S&T Bancorp Profit Climbs as Loan Growth Offsets Deposit Runoff
S&T Bancorp (STBA) posted second-quarter net income of $36.6 million, or $1.02 a share, up 8.5% from the prior quarter as commercial lending expanded and margins widened.
S&T Bancorp (STBA) reported second-quarter net income of $36.6 million, or $1.02 a share, up from $35.1 million, or $0.94 a share, in the first quarter and from $31.9 million, or $0.83 a share, a year earlier. The bank holding company, parent of S&T Bank, posted a 22.9% year-over-year increase in per-share earnings as loan growth, wider margins and lower credit costs combined to lift profitability.
Net interest margin on a fully taxable-equivalent basis expanded 7 basis points to 3.99% from 3.92% in the first quarter, extending a climb from 3.88% a year earlier. The expansion came from both sides of the balance sheet: asset yields rose 4 basis points to 5.64% while funding costs fell 4 basis points to 2.50%, a shift the company attributed to an improved funding mix. Net interest income rose to $90.4 million from $88.4 million in the first quarter and $86.6 million a year earlier.
Total portfolio loans grew $99.0 million, or 5.0% annualized, to $8.06 billion at June 30 from $7.96 billion at March 31. Commercial lending drove the increase, with commercial and industrial loans up $79.0 million and commercial construction up $71.4 million, for a combined $104.2 million rise in commercial loans. Commercial real estate balances declined $46.2 million and consumer loans slipped $5.2 million, partly offsetting the gain.
Total deposits fell $99.1 million to $8.09 billion, but the decline traced entirely to a $100.4 million reduction in brokered deposits. Customer deposits held steady after growing $307.7 million, or 8.0% annualized, in the first quarter, indicating the funding base outside brokered balances remained intact.
Asset quality improved sequentially even as it remained softer than a year ago. Net charge-offs dropped to $1.0 million, or 0.05% of average loans, from $1.7 million, or 0.09%, in the first quarter, while nonperforming assets fell $9.7 million to $40.2 million, or 0.50% of loans and other real estate owned, from $49.9 million, or 0.63%, at March 31. Both measures remained above year-earlier levels, when nonperforming assets stood at $21.3 million, or 0.27% of loans.
Noninterest income rose $1.3 million to $14.9 million from $13.6 million in the first quarter, helped by seasonally higher debit and credit card fees, higher other income, and a net $0.2 million securities gain. That gain reflected a $1.9 million benefit from a Visa Class B-2 share conversion, largely offset by a $1.7 million loss on a securities repositioning trade, a newly disclosed item this quarter. Noninterest expense increased $2.0 million to $58.7 million, led by a $1.3 million rise in salaries and benefits tied to merit increases and higher medical costs, along with a $1.0 million increase in other expense. The efficiency ratio on a fully taxable-equivalent basis ticked up to 55.52% from 55.23% in the first quarter but remained well below the 57.73% posted a year earlier.
Profitability metrics improved across the board. Return on average assets rose to 1.49% from 1.44%, return on average equity climbed to 10.37% from 9.77%, return on average tangible equity increased to 14.15% from 13.22%, and pre-provision net revenue as a share of average assets edged up to 1.89% from 1.87% in the first quarter.
The company stepped up share repurchases, buying back 1,074,924 shares for $47.6 million at an average price of $44.24 in the second quarter, a newly disclosed acceleration in capital return. The buyback pushed capital ratios lower, with shareholders' equity to assets falling to 14.12% from 14.39% and the common equity tier 1 ratio declining to 13.64% from 14.18% at March 31.