UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
☒
☐
For the transition period from to
Commission file number 0-12508
S&T BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
800 Philadelphia Street
Indiana
PA
(Address of principal executive offices)
25-1434426
(IRS Employer Identification No.)
15701
(zip code)
Registrant’s telephone number, including area code (800) 325-2265
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $2.50 per share
STBA
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
(Title of class)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☒ No ☐
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer
☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the
registrant's most recently completed second fiscal quarter. The aggregate estimated fair value of the voting and non-voting common
equity held by non-affiliates of the registrant as of June 30, 2023:
Common Stock, $2.50 par value – $1,025,756,372
The number of shares outstanding of each of the registrant's classes of common stock as of February 23, 2024:
Common Stock, $2.50 par value –38,233,365
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement of S&T Bancorp, Inc., to be filed pursuant to Regulation 14A for the 2024 annual meeting of
shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Part I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Part II.
Item 5.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
Item 6.
Reserved
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Part IV
Item 15.
Exhibits, Financial Statement Schedules
Signatures
1
2
12
21
21
23
23
23
24
25
25
48
50
106
106
106
106
107
107
107
107
107
108
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Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
PART I
Item 1. BUSINESS
General
S&T Bancorp, Inc. was incorporated on March 17, 1983 under the laws of the Commonwealth of Pennsylvania as a bank
holding company and is registered with the Board of Governors of the Federal Reserve System, or the Federal Reserve Board,
under the Bank Holding Company Act of 1956, as amended, or the BHCA, as a bank holding company and a financial holding
company. S&T Bancorp, Inc. has four active direct wholly-owned subsidiaries including S&T Bank, 9th Street Holdings, Inc.,
STBA Capital Trust I and DNB Capital Trust II, and owns a 50 percent interest in Commonwealth Trust Credit Life Insurance
Company, or CTCLIC. When used in this Report, “S&T,” “we,” “us” or “our” may refer to S&T Bancorp, Inc. individually,
S&T Bancorp, Inc. and its consolidated subsidiaries or certain of S&T Bancorp, Inc.’s subsidiaries or affiliates, depending on
the context. As of December 31, 2023, we had approximately $9.6 billion in assets, $7.7 billion in total loans, $7.5 billion in
deposits and $1.3 billion in shareholders’ equity.
S&T Bank is a full-service bank that operates in Pennsylvania and Ohio. S&T Bank deposits are insured by the Federal
Deposit Insurance Corporation, or FDIC, to the maximum extent provided by law. S&T Bank has four active wholly-owned
operating subsidiaries including S&T Insurance Group, LLC, S&T Bancholdings, Inc., Stewart Capital Advisors, LLC and DN
Acquisition Company, Inc.
Through S&T Bank and our non-bank subsidiaries, we offer consumer, commercial and small business banking services,
which include accepting time and demand deposits and originating commercial and consumer loans, brokerage services and
trust services including serving as executor and trustee under wills and deeds and as guardian and custodian of employee
benefits. We also manage private investment accounts for individuals and institutions through our registered investment
advisor. Total Wealth Management assets under administration, which are not accounted for as part of our assets, were $2.2
billion at December 31, 2023.
The main office of both S&T Bancorp, Inc. and S&T Bank is located at 800 Philadelphia Street, Indiana, Pennsylvania, and
our phone number is (800) 325-2265.
Human Capital Management
Our commitment to every customer starts with a talented team. To attract and retain our talented team, we strive to make
S&T an inclusive, safe and healthy workplace that provides our employees with opportunities to grow and develop. As of
December 31, 2023, we had approximately 1,244 full time equivalent employees.
Our Team and Culture
Our purpose is building a better future together through people-forward banking. We believe that all banking should be
personal. We cultivate relationships rooted in trust, strengthened by going above and beyond and renewed with every
interaction. We move banking forward, building better lives together by always putting people first.
Our team strives to embody values to encourage a culture that has enabled us to be named a top workplace. The following
are our five core values that support our Purpose:
Make People our Purpose
Humility, empathy and a sincere desire to uplift each other and our community guide our actions every day. We are people
in service of people, committed to constantly improving our communication and connection and delivering the right solutions.
Do the Right Thing
We are built on trust and following through on our promises. We hold ourselves accountable by delivering results,
continuously learning and striving for better every day.
Go Above and Beyond
We go as far as we possibly can to help advance the cause of our colleagues, customers and communities. In every case, we
seek the right solutions based on a holistic understanding of the opportunities ahead of us.
Value Every Voice
We stand for inclusivity, accessibility and opportunity. We listen for forward-looking ideas to better ourselves and improve our
experience. And we always welcome an honest and open dialogue with our colleagues, customers and the community at large.
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S&T BANCORP, INC. AND SUBSIDIARIES
Win as One Team
We function as one connected team working together to deliver a seamless experience. We communicate, collaborate and
care enough to go the extra mile for the colleagues we work alongside, the customers we serve and the communities where we
live.
Diversity and Inclusion
S&T fosters a diverse work culture where employees work together to better our company, services and community.
We are committed to promoting a diverse workforce and developing all people through:
•
•
•
•
Equal Opportunity Employment
Educating our employees and board of directors
Fostering a culture to address employees’ and customers’ needs
Partnering with diverse vendors
The S&T mindset is to encourage, develop and inspire all employees to achieve their best, motivated by their own personal
development. Our commitment is to a diverse, equitable and inclusive workplace where everyone utilizes their knowledge,
skills, abilities and unique interests to help each other find success and drive positive results. Our Compensation and Benefits
Committee of the Board of Directors oversees our diversity and inclusion strategy, and at least annually, measures the success
of diversity and inclusion initiatives by reviewing S&T’s strategies and statistics from S&T’s Human Capital Management
System.
Diversity, equity and inclusion, or DEI, is a commitment that we are focused on through various avenues to create
awareness, provide education, support our colleagues and communities, develop and improve products and services, partner
with diverse vendors and drive results tied to our overall organizational strategy. As part of our DEI strategy, we launched our
DEI Advisory Council during 2022. The DEI Advisory Council is co-chaired by our Chief Executive Officer and Chief Human
Resources Officer and is made up of colleagues from departments across our organization. We conduct an ongoing S&T
Commemorates webinar series that is designed to explore a wide scope of DEI topics.
Talent Development and Training
Our training plan strives to provide all departments with access to comprehensive training to enhance all job positions. Our
Corporate Training Department maintains oversight of all training to ensure that it is implemented and monitored properly and
encourages career development for our employees. Our training program offers a blended learning approach comprised of
classroom and online course delivery. We have many training sessions that are a virtual format through webinars and learning
management system delivery for regulatory, compliance, skill-based, technology, leadership and career development. Certain
trainings are conducted live based on the needs of the program. In 2023, our employees logged approximately 78,532 training
hours, on average 63 hours per employee, which is an increase of approximately 7 percent compared to 2022.
Safety, Health and Wellness
The safety, health and well-being of our employees is a top priority. We offer our employees and their families access to a
variety of flexible and convenient health and welfare programs that provide resources to help them maintain and/or improve
their physical and mental health. We also have a financial wellness program that assists our employees and their families with
budgeting and various personal financial content consisting of an online personal financial program and internally produced
webinars. We believe in the education and offering of programs and initiatives that make lasting positive impacts in the lives of
our employees.
Access to United States Securities and Exchange Commission Filings
All of our reports filed electronically with the United States Securities and Exchange Commission, or the SEC, including
this Annual Report on Form 10-K for the fiscal year ended December 31, 2023, our prior annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and our annual proxy statements, as well as any amendments to
those reports, are accessible at no cost on our website at www.stbancorp.com under Financials, SEC Filings. These filings are
also accessible on the SEC’s website at www.sec.gov. The charters of the Audit Committee, the Compensation and Benefits
Committee, the Credit Risk Committee, the Executive Committee, the Nominating and Corporate Governance Committee and
the Risk Committee as well as the Complaints Regarding Accounting, Internal Accounting Controls or Auditing Matters
("Whistleblower Policy"), the Code of Conduct for the CEO and CFO, the General Code of Conduct, the Shareholder
Communications Policy, and the Corporate Governance Guidelines are also available at www.stbancorp.com under
Governance.
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S&T BANCORP, INC. AND SUBSIDIARIES
Supervision and Regulation
General
S&T is extensively regulated under federal and state law. Regulation of bank holding companies and banks is intended
primarily for the protection of consumers, depositors, borrowers, the Federal Deposit Insurance Fund, or DIF, and the banking
system as a whole, and not for the protection of shareholders or creditors. The following describes certain aspects of that
regulation and does not purport to be a complete description of all regulations that affect S&T, or all aspects of any regulation
discussed here. To the extent statutory or regulatory provisions are described, the description is qualified in its entirety by
reference to the particular statutory or regulatory provisions. The discussion of the regulations applicable to S&T provided
below is based on our status as an institution with less than $10 billion in assets. If S&T’s assets cross the $10 billion threshold,
we will be subject to different and additional regulations than those described below.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, enacted in July 2010, has had and
will continue to have a broad impact on the financial services industry, including significant regulatory and compliance changes
addressing, among other things: (i) enhanced resolution authority of troubled and failing banks and their holding companies; (ii)
increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid
to the FDIC for federal deposit insurance; (v) enhanced corporate governance and executive compensation requirements and
disclosures; and (vi) numerous other provisions designed to improve supervision and oversight of, and strengthen safety and
soundness for, the financial services sector. Additionally, the Dodd-Frank Act established a new framework for systemic risk
oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the
Financial Stability Oversight Council, the Federal Reserve Board, the Office of the Comptroller of the Currency and the FDIC.
While many requirements called for in the Dodd-Frank Act have been implemented, these regulations are subject to continuing
interpretation and potential amendment. Given the continued uncertainty associated with the ongoing implementation of the
requirements of the Dodd-Frank Act by the various regulatory agencies, including the manner in which the remaining
provisions will be implemented and the interpretation of and potential amendments to existing regulations, the full extent of the
impact of such requirements on financial institutions’ operations remains unclear, but management expects will continue to
affect us in some way. The continuing changes resulting from the Dodd-Frank Act may impact the profitability of our business
activities, require changes to certain of our business practices, increase our operating and compliance costs, or otherwise
adversely affect our business. These changes may also require us to invest significant management attention and resources to
evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.
In addition, proposals to change the laws and regulations governing the banking industry are frequently raised in Congress,
in state legislatures and before the various bank regulatory agencies that may impact S&T. Such initiatives to change the laws
and regulations may include proposals to expand or contract the powers of bank holding companies and depository institutions
or proposals to substantially change the financial institution regulatory system. Any such legislation could change bank statutes
and our operating environment in substantial and unpredictable ways. If enacted, such legislation could affect how S&T and
S&T Bank operate and could significantly increase costs, impede the efficiency of internal business processes, limit our ability
to pursue business opportunities in an efficient manner, or affect the competitive balance among banks, credit unions and other
financial institutions, any of which could materially and adversely affect our business, financial condition and results of
operations. The likelihood and timing of any changes and the impact such changes might have on S&T is impossible to
determine with any certainty.
S&T
We are a bank holding company subject to regulation under the BHCA and the examination and reporting requirements of
the Federal Reserve Board. Under the BHCA, a bank holding company may not directly or indirectly acquire ownership or
control of more than five percent of the voting shares or substantially all of the assets of any additional bank, or merge or
consolidate with another bank holding company, without the prior approval of the Federal Reserve Board.
As a bank holding company, we are expected under statutory and regulatory provisions to serve as a source of financial and
managerial strength to our subsidiary bank. A bank holding company is also expected to commit resources, including capital
and other funds, to support its subsidiary bank.
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S&T BANCORP, INC. AND SUBSIDIARIES
We elected to become a financial holding company under the BHCA in 2001 and thereby may engage in a broader range of
financial activities than are permissible for traditional bank holding companies. In order to maintain our status as a financial
holding company, we must remain “well-capitalized” and “well-managed” and the depository institutions controlled by us must
remain “well-capitalized,” “well-managed” (as defined in federal law) and have at least a “satisfactory” Community
Reinvestment Act, or CRA, rating. Refer to Note 23 Regulatory Matters to the consolidated financial statements contained in
Part II, Item 8 of this Report for information concerning the current capital ratios of S&T and S&T Bank. No prior regulatory
approval is required for a financial holding company with total consolidated assets less than $50 billion to acquire a company,
other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board, unless the total consolidated assets to be acquired exceed $10
billion. The BHCA identifies several activities as “financial in nature” including, among others, securities underwriting; dealing
and market making; sponsoring mutual funds and investment companies; insurance underwriting and sales agency; investment
advisory activities; merchant banking activities and activities that the Federal Reserve Board has determined to be closely
related to banking. Banks may also engage in, subject to limitations on investment, activities that are financial in nature, other
than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment,
through a financial subsidiary of the bank, if the bank is “well-capitalized,” “well-managed” and has at least a “satisfactory”
CRA rating.
If S&T or S&T Bank ceases to be “well-capitalized” or “well-managed,” we will not be in compliance with the
requirements of the BHCA regarding financial holding companies or requirements regarding the operation of financial
subsidiaries by insured banks.
If a financial holding company is notified by the Federal Reserve Board of such a change in the ratings of any of its
subsidiary banks, it must take certain corrective actions within specified time frames. Furthermore, if S&T Bank was to receive
a CRA rating of less than “satisfactory,” then we would be prohibited from engaging in certain new activities or acquiring
companies engaged in certain financial activities until the rating is raised to “satisfactory” or better.
We are presently engaged in non-banking activities through the following six entities:
•
•
•
•
•
•
9th Street Holdings, Inc. was formed in June 1988 to hold and manage a group of investments previously owned
by S&T Bank and to give us additional latitude to purchase other investments.
S&T Bancholdings, Inc. was formed in August 2002 to hold and manage a group of investments previously
owned by S&T Bank and to give us additional latitude to purchase other investments.
CTCLIC is a joint venture with another financial institution, and acts as a reinsurer of credit life, accident and
health insurance policies that were sold by S&T Bank and the other institution. S&T Bank and the other
institution each have ownership interests of 50 percent in CTCLIC.
S&T Insurance Group, LLC distributes life insurance and long-term disability income insurance products.
During 2001, S&T Insurance Group, LLC and Attorneys Abstract Company, Inc. entered into an agreement to
form S&T Settlement Services, LLC, or STSS, with respective ownership interests of 55 percent and 45 percent.
STSS is a title insurance agency servicing commercial customers. We also have a 30 percent partnership interest
in Evergreen Insurance, LLC.
Stewart Capital Advisors, LLC was formed in August 2005 and is a registered investment advisor that manages
private investment accounts for individuals and institutions.
DN Acquisition Company, Inc. was acquired with the DNB First merger on November 30, 2019. DN
Acquisition Company, Inc. was formed to acquire and hold Other Real Estate Owned acquired through
foreclosure or deed in-lieu-of foreclosure, as well as Bank-occupied real estate.
S&T Bank
As a Pennsylvania-chartered, FDIC-insured non-member commercial bank, S&T Bank is subject to the supervision and
regulation of the Pennsylvania Department of Banking and Securities, or PADBS, and the FDIC. We are also subject to various
requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits,
restrictions on the types, amount and terms and conditions of loans that may be granted and limits on the types of other
activities in which S&T Bank may engage and the investments it may make. In addition, pursuant to the federal Bank Merger
Act, S&T Bank must obtain the prior approval of the FDIC before it can merge or consolidate with or acquire the assets or
assume the deposit liabilities of another bank.
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S&T BANCORP, INC. AND SUBSIDIARIES
S&T Bank is subject to affiliate transaction rules in Sections 23A and 23B of the Federal Reserve Act as implemented by
the Federal Reserve Board's Regulation W, that limit the amount of transactions between itself and S&T or any other company
or entity that controls or is under common control with any company or entity that controls S&T Bank, including for most
purposes any financial or depository institution subsidiary of S&T Bank. Under these provisions, “covered” transactions,
including making loans, purchasing assets, issuing guarantees and other similar transactions, between a bank and its parent
company or any other affiliate, generally are limited to 10 percent of the bank subsidiary’s capital and surplus, and with respect
to all transactions with affiliates, are limited to 20 percent of the bank subsidiary’s capital and surplus. Loans and extensions of
credit from a bank to an affiliate generally are required to be secured by eligible collateral in specified amounts, and in general
all affiliated transactions must be on terms consistent with safe and sound banking practices. Furthermore, in general,
transactions between a bank and its affiliates must be on terms and conditions that are at least as favorable to the bank as the
terms that would apply in comparable transactions between the bank and a third party. The Dodd-Frank Act expanded the
affiliate transaction rules to broaden the definition of affiliate to include as covered transactions securities borrowing or lending,
repurchase or reverse repurchase agreements and derivative activities, and to strengthen collateral requirements and limit
Federal Reserve exemptive authority.
Federal law also constrains the types and amounts of loans that S&T Bank may make to its executive officers, directors and
principal shareholders. Among other things, these loans are limited in amount, must be approved by the bank’s board of
directors in advance, and must be on terms and conditions as favorable to the bank as those available to an unrelated person.
The Dodd-Frank Act strengthened restrictions on loans to insiders and expanded the types of transactions subject to the various
limits to include credit exposure arising from a derivative transaction, a repurchase or reverse repurchase agreement and a
securities lending or borrowing transaction. The Dodd-Frank Act also placed restrictions on certain asset sales to and from an
insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by
the institution’s board of directors.
Insurance of Accounts; Depositor Preference
The deposits of S&T Bank are insured up to applicable limits per insured depositor by the Deposit Insurance Fund, or DIF,
as administered by the FDIC. The Dodd-Frank Act codified FDIC deposit insurance coverage per separately insured depositor
for all account types at $250,000.
As an FDIC-insured bank, S&T Bank is subject to FDIC insurance assessments, which are imposed based upon the
calculated risk the institution poses to the DIF.
Under the current assessment system, for an institution with less than $10 billion in assets, assessment rates are determined
based on a combination of financial ratios and CAMELS (capital adequacy, asset quality, management, earnings, liquidity and
sensitivity) composite ratings. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject
to certain limits. Under the current system, premiums are assessed quarterly. Assessments are calculated as a percentage of
average consolidated total assets less average tangible equity during the assessment period. As part of its semiannual update of
the restoration plan established by the FDIC to facilitate restoration of the reserve ratio of the DIF to the statutory minimum in
the mandated time frame the FDIC adopted a final rule in October 2022. The new rule, applicable to all insured depository
institutions, increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the
first quarterly assessment period of 2023 (January 1 through March 31, 2023). The increase in assessment rate schedules is
intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35 percent by the
statutory deadline of September 30, 2028. Second, the proposed change in assessment rates is further intended to support
growth in the DIF in progressing toward the 2 percent Designated Reserve Ratio, or DRR, established by the FDIC. The FDIC
has indicated that the new assessment rate schedules will remain in effect unless and until the DRR meets or exceeds 2 percent,
absent further FDIC action. Under the new rule, the total base assessment rates on an annualized basis range from 2.5 basis
points for certain “well-capitalized,” “well-managed” banks, with the highest ratings, to 42 basis points for complex institutions
posing the most risk to the DIF, compared to the 2022 rates that ranged from 1.5 to 40. S&T’s total assets were below $10
billion at December 31, 2023.
In November 2023, the FDIC approved a final rule to implement special assessments to recover the loss to the DIF
associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The
assessment base for the special assessment is equal to estimated uninsured deposits reported as of December 31, 2022, adjusted
to exclude the first $5 billion. The special assessment will be collected at an annual rate of approximately 13.4 basis points for
an anticipated total of eight quarterly assessment periods, beginning in the first quarterly assessment period of 2024 (January 1
through March 31, 2024). Because the Bank's uninsured deposits were below $5 billion at December. 31, 2022, this special
assessment is not applicable to S&T.
The FDIC may terminate the deposit insurance of any insured depository institution if it determines, after hearing that the
institution has engaged in unsafe or unsound practices, that the institution is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the Federal Reserve
Board. It also may suspend deposit insurance temporarily during the hearing process if the institution has no tangible capital. If
insurance of accounts is terminated, the accounts at the institution at the time of termination, less subsequent withdrawals, will
continue to be insured for a period of six months to two years, as determined by the FDIC.
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S&T BANCORP, INC. AND SUBSIDIARIES
Under federal law, deposits and certain claims for administrative expenses and employee compensation against insured
depository institutions are afforded a priority over other general unsecured claims against such an institution, including federal
funds and letters of credit, in the liquidation or other resolution of such an institution by a receiver. Such priority creditors
would include the FDIC.
Capital
The Federal Reserve Board and the FDIC have issued substantially similar minimum risk-based and leverage capital rules
applicable to the banking organizations they supervise. On December 31, 2023, both S&T and S&T Bank met the applicable
minimum regulatory capital requirements.
The following table summarizes the leverage and risk-based capital ratios for S&T and S&T Bank:
(dollars in thousands)
As of December 31, 2023
Leverage Ratio
S&T
S&T Bank
Common Equity Tier 1 (to Risk-Weighted Assets)
S&T
S&T Bank
Tier 1 Capital (to Risk-Weighted Assets)
S&T
S&T Bank
Total Capital (to Risk-Weighted Assets)
S&T
S&T Bank
Actual
Minimum
Regulatory Capital
Requirements
To be
Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
$ 1,034,828
11.21 %
$ 369,297
995,824
10.79 %
369,133
4.00 %
4.00 %
$ 461,621
461,416
1,010,828
13.37 %
340,159
995,824
13.18 %
339,954
4.50 %
4.50 %
491,341
491,045
1,034,828
13.69 %
453,545
995,824
13.18 %
453,272
6.00 %
6.00 %
604,727
604,362
5.00 %
5.00 %
6.50 %
6.50 %
8.00 %
8.00 %
1,154,376
15.27 %
604,727
1,115,315
14.76 %
604,362
8.00 %
8.00 %
755,909
755,453
10.00 %
10.00 %
The banking regulatory agencies may from time to time require that a banking organization maintain capital above the
minimum prescribed levels, whether because of its financial condition or actual or anticipated growth.
The risk-based capital standards establish a systematic, analytical framework that makes regulatory capital requirements
more sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures explicitly into
account in assessing capital adequacy and minimizes disincentives to holding liquid, low-risk assets. For purposes of the risk-
based ratios, assets and specified off-balance sheet instruments are assigned to broad risk categories, each with appropriate
weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.
The leverage ratio represents capital as a percentage of total average assets adjusted as specified in the guidelines.
In July 2013, the federal banking agencies issued final regulatory capital rules that replaced the then existing general risk-
based capital and related rules, broadly revising the basic definitions and elements of regulatory capital and making substantial
changes to the risk weightings for banking and trading book assets. These regulatory capital rules are designed to implement
Basel III (which were agreements reached in July 2010 by the international oversight body of the Basel Committee on Banking
Supervision to require more and higher-quality capital) as well as the minimum leverage and risk-based capital requirements of
the Dodd-Frank Act. These capital standards apply to all banks, regardless of size, and to all bank holding companies with
consolidated assets greater than $500 million and became effective on January 1, 2015. For smaller banking organizations such
as S&T and S&T Bank, the rules were subject to a transition period providing for full implementation as of January 1, 2019.
Generally, under the guidelines, common equity Tier 1 capital consists of common stock instruments that meet the
eligibility criteria in the rule, retained earnings, accumulated other comprehensive income and common equity Tier 1 minority
interest, less applicable regulatory adjustments and deductions including goodwill, intangible assets subject to limitation and
certain deferred tax assets subject to limitation. Tier 1 capital is comprised of common equity Tier 1 capital plus generally non-
cumulative perpetual preferred stock, Tier 1 minority interests and, for bank holding companies with less than $15 billion in
consolidated assets at December 31, 2009, certain restricted capital instruments including qualifying cumulative perpetual
preferred stock and grandfathered trust preferred securities, up to a limit of 25 percent of Tier 1 capital, less applicable
regulatory adjustments and deductions. Tier 2, or supplementary, capital generally includes portions of trust preferred securities
and cumulative perpetual preferred stock not otherwise counted in Tier 1 capital, as well as preferred stock, subordinated debt,
total capital minority interests not included in Tier 1, and the allowance for credit losses, or ACL, in an amount not exceeding
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1.25 percent of standardized risk-weighted assets, less applicable regulatory adjustments and deductions. Total capital is the
sum of Tier 1 and Tier 2 capital.
After a phase in period beginning in 2016, these regulatory capital rules also require a banking organization to maintain a
capital conservation buffer composed of common equity Tier 1 capital in an amount greater than 2.50 percent of total risk-
weighted assets beginning in 2019. As a result, since 2019, a banking organization has been required to maintain a common
equity Tier 1 risk-based capital ratio greater than 7.00 percent, a Tier 1 risk-based capital ratio greater than 8.50 percent and a
Total risk-based capital ratio greater than 10.50 percent; otherwise, it will be subject to restrictions on capital distributions and
discretionary bonus payments. Since 2019, the minimum capital requirements plus the capital conservation buffer exceed the
regulatory capital ratios required for an insured depository institution to be well-capitalized under prompt corrective action law,
described in "Other Safety and Soundness Regulations."
These regulatory capital rules also revise the calculation of risk-weighted assets, including a new framework under which
the risk weight will increase for most credit exposures that are 90 days or more past due or on nonaccrual, high-volatility
commercial real estate loans, mortgage servicing and deferred tax assets that are not deducted from capital and certain equity
exposures. The rules include changes to the credit conversion factors of off-balance sheet items, such as the unused portion of a
loan commitment.
Federal regulators periodically propose amendments to the regulatory capital rules and the related regulatory framework
and consider changes to the capital standards that could significantly increase the amount of capital needed to meet applicable
standards. The timing of adoption, ultimate form and effect of any such proposed amendments cannot be predicted.
Payment of Dividends
S&T is a legal entity separate and distinct from its banking and other subsidiaries. A substantial portion of our revenues
consist of dividend payments we receive from S&T Bank. The payment of common dividends by S&T is subject to certain
requirements and limitations of Pennsylvania law. S&T Bank, in turn, is subject to federal and state laws and regulations that
limit the amount of dividends it can pay to S&T. In addition, both S&T and S&T Bank are subject to various general regulatory
policies relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums.
The Federal Reserve Board has indicated that banking organizations should generally pay dividends only if (i) the
organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends
and (ii) the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and
overall financial condition. Thus, under certain circumstances based upon our financial condition, our ability to declare and pay
quarterly dividends may require consultation with the Federal Reserve Board and may be prohibited by applicable Federal
Reserve Board guidance.
Other Safety and Soundness Regulations
There are a number of obligations and restrictions imposed on bank holding companies such as us and our depository
institution subsidiary by federal law and regulatory policy. These obligations and restrictions are designed to reduce potential
loss exposure to the FDIC’s DIF in the event an insured depository institution becomes in danger of default or is in default.
Under current federal law, for example, the federal banking agencies possess broad powers to take prompt corrective action to
resolve problems of insured depository institutions. The extent of these powers depends upon whether the institution in question
is “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically
undercapitalized,” as defined by the law. As of December 31, 2023, S&T Bank was classified as “well-capitalized.” New
definitions of these categories, as set forth in the federal banking agencies’ final rule to implement Basel III and the minimum
leverage and risk-based capital requirements of the Dodd-Frank Act, became effective as of January 1, 2015. Refer to the above
section titled Capital within this Item 1. Business section for capital requirements. The classification of depository institutions is
primarily for the purpose of applying the federal banking agencies’ prompt corrective action provisions and is not intended to
be and should not be interpreted as a representation of overall financial condition or prospects of any financial institution.
The federal banking agencies’ prompt corrective action powers, which increase depending upon the degree to which an
institution is undercapitalized, can include, among other things, requiring an insured depository institution to adopt a capital
restoration plan, which cannot be approved unless guaranteed by the institution’s parent company; placing limits on asset
growth and restrictions on activities, including restrictions on transactions with affiliates; restricting the interest rates the
institution may pay on deposits; restricting the institution from accepting brokered deposits; prohibiting the payment of
principal or interest on subordinated debt; prohibiting the holding company from making capital distributions, including
payment of dividends, without prior regulatory approval; and, ultimately, appointing a receiver for the institution.
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The federal banking agencies have also adopted guidelines prescribing safety and soundness standards relating to internal
controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, fees and compensation and benefits. In general, the guidelines require appropriate systems and practices to identify and
manage specified risks and exposures. The guidelines prohibit excessive compensation as an unsafe and unsound practice and
characterize compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed
by an executive officer, employee, director or principal shareholder. In addition, the agencies have adopted regulations that
authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not in
compliance with any of such safety and soundness standards to submit a compliance plan. If, after being so notified, an
institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the
deficiency and may issue an order directing other actions of the types to which an “undercapitalized” institution is subject under
the prompt corrective action provisions described above.
Regulatory Enforcement Authority
The enforcement powers available to federal banking agencies are substantial and include, among other things and in
addition to other powers described herein, the ability to assess civil money penalties and impose other civil and criminal
penalties, to issue cease-and-desist or removal orders, to appoint a conservator to conserve the assets of an institution for the
benefit of its depositors and creditors and to initiate injunctive actions against banks and bank holding companies and
“institution affiliated parties,” as defined in the Federal Deposit Insurance Act. In general, these enforcement actions may be
initiated for violations of laws and regulations, and engagement in unsafe or unsound practices. Other actions or inactions may
provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.
At the state level, the PADBS also has broad enforcement powers over S&T Bank, including the power to impose fines and
other penalties and to appoint a conservator or receiver.
Interstate Banking and Branching
The BHCA currently permits bank holding companies from any state to acquire banks and bank holding companies located
in any other state, subject to certain conditions, including certain nationwide and state-imposed deposit concentration limits. In
addition, because of changes to law made by the Dodd-Frank Act, S&T Bank may now establish de novo branches in any state
to the same extent that a bank chartered in that state could establish a branch.
Community Reinvestment, Fair Lending and Consumer Protection Laws
In connection with its lending activities, S&T Bank is subject to a number of state and federal laws and regulations
designed to protect consumers and promote lending to various sectors of the economy and population. The federal laws include,
among others, the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Truth-in-Savings Act, the Home Mortgage
Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act and the CRA. In addition, federal
rules require disclosure of privacy policies to consumers.
The purpose of the CRA is to help address inequities in credit access for low- and moderate-income (LMI) individuals and
communities. It is designed to encourage regulated banks to help meet the credit needs of the local communities in which they
are chartered. The FRB, the FDIC and the OCC implement the CRA through their CRA regulations, which establish the
framework for how the agencies assess a bank’s record of helping to meet the credit needs of the communities that they serve,
including LMI neighborhoods, consistent with safe and sound operations. The CRA requires the appropriate federal banking
agency, in connection with its examination of a bank, to assess the bank’s record in meeting the credit needs of the communities
served by the bank, including LMI neighborhoods. Furthermore, such assessment is required of any bank that has applied,
among other things, to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository
institution, or to open or relocate a branch office. In the case of a bank holding company, including a financial holding
company, applying for approval to acquire a bank or bank holding company, the Federal Reserve Board will assess the record
of each subsidiary bank of the applicant bank holding company in considering the application. Under the CRA, institutions are
assigned a rating of “outstanding,” “satisfactory,” “needs to improve” or “unsatisfactory.” S&T Bank was rated “satisfactory” in
its most recent CRA performance evaluation.
More recently, on October 24, 2023, the FDIC, OCC and FRB jointly issued a final rule to the CRA designed to strengthen
and modernize the regulations implementing the CRA. The changes are designed to encourage banks to expand access to credit,
investment and banking services in LMI communities, adapt to changes in the banking industry, including mobile and internet
banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data
collection to bank size and type. Most of the final rule’s requirements will be applicable beginning in January 2026, while the
remaining requirements, including data reporting requirements, will be applicable in January 2027.
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With respect to consumer protection, the Dodd-Frank Act created the Consumer Financial Protection Bureau, or the CFPB,
which took over rulemaking responsibility on July 21, 2011 for the principal federal consumer financial protection laws, such as
those identified above. Institutions that have assets of $10 billion or less, such as S&T Bank, are subject to the rules established
by the CFPB, but will continue to be supervised in this area by their state and primary federal regulators, which in the case of
S&T Bank is the FDIC.
Fair lending laws prohibit discrimination in the provision of bank's lending practices, and the enforcement of these laws has
been a focus for bank regulators. Fair lending laws include the Equal Credit Opportunity Act and the Fair Housing Act, which
outlaw discrimination in credit transactions and residential real estate on the basis of prohibited factors including, among others,
race, color, national origin, sex and religion. A lender may be liable for policies that result in a disparate treatment of or have a
disparate impact on a protected class of applicants or borrowers. If a pattern or practice of lending discrimination is alleged by a
regulator, then that agency is required to refer the matter to the U.S. Department of Justice, or DOJ, for investigation. S&T
Bank is required to have a fair lending program that is of sufficient scope to monitor the inherent fair lending risk of the
institution and that appropriately remediates issues which are identified.
During 2013, the CFPB issued a series of final rules related to mortgage loan origination and mortgage loan servicing,
which became effective in 2014. In particular, on January 10, 2013, the CFPB issued a final rule implementing the ability-to-
repay and qualified mortgage (QM) provisions of the Truth-in-Lending Act, as amended by the Dodd-Frank Act (“QM Rule.”)
The ability-to-repay provision requires creditors to make reasonable, good-faith determinations that borrowers are able to repay
their mortgage loans before extending the credit, based on a number of factors and consideration of financial information about
the borrower from reasonably reliable third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the
definition of “qualified mortgage” are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The
presumption is a conclusive presumption/safe harbor for prime loans meeting the QM requirements, and a rebuttable
presumption for higher-priced/subprime loans meeting the QM requirements. The QM Rule also adds an explicit maximum
43 percent debt-to-income ratio (DTI) for borrowers if the loan is to meet the QM definition, though some mortgages that meet
government-sponsored enterprise, or GSE, Federal Housing Administration, or FHA, and Veterans Affairs, or VA,
underwriting guidelines may, for a period not to exceed seven years, meet the QM definition without being subject to the
43 percent DTI limits (GSE Patch). In December 2020, the CFPB published a final rule that replaced the 43 percent DTI ratio
limit in the general QM definition (the “General QM Rule”) with a limit based on the loan’s pricing. The final rule also created
a new category of qualified mortgage, called a seasoned qualified mortgage, for first lien, fixed rate covered loans that meet
certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period,
comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. The
compliance date of the final rules was October 1, 2022. These rules did not have a material impact on our mortgage business.
Anti-Money Laundering Rules
S&T Bank is subject to the Bank Secrecy Act, its implementing regulations and other anti-money laundering laws and
regulations, including the USA Patriot Act of 2001. Among other things, these laws and regulations require S&T Bank to take
steps to prevent the bank from being used to facilitate the flow of illegal or illicit money, to report large currency transactions
and to file suspicious activity reports. S&T Bank is also required to develop and implement a comprehensive anti-money
laundering compliance program. Banks must also have in place appropriate “know your customer” policies and procedures
which includes requirements to (1) identify and verify, subject to certain exceptions, the identity of the beneficial owners of all
legal entity customers at the time a new account is opened, and (2) include in its anti-money laundering program, risk-based
procedures for conducting ongoing customer due diligence, which are to include procedures that (a) assist in understanding the
nature and purpose of customer relationships for the purpose of developing a customer risk profile, and (b) require ongoing
monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.
Violations of these requirements can result in substantial civil and criminal sanctions. In addition, provisions of the USA Patriot
Act of 2001 require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution’s
anti-money laundering activities when considering applications for bank mergers and bank holding company acquisitions.
Other Dodd-Frank Provisions
In December 2013, federal regulators adopted final regulations regarding the Volcker Rule established in the Dodd-Frank
Act. The Volcker Rule generally prohibits banks and their affiliates from engaging in proprietary trading and investing in and
sponsoring certain unregistered investment companies generally covering hedge funds and private equity funds, subject to
certain exemptions. Banking entities had until July 21, 2017 to conform their activities to the requirements of the rule. Since
S&T generally does not engage in the activities prohibited by the Volcker Rule, the effectiveness of the rule has not had a
material effect on S&T Bank or its affiliates.
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In addition, the Dodd-Frank Act provides that the amount of any interchange fee charged for electronic debit transactions
by debit card issuers having assets over $10 billion must be reasonable and proportional to the actual cost of a transaction to the
issuer. The Federal Reserve Board has adopted a rule which limits the maximum permissible interchange fees that such issuers
can receive for an electronic debit transaction. This rule, Regulation II, was effective October 1, 2011, and then amended on
October 3, 2022 to require debit card issuers to provide at least two unaffiliated payment card networks to process card-not-
present debit card transactions. Regulation II does not apply to a bank that, together with its affiliates, has less than $10 billion
in assets, which includes S&T.
Cybersecurity
We are subject to a variety of regulatory expectations and requirements regarding cybersecurity and data privacy. Federal
regulators have issued statements regarding cybersecurity addressing the controls that financial institutions should design and
business continuity planning and recovery processes that should be in place. Additionally, the FDIC, OCC and Federal Reserve
Board issued a final rule that became effective in May 2022, requiring banking organizations that experience a computer-
security incident to notify certain entities and its federal regulator of the computer-security incident as soon as possible and no
later than 36 hours after the bank determines a computer-security incident has occurred. This rule also requires banking
organizations to notify their customers of a computer-security incident that has caused, or is reasonably likely to cause, a
material service disruption or degradation for four or more hours. Moreover, in March 2022, the Cyber Incident Reporting for
Critical Infrastructure Act was enacted and once final rules are adopted, will require certain covered entities to report a covered
cyber incident to the U.S. Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency, or CISA,
within 72 hours after a covered entity reasonably believes an incident has occurred. Separate reporting to CISA will also be
required within 24 hours if a ransom payment is made as a result of a ransomware attack. Furthermore, in September 2023, the
SEC’s Cybersecurity Risk Management, Strategy, Governance and Incident Disclosure rules went into effect now requiring,
among other disclosure obligations, companies to publicly disclose the occurrence of a material cybersecurity incident,
including the material aspects of the nature, scope and timing of the incident and the material impact on the company including
financial condition and results of operation beginning with any material cybersecurity incidents occurring on or after December
18, 2023.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations,
including data breach notification requirements. We actively monitor developments regarding regulatory expectations and
federal and state requirements with respect to cybersecurity and data breach notifications.
Competition
S&T Bank competes with other local, regional and national financial services providers, such as other financial holding
companies, commercial banks, credit unions, finance companies, brokerage and insurance firms and financial technology
companies, including competitors that provide their products and services online and through mobile devices. Some of our
competitors are not subject to the same level of regulation and oversight that is required of banks and bank holding companies
and are thus able to operate under lower cost structures. Our wealth management business competes with trust companies,
mutual fund companies, investment advisory firms, law firms, brokerage firms and other financial services companies.
Changes in bank regulation, such as changes in the products and services banks can offer and permitted involvement in
non-banking activities by bank holding companies, as well as bank mergers and acquisitions, can affect our ability to compete
with other financial services providers. Our ability to do so will depend upon how successfully we can respond to the evolving
competitive, regulatory, technological and demographic developments affecting our operations.
Our customers are primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey,
Delaware and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in these
states resulting in a geographic concentration. Our market area has a high density of financial institutions, some of which are
significantly larger institutions with greater financial resources than us, and many of which are our competitors to varying
degrees. Our competition for loans comes principally from commercial banks, mortgage banking companies, credit unions,
online lenders and other financial service companies. Our most direct competition for deposits has historically come from
commercial banks and credit unions. We face additional competition for deposits from non-depository competitors such as the
mutual fund industry, securities and brokerage firms, insurance companies and financial technology companies. Since larger
competitors have advantages in attracting business from larger corporations, we do not generally attempt to compete for that
business. Instead, we concentrate our efforts on attracting the business of individuals, and small and medium-size businesses.
We consider our competitive advantages to be customer service and responsiveness to customer needs, the convenience of
banking offices and hours, access to electronic banking services and the availability and pricing of our customized banking
solutions. We emphasize personalized banking and the advantage of local decision-making in our banking business.
The financial services industry is likely to become more competitive as further technological advances enable more
companies to provide financial services on a more efficient and convenient basis. Technological innovations have lowered
traditional barriers to entry and enabled many companies to compete in financial services markets. Many customers now expect
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a choice of banking options for the delivery of services, including traditional banking offices, telephone, internet, mobile,
ATMs, self-service branches, in-store branches and/or digital and technology based solutions. These delivery channels are
offered by traditional banks and savings associations, credit unions, brokerage firms, asset management groups, financial
technology companies, finance and insurance companies, internet-based companies and mortgage banking firms.
Item 1A. RISK FACTORS
Investments in our common stock involve risk. The following discussion highlights the risks that we believe are material to
S&T, potentially impacting our business, results of operations, financial condition and cash flows. However, other factors not
discussed below or elsewhere in this Annual Report on Form 10-K could adversely affect our businesses, results of operations
and financial condition. Therefore, the risk factors below do not necessarily include all risks that we may face.
Risks Related to Credit
Our ability to assess the credit-worthiness of our customers may diminish, which may adversely affect our results of
operations.
We incur credit risk by virtue of making loans and extending loan commitments and letters of credit. Credit risk is one of
our most significant risks. We manage our exposure to credit risk through the use of consistent underwriting standards that
emphasize “in-market” lending while avoiding excessive industry and other concentrations. Our credit administration function
employs risk management techniques to ensure that loans adhere to corporate policy and problem loans are promptly identified.
There can be no assurance that such measures will be effective in avoiding undue credit risk. If the models and approaches that
we use to select, manage and underwrite our consumer and commercial loan products change and our underwriting standards do
not reflect or capture the rapid changes in the economy, we may have higher credit losses.
The value of the collateral used to secure our loans may not be sufficient to compensate for the amount of unpaid loans
and we may be unsuccessful in recovering the remaining balances from our customers.
Decreases in real estate values, particularly with respect to our commercial real estate, or CRE, and mortgage activities,
could adversely affect the value of property used as collateral for our loans and our customers’ ability to repay these loans,
which in turn could impact our profitability. Repayment of our commercial loans is often dependent on the cash flow of the
borrower, which may become unpredictable. If the value of the assets, such as real estate, serving as collateral for the loan
portfolio were to decline materially, a significant part of the loan portfolio could become under-collateralized. If the loans that
are secured by real estate become troubled when real estate market conditions are declining or have declined, in the event of
foreclosure, we may not be able to realize the amount of collateral that was anticipated at the time of originating the loan. This
could result in higher charge-offs which could have a material adverse effect on our operating results and financial condition.
Changes in the overall credit quality of our portfolio can have a significant impact on our earnings.
Like other lenders, we face the risk that our customers will not repay their loans. We reserve for losses in our loan portfolio
based on our assessment of expected credit losses. Management determines the amount of ACL through undergoing a periodic
review of the loan portfolio, where it considers historical losses, the national unemployment forecast produced by the Federal
Reserve combined with qualitative factors around current conditions including changes in lending policies and practices,
economic conditions, changes in the loan portfolio, changes in lending management, results of internal loan reviews, asset
quality trends, collateral values, concentrations of credit risk and other external factors. This process, which is critical to our
financial results and condition, requires complex judgment including our assessment of economic conditions, which are
difficult to predict. The amount of future losses is difficult to predict because it is susceptible to changes in economic, operating
and other conditions, including changes in interest rates, which may be beyond our control. Although we have policies and
procedures in place to determine future losses, due to the subjective nature of this area, there can be no assurance that our
management has accurately assessed the level of allowances reflected in our consolidated financial statements. We may
underestimate our expected credit losses and fail to hold an ACL sufficient to account for these losses. Incorrect assumptions
could lead to material underestimates of expected losses and an inadequate ACL. As our assessment of expected losses changes,
we may need to increase or decrease our ACL, which could significantly impact our financial results and profitability.
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Our loan portfolio is concentrated within our market area, and our lack of geographic diversification increases our risk
profile.
The regional economic conditions within our market area affect the demand for our products and services as well as the
ability of our customers to repay their loans and the value of the collateral securing these loans. A significant decline in the
regional economy caused by inflation, recession, unemployment or other factors could negatively affect our customers, the
quality of our loan portfolio and the demand for our products and services. Any sustained period of increased payment
delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market area could adversely
affect the value of our assets, revenues, results of operations and financial condition. Moreover, we cannot give any assurance
that we will benefit from any market growth or favorable economic conditions in our primary market area.
Our loan portfolio has a significant concentration of commercial loans that have a higher risk of loss.
The majority of our loans are to commercial borrowers including commercial and industrial, or C&I, CRE, and
construction loans. The commercial loan portfolio typically involves a higher degree of credit risk than other types of loans. For
the C&I segment this is due to the customer’s repayment ability being based upon the success of its business operations, the
susceptibility of the customer’s business to changing economic conditions, the dependence of our customer on maintaining
sufficient cash flow to make payments on the loan and our reliance on the underlying collateral, which is usually only the
business assets that may not have sufficient value when the borrower encounters financial difficulties. For the CRE segment
higher risk is due to higher loan principal amounts, where the repayment of these loans is generally dependent, in large part, on
sufficient income from the properties securing the loans to cover operating expenses and debt service. Because payments on
loans secured by CRE often depend upon the successful operation and management of the properties, repayment of these loans
may be affected by factors outside the borrower’s control, including adverse conditions in the real estate market or the
economy. Additionally, we have a number of significant credit exposures to commercial borrowers, and while the majority of
these borrowers have numerous projects that make up the total aggregate exposure, if one or more of these borrowers default or
have financial difficulties, we could experience higher credit losses, which could adversely impact our financial condition and
results of operations. Further, an individual commercial loan balance is typically larger than other loans in our portfolio,
creating the potential for larger credit losses on an individual loan. The deterioration of one or a few of these loans could have a
material adverse effect on our financial condition and results of operations.
Risks Related to General Economic Conditions
General economic conditions may adversely impact our business, financial condition, results of operations, or cash
flows.
Various aspects of our business could be impacted by general macroeconomic conditions including, among others,
inflation, which has increased to levels not experienced in years, interest rates, rising or elevated unemployment, declines in
GDP, consumer spending, property values, supply chain complications and economic uncertainty. These conditions generally
have a negative impact on businesses, financial markets and consumers, which may impact the underlying credit quality of our
customers. The following could increase the risk of our customers defaulting or becoming delinquent in their obligations to us,
which could increase credit losses and adversely affect our credit portfolios and provision for credit losses: (i) increased cost of
borrowings, (ii) additional borrowings and increased leverage, (iii) drawdown from savings due to business disruption, (iv)
financial difficulties, or (v) business losses, particularly for borrowers in our C&I or CRE portfolio. If the macroeconomic
environment worsens, our credit portfolio and allowance for credit losses could be adversely impacted. These unfavorable
economic conditions could also impact the demand for loans and other products and services offered by us, the level of
customer deposits, the value of our investment securities, loans held for sale or other assets secured by residential or
commercial real estate, or the level of net interest income or net interest margin. Any of these developments could adversely
impact our business, financial condition, results of operations or cash flows.
We may not accurately predict the nature and timing of the policies of the Federal Reserve and other governmental
agencies and their impact on interest rates and financial markets, which could negatively impact our financial condition
and results of operations.
The monetary policies of the Federal Reserve have a significant impact on interest rates, the value of financial instruments
and other assets and liabilities, and overall financial market performance. These policies have a significant impact on the
activities and results of operations of banks and bank holding companies such as S&T. An important function of the Federal
Reserve is to monitor the national supply of bank credit and set certain interest rates. The actions of the Federal Reserve
influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits. In addition,
monetary policy actions by governmental authorities in the European Union or other countries could have an impact on global
interest rates, which could affect rates in the U.S. We may not accurately predict the nature or timing of future changes in
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monetary policies and interest rates or the precise effects that they may have on our activities and financial results, which could
negatively impact our financial condition and results of operations.
Financial challenges at other banking institutions and further adverse developments affecting the financial services
industry, and the soundness of financial institutions, and further disruption to the economy and U.S. banking system may
adversely affect our business, results of operations, liquidity and stock price.
Several bank receiverships in 2023 caused a state of volatility in the financial services industry and uncertainty with respect
to liquidity and the health of the U.S. banking system. Although we were not directly affected by these bank receiverships, this
news caused fear among depositors, which caused them to withdraw or attempt to withdraw their funds from these and other
financial institutions. Uncertainty may be compounded by the reach and depth of media attention, including social media, and
its ability to disseminate concerns or rumors about any events of these kinds or other similar risks, and have in the past and may
in the future lead to market-wide liquidity problems. Additionally, the stock prices of many financial institutions dropped and
became volatile. While the FDIC resolution of these banks was done in a manner that protected depositors, there remains
concern over the U.S. banking system as a result of continued economic volatility. Furthermore, financial services institutions
are interrelated as a result of trading, clearing, counterparty, or other relationships, which may expose us to credit risk and
losses in the event of a default by a counterparty or client. As a result of these recent events, we face the potential for
reputational risk, deposit outflows and increased credit risk which, individually or in the aggregate, could have a material
adverse effect on our business, financial condition and results of operations and liquidity.
Furthermore, if such levels of financial market and economic disruption and volatility continue, if actual events or concerns
or rumors involving limited liquidity, defaults, or other adverse developments, or if other banks and financial institutions enter
receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial
markets, our ability to access our existing cash, cash equivalents and investments may be threatened due to market-wide
liquidity problems. While we maintain liquidity primarily through customer deposits and through access to other short-term
funding sources, including advances from the Federal Home Loan Bank (FHLB), our efforts to monitor and manage liquidity
risk may not be successful or sufficient to deal with dramatic or unanticipated increase or reductions in our liquidity,
particularly in light of the impact of increased interest rates on the market value of investment securities. This situation could
have a material adverse impact on our results of operations and financial condition.
Additionally, regulatory pressures and additional regulation of financial institutions as a result of the industry
developments could have material adverse effects on our business, results of operations, financial condition and growth
prospects.
Geopolitical tensions and conflicts between nations has created significant economic and financial disruptions and
uncertainties, which could adversely affect our business, financial condition and results of operations.
In late February 2022, Russia launched a large-scale military attack on Ukraine. In response to the military action by
Russia, government actions, including broad-ranging economic sanctions against Russia, have been taken by the United States,
the United Kingdom, the European Union and other countries. The U.S. and global markets have experienced volatility and
disruption as a result of this military conflict and imposition of sanctions, impacting the financial and commodities markets.
The continued impact on financial markets, including the level and volatility of interest rates, could impact our earnings.
Russian military actions and the resulting sanctions could further adversely affect the global economy and financial markets and
lead to instability and lack of liquidity in capital markets. In addition, Russia may take retaliatory actions and other counter
measures including cyberattacks against the U.S., its government, infrastructure and businesses, including S&T.
Additionally, an armed conflict began in October 2023 involving Hamas and Israel. This conflict, as well as further
escalation of tensions between Israel and various countries in the Middle East and North Africa may cause additional
detrimental effects on the global economy, including capital markets.
Although the extent and duration of these military conflicts and any future escalation of such hostilities, market disruptions
and volatility, and the result of any diplomatic negotiations remains uncertain, these consequences, including those we cannot
yet predict, may cause our business, financial condition, results of operations and the price of our common stock to be adversely
affected.
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Risks Related to Our Operations
Failure to keep pace with technological changes could have a material adverse effect on our results of operations and
financial condition.
The financial services industry is constantly undergoing rapid technological change with frequent introductions of new
technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions
to better service customers and reduce costs. Our future success depends, in part, upon our ability to address the needs of our
customers by using technology to provide products and services that will satisfy their demands, as well as create additional
efficiencies within our operations. Many of our large competitors have substantially greater resources to invest in technological
improvements. We may not be able to effectively implement new technology-driven products and services quickly or be
successful in marketing these products and services to our customers. Failure to successfully keep pace with technological
change affecting the financial services industry could have a material adverse impact on our business, financial condition and
results of operations.
A cyber attack, information or security breach, or a failure of ours or of a third-party's infrastructure, computer and
data management systems could adversely affect our ability to conduct our business or manage our exposure to risk,
result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update
our operational and security systems and infrastructure, and adversely impact our results of operations, liquidity and
financial condition, as well as cause reputational harm.
Our business is highly dependent on the security and efficacy of our infrastructure, computer and data management
systems, as well as those of third parties with whom we interact. Cyber security risks for financial institutions have significantly
increased in recent years in part because of the proliferation of new technologies, the use of the Internet and
telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized
crime, hackers, terrorists and other external parties, including foreign state actors. Our operations rely on the secure processing,
transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management
systems and networks, and in the computer and data management systems and networks of third parties. We rely on digital
technologies, computer, database and email systems, software, and networks to conduct our operations. In addition, to access
our network and products and services, our customers and third parties may use personal mobile devices or computing devices
that are outside of our network environment. We have taken measures to implement backup systems and other safeguards to
support our operations, but our ability to conduct business may be adversely affected by any significant disruptions to us or to
third parties with whom we interact.
Financial services institutions, and third parties whom they conduct business with, have been subject to, and are likely to
continue to be the target of, cyber attacks, including computer viruses, malicious or destructive code, phishing attacks, denial of
service or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or
destruction of confidential, proprietary and other information of the institution, its employees or customers or of third parties, or
otherwise materially disrupt network access or business operations. For example, denial of service attacks have been launched
against a number of large financial institutions and several large retailers have disclosed substantial cyber security breaches
affecting debit accounts of their customers. We have experienced cyber security incidents in the past, such as vendor malware
attacks, phishing and other social engineering schemes designed to gain access to confidential information from our
employees,customers or vendors and, although not material, we anticipate that we could experience further incidents. There can
be no assurance that we will not suffer material losses or other material consequences relating to technology failure, cyber
incidents or other information or security breaches.
In addition to external threats, insider threats also present a risk to us. Insiders, having legitimate access to our systems and
the information contained in them, have the opportunity to make inappropriate use of the systems and information, or as a result
of human error, misconduct or malfeasance, expose us to risk. We have policies, procedures, and controls in place designed to
prevent or limit this risk, but we cannot guarantee that these policies, procedures and controls fully mitigate this risk.
Additionally, a number of our employees have shifted to working from remote locations, which we expect to remain high for
the foreseeable future, increasing the number of surfaces that require protection and the overall risks and exposures to cyber
threats.
Moreover, we are subject to laws and regulations in the United States and other jurisdictions regarding privacy, data
protection and data security and there continues to be heightened legislative and regulatory focus in this area. These laws and
regulations are rapidly evolving and increasing in complexity and will require us to incur costs, some of which may be
significant, to achieve and maintain compliance and could restrict our ability to provide certain products and services which
could have an adverse effect on our business, financial condition and results of operations. Furthermore, as cybersecurity
incidents increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we
view as adequate for our operations.
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As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify
and enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Any
of these matters could result in our loss of customers and business opportunities, significant disruption to our operations and
business, misappropriation or destruction of our confidential information and/or that of our customers, or damage to our
customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws,
litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage,
reimbursement or other compensatory costs, and additional compliance costs. In addition, any of the matters described above
could adversely impact our results of operations and financial condition.
Fraudulent activity associated with our products and services could adversely affect our results of operations, financial
condition and stock price, negatively impact our brand and reputation and result in regulatory intervention or
sanctions.
As a financial institution we are exposed to operational risk in the form of fraudulent activity that may be committed by
customers, other third parties, or employees, targeting us and our customers. The risk of fraud continues to increase for the
financial services industry. Fraudulent activity has escalated, become more sophisticated, and continues to evolve, as there are
more options to access financial services. While we believe we have operational risk controls in place to prevent or detect
fraud or to mitigate the impact of any fraud, we cannot provide assurance that we can prevent or detect fraud or that we will not
experience future fraud losses or incur costs or other damage related to such fraud, at levels that adversely affect our results of
operation, financial condition or stock price. Furthermore, fraudulent activity could negatively impact our brand and reputation,
which could also adversely affect our results of operation, financial condition or stock price. Fraudulent activity could also lead
to regulatory intervention or regulatory sanctions.
We rely on certain critical third-party providers for a number of services that are important to our business. An
interruption or cessation of an important service by any critical third-party provider could have a material adverse
effect on our business.
We are dependent for the majority of our technology, including our core operating system, on certain critical third-party
providers. If these companies were to discontinue providing services to us, we may experience significant disruption to our
business. In addition, each of these third parties faces the risk of cyber attack, information breach or loss, or technology failure.
If any of our critical third-party service providers experience such difficulties, or if there is any other disruption in our
relationships with them, we may be required to find alternative sources of such services. We are dependent on these critical
third-party providers securing their information systems, over which we have limited control, and a breach of their information
systems could adversely affect our ability to process transactions, service our clients or manage our exposure to risk and could
result in the disclosure of sensitive, personal customer information, which could have a material adverse impact on our business
through damage to our reputation, loss of business, remedial costs, additional regulatory scrutiny or exposure to civil litigation
and possible financial liability. Assurance cannot be provided that we could negotiate terms with alternative service sources that
are as favorable or could obtain services with similar functionality as found in existing systems without the need to expend
substantial resources, if at all, thereby resulting in a material adverse impact on our business and results of operations.
Failure to continue to attract, develop, and maintain a highly skilled workforce may have an adverse effect on our
business.
Our business requires that we attract, develop, and maintain a highly skilled workforce. Competition for qualified
employees and personnel in the banking industry is strong, and there are a limited number of qualified persons with knowledge
of, and experience in, the banking industry where we conduct our business. Our ability to attract and retain skilled personnel
cost effectively is subject to a variety of external factors, including the limited availability of qualified personnel in the
workforce in the local markets in which we operate, unemployment levels within those markets, prevailing wage rates, which
have increased significantly, health and other insurance costs, and changes in employment and labor laws. Furthermore, the
complexities introduced into the labor market as a result of the transition to increased work-from-home arrangements have
impacted the competitive landscape in our labor market. Based on current conditions in the labor market, we have experienced
some difficulty in retaining and attracting personnel and there is no assurance that we will be able to continue to successfully do
so.
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Risks Related to Our Business Strategy
Our strategy includes growth plans through organic growth and by means of acquisitions. Our financial condition and
results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
We intend to continue pursuing a growth strategy through organic growth within our current footprint and through market
expansion. We also actively evaluate acquisition opportunities as another source of growth. We cannot give assurance that we
will be able to expand our existing market presence, or successfully enter new markets or that any such expansion will not
adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our
business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully
implement our business strategy.
Our failure to find suitable acquisition candidates, or successfully bid against other competitors for acquisitions, could
adversely affect our ability to fully implement our business strategy. If we are successful in acquiring other entities, the process
of integrating such entities will divert significant management time and resources. We may not be able to integrate efficiently or
operate profitably any entity we may acquire. We may experience disruption and incur unexpected expenses in integrating
acquisitions. These failures could adversely impact our future prospects and results of operation.
We are subject to competition from both banks and non-banking companies.
The financial services industry is highly competitive, and we encounter strong competition for deposits, loans and other
financial services in our market area, including online providers of these products and services. Our principal competitors
include other local, regional and national financial services providers, such as other financial holding companies, commercial
banks, credit unions, finance companies and brokerage and insurance firms, including competitors that provide their products
and services online. Many of our non-bank competitors are not subject to the same degree of regulation that we are and have
advantages over us in providing certain services. Additionally, many of our competitors are significantly larger than we are and
have greater access to capital and other resources. Failure to compete effectively for deposit, loan and other financial services
customers in our markets could cause us to lose market share, slow our growth rate and have an adverse effect on our financial
condition and results of operations.
We may be required to raise capital in the future, but that capital may not be available or may not be on acceptable
terms when it is needed.
We are required by federal regulatory authorities to maintain adequate capital levels to support operations. While we
believe we currently have sufficient capital, if we cannot raise additional capital when needed, we may not be able to meet these
requirements. In addition, our ability to further expand our operations through organic growth, which includes growth within
our current footprint and growth through market expansion, may be adversely affected by any inability to raise necessary
capital. Our ability to raise additional capital at any given time is dependent on capital market conditions at that time and on our
financial performance and outlook.
Risks Related to Interest Rates and Investments
Our net interest income could be negatively affected by interest rate changes which may adversely affect our financial
condition.
Our results of operations are largely dependent on net interest income, which is the difference between the interest and fees
earned on interest-earning assets and the interest paid on interest-bearing liabilities. Therefore, any change in general market
interest rates, including changes resulting from the Federal Reserve Board’s policies, can have a significant effect on our net
interest income and total income. There may be mismatches between the maturity and repricing of our assets and liabilities that
could cause the net interest rate spread to compress, depending on the level and type of changes in the interest rate environment.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and the
policies of various governmental agencies. In addition, some of our customers often have the ability to prepay loans or redeem
deposits with either no penalties or penalties that are insufficient to compensate us for the lost income. A significant reduction
in our net interest income will adversely affect our business and results of operations. If we are unable to manage interest rate
risk effectively, our business, financial condition and results of operations could be materially harmed.
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Declines in the value of investment securities held by us could require write-downs, which would reduce our earnings.
In order to diversify earnings and enhance liquidity, we own debt instruments of government agencies and municipalities.
We may be required to record impairment charges on our debt securities if they suffer a decline in value due to the underlying
credit of the issuer. Additionally, the value of these investments may fluctuate depending on the interest rate environment,
general economic conditions and circumstances specific to the issuer. Volatile market conditions may detrimentally affect the
value of these securities, such as through reduced valuations due to the perception of heightened credit or liquidity risks.
Changes in the value of these instruments may result in a reduction to earnings and/or capital, which may adversely affect our
results of operations and financial condition.
Risks Related to Regulatory Compliance and Legal Matters
We are subject to extensive governmental regulation and supervision.
As discussed above, under :Supervision and regulation" in Item 1, we are subject to extensive state and federal regulation,
supervision and legislation that govern nearly every aspect of our operations. The regulations are primarily intended to protect
depositors, customers and the banking system as a whole, not shareholders. These regulations affect our lending practices,
capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory
agencies continually review banking laws, regulations and policies for possible changes. The Dodd-Frank Act, enacted in July
2010, instituted major changes to the banking and financial institutions regulatory regimes. Other changes to statutes,
regulations or policies could affect us in substantial and unpredictable ways. The regulatory environment of the current
administration may take a more active approach to financial services regulation with respect to its major policy goals, such as
climate change, racial equity, and consumer protection. Any regulatory changes could subject us to additional costs of
regulatory compliance and of doing business, limit the types of financial services and products we may offer and/or increase the
ability of non-banks to offer competing financial services and products, among other things, and could divert management’s
time from other business activities. Failure to comply with applicable laws, regulations, policies or supervisory guidance could
lead to enforcement and other legal actions by federal or state authorities, including criminal or civil penalties, the loss of FDIC
insurance, the revocation of a banking charter, other sanctions by regulatory agencies, and/or damage to our reputation. The
ramifications and uncertainties of the level of government intervention in the U.S. financial system could also adversely affect
us.
Our controls and policies and procedures may fail or be circumvented, which may result in a material adverse effect on
our business, financial condition and results of operations.
Management regularly reviews and updates our internal controls, disclosure controls and procedures and operating, risk
management and corporate governance policies and procedures. Any system of controls, policies and procedures, however well
designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that
the objectives of the system are met. Any failure or circumvention of internal controls, disclosure controls and procedures, or
operating, risk management and corporate governance policies and procedures, whether as a result of human error, misconduct
or malfeasance, or failure to comply with regulations related to controls and policies and procedures could have a material
adverse effect on our business, results of operations and financial condition.
Furthermore, we may in the future discover areas of our internal controls, disclosure controls and procedures, or operating,
risk management and corporate governance policies and procedures that need improvement. Failure to maintain effective
controls or to timely implement any necessary improvement of our internal and disclosure controls, or operating, risk
management and corporate governance policies and procedures, could, among other things, result in losses from errors, harm
our reputation, or cause investors to lose confidence in our reported financial information, all of which could have a material
adverse effect on our results of operations and financial condition.
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Negative public opinion could damage our reputation and adversely impact our earnings and liquidity.
Reputational risk, or the risk to our business, earnings, liquidity and capital from negative public opinion, is inherent in our
operations. Negative public opinion could result from our actual or alleged conduct in a variety of areas, including legal and
regulatory compliance, lending practices, corporate governance, litigation, ethical issues or inadequate protection of customer
information. Financial companies are highly vulnerable to reputational damage when they are found to have harmed customers,
particularly retail customers, through conduct that is illegal or viewed as unfair, deceptive, manipulative or otherwise wrongful.
We are dependent on third-party providers for a number of services that are important to our business. Refer to the risk factor
titled, “We rely on certain critical third-party providers for a number of services that are important to our business. An
interruption or cessation of an important service by any third-party provider could have a material adverse effect on our
business.” for additional information. A failure by any of these third-party service providers could cause a disruption in our
operations, which could result in negative public opinion about us or damage to our reputation. We expend significant resources
to comply with regulatory requirements, and the failure to comply with such regulations could result in reputational harm or
significant legal or remedial costs. Damage to our reputation could adversely affect our ability to retain and attract new
customers and employees, expose us to litigation and regulatory action and adversely impact our earnings and liquidity.
Our ability to pay dividends on our common stock may be limited.
Holders of our common stock will be entitled to receive only such dividends as our Board of Directors may declare out of
funds legally available for such payments. The payment of common stock dividends by S&T is subject to certain requirements
and limitations of Pennsylvania law. Although we have historically declared cash dividends on our common stock, we are not
required to do so and our Board of Directors could reduce, suspend or eliminate our dividend at any time. Substantial portions
of our revenue consist of dividend payments we receive from S&T Bank. The payment of common dividends by S&T Bank is
subject to certain requirements and limitations under federal and state laws and regulations that limit the amount of dividends it
can pay to S&T. In addition, both S&T and S&T Bank are subject to various general regulatory policies relating to the payment
of dividends, including requirements to maintain adequate capital above regulatory minimums. Any decrease to or elimination
of the dividends on our common stock could adversely affect the market price of our common stock.
We are subject to remaining uncertainty associated with the transition away from LIBOR.
Following publication on June 30, 2023, no settings of the London Interbank Offered Rate (“LIBOR”) continue to be
published on a representative basis and publication of many non-U.S. dollar LIBOR settings has been entirely discontinued. We
had a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that were
either directly or indirectly dependent on LIBOR. While we believe that we have successfully managed our transition from
LIBOR to alternative reference rates, given the inherent difference between LIBOR and the alternative reference rates, there
remain some uncertainties regarding the transition from LIBOR. In addition, due in part to the limited history of the alternative
reference rates, and continued uncertainty regarding their future performance, the impact on interest income and expense, the
return on and market value of assets and the impact on certain derivative financial instruments may vary from expectations.
While we do not expect the transition from LIBOR and the risks related thereto to have a material adverse effect on us, there
remains some uncertainty as to the ultimate impact on our business and results of operations.
Our business could be negatively impacted by environmental, social and governance (ESG) matters, including climate
change and related legislative and regulatory initiatives.
There has been an increased focus from regulators, investors, customers, employees and other stakeholders concerning
environmental, social and governance, or ESG, practices and disclosure, including climate change, hiring practices, the
diversity of the work force, racial and social justice issues and shareholder rights.
With respect to environmental in particular, increased focus and concern over the effects of climate change have resulted in
increased political and social initiatives directed toward climate change. Governments have entered into international
agreements with respect to climate change, and U.S. federal and state legislatures, regulatory agencies, and supervisory
authorities, including those with oversight of financial institutions, have proposed initiatives seeking to mitigate the effects of
climate change. While many of the current regulatory proposals do not apply directly to S&T, continued focus on climate
change may lead to the promulgation of new regulations or supervisory guidance applicable to S&T and, as a result, we may
experience increased compliance costs and other compliance-related risks. Furthermore, our customers could be impacted by
regulatory initiatives focused on addressing and mitigating the effects of climate change resulting in an adverse impact on their
financial condition and creditworthiness. Depending on the nature of the initiative, the business impacted, and the composition
of loan portfolio, our business and results of operations could be negatively impacted by climate change initiatives directed at
our customers. Additionally, our business and the business of our customers could be negatively impacted by disruptions in
economic activity resulting from the physical impacts of climate change.
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Furthermore, new government regulations with respect to other ESG matters could also result in new or more stringent
forms of ESG oversight and expanded mandatory and voluntary reporting, diligence, disclosure and ESG-related compliance
costs. In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in
connection with these matters. Failure to adapt to or comply with regulatory requirements or investor or stakeholder
expectations and standards with respect to ESG matters could have a material adverse impact on our future results of
operations, financial position, cash flows, ability to do business with certain third parties and our stock price.
Risks Related to Liquidity
We rely on a stable core deposit base as our primary source of liquidity.
We are dependent for our funding on a stable base of core deposits. Our ability to maintain a stable core deposit base is a
function of our financial performance, our reputation and the security provided by FDIC insurance, which combined, gives
customers confidence in us. If any of these considerations deteriorates, the stability of our core deposits could be harmed. In
addition, deposit levels may be affected by factors such as general interest rate levels, rates paid by competitors, returns
available to customers on alternative investments and general economic conditions. Accordingly, we may be required from time
to time to rely on other sources of liquidity to meet withdrawal demands or otherwise fund operations. Additional funding
sources accessible to S&T include borrowing availability at the Federal Home Loan Bank of Pittsburgh, or FHLB, federal funds
lines with other financial institutions, the Federal Reserve Borrower-in-Custody Program and the Federal Reserve Bank Term
Funding Program, or BTFP.
Our ability to meet contingency funding needs, in the event of a crisis that causes a disruption to our core deposit base,
is dependent on access to wholesale markets, including funds provided by the FHLB of Pittsburgh and other short-term
funding sources, including the Federal Reserve Discount Window and brokered deposits.
We own stock in the Federal Home Loan Bank of Pittsburgh, or FHLB, in order to qualify for membership in the FHLB
system, which enables us to borrow on our line of credit with the FHLB that is secured by a blanket lien on a significant portion
of our loan portfolio. Changes or disruptions to the FHLB or the FHLB system in general may materially impact our ability to
meet short and long-term liquidity needs or meet growth plans. Additionally, we cannot be assured that the FHLB will be able
to provide funding to us when needed, nor can we be certain that the FHLB will provide funds specifically to us, should our
financial condition and/or our regulators prevent access to our line of credit. We have other funding sources that
can be used such as the Federal Reserve Borrower-in-Custody Program, as well as the Federal Reserve BTFP which is available
to us through March 11, 2024 and brokered deposits. The inability to access this source of funds could have a materially
adverse effect on our ability to meet our customer’s needs. Our financial flexibility could be severely constrained if we were
unable to maintain our access to funding or if adequate financing is not available at acceptable interest rates.
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Risks Related to Owning Our Stock
The market price of our common stock may fluctuate significantly in response to a number of factors.
Our quarterly and annual operating results have varied significantly in the past and could vary significantly in the future,
which makes it difficult for us to predict our future operating results. Our operating results may fluctuate due to a variety of
factors, many of which are outside of our control, including the changing U.S. economic environment and changes in the
commercial and residential real estate market, any of which may cause our stock price to fluctuate. If our operating results fall
below the expectations of investors or securities analysts, the price of our common stock could decline substantially.
Additionally, our stock price can fluctuate significantly in response to a variety of factors including, among other things:
•
•
•
•
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•
•
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•
•
•
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volatility of stock market prices and volumes in general;
changes in market valuations of similar companies;
the nature and composition of our ownership base;
investor views on the attractiveness of a given sector in the market;
the flow of capital among market sectors;
changes in the conditions of credit markets;
changes in accounting policies or procedures as required by the Financial Accounting Standards Board, or
FASB, or other regulatory agencies;
legislative and regulatory actions, including the impact of the Dodd-Frank Act and related regulations, that may
subject us to additional regulatory oversight which may result in increased compliance costs and/or require us to
change our business model;
government intervention in the U.S. financial system and the effects of and changes in trade and monetary and
fiscal policies and laws, including the interest rate policies of the Federal Reserve Board;
additions or departures of key members of management;
fluctuations in our quarterly or annual operating results; and
changes in analysts’ estimates of our financial performance.
General Risk Factors
We may be a defendant from time to time in a variety of litigation and other actions, which could have a material
adverse effect on our financial condition and results of operations.
From time to time, customers and others make claims and take legal action pertaining to the performance of our
responsibilities. Whether customer claims and legal action related to the performance of our responsibilities are founded or
unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant
expenses, attention from management and financial liability. Any financial liability or reputational damage could have a
material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and
results of operations.
Item 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved SEC staff comments.
Item 1C. CYBERSECURITY
Risk Management and Strategy
S&T’s Information Security Program provides policies, procedures, controls and technical measures to assess, identify and
manage material cybersecurity risks. The Information Security Program is a part of S&T’s overall Enterprise Risk
Management, or ERM Program. The Information Security Program is designed to achieve the following objectives:
a. Protecting data through the use of automated and manual processes;
b. Periodically assessing and updating the program to address an evolving threat environment;
c. Maintaining a team of IT security professionals that continually monitor, detect, analyze, investigate and
report cybersecurity threats; and
d. Ensuring business continuity and disaster recovery.
We based and tailored our framework on the National Institute of Standards and Technology, or NIST, Cybersecurity
Framework and the Center for Internet Security, or CIS, Critical Security Controls.
The S&T Information Security Program utilizes a defense in depth strategy that leverages multiple security measures to
protect the bank's assets. We encrypt and leverage data loss prevention technology for sensitive data and use advanced transport
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layer security encryption for our applications. S&T employees are required to undergo annual information security awareness
training, which includes information regarding evolving threats such as phishing, malware and social engineering testing.
S&T performs periodic risk assessments that seek to identify both technical and physical risks to information systems. The
assessments incorporate cybersecurity-related principles from the Federal Financial Institutions Examination Council, or
FFIEC, Information Technology Examination Handbook, regulatory guidance and concepts from other industry standards,
including the NIST Cybersecurity Framework. An assessment typically includes:
Identifying reasonably foreseeable internal and external threats that could result in a cybersecurity incident;
a.
b. Assessing the likelihood and potential impact of those threats; and
c. Assessing the sufficiency of policies, procedures, practices, and technical measures in place to manage risks.
In addition to periodic risk assessments, S&T evaluates changes to IT systems or physical systems for any information
security impacts. S&T utilizes staff and independent third parties to conduct annual penetration testing and IT security health
assessments. We engage third parties to facilitate tabletop incident response and business continuity exercises. Additionally, we
participate in various cybersecurity industry forums and have access to law enforcement analysis regarding current threats.
Our third-party risk management program is integrated into our Information Security Program within our ERM Program.
The policies, procedures and practices applicable to the cybersecurity components of the third-party risk management program
were developed and are maintained consistent with the FFEIC IT Examination Handbook, as well as guidance from our
prudential regulators. We perform a risk assessment, including cyber threats, associated with use of third-party vendors and
exercise appropriate due diligence before entering into a vendor arrangement. We also engage a third-party to actively monitor
our cybersecurity risks and gather threat intelligence of select vendors and their products and services. Additionally, we conduct
information security assessments before sharing or allowing the hosting of sensitive data in computing environments managed
by third parties. Our contracts governing third party engagements require certain security and privacy protections where
applicable. All third parties with access to our information systems must review and acknowledge our Acceptable Use Policy
before access is granted.
When a cybersecurity incident occurs, whether detected internally or from third-party cybersecurity incidents, we evaluate
the incident for criticality across a range of contributing indicators, including service availability, impact to operations,
reputational impact, regulatory and legal considerations, data sensitivity and direct financial impact. The potential impact of the
incident, individually or in aggregate, is evaluated by the Chief Security Officer, or CSO, continuously across these criteria. We
have escalation procedures to notify members of senior and executive management, the Board (or an applicable subset) and
regulators in a timely manner based on the criticality of the cybersecurity incident. S&T also has in place incident response and
business continuity plans. The Incident Response Program outlines the policies, procedures and technical measures for
identifying an incident, assessing its nature and scope, minimizing and containing the impact, investigating the root cause and
reporting, as applicable. S&T uses data from incidents to reassess risk, evaluate and implement any additional controls deemed
necessary and measure the success of the incident response team. The Incident Response Program also includes staff training,
annual updates and testing. The Business Continuity Plan defines the policies, procedures and technical measures to restore
systems and critical operations. S&T also maintains business continuity plans for critical systems and applications managed or
hosted by third-party vendors.
To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially
affected us, including our business strategy, results of operations or financial condition. We may nevertheless be unsuccessful
in the future in preventing or mitigating a cybersecurity incident that could have a material impact on our business, results of
operations or financial condition. At December 31, 2023, management has assessed known cybersecurity incidents for potential
materiality and disclosure using formal documented processes and has determined that there have been no material
cybersecurity incidents, individually or in aggregate.
Governance
Board Oversight
The Risk Committee is appointed by the Board and is authorized to perform its functions in assisting the Board with
fulfilling its fiduciary responsibilities with respect to its oversight and assessment of S&T’s enterprise-wide risk management
framework. The Risk Committee oversees risk from cybersecurity threats as a part of its oversight of the ERM Program. The
Risk Committee regularly reviews reports from, and has discussions with, S&T’s Chief Risk Officer, or CRO, Chief Operating
Officer, or COO, CSO, Chief Information and Technology Officer and Director of Operational Risk Management regarding
cybersecurity risks, the threat landscape, updates on incidents and reports on our investments in cybersecurity risk mitigation
and governance. The Risk Committee chairperson reports activities and recommendations with respect to such matters to the
Board as are relevant and deemed appropriate by the Risk Committee. In the event of a material cybersecurity event, the CSO is
responsible for promptly reporting such incidents to the CRO, executive management and the Board. A special meeting of the
Board will be held, as deemed necessary by the Chairperson of the Board in consultation with the Chair of the Risk Committee.
22
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S&T BANCORP, INC. AND SUBSIDIARIES
Management’s Role
At the management level, the ERM Committee, CRO, COO, CSO, Chief Information and Technology Officer, Director of
Information Technology and Director of Operational Risk Management are responsible for assessing and managing material
risks from cybersecurity threats. The ERM Committee reports information to the Risk Committee on a quarterly basis, or more
often as needed.
Risk Management leadership, which assists the ERM Committee in assessing and managing cybersecurity threats, include
our CRO, COO, CSO, Chief Information and Technology Officer, Director of Information Technology and Director of
Operational Risk Management. Our CRO who oversees the risk management information security program reports to our CEO,
but has direct access to the Risk Committee. Our CRO is a Certified Public Accountant, holds a Certification in Risk
Management Assurance and has over 25 years of financial services experience. Our COO has over 20 years of banking
technology and operations experience, including serving as head of digital for a business unit at a large national bank. Our CSO
reports to the CRO and has 17 years of information technology and cybersecurity experience, including prior roles as chief
information officer, assistant director of information technology, chief information security officer and chief security officer in
federal law enforcement and banking organizations. Our Chief Information and Technology Officer has nine years of
information technology and cybersecurity experience. Our Director of Information Technology has 25 years of information
technology and cybersecurity experience. Our Director of Operational Risk Management has 10 years of information
technology and cybersecurity experience, including serving as a former chief information officer for a financial institution.
For more information regarding the risks associated with cybersecurity that may impact our business strategy, results of
operations or financial condition, see “ Part I, “Item 1A. Risk Factors” of this Annual Report on Form10-K.
Item 2. PROPERTIES
S&T Bancorp, Inc. headquarters is located in Indiana, Pennsylvania. We operate in Pennsylvania and Ohio. At
December 31, 2023, we operate 73 banking branches and four loan production offices, of which 43 are leased facilities.
Item 3. LEGAL PROCEEDINGS
The nature of our business generates a certain amount of litigation that arises in the ordinary course of business. However,
in management’s opinion, there are no proceedings pending that we are a party to or to which our property is subject that would
be material in relation to our financial condition or results of operations. In addition, no material proceedings are pending nor
are known to be threatened or contemplated against us by governmental authorities or other parties.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
23
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S&T BANCORP, INC. AND SUBSIDIARIES
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Stock Prices and Dividend Information
Our common stock is listed on the NASDAQ Global Select Market System, or NASDAQ, under the symbol STBA. As of
the close of business on January 31, 2024, we had approximately 2,539 shareholders of record. The number of record-holders
does not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other
nominees.
As discussed under "Our ability to pay dividends on our common stock may be limited." included in Item 1A. Risk Factors
in Part I, the amount and timing of dividends is subject to the discretion of the Board and depends upon business conditions and
regulatory requirements. The Board has the discretion to change the dividend at any time for any reason. The Board of
Directors presently intends to continue the policy of paying quarterly cash dividends. The amount of any future dividends will
depend on economic and market conditions, our financial condition and operating results and other factors, including applicable
government regulations and policies. S&T’s Board of Directors approved a quarterly cash dividend of $0.33 per share on
January 24, 2024.
Certain information relating to securities authorized for issuance under equity compensation plans is set forth under the
heading Equity Compensation Plan Information in Part III, Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters of this Report.
Purchases of Equity Securities
The following table is a summary of our purchases of common stock during the fourth quarter of 2023:
Period
10/1/2023 - 10/31/2023
11/1/2023 - 11/30/2023
12/1/2023 - 12/31/2023
Total number of
shares purchased
Average price paid per
share
Total number of shares
purchased as part of
publicly announced plan (1)
Approximate dollar value of
shares that may yet be
purchased under the plan (2)
—
—
—
$
—
—
—
—
—
—
$
9,807,925
9,807,925
9,807,925
$
—
—
Total
(1) On January 25, 2023, our Board of Directors authorized an extension of its $50 million share repurchase plan, which was set to expire March 31, 2023. This
authorization extended the expiration date of the repurchase plan through March 31, 2024. The plan permitted S&T to repurchase shares up to the previously
authorized $50 million in aggregate value of S&T's common stock through a combination of open market and privately negotiated repurchases. On January 24,
2024, our Board of Directors authorized a new $50 million share repurchase plan.The new plan replaced the existing share repurchase plan effective
immediately and is set to expire May 30, 2025. This repurchase authorization permits S&T to repurchase shares of S&T's common stock from time to time
through a combination of open market and privately negotiated repurchases up to the authorized $50 million aggregate value of S&T's common stock. The
specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions,
the trading price of the common stock, legal and contractual requirements and S&T’s financial performance. The repurchase plan does not obligate S&T to
repurchase any particular number of shares. S&T expects to fund any repurchases from cash on hand and internally generated funds. Any share repurchases
will not begin until permissible under applicable laws.
(2)Includes excise tax on repurchases, net of issuances for restricted stock awards.
9,807,925
—
$
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S&T BANCORP, INC. AND SUBSIDIARIES
Five-Year Cumulative Total Return
The following chart compares the cumulative total shareholder return on our common stock with the cumulative total
shareholder return of the NASDAQ Composite Index(1) and the NASDAQ Bank Index(2) assuming a $100 investment in each
on December 31, 2018 and the reinvestment of dividends.
Source: Bloomberg
Index
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
Period Ending
100.00
S&T Bancorp, Inc.
NASDAQ Composite(1)
NASDAQ Bank(2)
(1)The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on the Nasdaq Stock Market.
(2)The NASDAQ Bank Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as Banks. These
companies include banks providing a broad range of financial services, including retail banking, loans and money transmissions.
100.00
163.58
137.65
115.04
164.41
124.38
136.73
198.33
242.38
109.49
100.00
104.88
93.13
70.73
236.70
132.92
107.06
Item 6. [RESERVED]
25
Index ValueTotal Return PerformanceS&T Bancorp, Inc.NASDAQ CompositeNASDAQ Bank201820192020202120222023$50$100$150$200$250
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section reviews our financial condition for each of the past two fiscal years and results of operations for each of the
past three fiscal years. The Company's discussion and analysis focuses on significant factors impacting the financial condition
and results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022. This
discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Supplementary Data and
related notes within this Annual Report on Form 10-K. A similar discussion and analysis that compares the year ended
December 31, 2022 to the year ended December 31, 2021 may be found in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations” on our Form 10-K for the year ended December 31, 2022, filed with the
Securities and Exchange Commission, or SEC, on February 24, 2023. Certain reclassifications have been made to prior periods
to place them on a basis comparable with the current period presentation.
Important Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains or incorporates statements that we believe are “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 business and
operations. Forward-looking statements are typically identified by words or phrases such as “will likely result,” “expect,”
“anticipate,” “estimate,” “forecast,” “project,” “intend,” “believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,”
“continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,”
“achieve,” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should,
could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any
of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be
incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors
that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-
looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the
credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the
adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes;
operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our
reputational risks; sensitivity to the interest rate environment, a rapid increase in interest rates or a change in the shape of the
yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; any remaining uncertainties with the
transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital
requirements and our ability to address those requirements; unanticipated changes in our liquidity position; unanticipated
changes in regulatory and governmental policies impacting interest rates and financial markets; changes in accounting policies,
practices or guidance; legislation affecting the financial services industry as a whole, and S&T, in particular; developments
affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S. banking
system; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service
competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis;
managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions cannot be fully
realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than
anticipated; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an
important service by a third-party provider; our ability to attract and retain talented executives and employees; general
economic or business conditions, including the strength of regional economic conditions in our market area; ESG practices and
disclosures, including climate change, hiring practices, the diversity of the work force, and racial and social justice issues;
deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions
or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an
adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to
contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that
could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly,
by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our
future businesses and geopolitical tensions and conflicts between nations.
Many of these factors, as well as other factors, are described elsewhere in this report, including Part I, Item 1A, Risk
Factors and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using
information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements
because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from
actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to
update any forward-looking statement to reflect developments occurring after the statement is made.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, or
GAAP. Application of these principles requires management to make estimates, assumptions and judgments that affect the
amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and
judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this
information changes, the consolidated financial statements could reflect different estimates, assumptions and judgments.
Certain policies are based, to a greater extent, on estimates, assumptions and judgments of management and, as such, have a
greater possibility of producing results that could be materially different than originally reported.
Our most significant accounting policies are presented in Note 1 Summary of Significant Accounting Policies in the Notes
to Consolidated Financial Statements included in Part II, Item 8 of this Report. These policies, along with the disclosures
presented in the Notes to Consolidated Financial Statements, provide information on how significant assets and liabilities are
valued in the consolidated financial statements and how those values are determined.
We view critical accounting policies to be those which are highly dependent on subjective or complex estimates,
assumptions and judgments and where changes in those estimates and assumptions could have a significant impact on the
consolidated financial statements. Further, we view critical accounting estimates as those estimates made in accordance with
GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact
on our financial condition or results of operations. We currently view the determination of the ACL and goodwill and other
intangible assets to be critical accounting policies. We did not significantly change the manner in which we applied our critical
accounting policies or developed related assumptions or estimates during 2023. We have reviewed these critical accounting
estimates and related disclosures with the Audit Committee.
Allowance for Credit Losses
Our expected credit loss methodology requires consideration of a broader range of information to estimate expected credit
losses over the lifetime of an asset. The ACL is a valuation reserve established and maintained by charges against operating
income. It is an estimate of expected credit losses, measured over the contractual life of a loan, that considers historical loss
experience, current conditions and forecasts of future economic conditions.
Management’s evaluation process used to determine the appropriateness of the ACL is complex and requires the use of
estimates, assumptions and judgments which are inherently subject to high uncertainty. The evaluation process combines
several factors: historical loan loss experience, managements ongoing review of lending policies and practices, experience and
depth of staff, quality of the loan grading system, the fair value of underlying collateral, concentration of loans to specific
borrowers or industries, existing economic conditions and forecasts, segment specific risks and other quantitative and
qualitative factors which could affect future credit losses. Our reasonable and supportable forecast is based primarily on the
national unemployment forecast produced by the Federal Reserve and is for a period of two years. For periods beyond our two-
year forecast, we revert to historical loss rates utilizing a straight-line method over a one-year reversion period. Because current
economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of
estimated credit losses on loans and the appropriateness of the ACL could change significantly. It is challenging to estimate
how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors
and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.
In conjunction with our capital stress testing process, we consider different economic scenarios that impact the ACL.
Among other balance sheet and income statement changes, our severely adverse scenario would have resulted in an increase to
the ACL of approximately 70 percent. This severely adverse scenario shows how sensitive the ACL can be to key qualitative
and quantitative assumptions underlying the overall ACL calculation. To the extent actual losses are higher than management
estimates, additional provision for credit losses could be required and could adversely affect our earnings or financial position
in future periods.
Goodwill and Other Intangible Assets
As a result of acquisitions, we have recorded goodwill and identifiable intangible assets in our Consolidated Balance
Sheets. Goodwill represents the excess of the purchase price over the fair value of net assets acquired.
The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations are
recorded at their fair values. This often involves estimates based on third-party valuations or internal valuations based on
discounted cash flow analyses or other valuation techniques which are inherently subjective. Business combinations also
typically result in goodwill which is subject to ongoing periodic impairment tests based on the fair values of the reporting units
to which the acquired goodwill relates.
The carrying value of goodwill is tested annually for impairment each October 1st or more frequently if events and
circumstances indicate that it may be impaired. We test for impairment by comparing the fair value of the reporting unit with its
27
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
carrying amount. An impairment charge would be recognized if the carrying amount exceeds the reporting unit's fair value. A
qualitative assessment is performed to determine whether it is more likely than not that the reporting unit's fair value is less than
it's carrying value. We perform a quantitative impairment test only if we conclude that it is more likely than not that a reporting
unit's fair value is less than the carrying amount. Determining the fair value of a reporting unit is judgmental and involves the
use of significant estimates and assumptions. The fair value of the reporting unit is determined by using both a discounted cash
flow model and market based models. The discounted cash flow model has many assumptions including future earnings
projections, a long-term growth rate and discount rate. The market based method calculates the fair value based on observed
price multiples for similar companies. The fair values of each method are then weighted based on the relevance and reliability
in the current economic environment.
Based upon our qualitative assessment performed for our annual impairment analysis as of October 1, 2023, we concluded
that goodwill is not impaired.
Recent Accounting Pronouncements and Developments
Note 1 Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, which is included
in Part II, Item 8 Financial Statements and Supplementary Data of this Report, discusses new accounting pronouncements that
we have adopted and the expected impact of accounting pronouncements recently issued or proposed, but not yet required to be
adopted.
Explanation of Use of Non-GAAP Financial Measures
In addition to traditional financial measures presented in accordance with GAAP, our management uses, and this report
contains or references, certain non-GAAP financial measures discussed below. We believe these non-GAAP financial measures
provide information useful to investors in understanding our underlying business, operational performance and performance
trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although we
believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-
GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial
results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be
presented by other companies.
The interest income on interest-earning assets, net interest income and net interest margin are presented on an FTE basis
(non-GAAP). The FTE basis (non-GAAP) adjusts for the tax benefit of income on certain tax-exempt loans and securities and
the dividend-received deduction for equity securities using the federal statutory tax rate of 21 percent for each period. We
believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between
taxable and non-taxable sources of interest income.
The following table reconciles interest and dividend income and net interest income per the Consolidated Statements of Net
Income to interest income, net interest income and net interest margin on an FTE basis (non-GAAP) for the periods presented:
(dollars in thousands)
Interest and dividend income per Consolidated Statements of Net Income
Plus: taxable equivalent adjustment
Interest Income on an FTE Basis (Non-GAAP)
Years ended December 31,
2023
$ 477,901
2,550
$ 480,451
2022
$ 340,751
2,052
$ 342,803
Interest and dividend income per Consolidated Statements of Net Income
$ 477,901
$ 340,751
Less: Interest expense
Net Interest Income per Consolidated Statements of Net Income
Plus: taxable equivalent adjustment
(128,491)
349,410
2,550
(24,968)
315,783
2,052
Net Interest Income on an FTE Basis (Non-GAAP)
$ 351,960
$ 317,835
2021
$ 289,262
2,316
$ 291,578
$ 289,262
(13,150)
276,112
2,316
$ 278,428
Net interest margin
Plus: taxable equivalent adjustment
Net Interest Margin on an FTE Basis (Non-GAAP)
4.10 %
0.03 %
4.13 %
3.74 %
0.02 %
3.76 %
3.19 %
0.03 %
3.22 %
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The efficiency ratio is noninterest expense divided by noninterest income plus net interest income, on an FTE basis (non-
GAAP), which ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent
with industry practice. Below is a reconciliation of the non-GAAP efficiency ratio.
(dollars in thousands)
Efficiency Ratio (Non-GAAP)
Years ended December 31,
2023
2022
2021
Noninterest expense per Consolidated Statements of Net Income
$210,334
$196,746
$188,925
Net interest income per Consolidated Statements of Net Income
Plus: taxable equivalent adjustment
Net interest income (FTE) (non-GAAP)
Noninterest income per Consolidated Statements of Net Income
Less: net gains on sale of securities
Net interest income (FTE) (non-GAAP) plus noninterest income
Efficiency Ratio (Non-GAAP)
$349,410
2,550
351,960
57,620
—
$409,580
$315,783
2,052
317,835
58,259
(198)
$375,896
$276,112
2,316
278,428
64,696
(29)
$343,095
51.35%
52.34%
55.06%
Return on average tangible shareholders' equity (non-GAAP) is a key profitability metric used by management to measure
financial performance. The following table provides a reconciliation of return on average tangible shareholders' equity (non-
GAAP) by reconciling net income (GAAP) per the Consolidated Statements of Net Income to net income before amortization
and intangibles and average shareholder's equity to average tangible shareholders' equity for the periods presented:
(dollars in thousands)
Net income
Plus: amortization of intangibles, net of tax
Net income before amortization of intangibles
Years ended December 31,
2023
2022
$ 144,781
$ 135,520
1,042
1,199
$ 145,823
$ 136,719
2021
110,343
1,400
111,743
$
$
Average shareholders' equity
$ 1,227,332
$ 1,181,788
$ 1,186,161
Less: average goodwill and other intangible assets, net of deferred tax liability
(377,157)
(378,303)
(379,612)
Average tangible shareholders' equity
$ 850,175
$ 803,485
$
806,549
Return on Average Tangible Shareholders' Equity (non-GAAP)
17.15 %
17.02 %
13.85 %
Executive Overview
We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.6 billion at December 31,
2023. We operate in Pennsylvania and Ohio providing a full range of financial services with retail and commercial banking
products, cash management services, trust and brokerage services. Our common stock trades on the NASDAQ Global Select
Market under the symbol “STBA”.
We earn revenue primarily from interest on loans and securities and fees charged for financial services provided to our
customers. We incur expenses for the cost of deposits and other funding sources, provision for credit losses and other operating
costs such as salaries and employee benefits, data processing, occupancy and tax expense.
Our purpose is building a better future together through people-forward banking. We believe that all banking should be
personal. We cultivate relationships rooted in trust, strengthened by going above and beyond and renewed with every
interaction. Our strategic priorities for 2024 and beyond will be focused on our deposit franchise, core profitability, asset
quality and talent and engagement.
During the first quarter of 2023, the banking industry experienced significant volatility with several high-profile bank
failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer
confidence in the banking system. Despite these negative industry developments, our liquidity position and balance sheet
remain well-positioned. We have a well-diversified deposit base with a balance mix of 56.4 percent personal, 34.1 percent
business, 4.5 percent public funds and 5.0 percent brokered deposits at December 31, 2023. We have total uninsured deposits of
$2.3 billion, or 30 percent of our total deposit base. At December 31, 2023, we had remaining borrowing availability of $4.1
billion, which includes $2.7 billion with the FHLB of Pittsburgh, $769.7 million from the Federal Reserve Borrower-in-
Custody Program and $637.0 million from the Federal Reserve Bank Term Funding Program, or BTFP. Furthermore, our
capital remains strong with a Common Equity Tier 1 Ratio of 13.37 percent and a total capital ratio of 15.27 percent at
December 31, 2023.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Year Ended December 31, 2023
Earnings Summary
The following table presents a summary of key profitability metrics for the periods presented:
Years ended December 31,
(dollars in thousands)
Net income
Earnings per share - diluted
Return on average assets
2023
$ 144,781
$
3.74
1.56 %
Return on average shareholders' equity
Return on average tangible shareholders' equity (non-GAAP)(1)
(1) Reconciled to GAAP in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.
11.80 %
17.15 %
2022
$ 135,520
$
3.46
1.48 %
11.47 %
17.02 %
2021
$ 110,343
$
2.81
1.18 %
9.30 %
13.85 %
We earned record net income of $144.8 million for the second consecutive year, representing an increase of $9.3 million or
6.83 percent, compared to net income of $135.5 million in 2022. Earnings per diluted share increased 8.1 percent to a record
$3.74 in 2023 compared to $3.46 in 2022. The increase in net income was primarily due to higher net interest income related to
higher interest rates. Return on average assets increased 8 basis points to 1.56 percent for 2023 compared to 1.48 percent for
2022. Return on average shareholders' equity increased 33 basis points to 11.80 percent for 2023 compared to 11.47 percent for
2022.
Net interest income increased $33.6 million, or 10.65 percent, to $349.4 million compared to $315.8 million in 2022.
Interest and dividend income increased $137.2 million and interest expense increased $103.5 million compared to 2022. The net
interest margin, or NIM, on an FTE basis (non-GAAP) increased 37 basis points to 4.13 percent compared to 3.76 percent in
2022. The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates
during 2023 and an asset sensitive balance sheet. NIM is reconciled to net interest margin adjusted to an FTE basis (non-
GAAP) above in the "Explanation of Use of Non-GAAP Financial Measures" section of this Management’s Discussion and
Analysis, or MD&A.
The provision for credit losses increased $9.5 million to $17.9 million for 2023 compared to $8.4 million for 2022. The
increase in the provision for credit losses was mainly due to an increase in net charge-offs in 2023 and our qualitative reserve.
Net loan charge-offs were $13.2 million, or 0.18 percent of average loans, in 2023 compared to $2.6 million, or 0.04 percent of
average loans, in 2022.
Noninterest income was relatively consistent at $57.6 million compared to $58.3 million in 2022. Mortgage banking
income decreased $1.1 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding
originated mortgage loans on the balance sheet. Various other customer fees were down compared to the prior year due to lower
activity. Offsetting these decreases was an increase of $2.5 million in other noninterest income primarily related to valuation
adjustments and a $0.8 million increase in net gain on the sale of OREO partially offset by a $0.8 million decrease in fees on
commercial loan swaps.
Noninterest expense increased $13.6 million to $210.3 million compared to $196.7 million in 2022. Salaries and employee
benefits increased $8.2 million primarily due to higher salaries related to inflationary wage pressure, the acquisition of new
talent and a change in the valuation adjustment on a nonqualified benefit plan. Loan-related expense increased $2.1 million
primarily due to an increase in loan collection and legal expenses for the workout of criticized and classified loans. Furniture,
equipment and software expense increased $1.3 million due to new software implemented in 2023. FDIC insurance increased
$1.3 million due to a two basis point increase in the assessment rate. The efficiency ratio (non-GAAP) for 2023 improved to
51.35 percent compared to 52.34 percent for 2022 due to higher revenue in 2023. A reconciliation of the efficiency ratio (non-
GAAP) is provided above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.
The provision for income taxes increased $0.6 million to $34.0 million in 2023 compared to $33.4 million in 2022. The
increase in our income tax provision was primarily due to a $9.9 million increase in pretax income in 2023 compared to 2022.
The effective tax rate decreased 0.8 percent to 19.0 percent in 2023 compared to 19.8 percent in 2022. The decrease in the
effective tax rate was primarily due to an increase in Low Income Housing Tax Credits, or LIHTCs, in 2023 compared to 2022.
Net Interest Income
Our principal source of revenue is net interest income. Net interest income represents the difference between the interest
and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by
changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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spreads. The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability
Committee, or ALCO, in order to mitigate interest rate and liquidity risks of the balance sheet. A variety of ALCO strategies
were implemented, within prescribed ALCO risk parameters, to produce what we believe is an acceptable level of net interest
income.
As part of our interest rate risk management strategy, we use interest rate swaps to add stability to net interest income by
managing our exposure to interest rate movements. During 2022, we entered into interest rate swaps with a total notional
amount of $500.0 million with original maturities ranging from three to five years. There were no new interest rates swaps
entered into in 2023. Our strategy is to reduce our exposure to variability in expected future cash flows related to interest
payments on commercial loans that are currently indexed to the 1-month SOFR rate. Interest rates have increased substantially
in 2022 and 2023 resulting in an unrealized loss on the cash flow hedges of $11.6 million, which is reported in Other
Comprehensive Income (Loss), or OCI, net of applicable taxes.
Average Balance Sheet and Net Interest Income Analysis (FTE) (non-GAAP)
The following tables provide information regarding the average balances, interest and rates earned on interest-earning
assets and the average balances, interest and rates paid on interest-bearing liabilities for the periods presented:
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(dollars in thousands)
ASSETS
Interest-bearing deposits with banks
Securities, at fair value(1)(2)
2023
2022
2021
Average
Balance
Interest
Rate
Average
Balance
Interest
Rate
Average
Balance
Interest
Rate
$
141,954 $ 7,344
5.17 % $
378,323 $ 2,952
0.78 % $
722,057 $
973
0.13 %
976,095
25,445
2.61 %
1,017,471
22,880
2.25 %
832,304
18,135
2.18 %
Loans held for sale
121
8
6.71 %
1,115
49
4.38 %
4,094
124
3.03 %
Commercial real estate
Commercial and industrial
Commercial construction
3,216,593
183,204
5.70 %
3,182,821
139,575
4.39 %
3,249,559
119,594
3.68 %
1,665,630
118,221
7.10 %
1,706,861
83,568
4.90 %
1,829,563
75,860
4.15 %
381,838
28,835
7.55 %
401,780
18,795
4.68 %
471,286
15,443
3.28 %
Total Commercial Loans
5,264,061
330,260
6.27 %
5,291,462
241,938
4.57 %
5,550,407
210,897
3.80 %
Residential mortgage
Home equity
1,282,078
59,170
4.62 %
980,134
40,146
4.10 %
881,494
36,211
4.11 %
648,525
43,158
6.65 %
611,134
25,887
4.24 %
543,777
18,822
3.46 %
Installment and other consumer
117,807
9,929
8.43 %
119,703
7,177
6.00 %
Consumer construction
51,146
2,462
4.81 %
33,922
1,198
3.53 %
90,129
14,748
5,351
5.94 %
668
4.53 %
Total Consumer Loans
2,099,556
114,719
5.46 %
1,744,893
74,408
4.26 %
1,530,148
61,052
3.99 %
Total Portfolio Loans
Total Loans(1)(3)
Total other earning assets
7,363,617
444,979
6.04 %
7,036,355
316,346
4.50 %
7,080,555
271,949
3.84 %
7,363,738
444,987
6.04 %
7,037,470
316,395
4.50 %
7,084,649
272,073
3.84 %
37,988
2,675
7.04 %
12,694
576
4.54 %
10,363
397
3.83 %
Total Interest-earning Assets
8,519,775 $ 480,451
5.64 %
8,445,958 $ 342,803
4.06 %
8,649,372 $ 291,578
3.37 %
Noninterest-earning assets
Total Assets
LIABILITIES AND
SHAREHOLDERS’ EQUITY
756,481
$ 9,276,256
721,080
$ 9,167,038
726,478
$ 9,375,850
Interest-bearing demand
$
844,588 $ 6,056
0.72 % $
918,222 $ 1,025
0.11 % $
956,211 $
809
0.08 %
Money market
Savings
1,677,584
39,480
2.33 %
1,909,208
11,948
0.63 %
2,033,631
3,651
0.18 %
1,020,314
4,352
0.43 %
1,121,818
1,121
0.10 %
1,047,855
366
0.03 %
Certificates of deposit
1,302,478
42,948
3.30 %
993,722
5,813
0.58 %
1,255,370
5,930
0.47 %
Total Interest-bearing Deposits
4,844,964
92,836
1.92 %
4,942,970
19,907
0.40 %
5,293,066
10,757
0.20 %
Securities sold under repurchase
agreements
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
—
—
— %
500,421
27,238
5.44 %
31,706
52,215
1,332
4.20 %
4,110
7.87 %
35,836
40,013
19,090
54,420
36
0.10 %
1,659
4.15 %
411
2.15 %
2,395
4.40 %
69,964
6,301
22,995
61,653
79
12
0.11 %
0.19 %
458
1.99 %
1,843
2.99 %
Total Borrowings
584,342
32,680
5.59 %
149,359
4,501
3.01 %
160,913
2,392
1.49 %
Other interest-bearing liabilities
58,135
2,975
5.12 %
15,163
560
3.69 %
Total Interest-bearing Liabilities
5,487,441
128,491
2.34 %
5,107,492
24,968
0.49 %
5,453,979
13,150
0.24 %
Noninterest-bearing liabilities
Shareholders' equity
2,561,483
1,227,332
2,877,758
1,181,788
2,735,710
1,186,161
$ 9,276,256
Total Liabilities and Shareholders'
Equity
Net Interest Income(1)(2)
Net Interest Margin(1)(2)
(1) Tax-exempt interest income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent.
(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.
(3) Nonaccruing loans are included in the daily average loan amounts outstanding.
$ 9,167,038
$ 351,960
$ 317,835
4.13 %
3.76 %
$ 9,375,850
$ 278,428
3.22 %
Net interest income on an FTE basis (non-GAAP) increased $34.1 million, or 10.7 percent, compared to 2022. The net
interest margin, or NIM, on an FTE basis (non-GAAP) increased 37 basis points to 4.13 percent compared to 3.76 percent in
2022. The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates
during 2023.
Interest income on an FTE basis (non-GAAP) increased $137.6 million compared to 2022. The increase in interest income
on an FTE basis (non-GAAP) was primarily due to higher interest rates. Average loan balances increased $326.3 million
compared to 2022. The average yield on loan balances increased 154 basis points compared to 2022 due to higher interest rates.
Average interest-bearing deposits with banks decreased $236.4 million compared to 2022 due to declines in deposit balances
and loan growth. The average yield on interest-bearing deposits with banks increased 439 basis points compared to 2022 due to
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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increased interest rates. Overall, the FTE rate (non-GAAP) on interest-earning assets increased 158 basis points compared to
2022.
Interest expense increased $103.5 million compared to 2022. The increase in interest expense was primarily due to higher
interest rates and a shift in our funding mix to higher cost certificates of deposits and borrowings. Average interest-bearing
deposits decreased $98.0 million compared to 2022 due to the competitive market driven by rising interest rates. The average
rate paid on interest-bearing deposits increased 152 basis points due to higher interest rates. Certificates of deposit increased
$308.8 million compared to 2022. The increase in certificates of deposits was primarily due to higher interest rates resulting in
customers moving deposits to higher yield accounts. Average borrowings increased $435.0 million compared to 2022 primarily
due to decreased deposit balances and increased loans. The average rate paid on borrowings increased 258 basis points
compared to 2022 due to higher interest rates. Overall, the cost of interest-bearing liabilities increased 185 basis points
compared to 2022.
The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid
resulting from changes in volume and changes in rates:
(dollars in thousands)
Interest earned on:
Interest-bearing deposits with banks
Securities, at fair value(2)(3)
Loans held for sale
Commercial real estate
Commercial and industrial
Commercial construction
Total Commercial Loans
Residential mortgage
Home equity
Installment and other consumer
Consumer construction
Total Consumer Loans
Total Portfolio Loans
Total Loans(1)(2)
Total other earning assets
2023 Compared to 2022
Increase (Decrease) Due to
Rate (4)
Total
Volume (4)
2022 Compared to 2021
Increase (Decrease) Due to
Rate (4)
Total
Volume (4)
$
(1,845) $
6,236 $
(930)
(44)
1,481
(2,019)
(933)
(1,471)
12,368
1,584
(114)
608
14,446
12,976
12,932
1,149
3,495
3
42,149
36,671
10,973
89,793
6,656
15,688
2,866
654
25,864
115,657
115,660
950
4,392
2,565
(41)
43,630
34,653
10,040
88,322
19,024
17,272
2,752
1,263
40,311
128,633
128,592
2,099
$
(463) $
2,443 $
4,035
(90)
(2,456)
(5,088)
(2,278)
(9,822)
4,052
2,332
1,756
868
9,008
(814)
(904)
89
710
15
22,437
12,796
5,630
40,863
(117)
4,733
70
(338)
4,348
45,211
45,226
90
1,980
4,745
(75)
19,981
7,708
3,352
31,041
3,935
7,065
1,826
530
13,356
44,397
44,322
179
2,757 $
48,469 $
51,226
Change in Interest Earned on Interest-earning Assets
Interest paid on:
Interest-bearing demand
Money market
Savings
Certificates of deposit
Total Interest-bearing Deposits
Securities sold under repurchase agreements
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
Total Borrowings
Other interest-bearing liabilities
$
$
$
$
11,306 $
126,341 $
137,647
(82) $
5,114 $
(1,449)
(101)
1,806
173
(36)
19,095
272
(97)
19,233
1,587
28,981
3,332
35,329
72,756
—
6,484
650
1,811
8,945
829
5,031
27,532
3,231
37,135
72,929
(36)
25,578
921
1,714
28,178
2,416
(32) $
(224)
26
(1,236)
(1,466)
(38)
65
(78)
(216)
(267)
560
248 $
8,520
728
1,119
10,615
(5)
1,582
31
768
2,376
—
216
8,296
754
(117)
9,149
(43)
1,647
(47)
552
2,109
560
11,818
39,408
Change in Interest Paid on Interest-bearing Liabilities
20,993
82,530
103,523
(1,173)
12,991
Change in Net Interest Income
(1)Nonaccruing loans are included in the daily average loan amounts outstanding.
(2)Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent.
(3)Taxable investment income is adjusted for the dividend-received deduction for equity securities.
(4)Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.
43,812 $
(9,687) $
34,124
$
$
3,930 $
35,478 $
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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Provision for Credit Losses
The provision for credit losses includes a provision for losses on loans and on unfunded commitments. The provision for
credit losses fluctuates based on changes in loan balances, risk ratings, net loan charge-offs/recoveries, the macro environment
and our Current Expected Credit Loss, or CECL, forecast. The provision for credit losses increased $9.5 million to $17.9
million for 2023 compared to $8.4 million for 2022. The provision for credit losses included a reduction of $1.4 million for the
reserve for unfunded commitments for 2023 compared to an increase of $3.0 million for 2022.
The increase in the provision for credit losses for 2023 compared to 2022 was primarily due to increases in net loan charge-
offs and our qualitative reserve. Net loan charge-offs for 2023 were $13.2 million, or 0.18 percent of average loans, compared
to $2.6 million, or 0.04 percent of average loans for 2022. Offsetting loan charge-offs during 2023 were $11.5 million of loan
recoveries which included a $9.3 million recovery related to a 2020 customer fraud compared to $9.0 million of loan recoveries
during 2022. The increase in qualitative reserve was primarily due to deterioration in the CRE Price Index and our qualitative
reserve capturing additional expected losses in commercial loans that are not included in the model. Offsetting the increase in
provision for credit losses during 2023 was a $4.4 million decrease in the provision for unfunded loan commitments primarily
due to a decrease in loss rates and unused commitments in the construction portfolio.
Refer to the "Credit Quality" section of this MD&A for further details.
Noninterest Income
(dollars in thousands)
Net gain on sale of securities
Debit and credit card
Service charges on deposit accounts
Wealth management
Mortgage banking
Other noninterest income
Total Noninterest Income
NM - not meaningful
Years Ended December 31,
Twelve Months Ended December 31,
2023
2022
$ Change % Change
$
—
$
198
$
(198)
(100.0) %
18,248
19,008
16,193
16,829
12,186
12,717
1,164
9,829
2,215
7,292
(760)
(636)
(531)
(4.0) %
(3.8) %
(4.2) %
(1,051)
(47.4) %
2,537
34.8 %
(1.1) %
$ 57,620
$ 58,259
$
(639)
Noninterest income decreased $0.6 million to $57.6 million compared to $58.2 million in 2022. Mortgage banking income
decreased $1.1 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated
mortgage loans on the balance sheet. Debit and credit card income decreased by $0.8 million due to decreased customer
activity. Service charges on deposit accounts decreased by $0.6 million due to decreases in returned check and the elimination
of non-sufficient funds, or NSF, fees. Other noninterest income increased $2.5 million primarily related to a $3.3 million
increase in the fair value of assets in a nonqualified benefit plan, which has a corresponding offset in salaries and benefits
resulting in no impact to net income, and an increase in net gain on the sale of OREO of $0.8 million, partially offset by a $0.7
million decrease in the valuation of our commercial loan swaps and a $0.8 million decrease in fees on our commercial loan
swaps.
Noninterest Expense
(dollars in thousands)
Salaries and employee benefits
Data processing and information technology
Occupancy
Furniture, equipment and software
Professional services and legal
Other taxes
Marketing
FDIC insurance
Loan-related expense
Other
Total Noninterest Expense
Years Ended December 31,
2023
2022
$ Change % Change
$ 111,462
$ 103,221
$
8,241
17,437
14,814
12,912
7,823
6,813
6,488
4,122
5,391
16,918
14,812
11,606
8,318
6,620
5,600
2,854
3,337
23,072
23,460
519
2
1,306
(495)
193
888
1,268
2,054
(388)
8.0 %
3.1 %
— %
11.3 %
(6.0) %
2.9 %
15.9 %
44.4 %
61.6 %
(1.7) %
$ 210,334
$ 196,746
$ 13,588
6.9 %
Noninterest expense increased $13.6 million to $210.3 million compared to $196.7 million in 2022. Salaries and employee
benefits increased $8.2 million during 2023 primarily due to inflationary wage pressure, the acquisition of new talent, higher
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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medical costs and an increase in the fair value of assets in a nonqualified benefit plan, partially offset by a decrease in
incentives. Loan-related expense increased $2.1 million primarily due to an increase in loan collection and legal expenses for
the workout of criticized and classified loans. Furniture, equipment and software expense increased $1.3 million mainly due to
new software implemented in 2023. FDIC insurance increased $1.3 million due to a two basis point increase in the assessment
rate.
Provision for Income Taxes
The provision for income taxes increased $0.6 million to $34.0 million in 2023 compared to $33.4 million for 2022. The
increase in our income tax provision was primarily due to a $9.9 million increase in income before taxes in 2023 compared to
2022.
The effective tax rate, which is total tax expense as a percentage of income before taxes, decreased to 19.0 percent in 2023
compared to 19.8 percent in 2022. The decrease in the effective tax rate was primarily due to an increase in LIHTCs in 2023
compared to 2022. We have generated an annual effective tax rate that is less than the statutory rate of 21 percent due to
benefits resulting from tax-exempt interest, excludable dividend income, tax-exempt income on Bank Owned Life Insurance, or
BOLI, and tax benefits associated with LIHTCs.
Financial Condition as of December 31, 2023
Total assets increased $441.0 million to $9.6 billion at December 31, 2023 compared to $9.1 billion at December 31, 2022.
Total portfolio loans increased $469.4 million to $7.7 billion at December 31, 2023 compared to $7.2 billion at December 31,
2022. The increase in loans is primarily related to consumer loan growth of $352.9 million with an increase in consumer real
estate of $362.9 million compared to December 31, 2022. The commercial loan portfolio increased $116.5 million at
December 31, 2023 compared to December 31, 2022 due to an increase of $229.4 million in CRE loans offset by decreases of
$76.9 million in C&I and $36.1 million in construction.
Securities remained relatively unchanged at $970.4 million at December 31, 2023 compared to $1.0 billion at
December 31, 2022. The bond portfolio was in a net unrealized loss position of $82.0 million at December 31, 2023 compared
to a net unrealized loss position of $102.3 million at December 31, 2022. The decrease in the net unrealized loss portion of the
bond portfolio of $20.3 million was due to a change in interest rates.
Our deposits increased $301.8 million to $7.5 billion at December 31, 2023 compared to $7.2 billion at December 31,
2022. The increase related to the addition of $375.7 million of brokered deposits, including $200.7 million of brokered money
market accounts and $175.0 million of brokered certificates of deposit. Customer deposits decreased $73.9 million compared to
the prior year with decreases in noninterest-bearing demand deposits of $366.8 million and savings of $168.0 million partially
offset by an increase in certificates of deposit of $472.1 million. Customer deposits decreased primarily due to lower
commercial and consumer deposits due to the competitive pricing in this higher interest rate environment. Additionally,
noninterest-bearing demand decreased due to the shift into interest-bearing deposits as a result of the elevated interest rate
environment.
Total borrowings increased $64.4 million to $503.6 million at December 31, 2023 compared to $439.2 million at
December 31, 2022 primarily due to loan growth.
Total shareholders’ equity increased by $98.8 million to $1.3 billion at December 31, 2023 compared to $1.2 billion at
December 31, 2022. The increase was primarily due to net income of $144.8 million and other comprehensive income of $21.2
million, offset by dividends of $49.9 million and common stock repurchases of $20.0 million.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Securities Activity
The balances and average rates of our securities portfolio are presented below as of December 31:
(dollars in thousands)
U.S. Treasury securities
Obligations of U.S. government corporations
and agencies
Collateralized mortgage obligations of U.S.
government corporations and agencies
Residential mortgage-backed securities of U.S.
government corporations and agencies
Commercial mortgage-backed securities of
U.S. government corporations and agencies
Corporate obligations
Obligations of states and political subdivisions
Available-for-Sale Debt Securities
Equity securities
2023
2022
2021
Balance
Weighted-
Average
Yield
Balance
Weighted-
Average
Yield
Balance
Weighted-
Average
Yield
$
133,786
1.71 %
$
131,695
1.71 %
$
95,327
1.26 %
32,513
2.28 %
41,811
2.32 %
70,348
2.29 %
460,939
3.04 %
428,407
2.56 %
270,294
1.97 %
38,177
1.86 %
41,587
1.86 %
56,793
1.57 %
273,425
—
30,468
969,308
1,083
2.42 %
— %
3.34 %
3.06 %
2.62 %
327,313
500
30,471
1,001,784
994
$ 1,002,778
2.28 %
7.67 %
3.35 %
3.32 %
2.34 %
341,300
500
75,089
909,651
1,142
$
910,793
2.09 %
3.22 %
3.28 %
2.93 %
2.05 %
Total Securities Available for Sale
$
970,391
We invest in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to
increase net interest income and as a tool of ALCO to reposition the balance sheet for interest rate risk purposes. Securities are
subject to market risks that could negatively affect the level of liquidity available to us. Security purchases are subject to an
investment policy approved annually by our Board of Directors and administered through ALCO and our treasury function. Our
securities portfolio represents 10.2 percent of total assets and is classified as available for sale.The portfolio primarily consists
of structured agency backed fixed income securities with limited credit exposure. Securities decreased $32.4 million to $970.4
million at December 31, 2023 compared to $1.0 billion at December 31, 2022.
At December 31, 2023, our bond portfolio was in a net unrealized loss position of $82.0 million compared to a net
unrealized loss position of $102.3 million at December 31, 2022. At December 31, 2023, our bond portfolio had gross
unrealized losses of $83.8 million offset by $1.8 million in gross unrealized gains, compared to December 31, 2022, when total
gross unrealized losses were $102.6 million offset by gross unrealized gains of $0.3 million.
Management evaluates the securities portfolio to determine if an ACL is needed each quarter. We did not record an ACL
related to the securities portfolio at December 31, 2023 or December 31, 2022. The unrealized losses on debt securities were
primarily attributable to changes in interest rates and not related to the credit quality of these securities. All debt securities were
determined to be investment grade and paying principal and interest according to the contractual terms of the security at
December 31, 2023. We do not intend to sell and it is more likely than not that we will not be required to sell any of the
securities in an unrealized loss position before recovery of their amortized cost. We did not recognize any impairment charges
on our securities portfolio in 2023, 2022 or 2021. The securities portfolio could generate impairments in future periods
requiring realized losses to be reported.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth the maturities of securities at December 31, 2023 and the weighted average yields of such
securities. Taxable-equivalent adjustments for 2023 have been made in calculating yields on obligations of state and political
subdivisions.
(dollars in thousands)
Available-for-Sale
U.S. Treasury securities
Obligations of U.S. government corporations and
agencies
Collateralized mortgage obligations of U.S.
government corporations and agencies
Residential mortgage-backed securities of U.S.
government corporations and agencies
Commercial mortgage-backed securities of U.S.
government corporations and agencies
Obligations of states and political subdivisions (1)
Corporate bonds
Marketable equity securities
Total
Maturing
Within
One Year
After
One But within
Five Years
After
Five But Within
Ten Years
After
Ten Years
No Fixed
Maturity
Amount
Yield Amount
Yield Amount
Yield Amount
Yield Amount
Yield
$ —
— % $ 133,786
1.71 % $ —
— % $ —
— % $ —
— %
17,719
2.40 % 14,794
2.14 %
—
— %
—
— %
—
— % 11,127
2.86 % 48,724
3.66 % 401,088
2.97 %
8
5.00 %
1,458
2.79 %
—
— % 36,711
1.82 %
41,495
2.61 % 171,483
2.11 % 60,447
3.16 %
—
— %
— %
2,656
3.22 % 16,368
3.48 % 11,444
3.18 %
—
—
—
— %
— %
—
—
— %
— %
—
—
— %
— %
—
—
— %
— %
1,083
3.06 %
$ 59,222
$ 335,304
$ 125,539
$ 449,243
$ 1,083
—
—
—
—
—
—
— %
— %
— %
— %
— %
— %
Weighted Average Yield
(1) Weighted-average yields are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent for 2023.
1.99 %
3.40 %
2.55 %
2.88 %
3.06 %
Lending Activity
The following table summarizes our loan portfolio as of December 31:
2023
2022
2021
2020
2019
(dollars in thousands)
Amount
Commercial
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
Commercial real estate
$ 3,357,603
43.9 % $ 3,128,187
43.5 % $ 3,236,653
46.2 % $ 3,244,974
44.9 % $ 3,416,518
47.9 %
Commercial and industrial
1,642,106
21.5 % 1,718,976
23.9 % $ 1,728,969
24.7 % $ 1,954,453
27.0 % $ 1,720,833
24.1 %
Commercial construction
363,284
4.7 % 399,371
5.6 % 440,962
6.3 % 474,280
6.6 % 375,445
5.3 %
Total Commercial Loans
5,362,993
70.1 % 5,246,534
73.0 % 5,406,584
77.2 % 5,673,706
78.5 % 5,512,796
77.2 %
Consumer
Consumer real estate
2,175,451
28.4 % 1,812,539
25.2 % 1,485,478
21.2 % 1,471,238
20.4 % 1,545,323
21.7 %
Other consumer
114,897
1.5 % 124,896
1.7 % 107,928
1.5 %
80,915
1.1 %
79,033
1.1 %
Total Consumer Loans
2,290,348
29.9 % 1,937,435
27.0 % 1,593,406
22.8 % 1,552,153
21.5 % 1,624,356
22.8 %
Total Portfolio Loans
$ 7,653,341
100.0 % $ 7,183,969
100.0 % $ 6,999,990
100.0 % $ 7,225,859
100.0 % $ 7,137,152
100.0 %
The loan portfolio represents the most significant source of interest income for us. The risk that borrowers will be unable to
pay such obligations is inherent in the loan portfolio. Other conditions such as downturns in the borrower’s industry or the
overall economic climate can significantly impact the borrower’s ability to pay.
We maintain a General Lending Policy to control the quality of our loan portfolio. The policy delegates the authority to
extend loans under specific guidelines and underwriting standards. The General Lending Policy is formulated by management
and reviewed and ratified annually by the Board of Directors.
We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and
industry and actively managing concentrations. When concentrations exist in certain segments, we assess the credit risk within
those segments to determine if additional reserve is needed in the qualitative portion of the ACL. Total commercial loans
represented 70.1 percent of total portfolio loans at December 31, 2023 compared to 73.0 percent at December 31, 2022. Within
our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 69.4 percent, of
total commercial loans and 48.6 percent of total portfolio loans at December 31, 2023 compared to $3.5 billion, or 67.2 percent,
of total commercial loans and 49.1 percent of total portfolio loans at December 31, 2022.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Our multi-family and office segments are the most significant CRE and commercial construction concentrations for us. The
multi-family segment was $658.9 million, or 8.6 percent of total portfolio loans at December 31, 2023 compared to $568.3
million, or 7.9 percent at December 31, 2022. Criticized and classified loans in the multi-family segment are minimal at only
$7.4 million at December 31, 2023. The office segment represents $516.5 million, or 6.7 percent of total portfolio loans at
December 31, 2023 compared to $511.8 million, or 7.1 percent at December 31, 2022. Criticized and classified loans in the
office segment were only $11.6 million at December 31, 2023. Approximately 85 percent of the office portfolio is located in
non central business districts, or CBD, with the remaining 15 percent in CBD within our direct markets. We completed a target
review of the office portfolio in the third quarter of 2023 and did not identify any material credit risk.
We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware
and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in these states
resulting in a geographic concentration. We believe our knowledge of these markets outweighs the geographic concentration
risk. Our operating knowledge at the local and regional level is derived from our front-line connection to the customer and our
understanding of their businesses. We also have a portfolio management group that utilizes multiple data sources including
customer information, publicly available data and subscription service data to assess risk on an on-going basis and strong
overall risk management practices which help us understand and evaluate concentration risk. Our CRE and commercial
construction portfolios have exposure outside this geography of 3.9 percent of the combined portfolios and 1.9 percent of total
portfolio loans at December 31, 2023. This compares to 5.8 percent of the combined portfolios and 2.9 percent of total portfolio
loans at December 31, 2022.
Total portfolio loans increased $469.4 million, or 6.5 percent, to $7.7 billion at December 31, 2023 compared to $7.2
billion at December 31, 2022. As of December 31, 2023, 65.0 percent of our total loans were variable rate loans and 35.0
percent were fixed rate loans.
Commercial loans increased $116.5 million related to an increase of $229.4 million in CRE offset by decreases of $76.9
million in C&I and $36.1 million in commercial construction compared to December 31, 2022. Our loan demand was
influenced by the uncertain macroeconomic environment during 2023.
Consumer loans represent 29.9 percent of our total portfolio loans at December 31, 2023 and 27.0 percent at December 31,
2022. Consumer loans increased $352.9 million compared to December 31, 2022 primarily due to an increase of $343.2 million
in the residential real estate portfolio and $19.7 million in consumer construction. Portfolio consumer real estate loans increased
in 2023 based on a shift from mortgage loans sold to loans held in the portfolio on our balance sheet due to increased jumbo
loans and the pricing of loans in the secondary market compared to December 31, 2022.
We originate traditional fixed rate mortgage loans and adjustable rate mortgages with a maximum amortization term of 30
years. The loan to value, or LTV, policy guideline is 80 percent for residential first lien mortgages. Higher LTV loans may be
approved within unique program guidelines. We may originate home equity loans with a lien position that is second to
unrelated third-party lenders, but normally only to the extent that the combined LTV considering both the first and second liens
does not exceed 100 percent of the fair value of the property. Combo mortgage loans consisting of a residential first mortgage
and a home equity second mortgage are also available.
We typically originate and sell loans into the secondary market, primarily to Fannie Mae. We sell these loans in order to
mitigate interest-rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to
generate fee revenue from sales and servicing of the loans. During 2023, our strategy changed whereby we held more
mortgages on our balance sheet versus selling these loans in the secondary market. This shift in strategy was mainly due to loan
pricing in the secondary market and the desire to reduce our variable rate loan exposure in this interest rate environment. We
continue to monitor this strategy and could shift back to selling more residential mortgages into the secondary market in future
periods. We sold $0.2 million of 1-4 family mortgages in 2023 and $28.6 million in 2022 to Fannie Mae. Our servicing
portfolio of mortgage loans that we had originated and sold into the secondary market was $707.8 million at December 31,
2023 compared to $772.9 million at December 31, 2022. We also offer a variety of unsecured and secured consumer loan
products.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table presents the maturity of commercial and consumer loans outstanding as of December 31, 2023:
Maturity
Within One
Year
After One But
Within Five
Years
After Five Years
through 15 years
After 15 years
$
$
$
$
$
307,894
824,171
1,132,065
183,841
191,615
375,456
1,507,521
$
$
$
$
$
833,408
1,958,597
2,792,005
525,698
441,854
967,552
3,759,557
$
$
$
$
$
391,828
972,491
1,364,319
330,538
438,758
769,296
2,133,615
$
$
$
$
$
5,750
68,854
74,604
88,373
89,671
178,044
252,648
$
$
$
$
$
Total
1,538,880
3,824,113
5,362,993
1,128,450
1,161,898
2,290,348
7,653,341
(dollars in thousands)
Fixed interest rates
Variable interest rates
Total Commercial Loans
Fixed interest rates
Variable interest rates
Total Consumer Loans
Total Portfolio Loans
Off Balance Sheet Arrangements
In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their
financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the financial statements. Our exposure to credit loss, in the event the customer does not satisfy the terms
of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the same credit
policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers.
Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a
fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
The following table sets forth our commitments and letters of credit as of the dates presented:
(dollars in thousands)
Commitments to extend credit
Standby letters of credit
Total
December 31,
2023
2022
$ 2,566,154
$ 2,713,586
61,889
64,356
$ 2,628,043
$ 2,777,942
See Note 16 Commitments and Contingencies in Part II, Item 8. Financial Statements and Supplementary Data of this
Report for details on allowance for credit losses on unfunded commitments.
Credit Quality
On a quarterly basis, a criticized asset meeting is held to monitor all special mention and substandard loans greater than
$1.5 million and all business banking special mention and substandard loans greater than $0.5 million to establish action plans
for these loans. These loans typically represent the highest risk of loss to us. We monitor these loans through regular contact
with the borrower, review of current financial information and other documentation, review of all loan or potential loan
restructures or modifications and the regular re-evaluation of assets held as collateral.
Additional credit risk management practices include periodic review, at least annually, and updates of our lending policies
and procedures to support sound underwriting practices and portfolio management through portfolio stress testing. We have a
portfolio monitoring group that performs an annual review of all commercial relationships greater than $1.5 million and a
quarterly review of our Watch rated portfolio. Business banking relationships less than $1.5 million are monitored through
portfolio management software that identifies credit risk indicators. Our credit risk review process serves to independently
monitor credit quality and assess the effectiveness of credit risk management practices to provide oversight of all corporate
lending activities. The credit risk review function has the primary responsibility for assessing commercial credit administration
and credit decision functions of consumer and mortgage underwriting, as well as providing input to the loan risk rating process.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Nonperforming assets, or NPAs, consist of nonaccrual loans and OREO. The following represents NPAs as of December
31:
(dollars in thousands)
Nonaccrual Loans
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Total Nonaccrual Loans
OREO
Total Nonperforming Assets
Nonaccrual loans as a percent of total loans
Nonperforming assets as a percent of total loans plus OREO
2023
2022
$
$
7,267
3,244
4,960
7,146
330
22,947
75
$
23,022
$
0.30 %
0.30 %
7,323
2,974
384
8,093
278
19,052
3,065
22,117
0.27 %
0.31 %
Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or
generally when interest or principal payments are 90 days or more past due.
Nonperforming assets increased $0.9 million, or 4.1 percent, resulting in a nonperforming assets to total loans plus OREO
ratio of 0.30% at December 31, 2023 compared to 0.31% at December 31, 2022. Nonaccrual loans increased $3.9 million, or
20.4 percent, to $22.9 million at December 31, 2023 compared to $19.1 million at December 31, 2022. The decrease in OREO
related to the sale of a commercial property that resulted in a gain on sale of OREO of $3.9 million, which is included in other
noninterest income.
The following represents delinquency as of December 31:
(dollars in thousands)
90 days or more:
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Total Loans
30 to 89 days:
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Total Loans
2023
2022
Amount
% of
Loans
Amount
% of
Loans
$
7,267
0.22 %
$ 7,323
0.23 %
3,244
0.20 %
2,974
0.17 %
4,960
1.37 %
384
0.10 %
7,146
0.33 %
8,093
0.45 %
330
0.29 %
278
0.22 %
$ 22,947
0.30 % $ 19,052
0.27 %
$
7,665
0.23 %
$ 8,772
0.28 %
710
0.04 %
5,076
0.30 %
22
0.01 %
—
— %
6,295
0.29 %
6,268
0.35 %
429
0.37 %
225
0.18 %
$ 15,121
0.20 % $ 20,341
0.28 %
Closed-end installment loans, amortizing loans secured by real estate and any other loans with payments scheduled
monthly are reported past due when the borrower is in arrears two or more monthly payments. Other multi-payment obligations
with payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days
or more. We monitor delinquency on a monthly basis, including early-stage delinquencies of 30 to 89 days past due for early
identification of potential problem loans. Loans past due 90 days or more increased $3.9 million compared to December 31,
2022 and represented 0.30 percent of total loans at December 31, 2023. Loans past due by 30 to 89 days decreased $5.2 million
and represented 0.20 percent of total loans at December 31, 2023.
Allowance for Credit Losses
We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan
portfolio over the contractual life of a loan that considers our historical loss experience, current conditions and forecasts of
future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on
40
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
the following portfolio segments: 1) CRE, 2) C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate
and 6) Other Consumer.
Our charge-off policy for commercial loans requires that loans and other obligations that are not collectible be promptly
charged-off when the loss is confirmed, regardless of the delinquency status of the loan. We may elect to recognize a partial
charge-off when management has determined that the value of collateral or present value of expected future cash flows is less
than the remaining investment in the loan. A loan or obligation does not need to be charged-off, regardless of delinquency
status, if (i) management has determined that sufficient collateral exists to protect the remaining loan balance and a strategy
exists to liquidate the collateral, or (ii) management has determined that the present value of expected future cash flows is
sufficient to protect the remaining loan balance. Management may also consider a number of other factors to determine when a
charge-off is appropriate. These factors may include, but are not limited to:
The status of a bankruptcy proceeding;
The value of collateral and probability of successful liquidation; and/or
The status of adverse proceedings or litigation that may result in collection.
•
•
•
Consumer loans are evaluated for charge-off after the loan becomes 90 days past due. Unsecured loans are fully charged
off and secured loans are charged down to the estimated fair value of the collateral less the cost to sell.
The following table presents activity in the ACL for each of the three years presented below:
(dollars in thousands)
ACL Balance at Beginning of Year:
Charge-offs:
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Total
Recoveries:
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Total
Net Charge-offs
Impact of adoption of ASU 2022-02
Provision for credit losses
ACL Balance at End of Year:
Years Ended December 31,
2023
2022
2021
$
101,340
$
98,576
$
117,612
(1,706)
(20,535)
(451)
(446)
(1,500)
(24,638)
1,084
9,796
2
214
360
11,456
(13,182)
568
19,240
(1,820)
(7,801)
—
(621)
(1,375)
(11,617)
1,052
7,366
1
203
400
9,022
(2,595)
—
5,359
$
107,966
$
101,340
$
(13,493)
(22,305)
(55)
(719)
(952)
(37,524)
1,196
822
14
310
652
2,994
(34,530)
—
15,494
98,576
Net loan charge-offs for 2023 were $13.2 million, or 0.18 percent of average loans, compared to $2.6 million, or 0.04
percent of average loans for 2022. The most significant charge-offs during 2023 were for three C&I relationships totaling $16.9
million. Offsetting loan charge-offs during 2023 were $11.5 million of loan recoveries, which included a $9.3 million recovery
related to a 2020 customer fraud compared to $9.0 million of loan recoveries during 2022.
The following table summarizes net charge-offs as a percentage of average loans for the years presented:
Commercial real estate
Commercial and industrial
Commercial construction
Consumer real estate
Other consumer
Net charge-offs to average loans outstanding
Allowance for credit losses as a percentage of total portfolio loans
Allowance for credit losses to total nonaccrual loans
Provision for credit losses as a percentage of net loan charge-offs
41
2023
0.02 %
0.64 %
0.12 %
0.01 %
0.97 %
0.18 %
1.41 %
471 %
146 %
2022
0.02 %
0.03 %
— %
0.03 %
0.81 %
0.04 %
1.41 %
532 %
207 %
2021
0.38 %
1.17 %
0.01 %
0.03 %
0.33 %
0.49 %
1.41 %
149 %
45 %
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is the ACL balance by portfolio segment as of December 31:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
2023
2022
Amount
% of
Total
Amount
$ 37,886
35.1 % $ 41,428
34,538
32.0 %
25,710
5,382
12,858
14,663
2,639
5.0 %
6,264
11.9 %
12,547
13.6 %
12,105
2.4 %
3,286
% of
Total
40.9 %
25.4 %
6.2 %
12.4 %
11.9 %
3.2 %
$ 107,966
100.0 % $ 101,340
100.0 %
Significant to our ACL is a higher concentration of commercial loans. The ability of borrowers to repay commercial loans
is dependent upon the success of their business and general economic conditions. Due to the greater potential for loss within our
commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are
assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal
policies. Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high
quality, performing loans, and require attention from management to limit loss.
The ACL was $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023, compared to $101.3 million,
or 1.41 percent of total portfolio loans, at December 31, 2022. The increase in the ACL of $6.7 million was primarily due to a
$7.7 million increase in our qualitative reserve mainly related to deterioration in the Commercial Real Estate Price Index and a
higher C&I segment specific reserve which captures additional expected losses that are not included in the quantitative model.
Our quantitative reserve decreased $1.0 million primarily due to a reduction in criticized and classified loans mainly in our CRE
healthcare and CRE hotel portfolios partially offset by higher C&I substandard loans and loan growth during 2023.
Federal Home Loan Bank and Other Restricted Stock
At December 31, 2023, we held FHLB of Pittsburgh stock of $24.0 million compared to $22.0 million at December 31,
2022. This investment is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. We
hold FHLB stock because we are a member of the FHLB of Pittsburgh. The FHLB requires members to purchase and hold a
specified level of FHLB stock based upon the members’ asset values, level of borrowings and participation in other programs
offered. Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB. Members do not purchase stock
in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather,
members purchase stock to obtain access to the products and services offered by the FHLB. Unlike equity securities of
traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation
because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value. We reviewed and evaluated
the FHLB capital stock for impairment at December 31, 2023. The FHLB exceeds all required capital ratios. Additionally, we
considered that the FHLB has been paying dividends and actively redeeming stock throughout 2023 and 2022. Accordingly, we
believe sufficient evidence exists to conclude that no impairment existed at December 31, 2023.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Deposits
Deposits are our primary source of funds. We have a well-diversified deposit base with a balance mix of 56.4 percent
personal, 34.1 percent business, 4.5 percent public funds and 5.0 percent brokered at December 31, 2023.
(dollars in thousands)
Amount
% of Deposits
Amount
% of Deposits
$ Change
% Change
December 31, 2023
December 31, 2022
Personal
Business
Public funds
Brokered
Total Deposits
$
4,244,386
2,565,853
335,876
375,654
56.4 % $
34.1 %
4.5 %
5.0 %
4,171,701
2,666,995
381,274
—
57.8 % $
72,685
36.9 %
5.3 %
— %
(101,142)
(45,398)
375,654
301,799
1.0 %
(1.4) %
(0.6) %
5.2 %
4.2 %
$
7,521,769
100.0 % $
7,219,970
100.0 % $
The following table presents the composition of deposits at December 31:
(dollars in thousands)
Customer deposits
Noninterest-bearing demand
Interest-bearing demand
Money market
Savings
Certificates of deposit
Total customer deposits
Brokered deposits
Money market
Certificates of deposit
Total brokered deposits
Total Deposits
2023
2022
$ Change
$ 2,221,942
$ 2,588,692
$
(366,750)
825,787
1,741,189
950,546
1,406,652
7,146,116
200,653
175,000
375,653
846,653
1,731,521
1,118,511
934,593
7,219,970
—
—
—
(20,866)
9,668
(167,965)
472,059
(73,854)
200,653
175,000
375,653
$ 7,521,769
$ 7,219,970
$
301,799
Total deposits increased $301.8 million, or 4.18 percent, at December 31, 2023 compared to December 31, 2022. Total
customer deposits decreased $73.9 million from December 31, 2022 primarily due to lower commercial and consumer deposits
due to the competitive pricing in this higher interest rate environment. Additionally, noninterest-bearing demand decreased due
to the shift into interest-bearing deposits as a result of the elevated interest rate environment. Total brokered deposits increased
$375.7 million from December 31, 2022. Brokered deposits are an additional source of funds utilized by ALCO as a way to
diversify funding sources, as well as manage our funding costs and structure.
As a member of the IntraFi network, we are able to offer our customers insurance coverage on interest-bearing demand,
money market and certificate of deposit balances in excess of the FDIC insurance limits. IntraFi balances increased $210.4
million to $277.7 million at December 31, 2023 compared to $67.3 million at December 31, 2022.
We have total uninsured deposits of $2.3 billion, or 30.0 percent of our total deposit base, compared to $2.5 billion, or 34.0
percent, at December 31, 2022. Included in uninsured deposits is $296.0 million, or 4.0 percent of our total deposit base, of
municipal deposits which are fully collateralized.
The daily average balance of deposits and rates paid on deposits are summarized in the following table for the years ended
December 31:
(dollars in thousands)
Noninterest-bearing demand
Interest-bearing demand
Money market
Savings
Certificates of deposit
Brokered deposits
Total
2023
Amount
$ 2,349,919
844,588
1,638,947
1,020,314
1,226,989
114,322
Rate
—
0.72 %
2.28 %
0.43 %
3.17 %
5.43 %
2022
Amount
$ 2,705,210
918,222
1,909,209
1,121,818
991,396
2,323
Rate
—
0.11 %
0.63 %
0.10 %
0.58 %
2.10 %
2021
Amount
$ 2,594,152
956,211
2,026,083
1,047,855
1,246,499
16,419
$ 7,195,079
1.29 % $ 7,648,178
0.26 % $ 7,887,219
Rate
—
0.08 %
0.18 %
0.03 %
0.46 %
1.15 %
0.14 %
CDs of $250,000 and over accounted for 4.7 percent and 3.0 percent of total deposits at December 31, 2023 and December
31, 2022. These primarily represent deposit relationships with local customers in our market area.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Maturities of CDs of $250,000 or more outstanding at December 31, 2023 are summarized as follows:
(dollars in thousands)
Three months or less
Over three through six months
Over six through twelve months
Over twelve months
Total
Borrowings
(dollars in thousands)
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
Total Borrowings
2023
$
199,437
60,757
61,953
28,580
$
350,727
December 31, 2023
December 31, 2022
$ Change
$
415,000
$
370,000
$
39,277
49,358
14,741
54,453
45,000
24,536
(5,095)
$
503,635
$
439,194
$
64,441
Borrowings are an additional source of funding for us. Total borrowings increased $64.4 million to $503.6 million
compared to $439.2 million at December 31, 2022 primarily due to loan growth.
Information pertaining to short-term borrowings is summarized in the table below for the years ended December 31, 2023
and December 31, 2022.
(dollars in thousands)
Balance at the period end
Average balance during the period
Average interest rate during the period
Maximum month-end balance during the period
Average interest rate at the period end
Short-Term Borrowings
2023
2022
415,000
500,421
5.44 %
630,000
5.65 %
$
$
$
370,000
40,013
4.15 %
370,000
4.49 %
$
$
$
Information pertaining to long-term borrowings and junior subordinated debt securities is summarized in the tables below
for the years ended December 31, 2023 and December 31, 2022.
(dollars in thousands)
Balance at the period end
Average balance during the period
Average interest rate during the period
Maximum month-end balance during the period
Average interest rate at the period end
(dollars in thousands)
Balance at the period end
Average balance during the period
Average interest rate during the period
Maximum month-end balance during the period
Average interest rate at the period end
Long-Term Borrowings
2023
2022
39,277
31,706
4.20 %
39,589
4.52 %
$
$
$
14,741
19,090
2.15 %
22,344
2.61 %
Junior Subordinated Debt Securities
2023
2022
49,358
52,215
7.87 %
54,483
7.98 %
$
$
$
54,453
54,421
4.40 %
54,453
7.09 %
$
$
$
$
$
$
In 2023, we redeemed $5.0 million of junior subordinated debt securities, along with $0.2 million in common equity issued
by DNB Capital Trust I and held by us.
44
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Wealth Management Assets
The fair value of the S&T Bank Wealth Management assets under administration, which are not accounted for as part of
our assets, remained unchanged at $2.2 billion at December 31, 2023 and December 31, 2022. Assets under administration
consisted of $1.0 billion in S&T Trust, $1.0 billion in S&T Financial Services and $0.2 billion in Stewart Capital Advisors.
Liquidity and Capital Resources
Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. Our
primary future cash needs are centered on the ability to (i) satisfy the financial needs of depositors who may want to withdraw
funds or of borrowers needing to access funds to meet their credit needs and (ii) to meet our future cash commitments under
contractual obligations with third parties. In order to manage liquidity risk, our Board of Directors has delegated authority to
ALCO for the formulation, implementation and oversight of liquidity risk management for S&T. The ALCO’s goal is to
maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for
potential liquidity stress events. The ALCO monitors and manages liquidity through various ratios, reviewing cash flow
projections, performing stress tests and having a detailed contingency funding plan. The ALCO policy guidelines define
graduated risk tolerance levels. If our liquidity position moves to a level that has been defined as high risk, specific actions are
required, such as increased monitoring or the development of an action plan to reduce the risk position.
Our primary funding and liquidity source is a stable customer deposit base. We believe S&T has the ability to retain
existing deposits and attract new deposits, mitigating any funding dependency on other more volatile funding sources. Refer to
the "Financial Condition as of December 31, 2023 - Deposits" section of this MD&A, for additional discussion on deposits.
Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of
our normal funding program. Additional funding sources accessible to S&T include borrowing availability at the Federal Home
Loan Bank of Pittsburgh, or FHLB, federal funds lines with other financial institutions and the brokered deposit market.
Additionally, S&T has borrowing availability through the Federal Reserve Borrower-in-Custody Program and the Federal
Reserve BTFP.
In response to recent bank failures, the Federal Reserve authorized additional funding availability to eligible depository
institutions through the BTFP. The program is intended to help assure depositors that their institutions have an additional source
of liquidity to meet their needs. Under the BTFP, any collateral eligible for purchase by the Federal Reserve Banks in open
market operations can be pledged including U.S. Treasury securities, U.S. Agencies and U.S. Agency mortgage-backed
securities. Collateral advances will be equal to 100 percent of the par value of the collateral pledged with a term of up to one
year. Interest was charged at a fixed rate equal to the one-year overnight index swap rate plus 10 basis points with no
prepayment penalty. The rate on new advances, beginning on January 25, 2024, is set to be no lower than the interest rate on
reserve balances in effect on the day the loan is made. As of December 31, 2023, we have $637.0 million of collateral available
to pledge under the program and no outstanding balance. The Federal Reserve has announced that it is ending the BTFP and
will cease making new loans under this program on March 11, 2024.
Available borrowing capacity exceeds uninsured deposits of $2.3 billion at December 31, 2023 and $2.5 billion at
December 31, 2022. The following table summarizes borrowing funding sources available as of the dates presented:
December 31, 2023
December 31, 2022
(dollars in thousands)
FHLB
Borrower-in-Custody Program
Federal Reserve BTFP(1)
$
$
$
Borrowing
Capacity
Balance
Available
Borrowing
Capacity
Balance
Available
3,241,098 $
552,136 $
2,688,962 $
2,925,614 $
491,288 $
2,434,326
769,653 $
636,963 $
— $
— $
769,653
636,963
839,836
—
—
—
839,836
—
Total
(1) Emergency lending program created by the Federal Reserve in March 2023.
4,647,714 $
552,136 $
$
4,095,578 $
3,765,450 $
491,288 $
3,274,162
At December 31, 2023, we had available borrowing capacity of $4.1 billion, of which $2.7 billion was remaining
borrowing availability with the FHLB of Pittsburgh. We believe that these funding sources will provide adequate resources to
fund our short-term and long-term operating and financing needs. In addition, our ability to access capital markets provides
additional sources of funding with respect to strategic investing opportunities. Our access to and the availability of funds in the
future will be affected by many factors, including, but not limited to our financial condition and prospects, the liquidity of the
overall capital markets and the current state of the economy.
In the normal course of business, we enter into various contractual obligations, which require future payments that could
impact our liquidity and capital resources. We also utilize interest rate swaps to add stability and manage exposure to interest
rate movements, under which we are required to either receive cash from, or pay cash to, counterparties depending on changes
45
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in interest rates. Derivative contracts are carried at fair value representing the net present value of expected future cash receipts
or payments based on market rates as of the balance sheet date.
The following table summarizes our material contractual obligations as of December 31, 2023:
(dollars in thousands)
Certificates of deposit(1)
Short-term borrowings(1)
Long-term borrowings(1)
Junior subordinated debt securities(1)
Operating and finance leases
Funding commitments on Low Income Housing Partnerships
Total
(1)Excludes interest
2024
2025-2026
2027-2028
Later Years
Payments Due In
1,320,588
239,190
19,099
415,000
38,381
—
4,995
7,262
—
167
—
9,881
4,727
—
187
—
9,302
—
2,775
—
542
49,358
59,550
—
Total
1,581,652
415,000
39,277
49,358
83,728
11,989
$
1,786,226 $
253,965 $
28,588 $
112,225 $
2,181,004
An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of
highly liquid assets. Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet
financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance
levels of minimal, moderate and high. At December 31, 2023, S&T Bank had $897.4 million in highly liquid assets, which
consisted primarily of $160.3 million in interest-bearing deposits with banks and $736.9 million in unpledged securities. This
resulted in a highly liquid assets to total assets ratio of 9.4 percent at December 31, 2023 compared to 9.6 percent at
December 31, 2022. Highly liquid assets have increased by $27.3 million when comparing December 31, 2023 to December 31,
2022. The majority of the increase in liquid assets is attributed to increases in cash balances. Refer to Note 12. Qualified
Affordable Housing, Note 13 Deposits, Note 14 Short Term Borrowings, Note 15 Long Term Borrowings and Subordinated
Debt and Note 7 Right-Of-Use Assets and Lease Liabilities to the consolidated financial statements included in Part II, Item 8.
Financial Statements and Supplementary Data, and the Deposits and Borrowings section of this MD&A, for more details.
Capital Resources
Shareholders’ equity increased $98.8 million, or 8.3 percent, to $1.3 billion at December 31, 2023 compared to $1.2 billion
at December 31, 2022. The increase was primarily due to net income of $144.8 million and other comprehensive income of
$21.2 million, partially offset by dividends of $49.9 million and common stock repurchases of $20.0 million. The other
comprehensive income was primarily due to a $15.9 million improvement in unrealized losses on our available-for-sale debt
securities, net of tax and an improvement of $5.2 million in unrealized losses on our interest rate swaps, net of tax.
We continue to maintain a strong capital position with a leverage ratio of 11.21 percent as compared to the regulatory
guideline of 5.00 percent to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 13.37 percent compared to the
regulatory guideline of 6.50 percent to be well-capitalized. Our risk-based Tier 1 and Total capital ratios were 13.69 percent and
15.27 percent, which places us above the federal bank regulatory agencies’ well-capitalized guidelines of 8.00 percent and
10.00 percent, respectively. Our ratios are also above the required minimum ratios after the capital conservation buffer,
discussed further below, of common equity tier 1 risk-based capital ratio greater than 7.00 percent, tier 1 risk-based capital ratio
greater than 8.50 percent and a total risk-based capital ratio greater than 10.50 percent. We believe that we have the ability to
raise additional capital, if necessary.
On March 27, 2020, the regulators issued interim final rule, or IFR, “Regulatory Capital Rule: Revised Transition of the
Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity from the spread
of COVID-19. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the
estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount
of the capital benefit provided by the initial two-year delay (“five-year transition”). We adopted CECL effective January 1,
2020 and elected to implement the five-year transition.
In July 2013, the federal banking agencies issued a final rule to implement Basel III and the minimum leverage and risk-
based capital requirements of the Dodd-Frank Act. The rule requires a banking organization to maintain a capital conservation
buffer composed of common equity tier 1 capital in an amount greater than 2.50 percent of total risk-weighted assets. Banking
organizations must maintain a common equity tier 1 risk-based capital ratio greater than 7.00 percent, a tier 1 risk-based capital
ratio greater than 8.50 percent and a total risk-based capital ratio greater than 10.50 percent; otherwise, it will be subject to
restrictions on capital distributions and discretionary bonus payments. The minimum capital requirements plus the capital
conservation buffer exceeds the regulatory capital ratios required for an insured depository institution to be well-capitalized
under the FDIC's prompt corrective action framework.
46
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Federal regulators periodically propose amendments to the regulatory capital rules and the related regulatory framework
and consider changes to the capital standards that could significantly increase the amount of capital needed to meet applicable
standards. The timing of adoption, ultimate form and effect of any such proposed amendments cannot be predicted.
We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933 as amended, with the SEC,
which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and
warrants. We may use the proceeds from the sale of securities for general corporate purposes, which could include investments
at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases. As
of December 31, 2023, we had not issued any securities pursuant to the shelf registration statement.
Inflation
Inflation can have a significant impact on interest rates and, accordingly, can impact our financial performance. Inflation
can influence our asset growth, deposits, noninterest income and expense and credit quality. As a result, we closely monitor the
the rate of inflation in the economy. We do so by analyzing our capability to respond to changing interest rates and our ability
to manage noninterest income and expense. We monitor the mix of interest-rate sensitive assets and liabilities through our
management committee, ALCO, in order to manage the impact of inflation and the level of interest rates on net interest income.
We also manage the effects of inflation on S&T by reviewing the prices of our products and services, by introducing new
products and services and by controlling overhead expenses. Additionally, management is aware of the potential impacts that
inflation can have on our loan portfolio and our customer's ability to operate their businesses. We seek to minimize the various
inflationary inputs through a robust annual review process and sensitivity analysis when considering extensions of credit.
Additionally, we leverage our internal credit risk review in support of the current economic cycle. We continuously monitor our
portfolio for potential and emerging risks. See Risk Factors in Item 1A for further information regarding the impact of inflation
on the economy and on S&T.
47
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is defined as the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity
prices can adversely affect a financial institution’s earnings or capital. For most financial institutions, including S&T, market
risk primarily reflects exposures to changes in interest rates. Interest rate fluctuations affect earnings by changing net interest
income and other interest-sensitive income and expense levels. Interest rate changes also affect capital by changing the net
present value of a bank’s future cash flows, and the cash flows themselves, as rates change. Accepting this risk is a normal part
of banking and can be an important source of profitability and enhancing shareholder value. However, excessive interest rate
risk can threaten a bank’s earnings, capital, liquidity and solvency. Our sensitivity to changes in interest rate movements is
continually monitored by the ALCO. The ALCO monitors and manages market risk through rate shock analyses, economic
value of equity, or EVE, analyses and by performing stress tests and simulations to mitigate earnings and market value
fluctuations due to changes in interest rates.
Rate shock analyses results are compared to a base case to provide an estimate of the impact that market rate changes may
have on 12 and 24 months of pretax net interest income. The base case and rate shock analyses are performed on a static
balance sheet. A static balance sheet is a no growth balance sheet in which all maturing and/or repricing cash flows are
reinvested in the same product at the existing product spread. Rate shock analyses assume an immediate parallel shift in market
interest rates and also include management assumptions regarding the impact of interest rate changes on non-maturity deposit
products (noninterest-bearing demand, interest-bearing demand, money market and savings) and changes in the prepayment
behavior of loans and securities with optionality. S&T policy guidelines limit the change in pretax net interest income over 12
and 24 month horizons using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change
in pretax net interest income by graduated risk tolerance levels of minimal, moderate and high.
In order to monitor interest rate risk beyond the 24 month time horizon of rate shocks on pretax net interest income, we
also perform EVE analyses. EVE represents the present value of all asset cash flows minus the present value of all liability cash
flows. EVE change results are compared to a base case to determine the impact that market rate changes may have on our EVE.
As with rate shock analyses on pretax net interest income, EVE analyses incorporate management assumptions regarding
prepayment behavior of fixed rate loans and securities with optionality and the behavior and value of non-maturity deposit
products. S&T policy guidelines limit the change in EVE using rate shocks in increments of +/- 100 basis points. Policy
guidelines define the percentage change in EVE by graduated risk tolerance levels of minimal, moderate and high.
The table below reflects the rate shock analyses results for the 1-12 and 13-24 month periods of pretax net interest income
and EVE.
December 31, 2023
December 31, 2022
1 - 12 Months
13 - 24 Months
1 - 12 Months
13 - 24 Months
Change in Interest Rate
(basis points)
% Change in
Pretax
Net Interest
Income
% Change in
Pretax
Net Interest
Income
% Change in
EVE
% Change in
Pretax
Net Interest
Income
% Change in
Pretax
Net Interest
Income
% Change in
EVE
400
300
200
100
-100
-200
-300
-400
3.5
2.4
1.2
0.2
(3.5)
(4.2)
(6.6)
(9.3)
7.6
5.4
3.4
1.6
(5.1)
(6.7)
(11.2)
(15.1)
(31.4)
(23.5)
(15.2)
(7.3)
3.7
3.8
(0.5)
(13.7)
14.6
11.0
7.4
3.7
(6.1)
(10.2)
(14.1)
(21.1)
22.0
16.6
11.2
5.7
(8.8)
(14.8)
(21.0)
(30.1)
(13.2)
(8.5)
(4.6)
(1.5)
(2.6)
(7.7)
(17.0)
(32.7)
48
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The results from the rate shock analyses on net interest income are consistent with having an asset sensitive balance sheet.
Having an asset sensitive balance sheet means more assets than liabilities will reprice during the measured time frames. The
implications of an asset sensitive balance sheet will differ depending upon the change in market interest rates. For example,
with an asset sensitive balance sheet in a declining interest rate environment, more assets than liabilities will decrease in rate.
This situation could result in a decrease in net interest income and operating income. Conversely, with an asset sensitive
balance sheet in a rising interest rate environment, more assets than liabilities will increase in rate. This situation could result in
an increase in net interest income and operating income.
Our rate shock analyses show less improvement in the percentage change in pretax net interest income in the rates up
scenarios when comparing December 31, 2023 to December 31, 2022 primarily because we have a different deposit mix, more
short-term borrowings and a larger fixed-rate loan portfolio. The percentage change in pretax net interest income in the rates
down scenario shows an improvement when comparing December 31, 2023 to December 31, 2022 because of our increased
ability to cut liability costs as deposit rates have increased and we have more short-term borrowings. The changes in our
percentage changes in pretax net interest income reflect our strategic efforts to reduce our exposure to changes in interest rates.
Our EVE analyses show a decline in the percentage change in EVE in the rates up scenarios and an improvement in rates down
scenarios when comparing December 31, 2023 to December 31, 2022. These changes are mainly the result of the impact of
interest rates on the value of nonmaturity deposits and deposit valuation methodology enhancements that recognize changes in
customer behavior.
In addition to rate shocks and EVE analyses, we perform a market risk stress test at least annually. The market risk stress
test includes sensitivity analyses and simulations. Sensitivity analyses are performed to help us identify which model
assumptions cause the greatest impact on pretax net interest income. Sensitivity analyses may include changing prepayment
behavior of loans and securities with optionality and the impact of interest rate changes on non-maturity deposit products.
Simulation analyses may include the potential impact of rate changes other than the policy guidelines, yield curve shape
changes, significant balance mix changes and various growth scenarios.
49
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Net Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (PCAOB ID: 42)
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
51
52
53
54
55
57
103
105
50
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Cash and due from banks, including interest-bearing deposits of $160,802 and $138,149 at December 31, 2023
and December 31, 2022
Securities available for sale, at fair value
Loans held for sale
Portfolio loans, net of unearned income
Allowance for credit losses
Portfolio loans, net
Bank owned life insurance
Premises and equipment, net
Federal Home Loan Bank and other restricted stock, at cost
Goodwill
Other intangible assets, net
Other assets
Total Assets
LIABILITIES
Deposits:
Noninterest-bearing demand
Interest-bearing demand
Money market
Savings
Certificates of deposit
Total Deposits
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
Other liabilities
Total Liabilities
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value)
Authorized—50,000,000 shares
Issued—41,449,444 shares at December 31, 2023 and December 31, 2022
Outstanding—38,232,806 shares at December 31, 2023 and 38,999,733 shares at December 31, 2022
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock — 3,216,638 shares at December 31, 2023 and 2,449,711 shares at December 31, 2022, at cost
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
See Notes to Consolidated Financial Statements
December 31,
2023
2022
$
233,612
970,391
153
$
210,009
1,002,778
16
7,653,341
7,183,969
(107,966)
(101,340)
7,545,375
7,082,629
84,008
49,006
25,082
373,424
4,059
266,416
85,185
49,285
23,035
373,424
5,378
278,828
$ 9,551,526
$ 9,110,567
$ 2,221,942
$ 2,588,692
825,787
1,941,842
950,546
1,581,652
846,653
1,731,521
1,118,511
934,593
7,521,769
7,219,970
415,000
39,277
49,358
242,677
370,000
14,741
54,453
266,744
8,268,081
7,925,908
103,623
409,034
959,604
(90,901)
(97,915)
103,623
406,283
863,948
(112,125)
(77,070)
1,283,445
1,184,659
$ 9,551,526
$ 9,110,567
51
Years ended December 31,
2023
2022
2021
$ 443,124
$ 314,866
$ 270,460
31,611
852
2,314
23,743
1,579
563
15,706
2,593
503
477,901
340,751
289,262
92,836
35,655
128,491
349,410
17,892
331,518
—
18,248
16,193
12,186
1,164
9,829
57,620
19,907
5,061
24,968
10,757
2,393
13,150
315,783
276,112
8,366
16,215
307,417
259,897
198
19,008
16,829
12,717
2,215
7,292
58,259
29
17,952
15,040
12,889
9,734
9,052
64,696
111,462
103,221
100,214
17,437
14,814
12,912
7,823
6,813
6,488
4,122
28,463
210,334
178,804
34,023
$ 144,781
$
$
$
3.76
3.74
1.29
16,918
14,812
11,606
8,318
6,620
5,600
2,854
26,797
196,746
168,930
33,410
16,681
14,544
10,684
6,368
6,644
4,553
4,224
25,013
188,925
135,668
25,325
$ 135,520
$ 110,343
$
$
$
3.47
3.46
1.20
$
$
$
2.81
2.81
1.13
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(dollars in thousands, except per share data)
INTEREST AND DIVIDEND INCOME
Loans, including fees
Investment Securities:
Taxable
Tax-exempt
Dividends
Total Interest and Dividend Income
INTEREST EXPENSE
Deposits
Borrowings, junior subordinated debt securities and other
Total Interest Expense
NET INTEREST INCOME
Provision for credit losses
Net Interest Income After Provision for Credit Losses
NONINTEREST INCOME
Net gain on sale of securities
Debit and credit card
Service charges on deposit accounts
Wealth management
Mortgage banking
Other
Total Noninterest Income
NONINTEREST EXPENSE
Salaries and employee benefits
Data processing and information technology
Occupancy
Furniture, equipment and software
Professional services and legal
Other taxes
Marketing
FDIC insurance
Other
Total Noninterest Expense
Income Before Taxes
Income tax expense
Net Income
Earnings per share—basic
Earnings per share—diluted
Dividends declared per share
See Notes to Consolidated Financial Statements
52
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
Net Income
Available-for-Sale Debt Securities
Net change in fair value of available-for-sale debt securities
Tax effect
Net available-for-sale securities gains reclassified into earnings(1)
Tax effect
Net effect on other comprehensive income
Interest Rate Swaps
Net change in fair value of interest rate swaps
Tax effect
Net interest rate swap losses reclassified into earnings(2)
Tax effect
Net effect on other comprehensive income
Employee Benefit Plans
Adjustment to funded status of employee benefit plans
Tax effect
Net employee benefit plan losses reclassified into earnings(3)
Tax effect
Net effect on other comprehensive income
Other Comprehensive Income (Loss)
Comprehensive Income
Years ended December 31,
2023
2022
2021
$
144,781
$
135,520
$
110,343
20,317
(4,407)
—
—
15,910
(5,753)
1,237
12,382
(2,662)
5,204
142
(32)
—
—
110
(111,539)
23,805
(198)
42
(87,890)
(21,459)
4,581
91
(19)
(16,806)
(2,526)
608
2,080
(501)
(339)
(23,972)
5,115
—
—
(18,857)
—
—
—
—
—
363
(78)
3,198
(687)
2,796
21,224
(105,035)
(16,061)
$
166,005
$
30,485
$
94,282
(1) Reclassification adjustments are comprised of realized security gains or losses. The realized gains or losses have been recorded in net gain on sale of
securities in the Consolidated Statements of Net Income.
(2) Reclassification adjustments have been recorded in interest income in the Consolidated Statements of Net Income.
(3) Reclassification adjustments are comprised of realized actuarial gains or losses and settlement charges. These gains or losses and settlement charges have
been recorded in salaries and employee benefits in the Consolidated Statements of Net Income.
See Notes to Consolidated Financial Statements
53
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except share and per share data)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Balance at January 1, 2021
$ 103,623
$ 400,668
$ 710,061
$
8,971
$ (68,612)
$ 1,154,711
Net income for the year ended December 31, 2021
Other comprehensive loss, net of tax
Cash dividends declared ($1.13 per share)
Treasury stock issued for restricted stock awards (130,670
shares)
Forfeitures of restricted stock awards (77,483 shares)
Recognition of restricted stock compensation expense
—
—
—
—
—
—
—
—
—
—
—
2,427
110,343
—
(44,336)
(4,163)
1,754
—
—
(16,061)
—
—
—
—
—
—
—
110,343
(16,061)
(44,336)
4,163
(2,384)
—
—
(630)
2,427
Balance at December 31, 2021
$ 103,623
$ 403,095
$ 773,659
$
(7,090)
$ (66,833)
$ 1,206,454
Net income for the year ended December 31, 2022
Other comprehensive loss, net of tax
Cash dividends declared ($1.20 per share)
Treasury stock issued for restricted stock awards (4,250
shares)
Forfeitures of restricted stock awards (87,208 shares)
Repurchase of S&T stock (268,503 shares)
Recognition of restricted stock compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
—
3,188
135,520
—
—
(105,035)
(47,023)
(135)
1,927
—
—
—
—
—
—
—
—
—
—
135,520
(105,035)
(47,023)
135
(2,735)
(7,637)
—
—
(808)
(7,637)
3,188
Balance at December 31, 2022
$ 103,623
$ 406,283
$ 863,948
$
(112,125)
$ (77,070)
$ 1,184,659
Net income for the year ended December 31, 2023
Other comprehensive income, net of tax
Impact of adoption of ASU 2022-02
Cash dividends declared ($1.29 per share)
Treasury stock issued for restricted stock awards (36,166
shares)
Forfeitures of restricted stock awards (63,667 shares)
Repurchase of S&T Stock (739,426 shares)
Recognition of restricted stock compensation expense
—
—
—
—
—
—
—
—
—
—
—
—
144,781
—
(447)
(49,850)
(1,123)
—
—
3,874
—
1,172
—
—
—
21,224
—
—
—
—
—
—
—
—
—
—
144,781
21,224
(447)
(49,850)
1,123
(1,970)
—
(798)
(19,998)
(19,998)
—
3,874
Balance at December 31, 2023
$ 103,623
$ 409,034
$ 959,604
$
(90,901)
$ (97,915)
$ 1,283,445
See Notes to Consolidated Financial Statements
54
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
Net depreciation, amortization and accretion
Net amortization of discounts and premiums on securities
Stock-based compensation expense
Gain on sale of securities
Deferred income taxes
(Gain) loss on sale of fixed assets
Gain on sale of loans, net
(Gain) loss on sale and fair value adjustments of other real estate owned, net
Proceeds from the sale of mortgage loans
Mortgage loans originated for sale
Net change in:
Net (increase) decrease in interest receivable
Net increase (decrease) in interest payable
Net decrease (increase) in other assets
Net (decrease) increase in other liabilities
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Purchases of securities
Proceeds from maturities, prepayments and calls of securities
Proceeds from sales of securities
(Purchases) redemption of Federal Home Loan Bank stock
Net (increase) decrease in loans
Proceeds from sale of portfolio loans
Proceeds from sale of other real estate owned
Purchases of premises and equipment
Proceeds from the sale of premises and equipment
Proceeds from life insurance settlement
Net payments from cash flow hedge
Net Cash (Used in) Provided by Investing Activities
FINANCING ACTIVITIES
Net (decrease) increase in demand, money market and savings deposits
Net increase (decrease) in certificates of deposit
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments on long-term borrowings
Repurchase of shares for taxes on restricted stock
Cash dividends paid to common shareholders
Repurchase of common stock
Net Cash Provided by (Used in) Financing Activities
Net increase (decrease) in cash and due from banks
Cash and due from banks at beginning of period
Cash and Due From Banks at End of Period
See Notes to Consolidated Financial Statements
55
Years Ended December 31,
2023
2022
2021
$ 144,781 $ 135,520 $ 110,343
17,892
7,520
4,666
3,874
—
601
(100)
(81)
(3,898)
3,839
8,366
9,027
6,062
3,188
(198)
(2,932)
61
(1,229)
(3,119)
16,215
11,480
5,482
2,427
(29)
2,383
30
(8,856)
420
38,583
311,479
(3,895)
(35,848)
(286,257)
(7,094)
(10,033)
17,763
14,311
2,901
(24,628)
3,561
(2,087)
83,830
(28,430)
114,804
(35,569)
$ 171,749 $ 240,525 $ 214,852
(99,583)
(401,054)
(313,617)
147,710
160,830
144,905
—
30,490
(2,047)
(13,515)
1,917
3,511
(492,795)
(192,403)
173,401
11,641
7,051
8,024
12,529
5,107
1,259
(6,219)
(3,863)
(3,611)
710
1,696
(12,383)
161
214
(91)
14
353
—
(444,219)
(398,678)
13,239
(345,260)
(623,076)
875,378
647,111
(153,400)
(299,292)
45,000
25,000
(5,464)
(798)
(49,708)
(19,808)
285,509
(55,672)
—
—
(7,689)
(11,001)
(808)
(630)
(46,952)
(44,325)
(7,637)
296,073
(554,053)
23,603
(712,206)
210,009
922,215
—
464,458
692,549
229,666
$ 233,612 $ 210,009 $ 922,215
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Supplemental Disclosures
Loans transferred to portfolio from held for sale
Right of use assets obtained in exchange for lease obligations
Cash paid for interest
Cash paid for income taxes, net of refunds
Transfers of loans to other real estate owned
See Notes to Consolidated Financial Statements
Years Ended December 31,
2023
2022
2021
$
$
— $
2,009 $
— $
— $
4,467
2,987
$ 111,303 $
22,068 $
15,236
$
$
36,886 $
31,175 $
24,213
163 $
23 $
12,392
56
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
S&T Bancorp, Inc., or S&T, was incorporated on March 17, 1983 under the laws of the Commonwealth of Pennsylvania as
a bank holding company and has four active direct wholly owned subsidiaries, S&T Bank, 9th Street Holdings, Inc., STBA
Capital Trust I and DNB Capital Trust II, and owns a 50 percent interest in Commonwealth Trust Credit Life Insurance
Company, or CTCLIC.
We are presently engaged in non-banking activities through the following six entities: 9th Street Holdings, Inc.; S&T
Bancholdings, Inc.; CTCLIC; S&T Insurance Group, LLC; Stewart Capital Advisors, LLC; and DN Acquisition Company, Inc.
Our investment holding companies are 9th Street Holdings, Inc. and S&T Bancholdings, Inc. CTCLIC, which is a joint venture
with another financial institution, acts as a reinsurer of credit life, accident and health insurance policies sold by S&T Bank and
the other institution. S&T Insurance Group, LLC, through its subsidiaries, offers a variety of insurance products. Stewart
Capital Advisors, LLC is a registered investment advisor that manages private investment accounts for individuals and
institutions. DN Acquisition Company, Inc. was acquired with the DNB merger and was incorporated for the purpose of
acquiring and holding OREO acquired through foreclosure or deed in-lieu-of foreclosure, as well as Bank-occupied real estate.
Accounting Policies
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles, or
GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as well as disclosures of contingent assets and liabilities as of the dates of
the balance sheets and revenues and expenses for the periods then ended. Actual results could differ from those estimates. Our
significant accounting policies are described below.
Principles of Consolidation
The consolidated financial statements include the accounts of S&T and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation. Investments of 20 percent to 50 percent of the outstanding
common stock of investees are accounted for using the equity method of accounting.
Reclassification
Amounts in prior years' financial statements and footnotes are reclassified whenever necessary to conform to the current
period presentation. Reclassifications had no effect on our results of operations or financial condition.
Business Combinations
We account for business combinations using the acquisition method of accounting. All identifiable assets acquired,
liabilities assumed and any non-controlling interest in the acquiree are recognized and measured as of the acquisition date at fair
value. We record goodwill for the excess of the purchase price over the fair value of net assets acquired. Results of operations
of the acquired entities are included in the Consolidated Statement of Net Income from the date of acquisition.
Acquired loans are recorded at fair value on the date of acquisition with no carryover of the related ACL. Determining the
fair value of acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and
discounting those cash flows at a market rate of interest. In estimating the fair value of our acquired loans, we consider a
number of factors including loss rates, internal risk rating, delinquency status, loan type, loan term, prepayment rates, recovery
periods and the current interest rate environment. The premium or discount estimated through the loan fair value calculation is
recognized into interest income on a level yield basis over the remaining life of the loans.
Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced
more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as
purchased credit deteriorated, or PCD. An allowance is recognized for a PCD loan by adding it to the purchase price or fair
value in a business combination. There is no provision for credit losses, or PCL, recognized upon acquisition of a PCD loan
since the initial allowance is established through the purchase accounting. After initial recognition, the accounting for a PCD
loan follows the credit loss model that applies to that type of asset. Purchased financial loans that do not have a more-than-
significant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans. An
ACL is recorded with a corresponding charge to PCL. Subsequent to the acquisition date, the methods utilized to estimate the
required ACL for these loans is similar to the method used for originated loans.
57
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements
We use fair value measurements when recording and disclosing certain financial assets and liabilities. Available-for-sale
debt securities, equity securities, trading securities held in a deferred compensation plan and derivative financial instruments are
recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets at fair
value on a nonrecurring basis, such as loans held for sale, individually assessed loans, other real estate owned, or OREO, and
other repossessed assets, mortgage servicing rights, or MSRs, and certain other assets.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most
advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a
transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that
are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. In determining fair
value, we use various valuation approaches, including market, income and cost approaches. The fair value standard establishes
a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market
participants would use in pricing an asset or liability, which are developed based on market data we have obtained from
independent sources. Unobservable inputs reflect our estimates of assumptions that market participants would use in pricing an
asset or liability, which are developed based on the best information available in the circumstances.
The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets
or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value
hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1: valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.
Level 2: valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market
prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which
all significant assumptions are observable in the market or can be corroborated by market data.
Level 3: valuation is derived from other valuation methodologies, including discounted cash flow models and similar
techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of
assumptions that market participants would use in determining fair value.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the
fair value measurement. Our policy is to recognize transfers between any of the fair value hierarchy levels at the end of the
reporting period in which the transfer occurred.
The following are descriptions of the valuation methodologies that we use for financial instruments recorded at fair value
on either a recurring or nonrecurring basis.
Recurring Basis
Available-for-Sale Debt Securities
We obtain fair values for debt securities from a third-party pricing service which utilizes several sources for valuing fixed-
income securities. We validate prices received from our pricing service through comparison to a secondary pricing service and
broker quotes. We review the methodologies of the pricing services which provide us with a sufficient understanding of the
valuation models, assumptions, inputs and pricing to reasonably measure the fair value of our debt securities. The fair value of
U.S. treasury securities are based on quoted market prices in active markets and are classified as Level 1. The market valuation
sources for other debt securities include observable inputs rather than significant unobservable inputs and are classified as Level
2. The service provider utilizes pricing models that vary by asset class and include available trade, bid and other market
information. Generally, the methodologies include broker quotes, proprietary models and extensive quality control programs.
Equity Securities
Marketable equity securities with quoted prices in active markets for identical assets are classified as Level 1. Marketable
equity securities in markets that are not active are classified as Level 2.
Securities Held in a Deferred Compensation Plan
Securities Held in a Deferred Compensation Plan are reported at fair value with the gains and losses included in other
noninterest income in our Consolidated Statements of Net Income. These assets are held in a deferred compensation plan and
are invested in readily quoted mutual funds. Accordingly, these assets are classified as Level 1. Deferred compensation plan
assets are reported in other assets in the Consolidated Balance Sheets.
58
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
We use derivative instruments, including interest rate swaps that qualify as cash flow hedges, interest rate swaps for
commercial loans with our customers, interest rate lock commitments and forward commitments related to the sale of mortgage
loans in the secondary market. We calculate the fair value for derivatives using accepted valuation techniques, including
discounted cash flow analysis on the expected cash flows of each derivative. Each valuation considers the contractual terms of
the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and
implied volatilities. We incorporate credit valuation adjustments into the valuation models to appropriately reflect both our own
nonperformance risk and the respective counterparties’ nonperformance risk in calculating fair value measurements. We
consider the impact of master netting agreements and collateral postings with our counterparties to determine the credit
valuation adjustment. Interest rate swaps are classified as Level 2. Interest rate lock commitments and forward commitments
related to mortgage loans are classified as Level 3 due to significant unobservable inputs.
Nonrecurring Basis
Loans Held for Sale
Loans held for sale consist of 1-4 family residential loans originated for sale in the secondary market and, from time to
time, certain loans transferred from the loan portfolio to loans held for sale, all of which are carried at the lower of cost or fair
value. The fair value of 1-4 family residential loans, when marked to fair value, is based on the principal or most advantageous
market currently offered for similar loans using observable market data. Loans held for sale marked to fair value are classified
as Level 2 if the fair value is determined using a sales or market approach and Level 3 if the fair value is determined using an
income approach.
Loans Individually Evaluated
Loans that are individually evaluated to determine whether a specific allocation of ACL is needed are reported at the lower
of amortized cost or fair value. Fair value is determined using either the present value of expected future cash flows discounted
at the loan's original effective interest rate, the loan’s observable market price or the fair value of the collateral less estimated
selling costs when the loan is collateral dependent and we expect to liquidate the collateral. However, if repayment is expected
to come from the operation of the collateral, rather than liquidation, then we do not consider estimated selling costs in
determining the fair value of the collateral. Collateral values are generally based upon appraisals by approved, independent state
certified appraisers. Appraisals may be discounted based on our historical knowledge, changes in market conditions from the
time of appraisal or our knowledge of the borrower and the borrower’s business. If the fair value of loans individually evaluated
is determined based on an independent market based appraisal less estimated costs to sell, it is classified as Level 2. If the fair
value of loans individually evaluated is determined using an internal valuation, it is classified as Level 3.
OREO and Other Repossessed Assets
OREO and other repossessed assets obtained in partial or total satisfaction of a loan are recorded at fair value less cost to
sell. Fair value, when recorded, is generally based upon appraisals by approved, independent state certified appraisers.
Appraisals on OREO may be discounted based on our historical knowledge, changes in market conditions from the time of
appraisal or other information available to us. If the fair value for OREO is determined based on an independent market-based
appraisal less estimated costs to sell or an executed sales agreement, it is classified as Level 2. If the fair value for OREO is
determined using an internal valuation, it is classified as Level 3.
Mortgage Servicing Rights
MSRs are reported using the amortization method and are evaluated for impairment quarterly by comparing the carrying
value to the fair value of the MSRs. The fair value of MSRs is determined by calculating the present value of estimated future
net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other
economic factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is
the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value.
The valuation model includes significant unobservable inputs; therefore, MSRs are classified as Level 3 when marked to fair
value.
59
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments
Fair value accounting guidance requires disclosure of the fair value of all of an entity’s assets and liabilities that are
considered financial instruments. The majority of our assets and liabilities are considered financial instruments. Many of these
instruments lack an available trading market as characterized by a willing buyer and willing seller engaged in an exchange
transaction. Also, it is our general practice and intent to hold our financial instruments to maturity and to not engage in trading
or sales activities with respect to such financial instruments. For fair value disclosure purposes, we substantially utilize the fair
value measurement criteria as required and explained above. In cases where quoted fair values are not available, we use present
value methods to determine the fair value of our financial instruments.
Cash and Cash Equivalents
The carrying amounts reported in the Consolidated Balance Sheets for cash and due from banks, including interest-bearing
deposits approximate fair value.
Loans
Our methodology to fair value loans includes an exit price notion. The fair value of loans is estimated using discounted
cash flow analyses that utilize interest rates currently being offered for similar loans and adjusted for liquidity and credit risk.
The valuation models include significant unobservable inputs; therefore, loans are classified as Level 3. The carrying amount of
interest receivable approximates fair value.
Federal Home Loan Bank, or FHLB, and Other Restricted Stock
It is not practical to determine the fair value of our FHLB and other restricted stock due to the restrictions placed on the
transferability of these stocks; it is presented at carrying value.
Collateral Receivable
Collateral receivable is cash that is made available to counterparties as collateral for our interest rate swaps. The carrying
amount included in other assets on our Consolidated Balance Sheets approximates fair value.
Deposits
The fair values disclosed for deposits without defined maturities (e.g., noninterest and interest-bearing demand, money
market and savings accounts) are by definition equal to the amounts payable on demand. Deposits without defined maturities
are classified as Level 1. The carrying amounts for variable rate, fixed-term time deposits approximate their fair values.
Estimated fair values for fixed rate and other time deposits are based on discounted cash flow analysis using interest rates
currently offered for time deposits with similar terms. Fixed rate and other time deposits are classified as Level 2. The carrying
amount of accrued interest approximates fair value.
Short-Term Borrowings
The carrying amounts of securities sold under repurchase agreements, or REPOs, and other short-term borrowings
approximate their fair values. Fair values are based on observable inputs in a secondary market; therefore, these are classified as
Level 2.
Long-Term Borrowings
The fair values disclosed for fixed rate long-term borrowings are determined by discounting their contractual cash flows
using current interest rates for long-term borrowings of similar remaining maturities. The carrying amounts of variable rate
long-term borrowings approximate their fair values. Fair values are based on observable inputs in a secondary market;
therefore, these are classified as Level 2.
Junior Subordinated Debt Securities
The interest rate on the variable rate junior subordinated debt securities is reset quarterly; therefore, the carrying values
approximate their fair values. Fair values are based on observable inputs in a secondary market; therefore, these are classified as
Level 2.
60
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Collateral Payable
Collateral payable is cash that is received from counterparties as collateral for our interest rate swaps. The carrying amount
included in other liabilities on our Consolidated Balance Sheets approximates fair value.
Cash and Cash Equivalents
We consider cash and due from banks, interest-bearing deposits with banks and federal funds sold as cash and cash
equivalents.
Securities
We determine the appropriate classification of securities at the time of purchase. Debt securities are classified as available-
for-sale with the intent to hold for an indefinite period of time, but may be sold in response to changes in interest rates,
prepayment risk, liquidity needs or other factors.
A determination will be made on whether a decline in the fair value below the amortized cost basis is due to credit-related
factors or noncredit-related factors. Any impairment that is not credit-related is recognized in OCI, net of applicable taxes.
Credit-related impairment is recognized as an ACL on the balance sheet with a corresponding adjustment to provision for credit
losses in the Consolidated Statements of Net Income. Both the allowance and the adjustment to net income can be reversed if
conditions change. Our policy for credit impairment within the available-for-sale debt securities portfolio is based upon a
number of factors, including but not limited to, the financial condition of the underlying issuer, the ability of the issuer to meet
contractual obligations, the likelihood of the security’s ability to recover any decline in its estimated fair value and whether
management intends to sell the security or if it is more likely than not that management will be required to sell the investment
security prior to the security’s recovery of any decline in its estimated fair value.
Realized gains and losses on the sale of these securities are determined using the specific-identification method and are
recorded within noninterest income in the Consolidated Statements of Net Income. Bond premiums are amortized to the call
date, if any, and bond discounts are accreted to the maturity date, both on a level yield basis.
Equity securities are measured at fair value with net unrealized gains and losses recognized in other noninterest income in
the Consolidated Statements of Net Income.
Loans Held for Sale
Loans held for sale consist of 1-4 family residential loans originated for sale in the secondary market and, from time to
time, certain loans transferred from the loan portfolio to loans held for sale, all of which are carried at the lower of cost or fair
value. If a loan is transferred from the loan portfolio to the held for sale category, any write-down in the carrying amount of the
loan at the date of transfer is recorded as a charge-off against the ACL. Subsequent declines in fair value are recognized as a
charge to other noninterest income. When a loan is placed in the held for sale category, we stop amortizing the related deferred
fees and costs. The remaining unamortized fees and costs are recognized as part of the cost basis of the loan at the time it is
sold. Gains and losses on sales of mortgage loans held for sale are included in mortgage banking in noninterest income in the
Consolidated Statements of Net Income.
Loans
Loans are reported at the principal amount outstanding net of unearned income. Unearned income consists of net deferred
loan origination fees and costs and a discount or premium on acquired loans. Loan origination fees and direct loan origination
costs are deferred and amortized as an adjustment of loan yield over the lives of the loans without consideration of anticipated
prepayments. If a loan is paid off, the remaining unaccreted or unamortized net origination fees and costs are immediately
recognized into income. Accretion of discounts and amortization of premiums on loans are included in interest income in the
Consolidated Statements of Net Income. Interest is accrued and interest income is recognized on loans as earned.
Closed-end installment loans, amortizing loans secured by real estate and any other loans with payments scheduled
monthly are reported past due when the borrower is in arrears two or more monthly payments. Other multi-payment obligations
with payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days
or more.
Generally, consumer loans are charged off against the ACL upon the loan reaching 90 days past due. Commercial loans are
charged off as management becomes aware of facts and circumstances that raise doubt as to the collectability of all or a portion
of the principal and when we believe a confirmed loss exists.
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Nonaccrual Loans
We stop accruing interest on a loan when the borrower’s payment is 90 days past due. Loans are also placed on nonaccrual
status when we have doubt about the borrower’s ability to comply with contractual repayment terms, even if payment is not
past due. When the interest accrual is discontinued, all unpaid accrued interest is reversed against interest income. As a general
rule, a nonaccrual loan may be restored to accrual status when its principal and interest is paid current and the bank expects
repayment of the remaining contractual principal and interest, or when the loan otherwise becomes well secured and in the
process of collection.
Allowance for Credit Losses
The ACL is a valuation reserve established and maintained by charges against operating income and is deducted from the
amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are
charged off against the ACL when they are deemed uncollectible. The ACL is an estimate of expected credit losses, measured
over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future
economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from
period to period.
The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain
groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share similar risk
characteristics with other loans and are individually evaluated.
The ACL for homogeneous loans is calculated using a life-time loss rate methodology with both a quantitative and a
qualitative analysis that is applied on a quarterly basis. The ACL model is comprised of six distinct portfolio segments: 1)
Commercial Construction, 2) Commercial Real Estate, or CRE, 3) Commercial and Industrial, or C&I, 4) Business Banking, 5)
Consumer Real Estate and 6) Other Consumer. Each segment has a distinct set of risk characteristics monitored by
management. We further evaluate the ACL at a disaggregated level which includes type of collateral and our internal risk rating
system for the commercial and business banking segments and type of collateral, lien position and FICO score, for the
consumer segments. Historical credit loss experience is the basis for the estimation of expected credit losses. Our quantitative
model uses historic data back to the second quarter of 2009. We apply historical loss rates to pools of loans with similar risk
characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the
current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance
sheet date. Our reasonable and supportable forecast is for a period of two years and is based on the unemployment forecast and
management judgment. For periods beyond our two year reasonable and supportable forecast, we revert to historical loss rates
utilizing a straight-line method over a one year reversion period. The qualitative adjustments for current conditions are based
upon changes in lending policies and practices, experience and ability of lending staff, quality of the bank’s loan review system,
value of underlying collateral, the existence of and changes in concentrations, other external factors and segment specific risks.
These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required
reserve.
The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer
shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all
commercial loans greater than $1.0 million that meet the following criteria: 1) when it is determined that foreclosure is
probable, 2) substandard, doubtful and nonaccrual loans when repayment is expected to be provided substantially through the
operation or sale of the collateral, 3) when it is determined by management that a loan does not share similar risk characteristics
with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1)
the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable
market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist
primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are
discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair
value of the loan is less than the loan balance.
Our ACL Committee meets quarterly to verify the overall appropriateness of the ACL. Additionally, on an annual basis,
the ACL Committee meets to validate our ACL methodology. This validation includes reviewing the loan segmentation, critical
model assumptions, forecast and the qualitative framework. As a result of this ongoing monitoring process, we may make
changes to our ACL to be responsive to the economic environment.
Bank Owned Life Insurance
We have purchased life insurance policies on certain executive officers and employees. We receive the cash surrender
value of each policy upon its termination or benefits are payable to us upon the death of the insured. Changes in net cash
surrender value are recognized in other noninterest income in the Consolidated Statements of Net Income.
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Premises and Equipment
Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Maintenance
and repairs are charged to expense as incurred, while improvements that extend an asset’s useful life are capitalized and
depreciated over the estimated remaining life of the asset. Depreciation expense is computed by the straight-line method for
financial reporting purposes and accelerated methods for income tax purposes over the estimated useful lives of the particular
assets. Depreciation expense is included in occupancy on the Consolidated Statements of Net Income. Long-lived assets are
evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. No events or changes in circumstances occurred during the years ended December 31, 2023 and 2022.
The estimated useful lives for the various asset categories are as follows:
1) Land and Land Improvements
2) Buildings
3) Furniture and Fixtures
4) Computer Equipment and Software
5) Other Equipment
6) Vehicles
7) Leasehold Improvements
Right-of-Use Assets and Lease Liabilities
Non-depreciating assets
25 years
5 years
5 years or term of license
5 years
5 years
Lesser of estimated useful life of the asset (generally 15 years unless
established otherwise) or the remaining term of the lease, including
renewal options in the lease that are reasonably assured of exercise
We determine if a contract is or contains a lease at inception. Leases are classified as either finance or operating leases. We
recognize leases on our Consolidated Balance Sheets as right-of-use, or ROU, assets and related lease liabilities. Finance ROU
assets are included in premises and equipment and related finance lease liabilities are included in long-term borrowings.
Operating lease ROU assets are included in other assets and related operating lease liabilities are included in other liabilities.
Our lease liability is calculated as the present value of the lease payments over the lease term discounted using our estimated
incremental borrowing rate with similar terms at commencement date. Lease terms include options to extend or terminate the
lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is
recognized on a straight-line basis over the lease term for operating leases. Interest and amortization expenses are recognized
for finance leases over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and
the related lease expense is recognized on a straight-line basis over the lease term in occupancy on our Consolidated Statements
of Net Income. Lease and amortization expenses are included in occupancy expense and interest on finance lease liabilities is
included in borrowings interest expense in our Consolidated Statements of Net Income.
Restricted Investment in Bank Stock
FHLB stock is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. We hold
FHLB stock because we are a member of the FHLB of Pittsburgh. The FHLB requires members to purchase and hold a
specified level of FHLB stock based upon on the member's asset value, level of borrowings and participation in other programs
offered. Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB. Members do not purchase stock
in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather,
members purchase stock to obtain access to the low-cost products and services offered by the FHLB. Unlike equity securities of
traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation
because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value. Both cash and stock
dividends are reported as income in taxable investment securities in the Consolidated Statements of Net Income. FHLB stock is
evaluated for impairment when events and circumstance indicate that impairment could exist.
Goodwill and Other Intangible Assets
As a result of acquisitions, we have recorded goodwill and identifiable intangible assets in our Consolidated Balance
Sheets. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. We have one reporting
unit.
The carrying value of goodwill is tested annually for impairment each October 1st or more frequently if events and
circumstances indicate that it may be impaired. A qualitative assessment is performed to determine whether it is more likely
than not that the reporting unit's fair value is less than its carrying value. We perform a quantitative impairment test only if we
conclude that it is more likely than not that a reporting unit's fair value is less than the carrying amount. Determining the fair
value of a reporting unit is judgmental and involves the use of significant estimates and assumptions. The fair value of the
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reporting unit is determined by using both a discounted cash flow model and a market based model. The discounted cash flow
model has many assumptions including future earnings projections, a long-term growth rate and discount rate. The market
based model calculates fair value based on observed price multiples for similar companies. The fair values of each method are
then weighted based on relevance and reliability in the current economic environment.
We determine the amount of identifiable intangible assets based upon independent core deposit and insurance contract
valuations at the time of acquisition. Intangible assets with finite useful lives, consisting primarily of core deposit and customer
list intangibles, are amortized using straight-line or accelerated methods over their estimated weighted average useful lives,
ranging from 10 to 20 years. Intangible assets with finite useful lives are evaluated for impairment whenever events or changes
in circumstances indicate that their carrying amount may not be recoverable. No such events or changes in circumstances
occurred during the years ended December 31, 2023 and 2022.
Variable Interest Entities
Variable interest entities, or VIEs, are legal entities that generally either do not have equity investors with voting rights or
that have equity investors that do not provide sufficient financial resources for the entity to support its activities. When an
enterprise has both the power to direct the economic activities of the VIE and the obligation to absorb losses of the VIE or the
right to receive benefits of the VIE, the entity has a controlling financial interest in the VIE. A VIE often holds financial assets,
including loans, receivables or other property. The company with a controlling financial interest, the primary beneficiary, is
required to consolidate the VIE into its Consolidated Balance Sheets. S&T has two wholly-owned trust subsidiaries, STBA
Capital Trust I and DNB Capital Trust II, or the Trusts, for which it does not absorb a majority of expected losses or receive a
majority of the expected residual returns. DNB Capital Trust II was acquired with the DNB merger. At inception, these Trusts
issued floating rate trust preferred securities to the Trustees and used the proceeds from the sale to invest in junior subordinated
debt securities issued by us. The Trusts pay dividends on the trust preferred securities at the same rate as the interest we pay on
the junior subordinated debt held by the Trusts. The Trusts are VIEs with the third-party investors as their primary
beneficiaries, and accordingly, the Trusts and their net assets are not included in our consolidated financial statements.
However, the junior subordinated debt securities issued by S&T are included in liabilities in our Consolidated Balance Sheets.
Qualified Affordable Housing
We have made investments directly in Low Income Housing Tax Credit, or LIHTC, partnerships formed with third parties.
As a limited partner in these operating partnerships, we receive tax credits and tax deductions for losses incurred by the
underlying properties. These investments are amortized over a maximum of 10 years, which represents the period over which
the tax credits will be utilized. Our investments in Low Income Housing Partnerships, or LIHPs, represent unconsolidated VIEs
and the assets and liabilities of the partnerships are not recorded on our balance sheet. We have determined that we are not the
primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact the
economic performance of the partnership nor do we have both the obligation to absorb expected losses and the right to receive
benefits. We use the cost method to account for these partnerships. These investments are recorded in other assets in our
Consolidated Balance Sheets. Amortization expense is included in other noninterest expense in the Consolidated Statements of
Net Income.
OREO and Other Repossessed Assets
OREO and other repossessed assets are included in other assets in the Consolidated Balance Sheets and are comprised of
properties acquired through foreclosure proceedings or acceptance of a deed in lieu of a foreclosure. OREO and other
repossessed assets are recorded at fair value less cost to sell at the time of acquisition and when subsequent declines in fair
value occur. Subsequent declines in the fair value of OREO are recorded through a valuation allowance. Subsequent increases
in the fair value reduce the valuation allowance, but only to the amount that does not exceed the OREO foreclosure date cost
basis. Loan losses arising from the acquisition of any such property initially are charged against the ACL. Gains or losses
realized upon disposition of these assets are recorded in other noninterest income or expense in the Consolidated Statements of
Net Income depending on whether the net position is a gain or loss.
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Securities Held in a Deferred Compensation Plan
A nonqualified deferred compensation plan is offered to certain management employees providing an opportunity to
continue to defer income on a tax deferred basis in excess of annual contribution or compensation limits for qualified plans. The
plan assets are held in a grantor trust, are legally assets of S&T and are beneficially owned by the participants. The assets are
available to satisfy the claims of general creditors in the event we would need to file bankruptcy. Securities held in the
nonqualified deferred compensation plan are recorded in other assets in the Consolidated Balance Sheets at fair value. A
corresponding deferred compensation liability is recorded in other liabilities in the Consolidated Balance Sheets. Gains and
losses related to the change in value of plan assets are recorded in other noninterest income and salaries and employee benefits
expense in our Consolidated Statements of Net Income, resulting in no impact to net income.
Mortgage Servicing Rights
MSRs are recognized as separate assets when a mortgage loan is sold. MSRs represents the estimated fair value of future
net cash flows expected to be realized for performing the servicing activities. The fair value of the MSRs is estimated by
calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment
rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The
expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. Increases in mortgage
loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. MSRs are
reported in other assets in the Consolidated Balance Sheets and are amortized into mortgage banking in noninterest income in
the Consolidated Statements of Net Income in proportion to, and over the period of, the estimated future net servicing income
of the underlying mortgage loans.
MSRs are evaluated for impairment based on the estimated fair value of those rights. MSRs are stratified by certain risk
characteristics, primarily loan term and note rate. If temporary impairment exists within a risk stratification tranche, a valuation
allowance is established through a charge to income equal to the amount by which the carrying value exceeds the estimated fair
value. If it is later determined that all or a portion of the temporary impairment no longer exists for a particular tranche, the
valuation allowance is reduced.
Derivative Financial Instruments
Derivatives are recognized as either other assets or other liabilities on the balance sheet at fair value. All derivatives are
evaluated at inception to determine whether it is a hedging or non-hedging activity. The accounting for changes in the fair value
of derivatives depends on whether we have elected to designate a derivative in a hedging relationship and apply hedge
accounting based on whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.
Pursuant to our agreements with various financial institutions, we may receive collateral or may be required to post
collateral based upon mark-to-market positions. Beyond unsecured threshold levels, collateral in the form of cash or securities
may be made available to counterparties of interest rate swap transactions. Interest income on collateral receivable is included
in loan interest income in the Consolidated Statements of Net Income. Interest expense on collateral payable is included in
borrowings, junior subordinated debt securities and other interest expense in the Consolidated Statements of Net Income.
Derivatives contain an element of credit risk, the possibility that we will incur a loss because a counterparty, which may be
a financial institution or a customer, fails to meet its contractual obligations. All derivative contracts with financial institutions
may be executed only with counterparties approved by our Asset and Liability Committee, or ALCO, and derivatives with
customers may only be executed with customers within credit exposure limits approved in accordance with our credit policy.
We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide
for the net settlement of all contracts with a single counterparty in the event of default. We elect, however, to account for all
derivatives with counterparty institutions on a gross basis in the Consolidated Balance Sheets.
Interest Rate Swaps Designated as Hedging Instruments
As part of our interest rate risk management strategy, we use interest rate swaps to add stability to interest income and to
manage exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-
rate amounts from a counterparty in exchange for making variable rate payments over the life of the agreements without
exchange of the underlying notional amount.
Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types
of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the earnings effect of the
hedged forecasted transactions in a cash flow hedge. As long as the cash flow hedge continues to qualify for hedge accounting,
the entire change in the fair value of the hedging instrument is recognized in OCI, net of applicable taxes, and reclassified into
interest income as interest payments are received. The change in the fair value is included in the change in other liabilities in the
Consolidated Statements of Cash Flows.
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Interest Rate Contracts with Customers
Interest rate swaps are contracts in which a series of interest rate flows (fixed and variable) are exchanged over a prescribed
period. The notional amounts on which the interest payments are based are not exchanged. These derivative positions relate to
transactions in which we enter into an interest rate swap with a commercial customer, while at the same time entering into an
offsetting interest rate swap with another financial institution. In connection with each transaction, we agree to pay interest to
the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount
at a fixed rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional
amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to
effectively convert a variable rate loan to a fixed rate loan, while we continue to receive a variable amount of interest on the
loan. These agreements could have floors or caps on the contracted interest rates.
Interest rate swaps with customers and the corresponding offsetting interest rate swap with a financial institution are
considered derivatives, but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the
derivatives are recorded in current earnings and included in other noninterest income in the Consolidated Statements of Net
Income and included in the change in other assets and other liabilities in the Consolidated Statements of Cash Flows.
Interest Rate Lock Commitments and Forward Sale Contracts
In the normal course of business, we sell originated mortgage loans into the secondary mortgage loan market. We also offer
interest rate lock commitments to potential borrowers. The commitments are generally for a period of 60 days and guarantee a
specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower
to close on the loan. Accordingly, some commitments expire prior to becoming loans. We may encounter pricing risks if
interest rates increase significantly before the loan can be closed and sold. We may utilize forward sale contracts in order to
mitigate this pricing risk. Whenever a customer desires these products, a mortgage originator quotes a secondary market rate
guaranteed for that day by the investor. The rate lock is executed between the mortgagee and us and in turn a forward sale
contract may be executed between us and the investor. Both the rate lock commitment and the corresponding forward sale
contract for each customer are considered derivatives, but are not accounted for using hedge accounting. As such, changes in
the estimated fair value of the derivatives during the commitment period are recorded in current earnings and included in
mortgage banking in the Consolidated Statements of Net Income.
Treasury Stock
The repurchase of our common stock is recorded at cost. At the time of reissuance, the treasury stock account is reduced
using the average cost method. Gains and losses on the reissuance of common stock are recorded in additional paid-in capital.
The Inflation Reduction Act of 2022 created a new excise tax equal to 1 percent of the fair value of shares repurchased,
effective after December 31, 2022. The excise tax is included in the cost of treasury stock with an offset to other liabilities in
the Consolidated Balance Sheets. The excise tax liability is reduced by the fair market value of any reissuance occurring in the
same taxable year.
Revenue Recognition - Contracts with Customers
We earn revenue from contracts with our customers when we have completed our performance obligations and recognize
that revenue when services are provided to our customers. Our contracts with customers are primarily in the form of account
agreements. Generally, our services are transferred at a point in time in response to transactions initiated and controlled by our
customers under service agreements with an expected duration of one year or less. Our customers have the right to terminate
their service agreements at any time.
We do not defer incremental direct costs to obtain contracts with customers that would be amortized in one year or less.
These costs are primarily salaries and employee benefits recognized as expense in the period incurred.
Service charges on deposit accounts - We recognize monthly service charges for both commercial and personal banking
customers based on account fee schedules. Our performance obligation is generally satisfied and the related revenue recognized
at a point in time or over time when the services are provided. Other fees are earned based on specific transactions or customer
activity within the customers' deposit accounts. These are earned at the time the transaction or customer activity occurs.
Debit and credit card services - Interchange fees are earned whenever debit and credit cards are processed through third-
party card payment networks. ATM fees are based on transactions by our customers' and other customers' use of our ATMs or
other ATMs. Debit and credit card revenue is recognized at a point in time when the transaction is settled. Our performance
obligation to our customers is generally satisfied and the related revenue is recognized at a point in time when the service is
provided. Third-party service contracts include annual volume and marketing incentives which are recognized over a period of
twelve months when we meet thresholds as stated in the service contract.
Wealth management services - Wealth management services are primarily comprised of fees earned from the
management and administration of trusts, assets under administration and other financial advisory services. Generally, wealth
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management fees are earned over a period of time between monthly and annually, per the related fee schedules. Our
performance obligations with our customers are generally satisfied when we provide the services as stated in the customers'
agreements. The fees are based on a fixed amount or a scale based on the level of services provided or amount of assets under
management.
Other fee revenue - Other fee revenue includes a variety of other traditional banking services such as, electronic banking
fees, letters of credit origination fees, wire transfer fees, money orders, treasury checks, check sale fees and transfer fees. Our
performance obligations are generally satisfied at a point in time and fee revenue is recognized when the services are provided
or the transaction is settled.
Wealth Management Fees
Assets held in a fiduciary capacity by our subsidiary bank, S&T Bank, are not our assets and are therefore not included in
our consolidated financial statements. Wealth management fee income is reported in the Consolidated Statements of Net
Income on an accrual basis.
Stock-Based Compensation
Stock-based compensation includes restricted stock awards and restricted stock units, which are measured using the fair
value at the time of issuance. A Monte Carlo simulation is used to estimate the fair value of performance-based restricted stock
with a market condition. The grant date fair value is recognized over the period during which the recipient is required to provide
service in exchange for the award. Compensation expense for time-based restricted stock is recognized ratably over the period
of service based on fair value on the grant date. Compensation expense for performance-based restricted stock is recognized
ratably over the remaining vesting period if the likelihood of meeting the performance measure is probable, based on the fair
value on the grant date. We estimate expected forfeitures when stock-based awards are granted and record compensation
expense only for awards that are expected to vest.
Pensions
The expense for S&T Bank’s qualified and nonqualified defined benefit pension plans is actuarially determined using the
projected unit credit actuarial cost method. It requires us to make economic assumptions regarding future interest rates and asset
returns and various demographic assumptions. We estimate the discount rate used to measure benefit obligations by applying
the projected cash flow for future benefit payments to a yield curve of high-quality corporate bonds available in the marketplace
and by employing a model that matches bonds to our pension cash flows. The expected return on plan assets is an estimate of
the long-term rate of return on plan assets, which is determined based on the current asset mix and estimates of return by asset
class. We recognize in the Consolidated Balance Sheets an asset for the plan’s overfunded status or a liability for the plan’s
underfunded status. Gains or losses related to changes in benefit obligations or plan assets resulting from experience different
from that assumed are recognized as OCI in the period in which they occur. To the extent that such gains or losses exceed 10
percent of the greater of the projected benefit obligation or plan assets, they are recognized as a component of pension costs
over the future service periods of actively employed plan participants. The funding policy for the qualified plan is to contribute
an amount each year that is at least equal to the minimum required contribution, but not more than the maximum amount
permissible for taxable plan sponsors. Our nonqualified plans are unfunded.
On January 25, 2016, the Board of Directors approved an amendment to freeze benefit accruals under the qualified and
nonqualified defined benefit pension plans effective March 31, 2016. As a result, no additional benefits are earned by
participants in those plans based on service or pay after March 31, 2016. The plan was previously closed to new participants
effective December 31, 2007.
Marketing Costs
We expense all marketing-related costs, including advertising costs, as incurred.
Income Taxes
We estimate income tax expense based on amounts expected to be owed to the tax jurisdictions where we conduct business.
On a quarterly basis, management assesses the reasonableness of our effective tax rate based upon our current estimate of the
amount and components of net income, tax credits and the applicable statutory tax rates expected for the full year. We classify
interest and penalties as an element of tax expense.
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Deferred income tax assets and liabilities are determined using the asset and liability method and are reported in other
assets or other liabilities, as appropriate, in the Consolidated Balance Sheets. Under this method, the net deferred tax asset or
liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities and recognizes
enacted changes in tax rate and laws. When deferred tax assets are recognized, they are subject to a valuation allowance based
on management’s judgment as to whether realization is more likely than not.
Accrued taxes represent the net estimated amount due to taxing jurisdictions and are reported in other assets or other
liabilities, as appropriate, in the Consolidated Balance Sheets. We evaluate and assess the relative risks and appropriate tax
treatment of transactions and filing positions after considering statutes, regulations, judicial precedent and other information and
maintain tax accruals consistent with the evaluation of these relative risks and merits. Changes to the estimate of accrued taxes
occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by taxing
authorities and changes to statutory, judicial and regulatory guidance. These changes, when they occur, can affect deferred
taxes, accrued taxes, and the current period’s income tax expense and can be significant to our operating results.
Tax positions are recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax
examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
is greater than 50 percent likely of being realized on examination. For tax positions not meeting the more likely than not test, no
tax benefit is recorded.
Earnings Per Share
Basic and diluted earnings per share, or EPS, are calculated using the more dilutive of either the treasury stock method or
the two-class method. Unvested share-based payment awards that contain nonforfeitable rights to dividends are considered
participating securities under the two-class method. Income allocated to common shareholders is then divided by the weighted
average number of common shares outstanding during the period. Potentially dilutive securities are excluded from the basic
EPS calculation.
Under the treasury stock method, the weighted average number of common shares outstanding is increased by the
potentially dilutive common shares. For the two-class method, diluted EPS is calculated for each class of shareholders using the
weighted average number of shares attributed to each class. Potentially dilutive common shares are related to restricted stock.
Recently Adopted Accounting Standards Updates, or ASU, or Updated
Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting. The amendments in this ASU provided optional guidance for a limited period
of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting.
The amendments provided optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative
contracts and other transactions affected by the anticipated transition away from the London Inter-Bank Offered Rate, or
LIBOR, toward new interest rate benchmarks. The optional guidance generally allowed for the modified contract to be
accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or
reassessment of a previous accounting determination. The amendments in this ASU were effective as of March 12, 2020
through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Addendum (Topic 848) which
clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to
derivatives that are affected by the discounting transition. The guidance was effective for all entities as of March 12, 2020
through December 31, 2022. In December 2022, the FASB issued ASU No 2022-06, Reference Rate Reform (Topic 848):
Deferral of the Sunset Date of Topic 848. The amendments in this ASU defer the sunset date for applying the reference rate
reform relief by two years to December 31, 2024. We adopted ASU 2020-04 and ASU 2021-01 on January 1, 2022 and ASU
2022-06 upon issuance. We utilized the LIBOR transition relief as contract modifications were made during the course of the
reference rate reform transition period. ASU 2020-04, ASU 2021-01 and ASU 2022-06 did not have a material impact on our
consolidated financial statements.
Financial Instruments Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt
Restructuring and Vintage Disclosures. The guidance eliminates the “once a TDR, always a TDR” requirement for loan
disclosures and requires disclosures about the performance of modified loans to borrowers experiencing financial difficulty in
the 12 months following the modification.
The amendments eliminate the recognition and measurement guidance related to TDRs for creditors that have adopted ASC
326 Financial Instruments - Credit Losses. We adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments, on January 1, 2020. ASC 326 requires the recognition of lifetime
68
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
expected credit losses when a loan is originated or acquired, so the effect of credit losses that occur in loans modified in TDRs
is already included in the allowance for credit losses.
ASU 2022-02 requires a creditor to apply the loan refinancing and restructuring guidance in ASC 310-20 (consistent with
the accounting for other loan modifications) to determine whether a modification results in a new loan or a continuation of an
existing loan. It also requires enhanced disclosures for modifications in the form of interest rate reductions, principal
forgiveness, other-than-insignificant payment delays or term extensions (or combinations thereof) of loans made to borrowers
experiencing financial difficulty. Disclosures are required regardless of whether a modification of a loan to a borrower
experiencing financial difficulty results in a new loan. The objective of the disclosures is to provide information about the type
and magnitude of modifications and the degree of their success in mitigating potential credit losses.
The amendments in this ASU were effective for fiscal years beginning after December 15, 2022, and interim periods
therein. We adopted ASU 2022-02, as of January 1, 2023, using a modified retrospective transition approach. Results for
reporting periods beginning after January 1, 2023 are presented under ASU 2022-02 while prior period amounts continue to be
reported in accordance with previously applicable GAAP. Under the previously applicable accounting guidance, commercial
TDRs were individually assessed to determine if a specific reserve was required in the allowance for credit losses, or ACL. The
elimination of TDRs resulted in these loans being included in homogenous pools. The adoption of this ASU resulted in a day
one cumulative effective adjustment of $0.6 million which increased our ACL and decreased retained earnings. Refer to Note 6
Loans and Allowance for Credit Losses for additional disclosures related to modifications of loans to borrowers experiencing
financial difficulty as well as gross charge-off vintage disclosures.
Accounting Standards Issued But Not Yet Adopted
Investments Equity Method and Joint Ventures (Topic 323) Accounting for Investments in Tax Credit Structures Using the
Proportional Amortization Method
In March 2023, the FASB issued ASU 2023-02, Investments Equity Method and Joint Ventures (Topic 323): Accounting
for Investments in Tax Credit Structures Using the Proportional Amortization Method to allow reporting entities to consistently
account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits. If
certain conditions are met, a reporting entity may elect to account for its tax equity investments by using the proportional
amortization method regardless of the program from which it receives income tax credits, instead of only low-income-housing
tax credit, or LIHTC, structures. This amendment also eliminates certain LIHTC specific guidance aligning the accounting with
other equity investments in tax credit structures. Under the proportional amortization method, the equity investment is
amortized in proportion to the income tax credits and other income tax benefits received, Amortization expense and the income
tax benefits are required to be presented on a net basis in income tax expense on the Consolidated Statements of Net Income.
The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within
those fiscal years. We adopted this ASU, as of January 1, 2024, using a modified retrospective transition approach, which
resulted in an immaterial cumulative effect adjustment being recorded to retained earnings related to the transition of the cost
method to the proportional amortization method on LIHTC partnerships. Additional disclosure requirements will have minimal
impact to our consolidated financial statements.
Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures to improve disclosure requirements, primarily through enhanced disclosures about significant segment
expenses. This update does not change how a public entity identifies its operating segments; however, it does require that an
entity that has single reportable segment provide all the disclosures required by the amendments in this update. The
amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal
years beginning after December 15, 2024. A public entity should apply the amendments in this update retrospectively to all
prior periods presented in the consolidated financial statements. Early adoption is permitted. We currently have one reportable
operating segment, Community Banking. This ASU will not impact our consolidated financial statements and will have
minimal impact to to our disclosures, requiring identification of the chief operating decision maker and the information used to
make operating decisions and to allocate resources.
Income Taxes (Topic 740) Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
to enhance the transparency and decision usefulness of the disclosures. The amendments in this update address investor requests
for more transparency about income tax information through improvements to disclosures primarily related to the rate
reconciliation and income taxes paid information. The amendments in this update are effective for fiscal years beginning after
December 15, 2024. Early adoption is permitted for annual consolidated financial statements that have not yet been issued. This
ASU is not expected to have a significant impact on disclosures, and will not impact our consolidated financial statements.
69
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. EARNINGS PER SHARE
Diluted EPS is calculated using both the two-class and the treasury stock methods with the more dilutive method used to
determine diluted EPS. The two-class method was used to determine EPS for the twelve months ended December 31, 2023,
2022 and 2021. The following table reconciles the numerators and denominators of basic and diluted EPS calculations for the
periods presented:
(in thousands, except share and per share data)
Numerator for Earnings per Share—Basic and Diluted:
Net income
Less: Income allocated to participating shares
Net Income Allocated to Shareholders
Denominator for Earnings per Share—Basic:
Weighted Average Shares Outstanding—Basic
Denominator for Earnings per Share—Two-Class Method—Diluted:
Weighted Average Shares Outstanding—Basic
Add: Average participating shares outstanding
Denominator for Two-Class Method—Diluted
Earnings per share—basic
Earnings per share—diluted
Restricted stock considered anti-dilutive excluded from potentially dilutive shares
Twelve months ended December 31,
2023
2022
2021
144,781
156
144,625
$
$
135,520
381
135,139
$
$
110,343
492
109,851
38,432,447
38,988,174
39,050,241
38,432,447
38,988,174
39,050,241
222,958
42,760
2,720
38,655,405
39,030,934
39,052,961
$
$
3.76
3.74
293
3.47
3.46
12,654
$
$
2.81
2.81
793
$
$
$
$
70
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. FAIR VALUE MEASUREMENTS
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value
hierarchy level at the dates presented:
(dollars in thousands)
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities
Obligations of U.S. government corporations and agencies
Collateralized mortgage obligations of U.S. government corporations and agencies
Residential mortgage-backed securities of U.S. government corporations and agencies
Commercial mortgage-backed securities of U.S. government corporations and agencies
Obligations of states and political subdivisions
Total Available-for-Sale Debt Securities
Equity securities
Total Securities Available for Sale
Securities held in a deferred compensation plan
Derivative financial assets:
Interest rate swaps - commercial loans
Total Assets
LIABILITIES
Derivative financial liabilities:
Interest rate swaps - commercial loans
Interest rate swaps - cash flow hedge
Total Liabilities
(dollars in thousands)
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities
Obligations of U.S. government corporations and agencies
Collateralized mortgage obligations of U.S. government corporations and agencies
Residential mortgage-backed securities of U.S. government corporations and agencies
Commercial mortgage-backed securities of U.S. government corporations and agencies
Corporate obligations
Obligations of states and political subdivisions
Total Available-for-Sale Debt Securities
Equity securities
Total Securities Available for Sale
Securities held in a deferred compensation plan
Derivative financial assets:
Interest rate swaps - commercial loans
Interest rate lock commitments
Forward sale contracts - mortgage loans
Other Assets
Total Assets
LIABILITIES
Derivative financial liabilities:
Interest rate swaps - commercial loans
Interest rate swaps - cash flow hedge
Total Liabilities
71
December 31, 2023
Level 1
Level 2
Level 3
Total
$ 133,786
$
—
$
—
—
—
—
—
133,786
1,010
134,796
9,399
32,513
460,939
38,177
273,425
30,468
835,522
73
835,595
—
—
63,018
$ 144,195
$ 898,613
$
$
$
—
—
—
$
63,554
14,739
$
78,293
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 133,786
32,513
460,939
38,177
273,425
30,468
969,308
1,083
970,391
9,399
63,018
$ 1,042,808
$
63,554
14,739
$
78,293
December 31, 2022
Level 1
Level 2
Level 3
Total
$ 131,695
$
—
$
—
—
—
—
—
—
131,695
952
132,647
8,087
—
—
—
41,811
428,407
41,587
327,313
500
30,471
870,089
42
870,131
—
83,449
—
—
$ 140,734
$ 953,580
$
$
$
—
—
—
$
83,449
21,368
$ 104,817
$
$
—
—
—
—
—
—
—
—
—
—
—
—
5
2
7
—
—
—
$ 131,695
41,811
428,407
41,587
327,313
500
30,471
1,001,784
994
1,002,778
8,087
83,449
5
2
$ 1,094,321
$
83,449
21,368
$ 104,817
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets Recorded at Fair Value on a Nonrecurring Basis
We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are
recorded at the lower of cost or fair value in our consolidated financial statements. There were no liabilities measured at fair
value on a nonrecurring basis at either December 31, 2023 or December 31, 2022. There were no Level 3 assets and one Level
2 individually assessed loan measured at fair value on a nonrecurring basis as of December 31, 2023 for $5.9 million. At
December 31, 2022, there was one Level 3 OREO property measured at fair value for $3.1 million which was sold in 2023.
Fair Value of Financial Instruments
The following tables present the carrying values and fair values of our financial instruments at the dates presented:
(dollars in thousands)
ASSETS
Carrying
Value(1)
Fair Value Measurements at December 31, 2023
Total
Level 1
Level 2
Level 3
Cash and due from banks, including interest-bearing deposits
$ 233,612
$ 233,612
$ 233,612
$
—
$
Cash and due from banks, including interest-bearing deposits
$ 210,009
$ 210,009
$ 210,009
$
—
$
Securities available for sale
1,002,778
1,002,778
132,647
870,131
Securities available for sale
Loans held for sale
Portfolio loans, net
Collateral receivable
Securities held in a deferred compensation plan
Mortgage servicing rights
Interest rate swaps - commercial loans
LIABILITIES
Deposits
Collateral payable
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
Interest rate swaps - commercial loans
Interest rate swaps - cash flow hedge
(1) As reported in the Consolidated Balance Sheets
(dollars in thousands)
ASSETS
Loans held for sale
Portfolio loans, net
Collateral receivable
Securities held in a deferred compensation plan
Mortgage servicing rights
Interest rate swaps - commercial loans
Interest rate lock commitments
Forward sale contracts
LIABILITIES
Deposits
Collateral payable
Short-term borrowings
Long-term borrowings
Junior subordinated debt securities
Interest rate swaps - commercial loans
Interest rate swaps - cash flow hedge
(1) As reported in the Consolidated Balance Sheets
970,391
970,391
134,796
835,595
153
153
7,545,375
7,263,270
5,356
9,399
6,345
63,018
5,356
9,399
8,704
63,018
—
—
5,356
9,399
—
—
153
—
—
—
—
63,018
7,263,270
—
—
8,704
$ 7,521,769
$ 7,511,598
$ 5,940,117
$ 1,571,481
$
50,920
415,000
39,277
49,358
63,554
14,739
50,920
415,000
38,995
49,358
63,554
14,739
50,920
—
—
—
—
—
—
415,000
38,995
49,358
63,554
14,739
Carrying
Value(1)
Fair Value Measurements at December 31, 2022
Total
Level 1
Level 2
Level 3
16
16
7,082,629
6,815,167
6,307
8,087
7,147
83,449
5
2
6,307
8,087
9,994
83,449
5
2
—
—
6,307
8,087
—
—
—
—
16
—
—
—
—
83,449
—
—
6,815,167
—
—
9,994
$ 7,219,970
$ 7,194,225
$ 6,285,377
$ 908,848
$
65,065
370,000
14,741
54,453
83,449
21,368
65,065
370,000
14,174
54,453
83,449
21,368
65,065
—
—
—
—
—
—
370,000
14,174
54,453
83,449
21,368
72
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
2
—
—
—
—
—
—
—
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. DIVIDEND AND LOAN RESTRICTIONS
S&T is a legal entity separate and distinct from its banking and other subsidiaries. A substantial portion of our revenues
consist of dividend payments we receive from S&T Bank. S&T Bank, in turn, is subject to state laws and regulations that limit
the amount of dividends it can pay to us. In addition, both S&T and S&T Bank are subject to various general regulatory policies
relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The
Federal Reserve has indicated that banking organizations should generally pay dividends only if (i) the organization’s net
income available to common shareholders over the past year has been sufficient to fully fund the dividends and (ii) the
prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial
condition.
Federal law prohibits us from borrowing from S&T Bank unless such loans are collateralized by specific obligations.
Further, such loans are limited to 10 percent of S&T Bank’s capital stock and surplus.
NOTE 5. SECURITIES
The following table presents the fair values of our securities portfolio at the dates presented:
(dollars in thousands)
Debt securities
Equity securities
Total Securities Available for Sale
December 31, 2023
December 31, 2022
$
$
969,308 $
1,083
970,391 $
1,001,784
994
1,002,778
The following tables present the amortized cost and fair value of available-for-sale debt securities as of the dates presented:
(dollars in thousands)
U.S. Treasury securities
Obligations of U.S. government
corporations and agencies
Collateralized mortgage
obligations of U.S. government
corporations and agencies
Residential mortgage-backed
securities of U.S. government
corporations and agencies
Commercial mortgage-backed
securities of U.S. government
corporations and agencies
Corporate obligations
Obligations of states and political
subdivisions
Total Available-for-Sale Debt
Securities(1)
December 31, 2023
December 31, 2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$ 144,292
$
—
$ (10,506)
$ 133,786
$ 145,416
$
—
$ (13,721)
$ 131,695
33,342
—
(829)
32,513
43,479
—
(1,668)
41,811
507,942
1,068
(48,071)
460,939
482,039
203
(53,835)
428,407
44,707
7
(6,537)
38,177
49,418
3
(7,834)
41,587
290,775
—
30,255
458
—
213
(17,808)
273,425
352,465
—
—
—
500
30,468
30,788
—
—
55
(25,152)
327,313
—
500
(372)
30,471
$ 1,051,313
$
1,746
$ (83,751)
$ 969,308
$ 1,104,105
$
261
$ (102,582)
$ 1,001,784
(1) Excludes interest receivable of $3.8 million at December 31, 2023 and $3.7 million at December 31, 2022. Interest receivable is included in other assets in
the Consolidated Balance Sheets.
73
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables present the fair value and the age of gross unrealized losses on available-for-sale debt securities by
investment category as of the dates presented:
Less Than 12 Months
December 31, 2023
12 Months or More
Total
(dollars in thousands)
U.S. Treasury securities
Obligations of U.S. government
corporations and agencies
Collateralized mortgage
obligations of U.S. government
corporations and agencies
Residential mortgage-backed
securities of U.S. government
corporations and agencies
Commercial mortgage-backed
securities of U.S. government
corporations and agencies
Obligations of states and political
subdivisions
Total
Number
of
Securities
1
—
4
10
—
—
15
Fair
Value
Unrealized
Losses
$ 10,036 $
(52)
—
—
Number
of
Securities
13
5
Fair
Value
Unrealized
Losses
$ 123,750 $
(10,454)
32,513
(829)
Number
of
Securities
14
5
Fair
Value
Unrealized
Losses
$ 133,786 $
(10,506)
32,513
(829)
35,161
(318)
57
351,220
(47,753)
61
386,381
(48,071)
100
(1)
14
37,877
(6,536)
24
37,977
(6,537)
—
—
—
—
$ 45,297 $
(371)
29
249,005
(17,808)
29
249,005
(17,808)
—
118
$ 794,365 $
(83,380)
—
133
—
—
$ 839,662 $
(83,751)
Less Than 12 Months
December 31, 2022
12 Months or More
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
Fair
Value
Unrealized
Losses
Number
of
Securities
$ 57,057 $
(3,363)
41,811
(1,668)
8
—
$ 74,638 $
(10,358)
—
—
14
6
Total
Fair
Value
Unrealized
Losses
$ 131,695 $
(13,721)
41,811
(1,668)
296,509
(28,153)
13
112,902
(25,682)
60
409,411
(53,835)
7,143
(589)
241,009
(11,975)
2
116
20,127
(372)
$ 663,656 $
(46,120)
3
7
—
31
34,223
(7,245)
28
41,366
(7,834)
86,304
(13,177)
37
327,313
(25,152)
—
—
$ 308,067 $
(56,462)
2
147
20,127
(372)
$ 971,723 $ (102,582)
(dollars in thousands)
U.S. Treasury securities
Obligations of U.S. government
corporations and agencies
Collateralized mortgage
obligations of U.S. government
corporations and agencies
Residential mortgage-backed
securities of U.S. government
corporations and agencies
Commercial mortgage-backed
securities of U.S. government
corporations and agencies
Obligations of states and
political subdivisions
Total
6
6
47
25
30
We evaluate securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit
impairment or other factors. We do not believe any individual unrealized loss as of December 31, 2023 represents a credit
impairment. There were 133 debt securities in an unrealized loss position at December 31, 2023 and 147 debt securities in an
unrealized loss position at December 31, 2022. The unrealized losses on debt securities were attributable to changes in interest
rates and not related to the credit quality of the issuers. All debt securities were determined to be investment grade and paying
principal and interest according to the contractual terms of the security. We do not intend to sell, and it is more likely than not
that we will not be required to sell, the securities in an unrealized loss position before recovery of their amortized cost.
74
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents net unrealized gains and losses, net of tax, on available-for-sale debt securities included in
accumulated other comprehensive income (loss), for the periods presented:
(dollars in thousands)
December 31, 2023
December 31, 2022
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Unrealized
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Net
Unrealized
Losses
Total unrealized gains (losses) on available-for-sale debt securities
$
1,746
$
(83,751) $
(82,005)
$
261
$ (102,582) $ (102,321)
Income tax (expense) benefit
(372)
17,824
17,452
(56)
21,915
21,859
Net Unrealized Gains (Losses), Net of Tax Included in
Accumulated Other Comprehensive Income (Loss)
$
1,374
$
(65,927) $
(64,553)
$
205
$
(80,667) $
(80,462)
The amortized cost and fair value of available-for-sale debt securities at December 31, 2023 by contractual maturity are
included in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
(dollars in thousands)
Obligations of the U.S. Treasury, U.S. government corporations and agencies and obligations of states and political
subdivisions
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Available-for-Sale Debt Securities With Fixed Maturities
Debt Securities without a single maturity date
Collateralized mortgage obligations of U.S. government corporations and agencies
Residential mortgage-backed securities of U.S. government corporations and agencies
Commercial mortgage-backed securities of U.S. government corporations and agencies
December 31, 2023
Amortized
Cost
Fair Value
$
17,997
$
17,719
162,281
16,284
11,327
207,889
507,942
44,707
290,775
151,236
16,368
11,444
196,767
460,939
38,177
273,425
Total Available-for-Sale Debt Securities
$ 1,051,313
$ 969,308
Debt securities are pledged in order to meet various regulatory and legal requirements. Restricted pledged securities had a
carrying value of $18.4 million at December 31, 2023 and $17.9 million at December 31, 2022. Unrestricted pledged securities
had a carrying value of $214.0 million at December 31, 2023 and $251.5 million at December 31, 2022. Any changes to
restricted pledged securities require approval of the pledge beneficiary. Approval is not required for unrestricted pledged
securities.
NOTE 6. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans and Loans Held for Sale
Loans are presented net of unearned income. Unearned income consisted of net deferred loan fees and costs of $6.6 million
at December 31, 2023 and $7.4 million at December 31, 2022 and a discount related to purchase accounting fair value
adjustments of $3.1 million at December 31, 2023 and $4.5 million at December 31, 2022.
The following table summarizes the composition of originated and acquired loans as of the dates presented:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total Portfolio Loans
December 31, 2023
December 31, 2022
$
2,659,135
$
1,436,183
350,583
1,360,765
1,731,778
114,897
$
7,653,341
$
2,538,839
1,510,392
381,963
1,205,944
1,421,953
124,878
7,183,969
Loans held for sale
Total Loans(1)
7,183,985
(1) Excludes interest receivable of $35.3 million at December 31, 2023 and $28.3 million at December 31, 2022. Interest receivable is included in other assets in
the Consolidated Balance Sheets.
7,653,494
153
16
$
$
75
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Modifications to Borrowers Experiencing Financial Difficulty
The following table presents the amortized cost of loans to borrowers experiencing financial difficulty by portfolio segment
and type of modification during the periods presented:
(dollars in thousands)
Commercial real estate
Commercial industrial
Commercial construction
Business banking
Consumer real estate
Total(1)
Twelve Months Ended December 31, 2023
Term Extension
Term Extension and
Interest Rate
Reduction
Total
% of Portfolio
Segment
$
13,836 $
16,877
—
120
61
$
30,894 $
— $
—
—
—
189
189 $
13,836
16,877
—
120
250
31,083
0.52 %
1.18 %
— %
0.01 %
0.01 %
0.41 %
(1) Excludes loans that were fully paid off or fully charged-off by period end.
The following table describes the effect of loan modifications made to borrowers experiencing financial difficulty
during the periods presented:
Commercial real estate
Commercial industrial
Commercial construction
Business banking
Consumer real estate
Twelve Months Ended December 31, 2023
Weighted-Average Term
Extension (in months)
Weighted-Average
Interest Rate Reduction
4
5
—
19
168
—
—
—
—
2%
We closely monitor the performance of the loans that are modified to borrowers experiencing financial difficulty to
understand the effectiveness of the modification efforts. The following table presents the aging analysis of modifications to
borrowers experiencing financial difficulty in the last 12 months as of the date presented:
(dollars in thousands)
Commercial real estate
Commercial industrial
Commercial construction
Business banking
Consumer real estate
Total
December 31, 2023
Current
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
$
13,836
$
16,468
—
120
250
$
30,674
$
—
—
—
—
—
—
$
$
—
—
—
—
—
—
$
—
$
13,836
409
—
—
—
16,877
—
120
250
$
409
$
31,083
A payment default is defined as a loan having a payment past due 90 days or more after a modification took place. There
were no loans that were modified within the last 12 months that had a payment default during the twelve months ended
December 31, 2023. Additionally, we had three commitments to lend an additional $1.6 million to borrowers experiencing
financial difficulty that had a modification during 2023.
The effect of modifications made to borrowers experiencing financial difficulty is already included in the ACL because of
the measurement methodologies used to estimate the ACL, therefore, a change to the ACL is generally not recorded upon
modification. If principal forgiveness is provided, that portion of the loan will be charged-off, resulting in a reduction of the
amortized cost basis and a corresponding adjustment to the ACL. An assessment of whether the borrower is experiencing
financial difficulty is made on the date of a modification.
Troubled Debt Restructurings
Prior to the adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructuring and
Vintage Disclosures , we evaluated all substandard commercial and consumer loans that had experienced a forbearance or
modification of existing terms to determine if they should be designated as troubled debt restructurings, or TDRs.
76
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TDRs were returned to accruing status when the ultimate collectability of all contractual amounts due, according to the
restructured agreement, was not in doubt and there was a period of a minimum of six months of satisfactory payment
performance by the borrower either immediately before or after the restructuring. There was one $0.2 million TDR returned to
accruing status during 2022.
The following table summarizes TDRs as of the date presented:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
December 31, 2022
Accruing
TDRs
Nonaccruing
TDRs
Total
TDRs
$
—
$
626
1,655
438
6,168
4
$
—
—
—
1,087
1,798
9
—
626
1,655
1,525
7,966
13
$
8,891
$
2,894
$
11,785
The following table presents the TDRs by portfolio segment and type of concession for the periods presented:
Twelve Months Ended December 31, 2022
Type of Modification
Number
of
Contracts
Bankruptcy(1)
Other
Extend
Maturity
Modify
Rate
Modify
Payments
Total
Post-
Modification
Outstanding
Recorded
Investment(2)
Total
Pre-
Modification
Outstanding
Recorded
Investment(2)
— $
— $
— $
— $
— $
— $
— $
—
—
2
23
2
—
—
—
1,436
11
—
—
154
—
—
—
—
—
610
—
—
—
—
—
—
—
—
—
—
—
—
—
154
2,046
11
—
—
—
203
2,558
15
2,776
(dollars in thousands)
Commercial real estate
Commercial industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.
(2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to
modification. The post-modification balance represents the outstanding balance at period end.
1,447 $
2,211 $
610 $
154 $
27 $
— $
— $
As of December 31, 2022, we had 16 commitments to lend an additional $0.4 million on TDRs.
Defaulted TDRs were defined as loans having a payment default of 90 days or more after the restructuring takes place that
were restructured within the last 12 months prior to defaulting. There were no TDRs that defaulted during 2022.
The following table is a summary of nonperforming assets as of the dates presented:
(dollars in thousands)
Nonperforming Assets
Nonaccrual Loans
OREO
Total Nonperforming Assets
Nonperforming Assets
December 31, 2023
December 31, 2022
$
$
22,947
75
23,022
$
$
19,052
3,065
22,117
The following table presents a summary of the aggregate amount of loans to certain officers and directors of S&T or any
affiliates of such persons as of the dates presented:
(dollars in thousands)
Balance at beginning of year
New loans
Repayments or no longer considered a related party
Balance at End of Year
77
December 31,
2023
2022
$
4,128
$
936
(881)
6,157
1,085
(3,114)
$
4,183
$
4,128
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Credit Losses
We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan
portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts
of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on
the following portfolio segments: 1) CRE, 2) C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate
and 6) Other Consumer.
The following are key risks within each portfolio segment:
CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties
for various purposes such as hotels, retail, multifamily and health care. Operations of the individual projects and global cash
flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important
indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee,
if the project is not owner-occupied.
C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts
receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of
repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific
risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a
distressed or liquidation scenario to satisfy the outstanding debt.
Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the
acquisition and development of raw land for various purposes. While these loans are generally confined to the construction/
development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow
on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the
local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the
experience and resources of the developer.
Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated
through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit
quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a
standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is
an important indicator of risk, but there are also more specific risks depending on the collateral type and business.
Consumer Real Estate—Loans secured by first and second liens such as 1-4 family residential mortgages, home equity loans
and home equity lines of credit. The primary source of repayment for these loans is the income and assets of the borrower. The
condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state
of the local housing market can also have a significant impact on this segment because low demand and/or declining home
values can limit the ability of borrowers to sell a property and satisfy the debt.
Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as
unsecured loans. This segment includes auto loans, unsecured loans and lines of credit. The primary source of repayment for
these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate,
is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of
repayment due to less certain collateral values.
Management monitors various credit quality indicators for the commercial, business banking and consumer loan
portfolios, including changes in risk ratings, nonperforming status and delinquency on a monthly basis.
We monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon
the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the
pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.
Our risk ratings are consistent with regulatory guidance and are as follows:
Pass—The loan is currently performing and is of high quality.
Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left
uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit
position at some future date.
Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by
the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of
78
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not
corrected.
Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and
values, highly questionable and improbable.
The following tables present loan balances by year of origination and internally assigned risk rating for our portfolio
segments as of the dates presented:
79
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Commercial Real Estate
Pass
Special mention
Substandard
Doubtful
Total Commercial Real Estate
Year-to-date Gross Charge-offs
Commercial and Industrial
Pass
Special mention
Substandard
Doubtful
December 31, 2023
Risk Rating
2023
2022
2021
2020
2019
2018 and
Prior
Revolving
Revolving-
Term
Total
$ 276,677 $ 323,463 $ 433,308 $ 237,901 $ 383,799 $ 781,465 $
32,418 $
— $ 2,469,031
—
—
—
276,677
—
1,006
—
—
324,469
—
6,000
—
—
439,308
—
—
2,355
—
240,256
—
24,887
10,685
—
419,371
—
75,428
69,743
—
926,636
1,706
—
—
—
32,418
—
—
—
—
—
—
107,321
82,783
—
2,659,135
1,706
171,672
231,114
185,884
53,101
47,063
183,165
482,490
—
1,354,489
189
—
—
620
244
—
10,242
14,510
—
—
1,595
—
—
5,795
—
8,848
1,892
—
4,126
33,633
—
Total Commercial and Industrial
171,861
231,978
210,636
54,696
52,858
193,905
520,249
Year-to-date Gross Charge-offs
—
—
—
—
3,412
15,842
—
Commercial Construction
Pass
Special mention
Substandard
Doubtful
75,596
154,456
82,313
14,845
—
—
—
—
—
—
—
—
—
—
—
—
Total Commercial Construction
75,596
154,456
82,313
14,845
Year-to-date Gross Charge-offs
—
—
—
—
151
—
4,576
—
4,727
451
4,054
14,208
—
384
—
—
—
—
4,438
14,208
—
—
—
—
—
24,025
57,669
—
—
1,436,183
—
19,254
—
—
—
—
—
—
345,623
—
4,960
—
350,583
451
Business Banking
Pass
Special mention
Substandard
Doubtful
270,129
262,535
204,874
87,346
96,371
321,360
96,618
523
1,339,756
—
—
—
55
16
—
251
2,486
—
224
448
—
33
3,170
—
3,508
9,898
—
37
99
—
172
612
—
4,280
16,729
—
Total Business Banking
270,129
262,606
207,611
88,018
99,574
334,766
96,754
1,307
1,360,765
Year-to-date Gross Charge-offs
—
67
43
1
88
1,073
34
—
1,306
Consumer Real Estate
Pass
Special mention
Substandard
Doubtful
311,887
334,879
147,652
101,999
67,402
183,283
551,368
22,206
1,720,676
—
—
—
—
583
—
—
198
—
—
42
—
—
488
—
189
6,322
—
—
712
—
—
189
2,568
10,913
—
—
Total Consumer Real Estate
311,887
335,462
147,850
102,041
67,890
189,794
552,080
24,774
1,731,778
Year-to-date Gross Charge-offs
—
1
—
5
1
43
75
296
421
Other Consumer
Pass
Special mention
Substandard
Doubtful
11,286
11,965
6,483
3,842
1,062
—
—
—
—
—
—
—
24
—
6,507
175
—
5
—
3,847
19
—
20
—
1,082
37
526
—
146
—
672
5
76,426
3,109
114,699
—
—
—
—
3
—
—
198
—
76,426
3,112
114,897
—
288
1,500
Total Other Consumer
11,286
11,965
Year-to-date Gross Charge-offs
830
146
Pass
Special mention
Substandard
Doubtful
1,117,247
1,318,412
1,060,514
499,034
595,848
1,473,853
1,253,528
25,838
7,344,274
189
—
—
1,681
843
—
16,493
17,218
—
224
4,445
—
24,920
24,734
—
87,973
88,385
—
4,163
34,444
—
172
135,815
3,183
173,252
—
—
Total Loan Balance
$ 1,117,436 $ 1,320,936 $ 1,094,225 $ 503,703 $ 645,502 $ 1,650,211 $ 1,292,135 $
29,193 $ 7,653,341
Current Year-to-date Gross
Charge-offs
$
830 $
214 $
218 $
25 $
3,989 $
18,669 $
109 $
584 $
24,638
80
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Risk Rating
(dollars in thousands)
Commercial Real Estate
Pass
Special mention
Substandard
Doubtful
2022
2021
2020
2019
2018
2017 and
Prior
Revolving
Revolving-
Term
Total
$ 292,732 $ 360,423 $ 267,743 $ 422,872 $ 227,006 $ 704,600 $
21,666 $
— $ 2,297,042
—
—
—
—
—
—
—
1,306
—
13,187
13,434
—
20,090
14,845
—
101,112
77,823
—
—
—
—
—
—
—
134,389
107,408
—
Total Commercial Real Estate
292,732
360,423
269,049
449,493
261,941
883,535
21,666
—
2,538,839
Commercial and Industrial
Pass
Special mention
Substandard
Doubtful
253,324
264,012
88,544
63,190
62,874
138,250
559,777
—
1,429,971
—
372
—
25,436
—
—
—
—
—
5,103
5,705
—
1,885
1,152
—
7,132
1,891
—
19,280
12,465
—
—
—
—
58,836
21,585
—
Total Commercial and Industrial
253,696
289,448
88,544
73,998
65,911
147,273
591,522
—
1,510,392
Commercial Construction
Pass
Special mention
Substandard
Doubtful
120,655
159,737
40,762
—
—
—
10,954
—
—
—
—
—
6,338
8,104
—
—
3,953
—
—
—
2,297
—
1,879
—
27,284
—
—
—
Total Commercial Construction
120,655
170,691
40,762
14,442
3,953
4,176
27,284
—
—
—
—
—
361,026
19,058
1,879
—
381,963
Business Banking
Pass
Special mention
Substandard
Doubtful
Total Business Banking
Consumer Real Estate
Pass
Special mention
Substandard
Doubtful
287,520
233,499
87,926
107,819
80,549
276,843
104,354
645
1,179,155
—
159
—
157
67
—
146
3,077
—
—
1,912
—
2,790
1,550
—
3,945
11,391
32
793
124
—
95
551
—
7,926
18,831
32
287,679
233,723
91,149
109,731
84,889
292,211
105,271
1,291
1,205,944
296,900
148,790
91,477
74,155
30,658
191,228
552,994
21,547
1,407,749
—
48
—
—
213
—
—
136
—
—
428
—
—
1,373
—
882
8,059
—
—
655
—
—
882
2,410
13,322
—
—
Total Consumer Real Estate
296,948
149,003
91,613
74,583
32,031
200,169
553,649
23,957
1,421,953
Other Consumer
Pass
Special mention
Substandard
Doubtful
20,046
10,819
5,427
3,242
1,013
724
82,125
1,404
124,800
—
8
—
—
—
—
—
—
—
—
28
—
—
21
—
—
—
—
—
—
—
—
21
—
—
78
—
Total Other Consumer
20,054
10,819
5,427
3,270
1,034
724
82,125
1,425
124,878
Pass
Special Mention
Substandard
Doubtful
1,271,177
1,177,280
581,879
677,616
406,053
1,313,942
1,348,200
23,596
6,799,743
—
587
—
36,547
280
—
146
4,519
—
26,394
21,507
—
24,765
18,941
—
113,071
101,043
32
20,073
13,244
—
95
221,091
2,982
163,103
—
32
Total Loan Balance
$ 1,271,764 $ 1,214,107 $ 586,544 $ 725,517 $ 449,759 $ 1,528,088 $ 1,381,517 $
26,673 $ 7,183,969
81
—
—
—
—
—
—
—
—
6,320
2,659,135
1,435,305
878
1,436,183
345,623
4,960
350,583
Table of Contents
S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered
nonaccrual when interest and principal are 90 days or more past due or management has determined that a material deterioration
in the borrower’s financial condition exists. The risk of loss is generally highest for nonaccrual loans.
The following tables present loan balances by year of origination and accrual and nonaccrual status for our portfolio
segments as of the dates presented:
(dollars in thousands)
Commercial Real Estate
Accrual
Nonaccrual
2023
2022
2021
2020
2019
2018 and
Prior
Revolving
Revolving-
Term
Total
December 31, 2023
$ 276,677 $ 324,469 $ 439,308 $ 240,256 $ 419,371 $ 920,316 $
32,418 $
— $ 2,652,815
—
—
—
—
—
6,320
—
Total Commercial Real Estate
276,677
324,469
439,308
240,256
419,371
926,636
32,418
Commercial and Industrial
Accrual
Nonaccrual
171,861
231,978
210,636
54,696
52,858
193,257
520,019
—
—
—
—
—
648
230
Total Commercial and Industrial
171,861
231,978
210,636
54,696
52,858
193,905
520,249
Commercial Construction
Accrual
Nonaccrual
Total Commercial Construction
Business Banking
Accrual
Nonaccrual
Total Business Banking
Consumer Real Estate
Accrual
Nonaccrual
75,596
—
75,596
154,456
—
154,456
82,313
—
82,313
14,845
—
14,845
151
4,576
4,727
4,054
384
4,438
14,208
—
14,208
270,129
262,606
207,611
87,979
99,354
330,902
96,754
1,283
1,356,618
—
—
—
39
220
3,864
—
24
4,147
270,129
262,606
207,611
88,018
99,574
334,766
96,754
1,307
1,360,765
311,887
335,086
147,689
101,518
67,577
186,909
551,858
22,942
1,725,466
—
376
161
523
313
2,885
222
1,832
6,312
Total Consumer Real Estate
311,887
335,462
147,850
102,041
67,890
189,794
552,080
24,774
1,731,778
Other Consumer
Accrual
Nonaccrual
11,286
11,965
6,499
—
—
8
Total Other Consumer
11,286
11,965
6,507
3,656
191
3,847
1,082
—
1,082
541
131
672
76,426
—
76,426
3,112
—
3,112
114,567
330
114,897
Accrual
Nonaccrual
1,117,436
1,320,560
1,094,056
502,950
640,393
1,635,979
1,291,683
27,337
7,630,394
—
376
169
753
5,109
14,232
452
1,856
22,947
Total Loan Balance
$ 1,117,436 $ 1,320,936 $ 1,094,225 $ 503,703 $ 645,502 $ 1,650,211 $ 1,292,135 $
29,193 $ 7,653,341
82
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Commercial Real Estate
Accrual
Nonaccrual
2022
2021
2020
2019
2018
2017 and
Prior
Revolving
Revolving-
Term
Total
December 31, 2022
$ 292,732 $ 360,423 $ 269,049 $ 449,493 $ 261,941 $ 876,435 $
21,666 $
— $ 2,531,739
—
—
—
—
—
7,100
—
Total Commercial Real Estate
292,732
360,423
269,049
449,493
261,941
883,535
21,666
Commercial and Industrial
Accrual
Nonaccrual
253,696
289,448
88,544
73,998
65,858
147,273
591,292
—
—
—
—
53
—
230
Total Commercial and Industrial
253,696
289,448
88,544
73,998
65,911
147,273
591,522
Commercial Construction
Accrual
Nonaccrual
120,655
170,691
40,762
14,442
—
—
—
—
Total Commercial Construction
120,655
170,691
40,762
14,442
3,953
—
3,953
3,792
384
4,176
27,284
—
27,284
—
—
—
—
—
—
—
—
7,100
2,538,839
1,510,109
283
1,510,392
381,579
384
381,963
Business Banking
Accrual
Nonaccrual
Total Business Banking
Consumer Real Estate
Accrual
Nonaccrual
287,679
233,656
91,149
109,479
83,689
289,435
105,172
1,195
1,201,454
—
67
—
252
1,200
2,776
99
96
4,490
287,679
233,723
91,149
109,731
84,889
292,211
105,271
1,291
1,205,944
296,948
148,868
91,085
73,947
31,646
196,384
553,441
23,108
1,415,427
—
135
528
636
385
3,785
208
849
6,526
Total Consumer Real Estate
296,948
149,003
91,613
74,583
32,031
200,169
553,649
23,957
1,421,953
Other Consumer
Accrual
Nonaccrual
Total Other Consumer
Accrual
Nonaccrual
20,054
10,819
—
—
20,054
10,819
5,303
124
5,427
3,270
—
3,270
1,034
—
1,034
593
131
724
82,125
—
82,125
1,411
14
1,425
124,609
269
124,878
1,271,764
1,213,905
585,892
724,629
448,121
1,513,912
1,380,980
25,714
7,164,917
—
202
652
888
1,638
14,176
537
959
19,052
Total Loan Balance
$ 1,271,764 $ 1,214,107 $ 586,544 $ 725,517 $ 449,759 $ 1,528,088 $ 1,381,517 $
26,673 $ 7,183,969
The following tables present the age analysis of past due loans segregated by class of loans as of the dates presented:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
December 31, 2023
Current
30-59 Days
Past Due
60-89 Days
Past Due
Nonaccrual
Total Past
Due Loans
Total Loans
$ 2,649,412
$
1,435,301
345,623
1,351,048
1,719,751
114,138
—
4
—
3,525
3,352
366
$
3,403
$
6,320
$
9,723
$ 2,659,135
—
—
2,045
2,363
63
878
4,960
4,147
6,312
330
882
1,436,183
4,960
9,717
350,583
1,360,765
12,027
1,731,778
759
114,897
$ 7,615,273
$
7,247
$
7,874
$
22,947
$
38,068
$ 7,653,341
December 31, 2022
Current
30-59 Days
Past Due
60-89 Days
Past Due
Nonaccrual
Total Past
Due Loans
Total
Loans
$ 2,523,315
$
8,424
$
1,505,805
381,579
1,199,586
1,409,907
124,384
4,304
—
1,583
3,617
165
—
—
—
285
1,903
60
$
7,100
$
15,524
$ 2,538,839
283
384
4,490
6,526
269
4,587
1,510,392
384
381,963
6,358
1,205,944
12,046
1,421,953
494
124,878
$ 7,144,576
$
18,093
$
2,248
$
19,052
$
39,393
$ 7,183,969
83
Interest Income
Recognized
on Nonaccrual(1)
46
38
—
209
308
2
603
Interest Income
Recognized
on Nonaccrual(1)
580
148
171
228
257
1
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables present loans on nonaccrual status by class of loan for the year-to-date periods presented:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Total
(1) Represents only cash payments received and applied to interest on nonaccrual loans.
19,052
$
$
December 31, 2023
Beginning of Period
Nonaccrual
End of Period
Nonaccrual
Nonaccrual With No
Related Allowance
$
7,100
$
6,320
$
5,940
$
283
384
4,490
6,526
269
878
4,960
4,147
6,312
330
—
4,576
—
—
—
22,947
$
10,516
$
December 31, 2022
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Other consumer
Beginning of Period
Nonaccrual
End of Period
Nonaccrual
Nonaccrual With No
Related Allowance
$
31,488
$
7,100
$
5,649
$
15,239
2,471
9,641
7,294
158
283
384
4,490
6,526
269
—
—
933
—
—
Total
(1) Represents only cash payments received and applied to interest on nonaccrual loans.
66,291
$
$
19,052
$
6,582
$
1,385
84
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents collateral-dependent loans as of December 31, 2023:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Total
December 31, 2023
Type of Collateral
Real Estate
Business
Assets
Other
$
$
5,940
—
4,576
—
—
$
10,516
$
—
—
—
—
—
—
$
$
The following table presents collateral-dependent loans by class of loans as of December 31, 2022:
(dollars in thousands)
Commercial real estate
Commercial and industrial
Commercial construction
Business banking
Consumer real estate
Total
December 31, 2022
Type of Collateral
Business
Assets
Real Estate
$
$
5,649
—
1,655
260
561
—
626
—
1,112
—
Other
$
$
8,125
$
1,738
$
—
—
—
—
—
—
—
—
—
154
—
154
The following tables present activity in the ACL for the periods presented:
(dollars in thousands)
Allowance for credit losses on loans:
Twelve Months Ended December 31, 2023
Commercial
Real Estate
Commercial
and
Industrial
Commercial
Construction
Business
Banking
Consumer
Real Estate
Other
Consumer
Total Loans
Balance at beginning of period
$
41,428
$
25,710
$
6,264
$
12,547
$
12,105
$
3,286
$
101,340
Impact of ASU 2022-02
Provision for credit losses on loans(1)
Charge-offs
Recoveries
Net (Charge-offs)/ Recoveries
—
(2,803)
(1,706)
967
(739)
75
18,366
(19,254)
9,641
(9,613)
215
(648)
(451)
2
(449)
251
1,088
(1,306)
278
(1,028)
278
2,493
(421)
208
(213)
(251)
744
(1,500)
360
(1,140)
568
19,240
(24,638)
11,456
(13,182)
Balance at End of Period
$
37,886
$
34,538
$
5,382
$
12,858
$
14,663
$
2,639
$
107,966
(1) Excludes the provision for credits losses for unfunded commitments.
(dollars in thousands)
Allowance for credit losses on loans:
Twelve Months Ended December 31, 2022
Commercial
Real Estate
Commercial
and
Industrial
Commercial
Construction
Business
Banking
Consumer
Real Estate
Other
Consumer
Total
Loans
Balance at beginning of period
$
50,700
$
19,727
$
5,355
$
11,338
$
8,733
$
2,723
$
Provision for credit losses on loans(1)
(9,064)
Charge-offs
Recoveries
Net (Charge-offs)/Recoveries
(827)
619
(208)
4,797
(5,797)
6,983
1,186
908
—
1
1
3,644
(3,314)
879
(2,435)
3,536
(304)
140
(164)
1,538
(1,375)
400
(975)
98,576
5,359
(11,617)
9,022
(2,595)
Balance at End of Period
$
41,428
$
25,710
$
6,264
$
12,547
$
12,105
$
3,286
$
101,340
(1) Excludes the provision for credits losses for unfunded commitments.
85
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
We have 42 lease contracts, including 40 operating leases and 2 finance leases at December 31, 2023. These leases are for
our branch, loan production and support services facilities. Included in the lease expense for premises are leases with one S&T
director, which totaled approximately $0.2 million for each of the three years 2023, 2022 and 2021. One new lease agreement
was entered into in 2023.
The following table presents our lease expense for finance and operating leases for the years ended December 31:
(dollars in thousands)
Operating lease expense
Amortization of ROU assets - finance leases
Interest on lease liabilities - finance leases
Total Lease Expense
$
2023
5,199
90
60
$
2022
5,169
179
65
$
2021
5,135
224
74
$
5,349
$
5,413
$
5,433
The following table presents our ROU assets, weighted average term and the discount rates for finance and operating leases
as of December 31:
(dollars in thousands)
Operating Leases
ROU assets
Operating cash flows
Finance Leases
ROU assets
Operating cash flows
Financing cash flows
Weighted Average Lease Term - Years
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
2023
2022
$
$
$
$
$
42,100
6,996
786
60
69
17.8
12.0
5.93 %
6.02 %
$
$
$
$
$
43,089
6,826
876
65
160
17.9
12.7
5.83 %
6.01 %
The following table presents the maturity analysis of lease liabilities for finance and operating leases as of December 31,
2023:
(dollars in thousands)
Maturity Analysis
2024
2025
2026
2027
2028
Thereafter
Total
Less: Present value discount
Lease Liabilities
Finance
Operating
Total
$
130
132
133
135
130
748
1,408
(437)
971
$
$
4,865
$
4,995
4,864
4,752
4,499
4,538
58,802
82,320
(33,614)
4,996
4,885
4,634
4,668
59,550
83,728
(34,051)
$ 48,706
$ 49,677
86
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. PREMISES AND EQUIPMENT
The following table is a summary of premises and equipment as of the dates presented:
(dollars in thousands)
Land
Premises
Furniture and equipment
Leasehold improvements
Accumulated depreciation
Total
December 31,
2023
2022
$
8,651
$
62,150
52,638
12,527
135,966
(86,960)
8,651
61,904
48,941
12,083
131,579
(82,294)
$
49,006
$
49,285
Depreciation expense related to premises and equipment was $6.5 million in 2023, $6.4 million in 2022 and $6.6 million in
2021.
NOTE 9. GOODWILL AND OTHER INTANGIBLES
The following table presents goodwill as of the dates presented:
(dollars in thousands)
Balance at beginning of year
Additions
Balance at End of Year
December 31,
2023
2022
$
373,424
$
373,424
—
—
$
373,424
$
373,424
Goodwill is reviewed for impairment annually or more frequently if it is determined that a triggering event has occurred. In
our qualitative assessment performed for our annual impairment analysis as of October 1, 2023, we concluded that it is not
more likely than not that fair value is less than carrying value. Based on this conclusion, a quantitative impairment test was not
performed and we concluded that goodwill was not impaired. No events or circumstances since the October 1, 2023 annual
impairment test were noted that would indicate goodwill was impaired at December 31, 2023.
The following table presents a summary of intangible assets as of the dates presented:
(dollars in thousands)
Gross carrying amount at beginning of year
Additions
Accumulated amortization
Balance at End of Year
December 31,
2023
2022
$
31,340
$
31,340
—
—
(27,281)
(25,962)
$
4,059
$
5,378
Intangible assets of $4.1 million at December 31, 2023 relate to core deposit and wealth management customer
relationships resulting from acquisitions. We determined the amount of identifiable intangible assets for our core deposits based
upon an independent valuation. Other intangible assets are evaluated for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. There were no triggering events in 2023 requiring
an impairment analysis to be completed.
Amortization expense on finite-lived intangible assets totaled $1.3 million, $1.5 million and $1.8 million for 2023, 2022
and 2021.
87
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the expected amortization expense for finite-lived intangible assets, assuming no new
additions, for each of the five years following December 31, 2023 and thereafter:
(dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
Amount
1,151
820
671
562
480
375
4,059
$
$
$
$
$
$
$
NOTE 10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Derivatives Designated as Hedging Instruments
The following table indicates the amounts representing the value of derivative assets and derivative liabilities as of the dates
presented:
Derivative Assets
(Included in Other Assets)
Derivative Liabilities
(Included in Other Liabilities)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
(dollars in thousands)
Derivatives Designated as Hedging Instruments
Interest rate swap contracts - cash flow hedge
$
— $ — $
— $ — $ 500,000 $ 14,739 $ 500,000 $ 21,368
Total Derivatives Designated as Hedging Instruments $
— $ — $
— $ — $ 500,000 $ 14,739 $ 500,000 $ 21,368
Derivatives Not Designated as Hedging Instruments
Interest rate swap contracts - commercial loans
$ 892,712 $ 63,018 $ 976,707 $ 83,449 $ 892,712 $ 63,554 $ 976,707 $ 83,449
Interest rate lock commitments - mortgage loans
Forward sales contracts - mortgage loans
Total Derivatives Not Designated as Hedging
Instruments
—
—
—
—
126
130
5
2
—
—
—
—
—
—
—
—
$ 892,712 $ 63,018 $ 976,963 $ 83,456 $ 892,712 $ 63,554 $ 976,707 $ 83,449
Total Derivatives
$ 892,712 $ 63,018 $ 976,963 $ 83,456 $ 1,392,712 $ 78,293 $ 1,476,707 $ 104,817
88
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table indicates the gross amounts of interest rate swap derivative assets and derivative liabilities, the
amounts offset and the carrying values in the Consolidated Balance Sheets at the dates presented:
(dollars in thousands)
Gross amounts recognized
Gross amounts offset
Net amounts presented in the Consolidated Balance
Sheets
Netting adjustments(1)
Cash collateral(2)
Derivatives (included
in Other Assets)
Derivatives (included
in Other Liabilities)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
$
63,018
$
83,449
$
78,293
$
—
63,018
(10,424)
(50,920)
—
83,449
(15,196)
(65,065)
—
78,293
(10,424)
(5,356)
104,817
—
104,817
(15,196)
(6,307)
Net Amount
1,674
(1) Netting adjustments represent the amounts recorded to convert derivative assets and liabilities from a gross basis to a net basis in accordance with the
applicable accounting guidance.
(2) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with
the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash
collateral, if any, is not reflected above.
62,513
3,188
83,314
$
$
$
$
The following table presents the effect, net of tax, of the cash flow hedges on OCI and on the Consolidated Statements of
Comprehensive Income for the years presented:
Amount of Gain (Loss) Recognized in Other
Comprehensive Income (Loss)
Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income
(Loss) into Interest Income
(dollars in thousands)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge
Total
$
$
5,204
5,204
$
$
(16,806)
(16,806)
$
$
(9,720)
(9,720)
$
$
(72)
(72)
Amounts reported in OCI related to derivatives that are designated as hedging instruments are reclassified to interest
income as interest payments are received on variable rate assets. During the next twelve months, we estimate that an additional
$10.6 million will be reclassified as a decrease to interest income. Our current interest rate swap agreements have 3-5 year
terms with maturity dates extending into 2027.
The following table indicates the gain or loss recognized in income on derivatives not designated as hedging instruments
for the periods presented:
(dollars in thousands)
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans
Interest rate lock commitments—mortgage loans
Forward sale contracts—mortgage loans
Total Derivatives (Loss) Gain
Twelve months ended December 31,
2023
2022
2021
$
(554)
(5)
(2)
$
(561)
$
$
103
(396)
(2)
(295)
$
610
(2,499)
389
$
(1,500)
89
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. MORTGAGE SERVICING RIGHTS
For the years ended December 31, 2023, 2022 and 2021, the 1-4 family mortgage loans that were sold to Fannie Mae
amounted to $0.2 million, $28.6 million and $287.9 million. At December 31, 2023, 2022 and 2021, our servicing portfolio
unpaid principal balance was $707.8 million, $772.9 million and $841.7 million,.
The following table indicates MSRs and the net carrying values:
(dollars in thousands)
Balance at December 31, 2021
Additions
Amortization
Temporary recapture
Balance at December 2022
Additions
Amortization
Temporary recapture
Balance at December 31, 2023
Servicing
Rights
Valuation
Allowance
Net Carrying
Value
$
7,887
$
(210)
$
358
(1,098)
—
$
7,147
$
2
(804)
—
$
6,345
$
—
—
210
—
—
—
—
—
$
7,677
358
(1,098)
210
7,147
2
(804)
—
$
6,345
NOTE 12. QUALIFIED AFFORDABLE HOUSING
As part of our responsibilities under the Community Reinvestment Act and due to their favorable federal income tax
benefits, we invest in LIHPs. As a limited partner in these operating partnerships, we receive tax credits and tax deductions for
losses incurred by the underlying properties. Our maximum exposure to loss associated with these investments consists of the
investments' fair value plus any unfunded commitments as well as the denial of the tax credits if the project is deemed non-
compliant. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss
to be remote. Our investments in LIHPs represent unconsolidated variable interest entities, or VIEs, and the assets and liabilities
of the partnerships are not recorded on our balance sheet. We have determined that we are not the primary beneficiary of these
VIEs because we do not have the power to direct the activities that most significantly impact their economic performance.
Our total investment in qualified affordable housing projects was $33.5 million at December 31, 2023 and $23.6 million at
December 31, 2022. Amortization expense, included in other noninterest expense in the Consolidated Statements of Net Income
was $2.0 million, $1.4 million and $1.2 million for the twelve months ended December 31, 2023, 2022 and 2021. The
amortization expense was offset by tax credits of $2.6 million, $1.2 million and $2.0 million for the twelve months ended
December 31, 2023, 2022 and 2021 as a reduction to our federal tax provision.
We did not invest in any new qualified affordable housing projects in 2023. As of December 31, 2023, the aggregate
commitment for existing projects was $12.0 million. No amortization expense or tax credits will be recognized for these
projects until complete.
NOTE 13. DEPOSITS
The following table presents the composition of deposits at December 31 and interest expense for the years ended
December 31:
(dollars in thousands)
Noninterest-bearing demand
Interest-bearing demand
Money market
Savings
Certificates of deposit
Total
2023
2022
2021
Balance
Interest
Expense
Balance
Interest
Expense
Balance
Interest
Expense
$ 2,221,942
$
—
$ 2,588,692
$
—
$ 2,748,586
$
825,787
1,941,842
950,546
1,581,652
6,056
39,480
4,352
42,948
846,653
1,731,521
1,118,511
934,593
1,025
11,948
1,121
5,813
979,133
2,070,579
1,110,155
1,088,071
—
809
3,652
366
5,930
$ 7,521,769
$
92,836
$ 7,219,970
$
19,907
$ 7,996,524
$
10,757
The aggregate of all certificates of deposits over $250,000, including brokered CDs, were $350.7 million at December 31,
2023 and $219.2 million at December 31, 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table indicates the scheduled maturities of certificates of deposit at December 31, 2023:
(dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
Amount
$ 1,320,588
218,385
20,805
11,260
7,839
2,775
$ 1,581,652
NOTE 14. SHORT TERM BORROWINGS
Short-term borrowings are for terms under or equal to one year and at December 31, 2023 are comprised of FHLB
advances. FHLB advances are for various terms and are secured by a blanket lien on residential mortgages and other real estate
secured loans.
The following table presents the composition of short-term borrowings, the weighted average interest rate as of December
31, 2023 and interest expense for the years ended December 31:
2023
Weighted
Average
Interest
Rate
Balance
2022
Weighted
Average
Interest
Rate
2021
Weighted
Average
Interest
Rate
Interest
Expense
Interest
Expense
Balance
Interest
Expense
Balance
(dollars in thousands)
FHLB advances
415,000
5.65 %
27,234
370,000
4.49 %
1,649
Total Short-term Borrowings
$ 415,000
5.65 % $ 27,234
$ 370,000
4.49 % $ 1,649
$
NOTE 15. LONG TERM BORROWINGS AND SUBORDINATED DEBT
—
—
— %
— % $
12
12
Long-term borrowings are for original terms greater than one year and are comprised of FHLB advances, finance leases
and junior subordinated debt securities. Our long-term borrowings were $39.3 million as of December 31, 2023 and
$14.7 million as of December 31, 2022. Long-term FHLB advances are secured by the same loans as short-term FHLB
advances. Total loans pledged as collateral at the FHLB were $4.6 billion at December 31, 2023. We were eligible to borrow up
to an additional $2.7 billion based on qualifying collateral and up to a maximum borrowing capacity of $3.2 billion at
December 31, 2023.
The following table represents the balance of long-term borrowings, the weighted average interest rate as of December 31
and interest expense for the years ended December 31:
(dollars in thousand)
Long-term borrowings
Weighted average interest rate
Interest expense
2023
2022
2021
$
39,277
$
14,741
$
22,430
4.52 %
2.61 %
1.94 %
$
1,332
$
411
$
458
Scheduled annual maturities and average interest rates for all of our long-term debt for each of the five years subsequent to
December 31, 2023 and thereafter are as follows:
(dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
Balance Average Rate
$
38,381
81
86
93
94
542
$
39,277
4.49 %
5.98 %
6.00 %
6.02 %
6.05 %
5.89 %
4.52 %
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Junior Subordinated Debt Securities
The following table represents the composition of junior subordinated debt securities at December 31 and the interest
expense for the years ended December 31:
(dollars in thousands)
Junior subordinated debt
Junior subordinated debt—trust preferred securities
Total
2023
2022
2021
Balance
Interest
Expense
Balance
Interest
Expense
Balance
$
$
25,000 $
1,738
$
25,000 $
850
$
25,000 $
24,358
2,372
29,453
1,545
29,393
49,358 $
4,110
$
54,453 $
2,395
$
54,393 $
Interest
Expense
756
1,087
1,843
The following table summarizes the key terms of our junior subordinated debt securities:
(dollars in thousands)
Junior Subordinated Debt
Trust Preferred Securities
Stated Maturity Date
Optional redemption date at par
Regulatory Capital
Interest Rate
Interest Rate at December 31, 2023
2006 Junior Subordinated Debt
$25,000
—
12/15/2036
Any time after 9/15/2011
Tier 2
3 month CME Term SOFR plus 186 bps
7.25%
We have completed three private placements of trust preferred securities to financial institutions. In 2023, we redeemed
$5.0 million of junior subordinated debt securities, along with $0.2 million in common equity issued by DNB Capital Trust I
and held by us. As a result, DNB Capital Trust I has been paid off in its entirety, and we own 100 percent of the common equity
of STBA Capital Trust I and DNB Capital Trust II, or the Trusts. The Trusts were formed to issue mandatorily redeemable
capital securities to third-party investors. The proceeds from the sale of the securities and the issuance of the common equity by
the Trusts were invested in junior subordinated debt securities issued by us. The third-party investors are considered the
primary beneficiaries of the Trusts; therefore, the Trusts qualify as VIEs, but are not consolidated into our financial statements.
The Trusts pay dividends on the securities at the same rate as the interest paid by us on the junior subordinated debt held by the
Trusts. DNB Capital Trust II was acquired with the DNB merger.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Commitments
In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their
financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated financial statements. Our exposure to credit loss, in the event the customer does not
satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the
same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to
customers. Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require
payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
The following table sets forth our commitments and letters of credit as of the dates presented:
(dollars in thousands)
Commitments to extend credit
Standby letters of credit
Total
December 31, 2023
December 31, 2022
$ 2,566,154
61,889
$ 2,628,043
$ 2,713,586
64,356
$ 2,777,942
Allowance for Credit Losses on Unfunded Loan Commitments
We maintain an allowance for credit losses on unfunded commercial and consumer lending commitments and letters of
credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to
that used to determine the allowance for credit losses for loans, modified to take into account the probability of a draw-down on
the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
our Consolidated Statements of Net Income. The allowance for unfunded commitments is included in other liabilities in the
Consolidated Balance Sheets.
The following table presents activity in the allowance for credit losses on unfunded loan commitments for the periods
presented:
(dollars in thousands)
Balance at beginning of period
Provision for credit losses
Total
Litigation
Twelve months ended December 31,
2023
8,196
(1,348)
6,848
$
$
2022
5,189
3,007
8,196
$
$
In the normal course of business, we are subject to various legal and administrative proceedings and claims. While any type
of litigation contains a level of uncertainty, we believe that the outcome of such proceedings or claims pending will not have a
material adverse effect on our consolidated financial position or results of operations.
NOTE 17. REVENUE FROM CONTRACTS WITH CUSTOMERS
The information presented in the following table presents the point of revenue recognition for revenue from contracts with
customers. Other revenue streams are excluded such as: interest income, net securities gains and losses, insurance, mortgage
banking and other revenues that are accounted for under other GAAP.
(dollars in thousands)
Revenue Streams(1)
Service charges on deposit accounts
Debit and credit card
Wealth management
Point of Revenue Recognition
Over a period of time
At a point in time
Over a period of time
At a point in time
Over a period of time
At a point in time
Years ended December 31,
2023
2022
2021
$
1,659 $
1,703 $
1,880
14,534
15,126
13,160
$ 16,193 $ 16,829 $ 15,040
$
1,288 $
1,709 $
919
16,960
17,299
17,033
$ 18,248 $ 19,008 $ 17,952
$
7,969 $
8,714 $
4,217
4,003
9,187
3,702
$ 12,186 $ 12,717 $ 12,889
Other fee revenue
(1) Refer to Note 1 Summary of Significant Accounting Policies for the types of revenue streams that are included within each category.
At a point in time
$
1,310 $
1,550 $
1,900
NOTE 18. INCOME TAXES
The following table presents the composition of income tax expense (benefit) for the years ended December 31:
(dollars in thousands)
2023
2022
2021
Federal
Current
Deferred
Total Federal
State
Current
Deferred
Total State
Total Federal and State
$
33,070
$
35,514
$
22,581
459
33,529
(2,801)
32,713
2,273
24,854
352
142
494
828
(131)
697
361
110
471
$
34,023
$
33,410
$
25,325
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to
income before income taxes. We ordinarily generate an annual effective tax rate that is less than the statutory rate of 21 percent
primarily due to benefits resulting from certain partnership investments, such as low income housing and historic rehabilitation
projects, tax-exempt interest, excludable dividend income and tax-exempt income on BOLI.
The following table presents a reconciliation of the statutory tax rate to the effective tax rate for the years ended
December 31:
Statutory tax rate
Tax-exempt interest
Low income housing tax credits
Bank owned life insurance
Other
Effective Tax Rate
2023
21.0 %
(0.8) %
(1.5) %
(0.2) %
0.5 %
19.0 %
2022
21.0 %
(1.0) %
(0.7) %
(0.2) %
0.7 %
19.8 %
2021
21.0 %
(1.3) %
(1.5) %
(0.3) %
0.8 %
18.7 %
The following table presents significant components of our temporary differences as of the dates presented:
(dollars in thousands)
Deferred Tax Assets:
Allowance for loan losses and other reserves
Net unrealized holding losses on securities available-for-sale
Lease liabilities
State net operating loss carryforwards
Net unrealized losses on interest rate swaps
Cumulative adjustment to funded status of pension
Low income housing partnerships and other investments
Other employee benefits
Capital loss carryforward
Other
Deferred Tax Assets
Less: Valuation allowance
Total Deferred Tax Assets
Deferred Tax Liabilities:
Right-of-use lease assets
Deferred loan income, net
Prepaid pension
Purchase accounting adjustments
Depreciation on premises and equipment
Other
Total Deferred Tax liabilities
Net Deferred Tax Asset
December 31,
2023
2022
$
24,465
$
23,421
17,452
10,572
3,464
3,137
3,987
174
3,740
2,092
1,202
70,285
(3,464)
66,821
(9,127)
(4,633)
(3,360)
(1,823)
(1,182)
(1,428)
21,843
10,767
5,924
4,562
4,029
2,692
4,181
2
549
77,970
(5,924)
72,046
(9,385)
(4,533)
(3,706)
(1,945)
(629)
(240)
(21,553)
(20,438)
$
45,268
$
51,608
We establish a valuation allowance when it is more likely than not that we will not be able to realize the benefit of the
deferred tax assets. Except for Pennsylvania net operating losses, or NOLs, we have determined that no valuation allowance is
needed for deferred tax assets because it is more likely than not that these assets will be realized through future reversals of
existing temporary differences and through future taxable income. The valuation allowance is reviewed quarterly and adjusted
based on management’s assessments of realizable deferred tax assets. Gross deferred tax assets were reduced by a valuation
allowance of $3.5 million in 2023 compared to $5.9 million in 2022 related to Pennsylvania income tax NOLs. The
Pennsylvania NOL carryforwards total $69.4 million and will expire in the years 2024-2043.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized Tax Benefits
The following table reconciles the change in Federal and State gross unrecognized tax benefits, or UTB, for the years
ended December 31:
(dollars in thousands)
Balance at beginning of year
Prior period tax positions
Current period tax positions
Balance at End of Year
Amount That Would Affect the Effective Tax Rate if Recognized
2023
2022
$
1,648
$
1,331
$
(434)
726
1,940
1,551
$
$
—
317
1,648
1,148
$
$
$
$
2021
1,277
—
54
1,331
1,069
As of December 31, 2023, we had $1.9 million of unrecognized gross tax benefits. Gross tax benefits do not reflect the
federal tax effect associated with state income tax amounts. The total amount of the net unrecognized tax benefits at December
31, 2023 that would have affected the effective tax rate, if recognized, was $1.6 million.
We classify interest and penalties as an element of tax expense. We monitor changes in tax statutes and regulations to
determine if significant changes will occur over the next 12 months. As of December 31, 2023, no significant changes to UTB
are projected; however, tax audit examinations are possible. As of December 31, 2023, all income tax returns filed for the tax
years 2020 - 2022 remain subject to examination by the respective taxing authorities.
NOTE 19. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents the changes in the components of Accumulated Other Comprehensive Income (Loss) for the
periods presented:
(dollars in thousands)
Balance at December 31, 2020
Net Change
Balance at December 31, 2021
Net Change
Balance at December 31, 2022
Net Change
Balance at December 31, 2023
All amounts are net of tax.
Available-for-
Sale Debt
Securities
Interest Rate
Swaps
Employee
Benefit Plans
Total
$
$
$
$
26,284
$
(18,857)
7,427
$
—
—
—
$
$
(17,313)
$
8,971
2,796
(14,517)
$
(16,061)
(7,090)
(87,890)
(16,806)
(339)
(105,035)
(80,463)
$
(16,806)
$
(14,856)
$
(112,125)
15,910
5,204
110
21,224
(64,553)
$
(11,602)
$
(14,746)
$
(90,901)
NOTE 20. EMPLOYEE BENEFITS
We maintain a qualified defined benefit pension plan, or Plan, covering substantially all employees hired prior to
January 1, 2008. The benefits are based on years of service and the employee’s compensation for the highest five consecutive
years in the last ten years through March 31, 2016 when the Plan was frozen. Contributions are intended to provide for benefits
attributed to employee service to date and for those benefits expected to be earned in the future.
Our qualified and nonqualified defined benefit plans, or Plans, were amended to freeze benefit accruals for all persons
entitled to benefits under the Plans in 2016. We will continue recording pension expense related to these plans, primarily
representing interest costs on the accumulated benefit obligation and amortization of actuarial losses accumulated in the Plans,
as well as income from expected investment returns on pension assets. Since the Plans have been frozen, no service costs are
included in net periodic pension expense.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the benefit obligation and Plan assets deriving the funded status:
(dollars in thousands)
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year
Interest cost
Actuarial gain/(loss)
Benefits paid
Projected Benefit Obligation at End of Year
Change in Plan Assets
Fair value of plan assets at beginning of year
Actual gain/(loss) on plan assets
Benefits paid
Fair Value of Plan Assets at End of Year
Funded Status
The following table sets forth the amounts recognized in accumulated OCI at December 31:
(dollars in thousands)
Net actuarial loss
Total (Before Tax Effects)
Below are the actuarial weighted average assumptions used in determining the benefit obligation:
2023
2022
$
73,366
$
104,097
3,812
2,248
(6,239)
3,160
(23,020)
(10,871)
73,187
$
73,366
73,086
$
107,525
4,727
(6,239)
71,574
(1,613)
$
$
(23,568)
(10,871)
73,086
(280)
$
$
$
$
2023
19,137
$
19,137
$
2022
19,409
19,409
2023
2022
Discount rate
Rate of compensation increase(1)
(1)Rate of compensation increase is not applicable due to the plan amendment to freeze benefit accruals under the qualified and nonqualified defined benefit
pension plans effective March 31, 2016.
5.03 %
— %
5.41 %
— %
The following table summarizes the components of net periodic pension cost and other changes in Plan assets and benefit
obligations recognized in other comprehensive loss for the years ended December 31:
(dollars in thousands)
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation
Expected return on plan assets
Recognized net actuarial loss
Settlement charge
Net Periodic Pension Expense
Other Changes in Plan Assets and Benefit Obligation Recognized in Other Comprehensive Income
(Loss)
Net actuarial loss
Recognized net actuarial loss
Settlement loss recognized
Total Changes in Plan Assets and Benefit Obligation Before Tax Effects
Total Recognized in Net Benefit Cost and Other Comprehensive Income (Before Tax Effects)
2023
2022
2021
$
3,812
$
3,160
$
2,950
(3,932)
1,725
—
$
1,605
$
(3,158)
(2,677)
1,229
1,097
2,328
$
1,051
1,629
2,953
$
1,453
(1,725)
—
(272)
1,333
$
$
$
$
$
$
3,706
$
1,137
(1,229)
(1,097)
1,380
3,708
$
$
(1,051)
(1,629)
(1,543)
1,410
The following table summarizes the actuarial weighted average assumptions used in determining net periodic pension cost:
Discount rate
Rate of compensation increase(1)
2023
5.41 %
— %
2022
2.80 %
— %
2021
2.48 %
— %
Expected return on assets
(1)Rate of compensation increase is not applicable due to the plan amendment to freeze benefit accruals under the qualified and nonqualified defined benefit
pension plans effective March 31, 2016.
3.29 %
5.72 %
2.42 %
The accumulated benefit obligation for the Plan was $73.2 million at December 31, 2023 and $73.4 million at
December 31, 2022.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We consider many factors when setting the assumed rate of return on Plan assets. As a general guideline the assumed rate
of return is equal to the weighted average of the expected returns for each asset category and is estimated based on historical
returns as well as expected future returns. The weighted average discount rate is derived from corporate yield curves.
S&T Bank’s Retirement Plan Committee determines the investment policy for the Plan. In general, the targeted asset
allocation is 5 percent to 15 percent equities and alternatives and 85 percent to 95 percent fixed income. A strategic allocation
within each asset class is based on the Plan’s duration, time horizon, risk tolerances, performance expectations and asset class
preferences. Investment managers have discretion to invest in any equity or fixed-income asset class, subject to the securities
guidelines of the Plan’s Investment Policy Statement. At this time, S&T Bank is not required to make a cash contribution to the
Plan in 2024.
The following table provides information regarding estimated future benefit payments to be paid in each of the next five
years and in the aggregate for the five years thereafter:
(dollars in thousands)
2024
2025
2026
2027
2028
2029 - 2033
$
Amount
6,323
6,192
6,051
6,037
5,869
27,770
We maintain a Thrift Plan, a qualified defined contribution plan, in which substantially all employees are eligible to
participate. We make matching contributions to the Thrift Plan up to 3.5 percent of participants’ eligible compensation and may
make additional profit-sharing contributions as provided by the Thrift Plan. Expense related to these contributions amounted to
$2.7 million in 2023, $2.5 million in 2022 and $2.4 million in 2021.
Fair Value Measurements
The following tables present our Plan assets measured at fair value on a recurring basis by fair value hierarchy level at
December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, there were no transfers between Level 1
and Level 2 for items of a recurring basis. There were no purchases or transfers of Level 3 plan assets in 2023 or 2022.
(dollars in thousands)
Cash and cash equivalents(2)
Fixed income(3)
Equities:
Equity index mutual funds—international(4)
Domestic individual equities(5)
December 31, 2023
Fair Value Asset Classes(1)
Level 1
Level 2
Level 3
$
934
$
63,629
2,086
4,925
$
—
—
—
—
$
—
—
—
—
Total
934
63,629
2,086
4,925
Total Assets at Fair Value
$
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)This asset class includes FDIC insured money market instruments.
(3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have
discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the
U.S. dollar.
(4)The sole investment within this asset class is the Vanguard Total International Stock Index Fund Admiral Shares.
(5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
71,574
—
—
$
$
$
71,574
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Cash and cash equivalents(2)
Fixed income(3)
Equities:
Equity index mutual funds—international(4)
Domestic individual equities(5)
December 31, 2022
Fair Value Asset Classes(1)
Level 1
Level 2
Level 3
$
939
$
64,878
2,231
5,038
$
—
—
—
—
$
—
—
—
—
Total
939
64,878
2,231
5,038
Total Assets at Fair Value
$
(1)Refer to Note 1 Summary of Significant Accounting Policies, Fair Value Measurements for a description of levels within the fair value hierarchy.
(2)This asset class includes FDIC insured money market instruments.
(3)This asset class includes a variety of fixed income mutual funds which primarily invest in investment grade rated securities. Investment managers have
discretion to invest in fixed income related securities including futures, options and other derivatives. Investments may be made in currencies other than the
U.S. dollar.
(4)The sole investment within this asset class is Vanguard Total International Stock Index Fund Admiral Shares.
(5)This asset class includes individual domestic equities invested in an active all-cap strategy. It may also include convertible bonds.
73,086
—
—
$
$
$
73,086
NOTE 21. INCENTIVE AND RESTRICTED STOCK PLAN AND DIVIDEND REINVESTMENT PLAN
On May 17, 2021, shareholders approved the adoption of the 2021 Incentive Plan that provides for cash performance
awards and for granting incentive stock options, nonstatutory stock options, restricted stock, restricted stock units and
appreciation rights. The 2021 plan replaces and supersedes the S&T Bancorp, Inc. 2014 Incentive Plan. Since the 2021 plan has
been approved by our shareholders, no new awards will be granted under the 2014 plan. The 2014 plan will continue to govern
all awards granted under that plan. A maximum of 1,000,000 shares of our common stock were available for awards granted
under the 2021 Incentive Plan and the plan expires ten years from the date of board approval. Previously granted but forfeited
shares are added to the shares available for issuance.
The 2014 Incentive Stock Plan also provided for cash performance awards and for granting incentive stock options,
nonstatutory stock options, restricted stock, restricted stock units and appreciation rights. A maximum of 750,000 shares of our
common stock were available for awards granted under the 2014 Incentive Plan and the plan expires ten years from the date of
board approval. Previously granted but forfeited shares are added to the shares available for issuance.
Restricted Stock
We periodically issue restricted stock to employees and directors pursuant to our 2021 and 2014 Stock Plans. Restricted
stock awards are part of the compensation arrangements approved by the Compensation and Benefits Committee. Restricted
shares granted under the plans consist of both time and performance-based awards. The awards are granted in accordance with
performance levels set by the Compensation and Benefits Committee. Under the 2021 plan, we issued 162,677 restricted stock
awards during 2023, 181,392 restricted stock awards in 2022 and 30,959 restricted stock awards in 2021. During 2023 and
2022, no restricted stock awards were granted under the 2014 stock plan. In 2021, we granted 99,711 restricted stock awards
under the 2014 plan.
The following table provides information about restricted stock awards granted under the plans for the periods presented:
Vesting Period
2023
2022
2021
December 31,
2021 Stock Plan
Directors
Chief Executive Officer
Other Awards
2014 Stock Plan
Other Awards
Total Restricted Stock Grants
One year
One year
Three years
Three years
17,145
—
145,532
—
162,677
16,488
—
164,904
—
181,392
14,650
8,309
8,000
99,711
130,670
Common stock is issued as vesting restrictions lapse, which varies according to the terms of the vesting schedules in the
award agreements. The vesting of time based awards is generally 1 to 3 years. The vesting of performance-based awards is
based on S&T's achievement of relative return on average equity and total shareholder return, over a three year performance
period compared to a peer group as defined in the award agreements. Restricted stock grants are forfeited if a grantee leaves
S&T before the end of the vesting period except where accelerated vesting provisions are defined with the award agreements.
During 2023, 2022 and 2021, we recognized compensation expense of $3.9 million, $3.2 million and $2.4 million and
realized a tax benefit of $0.8 million, $0.7 million and $0.5 million related to restricted stock grants.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides information about restricted stock granted under the plans for the years ended December 31:
(dollars in thousands), except per share data
Non-vested at December 31, 2021
Granted
Vested
Forfeited
Non-vested at December 31, 2022
Granted
Vested
Forfeited
Non-vested at December 31, 2023
Restricted
Stock
Weighted
Average
Grant Date
Fair Value
278,388
$
181,392
87,513
80,122
292,145
$
162,677
91,955
47,157
315,710
$
25.64
29.51
28.17
31.91
25.56
30.84
26.92
26.52
27.75
The maximum number of shares that can be issued if performance is achieved at the maximum level is approximately
438,000 shares at December 31, 2023. As of December 31, 2023, there was $4.4 million of total unrecognized compensation
cost related to restricted stock that will be recognized as compensation expense over a weighted average period of 1.84 years.
Dividend Reinvestment Plan
We also sponsor a Dividend Reinvestment and Stock Purchase Plan, or Dividend Plan, where shareholders may purchase
shares of S&T common stock at the average fair value with reinvested dividends and voluntary cash contributions. The plan
administrator and transfer agent may purchase shares directly from us from shares held in treasury or purchase shares in the
open market to fulfill the Dividend Plan’s needs.
NOTE 22. PARENT COMPANY CONDENSED FINANCIAL INFORMATION
The following condensed financial statements summarize the financial position of S&T Bancorp, Inc. as of December 31,
2023 and 2022 and the results of its operations and cash flows for each of the three years ended December 31, 2023, 2022 and
2021.
BALANCE SHEETS
(dollars in thousands)
ASSETS
Cash
Investments in:
Bank subsidiary
Nonbank subsidiaries
Other assets
Total Assets
LIABILITIES
Long-term debt
Other liabilities
Total Liabilities
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
December 31,
2023
2022
$
20,733
$
13,817
1,268,441
1,184,327
4,658
14,695
4,662
11,819
$ 1,308,527
$ 1,214,625
$
24,474
$
29,713
608
25,082
253
29,966
1,283,445
1,184,659
$ 1,308,527
$ 1,214,625
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STATEMENTS OF NET INCOME
(dollars in thousands)
Dividends from subsidiaries
Investment income
Total Income
Interest expense on long-term debt
Other expenses
Tax expense
Income before income tax and undistributed net income of subsidiaries
Income tax benefit
Income before undistributed net income of subsidiaries
Equity in undistributed net income (distribution in excess of net income) of:
Bank subsidiary
Nonbank subsidiaries
Net Income
STATEMENTS OF CASH FLOWS
(dollars in thousands)
OPERATING ACTIVITIES
Net Income
Equity in undistributed (earnings) losses of subsidiaries
Other
Net Cash Provided by Operating Activities
FINANCING ACTIVITIES
Repayment of long term debt
Sale of treasury shares, net
Purchase of treasury shares
Cash dividends paid to common shareholders
Net Cash Used in Financing Activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at End of Year
NOTE 23. REGULATORY MATTERS
Years ended December 31,
2023
2022
2021
$
86,950
$
61,426
$
62,333
—
86,950
2,372
4,764
7,136
79,814
(1,478)
81,292
63,337
152
—
61,426
1,545
4,112
5,657
55,769
(1,208)
56,977
79,566
(1,023)
—
62,333
1,400
3,947
5,347
56,986
(1,140)
58,126
57,025
(4,808)
$
144,781
$
135,520
$
110,343
Years ended December 31,
2023
2022
2021
$
144,781
$
135,520
$
110,343
(63,489)
(78,543)
(52,217)
1,402
82,694
(5,464)
(798)
(19,808)
(49,708)
(75,778)
6,916
13,817
1,468
58,445
—
(808)
(7,637)
(46,952)
(55,397)
3,048
10,769
761
58,887
(9,750)
(629)
—
(44,324)
(54,703)
4,184
6,585
$
20,733
$
13,817
$
10,769
We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the
minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on our consolidated financial statements. Under capital guidelines and the
regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures
of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital
amounts and classification are also subject to qualitative judgments by the regulators about risk weightings and other factors.
The most recent notifications from the Federal Reserve and the FDIC categorized S&T and S&T Bank as well capitalized
under the regulatory framework for corrective action. There have been no conditions or events that we believe have changed
S&T's or S&T Bank’s status during 2023 and 2022.
Common equity tier 1 capital includes common stock and related surplus plus retained earnings, less goodwill and
intangible assets subject to a limitation and certain deferred tax assets subject to a limitation. In addition, we made a one-time
permanent election to exclude accumulated OCI from capital. For regulatory purposes, trust preferred securities totaling $24.0
million, issued by an unconsolidated trust subsidiary of S&T underlying junior subordinated debt, are included in Tier 1 capital
for S&T. Total capital consists of Tier 1 capital plus junior subordinated debt and the ACL subject to limitation. We currently
have $25.0 million in junior subordinated debt which is included in Tier 2 capital for S&T in accordance with current
regulatory reporting requirements.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and
ratios of Total, Tier 1 and Common Equity Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets. As of
December 31, 2023 and 2022, we met all capital adequacy requirements to which we are subject.
The following table summarizes risk-based capital amounts and ratios for S&T and S&T Bank:
(dollars in thousands)
As of December 31, 2023
Leverage Ratio
S&T
S&T Bank
Common Equity Tier 1 ratio
S&T
S&T Bank
Tier 1 Capital (to Risk-Weighted Assets)
S&T
S&T Bank
Total Capital (to Risk-Weighted Assets)
S&T
S&T Bank
As of December 31, 2022
Leverage Ratio
S&T
S&T Bank
Common Equity Tier 1 ratio
S&T
S&T Bank
Tier 1 Capital (to Risk-Weighted Assets)
S&T
S&T Bank
Total Capital (to Risk-Weighted Assets)
S&T
S&T Bank
Actual
Minimum
Regulatory Capital
Requirements
To be
Well Capitalized
Under Prompt
Corrective Action
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
$ 1,034,828
11.21 % $
369,297
4.00 % $
461,621
995,824
10.79 %
369,133
4.00 %
461,416
1,010,828
995,824
1,034,828
995,824
1,154,376
1,115,315
13.37 %
340,159
4.50 %
491,341
13.18 %
339,954
4.50 %
491,045
13.69 %
453,545
6.00 %
604,727
13.18 %
453,272
6.00 %
604,362
15.27 %
604,727
8.00 %
755,909
14.76 %
604,362
8.00 %
755,453
$
967,708
11.06 % $
349,914
4.00 % $
437,392
938,377
10.73 %
349,746
4.00 %
437,182
938,708
938,377
967,708
938,377
12.81 %
329,701
4.50 %
476,235
12.81 %
329,565
4.50 %
476,038
13.21 %
439,602
6.00 %
586,135
12.81 %
439,420
6.00 %
585,893
1,078,897
1,049,566
14.73 %
586,135
8.00 %
732,669
14.33 %
585,893
8.00 %
732,367
5.00 %
5.00 %
6.50 %
6.50 %
8.00 %
8.00 %
10.00 %
10.00 %
5.00 %
5.00 %
6.50 %
6.50 %
8.00 %
8.00 %
10.00 %
10.00 %
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24. SHARE REPURCHASE PLAN
On January 25, 2023, our Board of Directors authorized an extension of its $50 million share repurchase plan, which was
set to expire March 31, 2023. This authorization extended the expiration date of the repurchase plan through March 31, 2024.
The plan permitted S&T to repurchase shares up to the previously authorized $50 million in aggregate value of S&T's common
stock through a combination of open market and privately negotiated repurchases. At December 31, 2023, there was
$9.8 million in capacity remaining under the existing plan. On January 24, 2024, our Board authorized a new $50 million share
repurchase plan. The new plan is set to expire May 30, 2025 and replaced the existing share repurchase plan effective
immediately. This repurchase authorization permits S&T to repurchase shares of S&T's common stock from time to time
through a combination of open market and privately negotiated repurchases up to the authorized $50 million aggregate value of
S&T's common stock. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend
on a variety of factors, including general market conditions, the trading price of the common stock, legal and contractual
requirements and S&T’s financial performance. The repurchase plan does not obligate S&T to repurchase any particular
number of shares. S&T expects to fund any repurchases from cash on hand and internally generated funds. Any share
repurchases will not begin until permissible under applicable laws.
The following table presents repurchase activity for the periods presented:
(in thousands, except share and per share data)
Value of shares authorized to repurchase
Remaining plan capacity at the beginning of the period
Total shares repurchased
Average share price for the period
Total cost of repurchases(1)
Remaining plan capacity at the end of the period
(1) Includes excise tax on repurchases, net of issuances for restricted stock awards.
Twelve Months Ended December 31,
2023
50,000
29,805
739,426
27.05
19,998
9,808
$
$
$
$
$
2022
50,000
37,442
268,503
28.44
7,637
29,805
$
$
$
$
$
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S&T BANCORP, INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of S&T Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of S&T Bancorp, Inc. and subsidiaries (the Company) as of
December 31, 2023 and 2022, the related consolidated statements of net income, comprehensive income, changes in
shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 26, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosures to which it relates.
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S&T BANCORP, INC. AND SUBSIDIARIES
Allowance for Credit Losses (ACL)
Description of the
Matter
At December 31, 2023, the Company’s gross portfolio of loans was $7.7 billion with an associated ACL
of $108.0 million. As discussed in Notes 1 and 6 to the consolidated financial statements, the ACL is an
estimate of expected credit losses, measured over the contractual life of a loan, that considers historical
loss experience, current conditions and forecasts of future economic conditions. The methodology for
determining the ACL has two main components: evaluation of expected credit losses for certain groups
of homogeneous loans that share similar risk characteristics and an individual assessment of loans that
do not share risk characteristics with other loans to determine if a specific reserve is appropriate.
The ACL for homogeneous loans is calculated using a life-time loss rate methodology with both a
quantitative and a qualitative analysis that is applied on a quarterly basis. Management applies
qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not
already reflected in the historical loss information at the balance sheet date. Judgment was required by
management to determine the segment specific risk and the reasonable and supportable forecast, which
are both part of the qualitative allowance.
Auditing the ACL involves a high degree of subjectivity due to the segment specific risk and the
reasonable and supportable forecast, which are both part of the qualitative allowance. Management’s
identification and measurement of the segment specific risk and the reasonable and supportable forecast
are highly judgmental and could have a significant effect on the ACL.
How We Addressed
the Matter in
Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
Company’s controls over the ACL process, which include, among others, management’s review and
approval controls designed to assess the need for and level of the segment specific risk and the
reasonable and supportable forecast, which are both part of the qualitative allowance, and the controls
related to the reliability of the data utilized to support management’s assessment.
To test the segment specific risk and reasonable and supportable forecast, which are both part of the
qualitative allowance, we evaluated the appropriateness of management’s methodology and assessed the
basis for the adjustments and whether all relevant risks were reflected in the ACL. Regarding the
measurement of the segment specific risk and the reasonable and supportable forecast, we evaluated the
completeness, accuracy and relevance of the underlying internal and external data utilized in
management’s estimate and considered the existence of additional or contrary information. We evaluated
the overall ACL, inclusive of the qualitative adjustments, and whether the amount appropriately reflects
a reasonable estimate of lifetime losses by comparing the overall ACL to historical losses and ACL
reserves established by peer banking institutions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Pittsburgh, Pennsylvania
February 26, 2024
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S&T BANCORP, INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of S&T Bancorp, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited S&T Bancorp, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, S&T Bancorp, Inc. and subsidiaries (the
Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated
statements of net income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in
the period ended December 31, 2023, and the related notes and our report dated February 26, 2024 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 26, 2024
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None
Item 9A. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of S&T’s Chief Executive Officer, or CEO, and Chief Financial Officer,
or CFO (its principal executive officer and principal financial officer), management has evaluated the effectiveness of the
design and operation of S&T’s disclosure controls and procedures as of December 31, 2023. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us
in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded,
processed, summarized and reported within the time periods required by the Securities and Exchange Commission, or the SEC,
and that such information is accumulated and communicated to S&T’s management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
Based on and as of the date of such evaluation, our CEO and CFO concluded that the design and operation of our
disclosure controls and procedures were effective in all material respects, as of the end of the period covered by this Report.
b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rule 13a-15(f). Management assessed S&T’s system of internal control over financial
reporting as of December 31, 2023, in relation to criteria for effective internal control over financial reporting as described in
“Internal Control Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in 2013. Based on this assessment, management concludes that, as of December 31, 2023, S&T’s system
of internal control over financial reporting is effective and meets the criteria of the “Internal Control Integrated Framework
(2013).”
Management assessed the effectiveness of S&T's internal control over financial reporting as of December 31, 2023, in
relation to criteria for effective internal control over financial reporting as described in Internal Control - Integrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this
assessment, management concluded that, as of December 31, 2023, S&T's internal controls over financial reporting were
effective. Our independent registered public accounting firm, has issued a report on the effectiveness of S&T’s internal control
over financial reporting as of December 31, 2023, which is included herein.
c) Changes in Internal Control Over Financial Reporting
No changes were made to S&T’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, S&T’s internal control
over financial reporting.
Item 9B. OTHER INFORMATION
(c) During the three months ended December 31, 2023, no director or Section 16 officer of the Company adopted,
terminated or modified a ‘Rule 10b5-1 trading arrangement’ or ‘non-Rule 10b5-1 trading arrangement,’ as each term is defined
in Item 408(a) of Regulation S-K.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by Part III, Item 10 of Form 10-K is incorporated herein from the sections entitled “Proposal 1 -
Election of Directors,” “Executive Officers of the Registrant,” “Corporate Governance - Audit Committee,” “Corporate
Governance - Director Qualifications and Nominations; Board Diversity” and “Corporate Governance - Code of Conduct and
Ethics” in our proxy statement to be filed for the 2024 annual meeting of shareholders.
Item 11. EXECUTIVE COMPENSATION
The information required by Part III, Item 11 of Form 10-K is incorporated herein from the sections entitled
“Compensation Discussion and Analysis,” “Executive Compensation,” “Director Compensation,” “Corporate Governance -
Compensation Committee Interlocks and Insider Participation,” “Corporate Governance - The S&T Board’s Role in Risk
Oversight” and “Compensation and Benefits Committee Report” in our proxy statement to be filed for the 2024 annual meeting
of shareholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Except as set forth below, the information required by Part III, Item 12 of Form 10-K is incorporated herein from the
sections entitled “Beneficial Owners of S&T Common Stock” and “Beneficial Ownership of S&T Common Stock by Directors
and Officers” in our proxy statement to be filed for the 2024 annual meeting of shareholders.
Equity Compensation Plan Information
The following table provides information as of December 31, 2023 related to the equity compensation plans in effect at that
time.
Plan category
Equity compensation plan approved by shareholders
Equity compensation plans not approved by shareholders
Total
(a)
(b)
(c)
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights (1)
Weighted average exercise
price of outstanding
options, warrants
and rights
140,045
(2)
—
140,045
—
—
$
Number of securities
remaining available for
future issuance under
equity compensation plan
(excluding securities
reflected in column (a))
808,986
—
808,986
(1)Awards granted under the 2014 and 2021 Incentive Stock Plan.
(2) Represents performance shares that can be earned with no associated exercise price.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Part III, Item 13 of Form 10-K is incorporated herein from the sections entitled “Related
Person Transactions” and “Corporate Governance - Director Independence” in our proxy statement to be filed for the 2024
annual meeting of shareholders.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Part III, Item 14 of Form 10-K is incorporated herein from the section entitled “Proposal 2:
Ratification of the Selection of Independent Registered Public Accounting Firm for Fiscal Year 2024” in our proxy statement to
be filed for the 2024 annual meeting of shareholders.
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S&T BANCORP, INC. AND SUBSIDIARIES
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report.
PART IV
Consolidated Financial Statements: The following consolidated financial statements are included in Part II, Item 8 of this
Report. No financial statement schedules are being filed because the required information is inapplicable or is presented in the
consolidated financial statements or related notes.
Consolidated Balance Sheets
Consolidated Statements of Net Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
51
52
53
54
55
57
103
105
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S&T BANCORP, INC. AND SUBSIDIARIES
(b) Exhibits
2.1
2.2
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Agreement and Plan of Merger, dated as of October 29, 2014, between S&T Bancorp, Inc. and Integrity
Bancshares, Inc. Filed as Exhibit 2.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on
October 30, 2014, and incorporated herein by reference.
Agreement and Plan of Merger, dated June 5, 2019, by and between DNB Financial Corporation and
S&T Bancorp, Inc. Filed as Exhibit 2.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June
5, 2019, and incorporated herein by reference.
Amended and Restated Articles of Incorporation of S&T Bancorp, Inc. Filed as Exhibit 3.1 to S&T
Bancorp, Inc. Quarterly Report on Form 10-Q filed for the quarter ended June 30, 2021 filed on August
4, 2021, and incorporated herein by reference.
Amended and Restated By-laws of S&T Bancorp, Inc. Filed as Exhibit 3.1 to S&T Bancorp, Inc. Current
Report on Form 8-K filed on December 21, 2022, and incorporated herein by reference.
The Company has certain long-term debt but has not filed the instruments evidencing such debt as
Exhibit 4 as none of such instruments authorize the issuance of debt exceeding 10 percent of the
Companies total consolidated assets. The Company agrees to furnish a copy of each such agreement to
the Securities and Exchange Commission upon request.
Description of Securities. Filed as Exhibit 4.1 to S&T Bancorp, Inc. Annual Report on Form 10-K for
year ended December 31, 2019, and incorporated herein by reference
S&T Bancorp, Inc. 2003 Incentive Stock Plan. Filed as Exhibit 4.2 to Form S-8 Registration Statement
(No. 333-111557) of S&T Bancorp, Inc. dated December 24, 2003, and incorporated herein by
reference.*
S&T Bancorp, Inc. Thrift Plan for Employees of S&T Bank, as amended and restated. Filed as Exhibit
4.2 to Form S-8 Registration Statement (No. 333-156541) of S&T Bancorp, Inc. dated December 31,
2008, and incorporated herein by reference.*
Dividend Reinvestment and Stock Purchase Plan of S&T Bancorp, Inc. Filed as Exhibit 4.2 to Form
S-3D Registration Statement (No. 333-156555) of S&T Bancorp, Inc. dated January 2, 2009 (included
within the prospectus contained therein), and incorporated herein by reference.
Severance Agreement, by and between Todd D. Brice and S&T Bancorp, Inc. dated April 7, 2015. Filed
as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on August 10, 2015, and
incorporated herein by reference.*
Letter Agreement, dated as of October 2, 2020, by and between S&T Bancorp, Inc. and Todd D. Brice.
Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on October 2, 2020, and
incorporated herein by reference.*
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, dated October 14, 2020, by
and between David G. Antolik and S&T Bancorp, Inc. Filed as Exhibit 10.3 to S&T Bancorp, Inc.
Current Report on Form 8-K filed on October 16, 2020, and incorporated herein by reference.*
Restricted Stock Award Agreement David G. Antolik, dated October 12, 2020. Filed as Exhibit 10.1 to
S&T Bancorp, Inc. Current Report on Form 8-K filed on October 16, 2020, and incorporated herein by
reference.*
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, dated October 14, 2020, by
and between Mark Kochvar and S&T Bancorp, Inc. Filed as Exhibit 10.4 to S&T Bancorp, Inc. Current
Report on Form 8-K filed on October 16, 2020.*
Restricted Stock Award Agreement Mark Kochvar, dated October 12, 2020. Filed as Exhibit 10.2 to
S&T Bancorp, Inc. Current Report on Form 8-K filed on October 16, 2020, and incorporated herein by
reference.*
10.10
S&T Bancorp, Inc. 2014 Incentive Plan. Filed as Exhibit 10.9 to S&T Bancorp, Inc. Annual Report on
Form 10-K for the year ended December 31, 2013, and incorporated herein by reference. *
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10.13
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Severance and General Release Agreement, dated August 4, 2020, by and between David P. Ruddock
and S&T Bancorp, Inc., S&T Bank and any of their subsidiaries or affiliated business. Filed as Exhibit
10.1 to S&T Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and
incorporated herein by reference *
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, dated November 2, 2020, by
and between Ernest J. Draganza and S&T Bancorp, Inc., S&T Bank and their subsidiaries and affiliated
companies. Filed as Exhibit 10.2 to S&T Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter
ended September 30, 2020, and incorporated herein by reference.*
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, October 21, 2020, by and
between George Basara and S&T Bancorp, Inc. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Quarterly
Report on Form 10-Q for the quarter ended March 31, 2021, and incorporated herein by reference.*
Severance Agreement dated April 20, 2015 by and between George Basara and S&T Bancorp, Inc. Filed
as Exhibit 10.2 to S&T Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31,
2021, and incorporated herein by reference.*
S&T Bancorp, Inc. 2021 Incentive Plan. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on
Form 8-K filed on May 20, 2021, and incorporated herein by reference.*
Severance and General Release Agreement, by and between Ernest J. Draganza and S&T Bancorp, Inc.
Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 3, 2021, and
incorporated herein by reference.*
Employment Agreement, dated July 12, 2021, by and between S&T Bancorp, Inc. and Christopher J.
McComish. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on July 12,
2021, and incorporated herein by reference.*
Employment Agreement, dated July 12, 2021, by and between S&T Bancorp, Inc. and David G. Antolik
Filed as Exhibit 10.2 to S&T Bancorp, Inc. Current Report on Form 8-K filed on July 12, 2021, and
incorporated herein by reference.*
Severance Agreement dated June 7, 2022 by and between George Basara and S&T Bancorp, Inc. Filed as
Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 10, 2022, and incorporated
herein by reference.*
Form of Restricted Stock Unit Award Agreement - Non-LTIP. Filed as Exhibit 10.2 to S&T Bancorp,
Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on August 3, 2022, and
incorporated herein by reference.*
Form of Restricted Stock Unit Award Agreement - LTIP. Filed as Exhibit 10.3 to S&T Bancorp, Inc.
Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on August 3, 2022, and
incorporated herein by reference.*
Form of Restricted Stock Unit Award Agreement - Directors. Filed as Exhibit 10.4 to S&T Bancorp, Inc.
Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on August 3, 2022, and
incorporated herein by reference.*
Severance and General Release Agreement, dated October 12, 2022, by and between Charles Carroll and
S&T Bancorp, Inc., S&T Bank and any of their subsidiaries or affiliated businesses. Filed as Exhibit
10.1 to S&T Bancorp, Inc. Current Report on Form 8-K/A filed on October 17, 2022, and incorporated
herein by reference.*
S&T Bancorp, Inc. Deferred Compensation Plan. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current
Report on Form 8-K filed on October 21, 2022, and incorporated herein by reference.*
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, dated October 21, 2020,
between Mr. Carroll and S&T Bancorp, Inc. S&T Bank, and their subsidiaries and affiliated companies.
Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on September 29, 2022,
and incorporated herein by reference.*
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Rule 13a-14(a) Certification of the Principal Executive Officer.
Rule 13a-14(a) Certification of the Principal Financial Officer.
Rule 13a-14(b) Certification of the Chief Executive Officer and Principal Financial Officer.
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Clawback Policy
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document
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XBRL Taxonomy Extension Schema
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XBRL Taxonomy Extension Definition Linkbase
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)
*Management Contract or Compensatory Plan or Arrangement
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S&T BANCORP, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
S&T BANCORP, INC.
(Registrant)
/s/ Christopher J. McComish
Christopher J. McComish, Chief Executive Officer
(Principal Executive Officer)
/s/ Mark Kochvar
Mark Kochvar
Senior Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
2/26/2024
Date
2/26/2024
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Christopher J. McComish
Christopher J. McComish
Chief Executive Officer (Principal Executive Officer)
2/26/2024
/s/ Mark Kochvar
Mark Kochvar
/s/ Melanie Lazzari
Melanie Lazzari
/s/ David G. Antolik
David G. Antolik
/s/ Christine J. Toretti
Christine J. Toretti
/s/ Lewis W. Adkins, Jr
Lewis W. Adkins, Jr.
/s/ Peter R. Barsz
Peter R. Barsz
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
2/26/2024
Executive Vice President, Controller
2/26/2024
President and Director
2/26/2024
Chair of the Board and Director
2/26/2024
Director
Director
112
2/26/2024
2/26/2024
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S&T BANCORP, INC. AND SUBSIDIARIES
SIGNATURE
TITLE
/s/ Christina A. Cassotis
Director
Christina A. Cassotis
/s/ Michael J. Donnelly
Director
Michael J. Donnelly
/s/ Jeffrey D. Grube
Jeffrey D. Grube
/s/ William J. Hieb
William J. Hieb
Director
Director
/s/ Frank J. Palermo, Jr.
Director
Frank J. Palermo, Jr.
/s/ Bhaskar Ramachandran
Director
Bhaskar Ramachandran
/s/ Steven J. Weingarten
Director
Steven J. Weingarten
DATE
2/26/2024
2/26/2024
2/26/2024
2/26/2024
2/26/2024
2/26/2024
2/26/2024
113