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    STBA
    Earnings call· Jun 2026(Q2 FY26)

    S&T BANCORP INC STBA

    Jul 23, 2026 Source

    Executive summary

    S&T Bancorp Q2 FY26 — Strong EPS Growth and Capital Management

    S&T Bancorp delivered a strong second quarter, marked by significant EPS growth and solid returns, driven by expanding net interest margin and effective capital management through share repurchases. The bank demonstrated positive operating leverage and improved asset quality, while strategically growing its C&I portfolio. Management is actively navigating competitive deposit pricing and preparing for potential Durbin Amendment impacts as assets approach the $10 billion threshold.

    Highlights

    5

    • Net income was $36.6 million, or $1.2 per diluted share, up 22.9% from Q2 FY25.

    • Net interest margin expanded 7 basis points from the linked quarter to 3.99%.

    • Efficiency ratio improved to 55.38% for the first six months of FY26, compared to 57% for the first six months of FY25.

    • Repurchased almost 3.2 million shares for $133 million over the past three quarters, with a new $100 million authorization.

    • Loan growth was $99 million or 5% annualized in Q2 FY26, driven by C&I and commercial construction.

    Concerns

    4

    • Permanent commercial real estate balances declined $46 million, primarily due to loans paid off by non-bank lenders.

    • A bond portfolio repositioning resulted in a $1.7 million loss, partially offsetting a $1.9 million gain on Visa Class B2 shares.

    • Increased competition in deposit pricing, particularly from smaller banks, is noted.

    • Anticipated $6 million annual impact from Durbin Amendment, with half hitting in FY27 and full in FY28, upon crossing $10 billion in assets.

    Guidance & targets

    6
    CategoryTargetConfidence
    Loan growth
    annualized mid-single-digit growth
    high materiality
    High
    Net interest margin (NIM)
    stability around the current high 390s level
    high materiality
    Medium
    Non-interest expense
    maximum around 3% increase year over year
    medium materiality
    High
    Fees (Non-interest income)
    approximately $14 million per quarter
    medium materiality
    Medium
    Durbin Amendment impact
    $6 million annually
    high materiality
    High
    Total assets
    over $10 billion
    high materiality
    High

    Operational metrics

    21
    Return on assets (ROA)
    1.49%
    Q2 FY26

    Solid return metric for the quarter.

    Net income growth
    8.5%QoQ
    Q2 FY26

    Net income was $36.6 million; also up 22.9% YoY.

    Diluted EPS growth
    8.5%QoQ
    Q2 FY26

    Diluted EPS was $1.2; also up 22.9% YoY.

    Broker deposits reduction
    $100 millionQoQ
    Q2 FY26

    Reduced $180 million year-to-date, improving funding mix.

    DDA levels
    28%
    Q2 FY26

    Industry-leading level, highlighting value of relationship-based model.

    Share repurchases (past 3 quarters)
    3.2 million shares
    Past 3 quarters

    Reflects active capital management.

    Share repurchases (Q2 FY26)
    1.1 million shares
    Q2 FY26

    Part of ongoing capital management strategy.

    C&I balances increase
    $79 millionQoQ
    Q2 FY26

    Reflects strategic focus and investment in C&I capabilities.

    C&I revolving line utilization
    44%up from 41% QoQ
    Q2 FY26

    Demonstrates increased demand from C&I customer base.

    C&I revolving commitment growth
    6%annualized
    Q2 FY26

    Demonstrates continued demand and increased banker productivity.

    Commercial construction balances increase
    $71 millionQoQ
    Q2 FY26

    Supports well-capitalized developers within the bank's footprint.

    Total construction commitments increase
    $65 millionQoQ
    Q2 FY26

    Further evidence of solid customer activity.

    Number of construction commitments increase
    19%QoQ
    Q2 FY26

    Indicates solid customer activity.

    Non-performing assets decrease
    $9.7 millionQoQ
    Q2 FY26

    Non-performing assets totaled $40.2 million or 0.5% of total loans plus OREO.

    Non-interest income increase
    $1.3 millionQoQ
    Q2 FY26

    Increases were broad-based across categories.

    Gain on Visa Class B2 shares
    $1.9 million
    Q2 FY26

    From conversion of shares, partially offset by bond repositioning loss.

    Loss on bond portfolio repositioning
    $1.7 million
    Q2 FY26

    On a small $34 million bond portfolio, with an earn back of 1.4 years.

    TCE ratio decrease
    28 bpsQoQ
    Q2 FY26

    Primarily due to share repurchases completed in Q2 FY26.

    Commercial banking team increase
    20%YTD
    YTD FY26

    Investment in talent to deepen customer relationships and expand presence.

    New loan rate
    just over 6%
    Q2 FY26

    Overall rate for new loans originated during the quarter.

    Total assets
    $9.94 billionflat QoQ
    Q2 FY26 end

    Anticipated to cross $10 billion in the second half of 2026.

    Industry KPIs

    13
    MetricValueDetails
    Loans$8 billionUSD
    DepositsStable
    Rotce ROE14%%
    Cet1 ratioVery strong
    Capital returns$100 millionUSD
    Fee income lines$14 millionUSD
    Allowance reserves1.16%% of total loans
    Net interest income$90.4 millionUSD
    Net interest margin3.99%%
    Net charge offs npls$1 millionUSD
    Total operating expenses$60.4 millionUSD
    Provision for credit losses$1.1 millionUSD
    Efficiency ratio operating leverage55.38%%

    Risks & headwinds

    4
    Decline in permanent commercial real estate balancesQ2 FY26

    $46 million decline

    Mitigation: Primarily driven by loans paid off by non-bank lenders, reflecting the quality of the borrower base and attractiveness of projects. Continued funding of commercial construction loans supports developers.

    Loss from bond portfolio repositioningQ2 FY26

    $1.7 million loss

    Mitigation: Partially offset by a $1.9 million gain on Visa Class B2 shares. The repositioning has an earn back period of approximately 1.4 years.

    Increased competition in deposit pricingOngoing

    More aggressive, particularly from smaller banks

    Mitigation: Management expects to maintain spreads and net interest margin rates by holding onto the good mix of deposits. Some CD repricing benefit is expected in Q3 before leveling off.

    Durbin Amendment impact from crossing $10 billion asset thresholdHalf in FY27, full in FY28

    $6 million annual impact

    Mitigation: Management is confident in its ability to overcome this impact through various levers, including expense savings, generating other forms of fee income, and leveraging positive operating leverage.

    What to watch in Q3 FY26

    5

    Loan growth

    Balance of 2026
    Current5% annualized in Q2 FY26
    TargetMid-single-digit annualized growth

    Why it matters

    Indicates continued demand and effectiveness of C&I banker hires, supporting NII growth.

    Looking ahead, our CRE and C&I pipeline activities remain solid and support our expectation for annualized mid-single-digit loan growth for the balance of 2026.

    Q&A highlights

    6

    Confirmed mid-single-digit loan growth guidance for the rest of the year and whether deposits will fund it.

    Management confirmed mid-single-digit loan growth for the balance of 2026 and stated they fully anticipate funding this growth through deposit increases, based on current pipelines and activity.

    “Yes, we fully anticipate, yes, based on pipelines activity we've seen year to date, we'll be able to sell funds through DepositCross.”

    asked by Daniel Tomeo · answered by Dave Antolik

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Talent Investment and C&I Growth

    S&T Bancorp is strategically building its C&I capabilities, increasing its total commercial banking team by approximately 20% year-to-date with a goal of 30% by year-end. This investment is yielding results, with C&I balances increasing by $79 million in the quarter and revolving line utilization rising from 41% to 44%. This demonstrates increased demand from customers and improved banker productivity, particularly in Western Pennsylvania and Northeast Ohio.

    02

    Deposit Franchise Strength and Funding Mix Improvement

    Customer deposits remained stable in Q2 FY26 after very strong Q1 growth, with year-to-date deposits up 8% annualized. The bank actively reduced broker deposits by $100 million in the quarter and $180 million year-to-date, which improved the quality of its funding mix. DDA levels remain strong at an industry-leading 28% of total deposits, highlighting the value of its relationship-based model and core deposit base.

    03

    Asset Quality and Credit Management

    The loan portfolio continues to perform in line with expectations, demonstrating disciplined underwriting and ongoing portfolio management. Non-performing assets declined by $9.7 million during the quarter to $40.2 million, representing 0.5% of total loans plus OREO. Net charge-offs were very low at just $1 million, resulting in a modest provision expense of $1.1 million. The allowance for credit losses remained essentially unchanged at 1.16% of total loans.

    04

    Capital Management and Share Repurchases

    The company actively manages capital, having repurchased almost 3.2 million shares, representing 8% of outstanding shares, for a total of $133 million over the past three quarters. In Q2 FY26 alone, 1.1 million shares were repurchased for $47.6 million at an average price of $44.24. The board reauthorized another $100 million for share repurchases, providing flexibility for organic growth, capital returns, and evaluating strategic opportunities.

    05

    Net Interest Margin Stability and Drivers

    Net interest margin expanded 7 basis points from the linked quarter to 3.99%, supported by both higher loan yields and a better funding mix due to lower interest-bearing deposit rates. Management expects relative NIM stability around the current high 390s level to continue for the next several quarters, citing tailwinds from maturing fixed swaps and remaining security/loan repricing, positioning the bank well for changing interest rate conditions.

    06

    Durbin Amendment Threshold Navigation

    S&T Bancorp anticipates crossing the $10 billion asset threshold in the second half of 2026. Management estimates a Durbin Amendment impact of approximately $6 million annually, with half of that impact expected in FY27 and the full amount in FY28. The company expresses confidence in its ability to offset this impact through various levers, including continued operating leverage, expense savings, and generating other forms of fee income.

    AI-generated summary of the company’s earnings call. Not investment advice.