gives you confidence that elevated payoffs and paydowns will slow, and how do you view the risk of refinancing as rates decline?
A: David Antolik, President: We have rate protection in many loan products, allowing us to proactively manage refinancing risks. Improved customer activity and a stronger pipeline, particularly in commercial and consumer segments, support our confidence in future growth.
Q: How are you managing liquidity levels, and what are your thoughts on deposit growth relative to loan growth in 2025?
A: Mark Kochvar, CFO: We allowed cash levels to build to pay off brokered CDs, which happened late in the quarter. We expect deposit growth to mirror or potentially exceed loan growth, given our focus on deposit franchise and the current loan-to-deposit ratio.
Q: Are you contemplating additional securities restructurings, and what was the yield pickup from previous restructurings?
A: Mark Kochvar, CFO: We are not anticipating significant additional restructurings. Previous restructurings yielded a pickup of about 370 basis points and 270 basis points, respectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
