S&T Bancorp(US:STBA)2020-08-01 23:25Financial 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]