S&T BANCORP INC (STBA)·Q2 2025 Earnings Summary

Executive Summary

• Q2 delivered resilient profitability with diluted EPS of $0.83, a modest beat versus consensus ($0.83 vs $0.806), as NIM expanded 7 bps to 3.88% and net interest income rose 3.9% QoQ; revenue was essentially in line/slightly light versus consensus ($98.1M actual vs $99.1M est.) .
• Balance sheet growth remained disciplined: loans +$98.1M (5.0% annualized) and deposits +$28.0M (1.4% annualized); asset quality stayed strong with NPAs at 0.27% and net charge-offs at 0.06% annualized .
• Management guided NIM to remain “fairly stable” in the mid‑3.80s assuming two Fed cuts; noninterest expense run-rate nudged up to ~$57–58M for 2H, while fee income run-rate held at ~$13–14M/quarter .
• Catalysts: continued NIM stability with earning-asset repricing, improving loan pipelines and added bankers, durable deposit mix (28% DDA), and active but disciplined M&A posture amid a probable approach to ~$10B assets (Durbin impact ~$6–7M annually if/when crossed) .

What Went Well and What Went Wrong

• What Went Well

  • Margin expansion and NII growth: NIM rose 7 bps to 3.88% and NII increased by $3.3M (3.90%) QoQ, supported by asset repricing and stable funding costs .
  • Quality and coverage: NPAs fell to 0.27% of loans+OREO, ACL coverage remained robust at 1.24% of loans and 463% of nonaccruals; net charge-offs were a low 0.06% annualized .
  • Strategic execution: CEO emphasized “excellent returns...driven by NIM expansion and solid loan growth,” with noninterest-bearing deposits at 28% and “eight straight quarters of deposit growth” supporting a strong platform for growth .

• What Went Wrong

  • Expense drift: Noninterest expense rose $3.0M QoQ to $58.1M, driven by merit increases, incentives, and higher medical costs; efficiency ratio deteriorated to 57.73% .
  • Slight revenue shortfall vs Street: S&P Global revenue came in at $98.1M vs $99.1M consensus (EPS beat offset by modest revenue miss). Fee rebound largely reflected absence of Q1 securities losses and seasonal activity .
  • Modest deposit growth: Total deposits rose a muted 1.42% annualized QoQ; mix improved but interest-bearing demand and savings declined, offset by growth in CDs and money market .

Financial Results

Headline vs. Estimates (S&P Global)

Values marked with * retrieved from S&P Global.

Operating metrics vs prior periods

Loan portfolio breakdown and growth

Key KPIs and balance sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Q2 was another quarter of strong earnings and returns… NIM expansion… solid loan growth while asset quality metrics remain at very favorable levels.”
• CEO on strategy and deposits: “Non-interest-bearing deposits representing 28% of total deposits and eight straight quarters of deposit growth…”
• President on growth: “We believe that we can consistently deliver loan growth in the high mid-single-digit range for the second half of 2025… added four new commercial bankers.”
• CFO on NIM outlook: “We expect the net interest margin to stay fairly stable if the Fed cuts rates twice this year… limited upside in a higher for longer scenario.”
• CFO on expenses: “Quarterly expense run rate… approximately $57–$58 million for the second half of the year.”

Q&A Highlights

• Margin and rate sensitivity: NIM should hold mid‑3.80s with two cuts; a couple of bps upside if higher‑for‑longer; asset repricing and swap roll-offs aid margin .
• Funding and growth: Incremental loan growth could pressure incremental margin slightly if deposit pricing tightens, but deposit-raising success can offset via lower borrowings .
• Crossing $10B & Durbin: Potential to manage timing if close; Durbin impact estimated ~$6–7M annually; limited incremental expense expected on crossing .
• Loan yields: New production ~6.52% vs ~6.36% payoffs, ~+16 bps replacement benefit, strongest pickup in mortgage and business turnover .
• Securities strategy: New purchases ~4.5–5% in agency CMOs; ~$50M quarterly maturities/cashflow; pickup narrowing .
• M&A and geography: Active discussions; focus on PA/OH and extensions into VA/MD/DC; target sizes ~$1–5B .

Estimates Context

• Q2 2025: EPS beat and revenue slightly below Street — EPS $0.83 vs $0.806*; Revenue $98.1M vs $99.1M* — driven by NIM expansion and fee normalization as Q1’s securities loss didn’t repeat .
• Q1 2025: EPS also beat consensus materially ($0.87 vs $0.748*), indicating conservative Street expectations into 1H .
• Forward implications: Stable NIM guidance and stronger loan pipelines suggest Street may modestly lift out-quarter NII assumptions, while a higher 2H expense run-rate ($57–58M) may temper operating leverage expectations .
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Core spread earnings momentum: FTE NIM at 3.88% with clear path to “fairly stable” margins amid asset repricing and swaps roll-off .
• Quality remains a differentiator: NPAs at 0.27% and low charge-offs provide cushion to grow loans without outsized credit cost volatility .
• Growth engine built: Loan pipelines + added producers support high mid‑single‑digit 2H loan growth, with deposit franchise (28% DDA) and exception pricing discipline funding growth .
• Expense inflection: 2H run-rate guided to $57–58M; watch execution on operating efficiency as growth scales .
• Path to $10B and optionality: Crossing implies Durbin headwind (~$6–7M); capital and M&A engagement could offset and enhance scale benefits .
• Dividend maintained and rising YoY: $0.34 declared post‑quarter, +3% YoY, signaling confidence in earnings durability .
• Near-term trading lens: Modest revenue miss vs a clean EPS beat, NIM upside stability, and benign credit backdrop are constructive; expense cadence is the principal watch item into 2H .