S&T Bancorp(STBA) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Total assets slightly decreased to $9.43 billion, net income for Q1 2022 declined to $29.1 million, and shareholders' equity fell due to increased accumulated other comprehensive loss Consolidated Balance Sheets Total assets decreased by $56.2 million to $9.43 billion, driven by reduced cash and partially offset by increased securities, while total liabilities and shareholders' equity also declined Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $9,432,281 | $9,488,529 | | Cash and due from banks | $823,757 | $922,215 | | Securities, at fair value | $1,028,218 | $910,793 | | Portfolio loans, net | $6,863,996 | $6,901,414 | | Total Liabilities | $8,247,331 | $8,282,075 | | Total Deposits | $7,960,458 | $7,996,524 | | Total Shareholders' Equity | $1,184,950 | $1,206,454 | | Accumulated other comprehensive loss | ($47,043) | ($7,090) | Condensed Consolidated Statements of Comprehensive Income (Loss) Net income for Q1 2022 decreased to $29.1 million from $31.9 million year-over-year, primarily due to lower net interest and noninterest income, partially offset by a negative provision for credit losses Q1 Performance Summary (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Interest Income | $67,733 | $70,659 | | Provision for credit losses | ($512) | $3,137 | | Total Noninterest Income | $15,226 | $17,236 | | Total Noninterest Expense | $47,414 | $45,580 | | Net Income | $29,143 | $31,902 | | Earnings per share—diluted | $0.74 | $0.81 | | Comprehensive (Loss) Income | ($10,810) | $23,992 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $1.206 billion to $1.185 billion, primarily due to a $39.95 million other comprehensive loss and cash dividends, outweighing net income - Total shareholders' equity decreased by $21.5 million during Q1 2022[12] - The decrease was driven by an other comprehensive loss of $39.95 million and cash dividends of $11.38 million, which offset the $29.14 million in net income[12] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $86.6 million, while investing and financing activities used $122.9 million and $62.1 million respectively, resulting in a $98.5 million net decrease in cash Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $86,596 | $90,000 | | Net Cash Used in Investing Activities | ($122,940) | ($19,507) | | Net Cash (Used in) Provided by Financing Activities | ($62,114) | $371,270 | | Net (decrease) increase in cash and cash equivalents | ($98,458) | $441,763 | Notes to Consolidated Financial Statements Notes detail the basis of presentation, fair value measurements, securities portfolio changes, stable loan portfolio with decreased PPP loans and nonperforming assets, a slight increase in ACL to $99.9 million, and new interest rate swaps - In Q1 2022, the company entered into four interest rate swaps designated as cash flow hedges to manage variability in cash flows from variable-rate assets[19][83] - The Allowance for Credit Losses (ACL) on loans stood at $99.9 million at March 31, 2022, up from $98.6 million at year-end 2021[8][77] - Nonperforming assets decreased to $59.6 million at March 31, 2022, from $79.6 million at December 31, 2021, primarily due to a reduction in nonaccrual loans and OREO[57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a decrease in Q1 2022 net income to $29.1 million due to lower net interest and noninterest income, partially offset by a negative provision for credit losses, while assets slightly decreased, and capital ratios remained strong Overview S&T Bancorp, a $9.4 billion bank holding company, focuses on organic loan growth, rigorous risk management, strategic infrastructure investments, and talent development as its 2022 priorities - The company's priorities for 2022 include high-impact growth initiatives, rigorous credit and enterprise risk management, strategic infrastructure investments (including digital), and talent development[103] - Organic loan growth is a top priority, pursued through a collaborative model and potential market expansion, with acquisitions also being evaluated[103] Results of Operations Q1 2022 results show a $2.9 million decline in net interest income due to reduced PPP revenue, a negative $0.5 million provision for credit losses, a $2.0 million drop in noninterest income, and a $1.8 million increase in noninterest expenses Q1 2022 vs Q1 2021 Performance Changes (in millions) | Metric | Change | Key Driver | | :--- | :--- | :--- | | Net Interest Income | -$2.9 | Reduced PPP revenue (-$4.1M) | | Provision for Credit Losses | -$3.6 | $2.5M C&I recovery & improved economy | | Noninterest Income | -$2.0 | Lower mortgage banking income (-$3.3M) | | Noninterest Expense | +$1.8 | Higher professional services & salaries | - The net interest margin (NIM) on an FTE basis (non-GAAP) decreased by 31 basis points year-over-year, with increased cash balances and reduced PPP revenue being the primary negative factors[105] Financial Condition Total assets slightly decreased to $9.4 billion, reflecting a shift from cash to securities, while portfolio loans declined but non-PPP loans grew, deposits remained stable, and shareholders' equity decreased due to unrealized losses - Total assets decreased by $56.2 million to $9.4 billion, with a strategic shift from cash to securities[131] - Excluding PPP loans, the portfolio loan balance increased by $10.3 million from December 31, 2021[131] - The securities portfolio shifted from a $9.4 million net unrealized gain at year-end 2021 to a $38.8 million net unrealized loss at March 31, 2022, due to rising interest rates[132][137] Allowance for Credit Losses (ACL) The ACL slightly increased to $99.9 million, driven by specific and qualitative reserves, while net loan recoveries of $2.0 million were recorded, and asset quality metrics improved with decreased substandard loans Key ACL Ratios | Ratio | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | ACL as a % of total portfolio loans | 1.43% | 1.41% | | ACL to nonperforming loans | 190% | 149% | - Net loan recoveries were $2.0 million for Q1 2022, primarily due to a $2.5 million recovery on a C&I relationship[149] - Substandard loans decreased by $25.4 million to $209.8 million, and special mention loans decreased by $24.5 million to $167.8 million, largely due to upgrades in the hotel portfolio[150] Liquidity and Capital Resources The company maintains strong liquidity with $1.3 billion in highly liquid assets and $2.6 billion in FHLB borrowing capacity, while all capital ratios remain well above regulatory thresholds S&T Bancorp, Inc. Capital Ratios | Ratio | March 31, 2022 | Well-Capitalized Threshold | | :--- | :--- | :--- | | Common equity tier 1 | 12.26% | 6.50% | | Tier 1 capital | 12.67% | 8.00% | | Total capital | 14.18% | 10.00% | - The company had $1.3 billion in highly liquid assets and $2.6 billion in remaining FHLB borrowing availability at quarter-end[162] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with an asset-sensitive balance sheet indicating net interest income is projected to increase in a rising rate environment and decrease in a falling rate environment - The company's balance sheet is asset-sensitive, meaning net interest income is expected to rise with increasing interest rates and fall with decreasing rates[171] Net Interest Income Sensitivity Analysis (1-12 Months) | Change in Interest Rate (bps) | % Change in Pretax Net Interest Income | | :--- | :--- | | +400 | 37.7% | | +200 | 18.7% | | +100 | 9.1% | | -100 | (6.5)% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2022[175] - No material changes were made to internal control over financial reporting during the first quarter of 2022[176] PART II. OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None[178] Risk Factors No material changes to risk factors were reported, except for a new risk factor related to the Russia-Ukraine conflict, highlighting potential adverse effects from sanctions, market volatility, and cyberattacks - A new risk factor was added related to Russia's invasion of Ukraine, noting potential disruptions from sanctions, market volatility, inflation, and cyberattacks that could adversely affect business operations and financial results[179] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares in Q1 2022, but extended its $50 million share repurchase plan through March 31, 2023, with $37.4 million remaining capacity - No shares were repurchased during the first quarter of 2022[180] - The company's $50 million share repurchase plan was extended to March 31, 2023, with $37.4 million in capacity remaining[180] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[181] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[181] Other Information The company reported no other information - None[181] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files