| --- | |-------| | | | | Forward Looking Statements and Risk Factors This information contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting S&T and its future ...

Financial Data and Key Metrics Changes - The company reported a loss of $33.1 million, or $0.85 per share, primarily due to a significant check-kiting scheme by a single business customer [6] - Excluding the loss from the fraud, core EPS was $0.34 per share, with a return on assets of 0.57%, return on equity of 4.48%, and return on tangible common equity of 6.86% [7] - The efficiency ratio improved to 50.51%, indicating effective expense management [8] - Total reserves increased by 18.34% to $114.6 million, with a reserve to loan ratio of 1.64% excluding PPP [14] Business Line Data and Key Metrics Changes - Mortgage banking production year-to-date was $213 million, a 54% increase year-over-year, with 70% of production being refinancing [10] - Commercial and industrial (C&I) loans saw a growth of $359 million due to PPP loans, while excluding PPP, C&I balances declined by $189 million [17] - Construction loan balances increased by $62 million, showing resilience despite COVID-19 impacts [18] Market Data and Key Metrics Changes - Significant deposit growth of $810 million was reported, with over half in noninterest-bearing demand deposit accounts [8] - The company experienced a 24% decline in branch transactions year-over-year, while digital banking activities surged, with call center volumes up 41% and Zelle payments up 27% [11] Company Strategy and Development Direction - The company is focused on enhancing processes and monitoring to prevent future fraud incidents [6] - A new website was launched to improve digital client services, reflecting a commitment to digital transformation [12] - The company aims to maintain a low efficiency ratio while managing expenses amid margin pressures expected in the coming year [36] Management Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing impact of COVID-19 on operations and emphasized the importance of health and safety measures [11] - There is an expectation of continued weakness in service charges and swaps in the second half of the year, but strong mortgage activity is anticipated [29] - Management is closely monitoring credit risks, particularly in the hotel segment, and expects a longer recovery period for this sector [22] Other Important Information - The Board of Directors declared a dividend of $0.28, a 3% increase from the same period last year [15] - The company has implemented a robust monitoring process for its most severely impacted loan segments, particularly hotels [22] Q&A Session Summary Question: Are there initiatives to reduce the expense rate beyond the second half guide in 2021? - Management is reviewing branch operations and has exited 12 positions to manage expenses, but no specific branch closures are committed at this time [35] Question: How do you expect the percentage of modified loans to trend in the coming months? - Management anticipates a continued reduction in modified loans as modifications expire, with close monitoring of segments with concerns [37] Question: What is the average loan size within the hotel and retail CRE books? - The average hotel loan size is $3.1 million, with modified averages at $3.8 million [56] Question: What changes have been made internally due to the fraud incident? - The company has enhanced processes and oversight following a thorough investigation into the fraud incident [57]