S&T Bancorp Inc: Form 10-Q for the period ended Mar 31, 2024

(dollars in thousands)

(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.

Net interest income on an FTE basis (non-GAAP) decreased $5.2 million, or 5.8 percent, for the three months ended March 31, 2024, compared to the same period in 2023. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 48 basis points for the three months ended March 31, 2024, compared to the same period in 2023. The decreases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates and a shift in our funding mix to higher cost money market and certificates of deposits.

Interest income on an FTE basis (non-GAAP) increased $17.0 million for the three months ended March 31, 2024, compared to the same period in 2023. The increased interest income on an FTE basis (non-GAAP) was primarily due to higher interest rates. Average loan balances increased $468.1 million for the three months ended March 31, 2024, compared to the same period in 2023. The average yield on loan balances increased 44 basis points for the three months ended March 31, 2024 compared to the same period in 2023, due to increased interest rates. Overall, the FTE rate (non-GAAP) on interest-earning assets increased 47 basis points for the three months ended March 31, 2024, compared to the same period in 2023.

Interest expense increased $22.2 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase in interest expense was primarily due to higher interest rates and a shift in our funding mix to higher cost products. Average interest-bearing deposits increased $689.4 million, of which $377.8 million was brokered deposits, for the three months ended March 31, 2024, compared to the same period in 2023. The average rate paid on interest-bearing deposits increased 147 basis points for the three months ended March 31, 2024, compared to the same period in 2023, due to higher interest rates. Certificates of deposits increased $586.6 million and the average rate paid on certificates of deposits increased 218 basis points. The increase to certificate of deposits was due to higher interest rates resulting in customers moving deposits to higher yield accounts and the addition of $199.8 million of brokered certificates of deposits. The average rate paid on borrowings increased 46 basis points for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to increased interest rates. Overall, the cost of interest-bearing liabilities increased 131 basis points for the three months ended March 31, 2024, compared to the same period in 2023.

The following table sets forth a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates for the periods presented:

(dollars in thousands)

(1) Tax-exempt 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.

(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

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 $1.7 million to $2.6 million for the three months ended March 31, 2024, compared to $0.9 million for the same period in 2023. The increase in the

provision for credit losses for the three months ended March 31, 2024, compared to the same period in 2023 was primarily due

to an increase in net loan charge-offs, which was partially offset by reductions in our specific reserve for loans individually

evaluated due to the resolution of a $6.0 million commercial relationship and in our healthcare segment specific reserve due to reduced exposure. The provision for credit losses included a reduction of $0.8 million for the reserve for unfunded commitments for the three months ended March 31, 2024, compared to a reduction of $0.2 million for the same period in 2023.

Net loan charge-offs for the three months ended March 31, 2024 were $6.6 million, or 0.35 percent of average loans, compared to net recoveries of $5.1 million, or 0.29 percent of average loans, for the same period in 2023. Net loan charge-offs for the three months ended March 31, 2024 were primarily related to two commercial real estate, or CRE, relationships totaling $5.3 million and a commercial and industrial, or C&I, relationship totaling $1.1 million. Offsetting loan charge-offs of $4.5 million during the three months ended March 31, 2023 was a $9.3 million recovery related to a 2020 customer fraud. Refer to the "Allowance for Credit Losses" section of this MD&A for further details.

Noninterest Income

(dollars in thousands)

Noninterest income decreased $0.4 million to $12.8 million for the three months ended March 31, 2024, compared to the same period in 2023. Service charges on deposit accounts decreased $0.2 million for the three months ended March 31, 2024 due to decreases in returned check fees and the elimination of NSF fees in April 2023. Debit and credit card income decreased $0.1 million due to decreased customer activity and merchant referral revenue.

Noninterest Expense

(dollars in thousands)

Noninterest expense increased $2.8 million to $54.5 million for the three months ended March 31, 2024 compared to the same period in 2023. Salaries and employee benefits increased $1.9 million for the three months ended March 31, 2024 due to annual merit increases, inflationary wage pressure and the acquisition of new talent. Data processing and information technology increased $0.7 million due to additional services provided through our third party provider. Furniture, equipment and software expenses increased $0.6 million as a result of software and technology investments, which further contributed to the overall increase in noninterest expense. Other noninterest expense decreased $0.5 million primarily due to the adoption of new accounting guidance on January 1, 2024. Amortization expense of $0.8 million related to tax credit equity investments is included in income tax expense for the three months ended March 31, 2024, compared to amortization expense of $0.5 million included in other noninterest expense for the same period in 2023.

Provision for Income Taxes

The provision for income taxes decreased $1.7 million to $7.9 million for the three months ended March 31, 2024, compared to $9.6 million for the three months ended March 31, 2023. The decrease in our income tax provision was primarily due to a $10.2 million decrease in income before taxes in 2024 compared to 2023.

The effective tax rate, which is total tax expense as a percentage of income before taxes, increased to 20.2 percent for the three months ended March 31, 2024, compared to 19.4 percent in the same period in 2023. The increase in the effective tax rate for the three months ended March 31, 2024 was primarily due to the adoption of the proportional amortization method, or PAM, related to tax credit equity investments on January 1, 2024. Under the PAM, amortization expense related to tax credit equity investments is included in income tax expense for the three months ended March 31, 2024, compared to other noninterest expense for the same period in 2023.

Financial Condition as of March 31, 2024

Total assets were $9.5 billion at March 31, 2024, compared to $9.6 billion at December 31, 2023. Total portfolio loans remained unchanged at $7.7 billion at March 31, 2024, compared to December 31, 2023. The commercial loan portfolio decreased $38.1 million at March 31, 2024, compared to December 31, 2023, primarily due to a decrease of $45.0 million in C&I loans, offset by an increase of $10.1 million in CRE.

Securities remained unchanged at $1.0 billion at March 31, 2024 and December 31, 2023. The bond portfolio was in a net unrealized loss position of $87.8 million at March 31, 2024, compared to a net unrealized loss position of $82.0 million at December 31, 2023. The increase in the net unrealized loss portion of the bond portfolio of $5.8 million was due to a change in interest rates.

Our total deposits increased $78.6 million at March 31, 2024, compared to December 31, 2023. Customer deposits increased $77.8 million compared to December 31, 2023, as a result of our focus on deposit franchise. The pace of customers moving deposits to higher costing deposit types has moderated compared to the prior year

Total borrowings decreased $130.1 million to $373.5 million at March 31, 2024 compared to $503.6 million at December 31, 2023 primarily due to deposit growth.

Total shareholders’ equity increased by $11.6 million to $1.3 billion at March 31, 2024, compared to December 31, 2023. The increase was primarily due to net income of $31.2 million, offset by other comprehensive loss of $6.8 million and dividends of $12.7 million.

Securities Activity

(dollars in thousands)

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. Securities remained unchanged at $1.0 billion at March 31, 2024 compared to December 31, 2023.

At March 31, 2024, our bond portfolio was in a net unrealized loss position of $87.8 million compared to a net unrealized loss position of $82.0 million at December 31, 2023. At March 31, 2024, our bond portfolio had gross unrealized losses of $88.4 million and $0.6 million in gross unrealized gains, compared to December 31, 2023, when total gross unrealized losses were $83.8 million offset by gross unrealized gains of $1.8 million.

Loan Composition

The following table summarizes our loan portfolio as of the dates presented:

(dollars in thousands)

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.

Total portfolio loans remained unchanged at $7.7 billion at March 31, 2024 and December 31, 2023. As of March 31, 2024, 64 percent of our total loans were variable rate loans and 36 percent were fixed rate loans, compared to 65 percent variable rate and 35 percent fixed rate at December 31, 2023. Commercial loans, including CRE, C&I and commercial construction, comprised 69.6 percent of total portfolio loans at March 31, 2024 and 70.1 percent at December 31, 2023. The commercial loan portfolio decreased $38.1 million at March 31, 2024 compared to December 31, 2023, primarily due to a decrease of $45.0 million in C&I, offset by an increase of $10.1 million in CRE. Loan volume has slowed due to higher interest rates and an uncertain macro environment.

Our multifamily and office segments are the most significant CRE and commercial construction concentrations within our portfolio. Approximately 95 percent of multifamily and office CRE loans are located within our market area, which includes Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware and Maryland

In the CRE segment, multifamily represented $580.8 million, or 7.6 percent of total portfolio loans, at March 31, 2024, compared to $569.4 million, or 7.4 percent, at December 31, 2023. The average loan size of multifamily CRE is $1.0 million, with an average loan-to-value of 56 percent. There were no special mention loans and $6.9 million substandard in the multifamily CRE segment at March 31, 2024, compared to special mention loans of $3.8 million and substandard of $13.0 million at December 31, 2023.

Office CRE was $482.0 million, or 6.3 percent of total portfolio loans, at March 31, 2024, compared to $480.5 million, or 6.3 percent, at December 31, 2023. The average loan size within the office CRE portfolio is $1.1 million, with an average loan-to-value of approximately 55 percent. Special mention loans in the office CRE segment were $12.3 million and substandard were $2.1 million at March 31, 2024, compared to special mention loans of $9.1 million and substandard of $2.5 million at December 31, 2023. Approximately 90 percent of the office portfolio is located in non-central business districts, with the remaining 10 percent in central business districts within our market area.

In addition, within the commercial construction segment, multifamily represented $115.3 million, or 1.5 percent of total portfolio loans, at March 31, 2024, compared to $119.0 million, or 1.6 percent, at December 31, 2023. Commercial construction office was $29.5 million, or 0.4 percent of total portfolio loans, at December 31, 2024, compared to $36.0 million, or 0.5 percent, at December 31, 2023. There were no special mention or substandard commercial construction loans within our multifamily or office segments for the periods presented.

Consumer loans represent 30.4 percent of our total portfolio loans at March 31, 2024 and 29.9 percent at December 31, 2023. The consumer loan portfolio increased $40.8 million at March 31, 2024, primarily due to growth in our consumer real estate portfolio of $47.4 million compared to December 31, 2023. Consistent with 2023, we continue to retain consumer real estate loans on our balance sheet as portfolio loans, versus selling these loans due to the loan pricing in the secondary market.

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. Refer to Part 1. Financial Information, Note 5 Loans and Allowance for Credit Losses for details on our portfolio segments.

The following table presents activity in the ACL for the periods presented:

(dollars in thousands)

The following table presents key ACL ratios for the periods presented:

(1) Year-to-date net charge-offs annualized

Net loan charge-offs were $6.6 million, or 0.35 percent of average loans, for the three months ended March 31, 2024. Refer to the "Provision for Credit Losses" section of this MD&A for further details.

The ACL was $104.8 million, or 1.37 percent of total portfolio loans, at March 31, 2024, compared to $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023. The decrease in the ACL of $3.2 million was primarily related to decreased exposure in our healthcare portfolio.

Substandard loans decreased $20.3 million to $153.0 million at March 31, 2024, compared to $173.3 million at December 31, 2023. The decrease in substandard loans was primarily due to loan payoffs and commercial charge-offs of $6.6 million. Special mention loans increased $11.5 million to $147.3 million at March 31, 2024, compared to $135.8 million at December 31, 2023. The increase in special mention loans was primarily due to risk rating downgrades in our C&I portfolio.

Our allowance on unfunded loan commitments and letters of credit provide for the risk of expected loss in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL 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 the Condensed Consolidated Statements of Comprehensive Income. The allowance for unfunded loan commitments decreased $0.8 million to $6.0 million at March 31, 2024, compared to $6.8 million at December 31, 2023. The decrease was due to decreased loss rates and a reduction in unused commitments in our construction portfolio. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

Nonperforming assets, or NPA's, consist of nonaccrual loans and OREO. The following represents NPA's as of the dates presented:

(dollars in thousands)

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 the contractual due date. Nonaccrual loans increased $10.3 million to $33.2 million at March 31, 2024, compared to $22.9 million at December 31, 2023. The increase in nonaccrual loans primarily related to the addition of a $16.4 million CRE loan, which was written down to the value of an asset sale agreement and a $3.2 million partial charge-off was processed. The sale is expected to take place later in 2024. Partially offsetting the increase in nonaccrual loans for the three months ended March 31, 2024, was the payoff of a $5.9 million CRE loan.

Deposits

Deposits are our primary source of funds. We have a well-diversified deposit base with a balance mix of 58.3 percent personal, 32.1 percent business, 4.6 percent public funds and 5.0 percent brokered at March 31, 2024.

(dollars in thousands)

The following table presents the composition of deposits for the periods presented:

(dollars in thousands)

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Our total deposits increased $78.6 million at March 31, 2024, compared to December 31, 2023. Customer deposits increased $77.8 million compared to December 31, 2023, as a result of our focus on deposit franchise. While we are still seeing movement by customers to higher cost certificate of deposits, the rate of customers moving deposits to higher costing deposit types has moderated compared to the prior year.

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 $29.1 million to $306.8 million at March 31, 2024, compared to $277.7 million at December 31, 2023. We had total uninsured deposits of $2.3 billion, or 30 percent of our total deposit base, at both March 31, 2024 and December 31, 2023.

Borrowings

(dollars in thousands)

Borrowings are an additional source of funding for us. Total borrowings decreased $130.1 million to $373.5 million at March 31, 2024, compared to $503.6 million at December 31, 2023, primarily due to deposit growth.

Information pertaining to short-term borrowings is summarized in the table below for the three months ended March 31, 2024 and the twelve months ended December 31, 2023.

(dollars in thousands)

Information pertaining to long-term borrowings and junior subordinated debt securities is summarized in the tables below for the three months ended March 31, 2024 and the twelve months ended December 31, 2023.

(dollars in thousands)

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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 March 31, 2024 - 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. We also have availability at the Federal Reserve Discount Window through the Borrower-in-Custody Program.

In response to the bank failures in March 2023, the Federal Reserve authorized additional funding availability to eligible depository institutions through the Federal Reserve Bank Term Funding Program, or BTFP. The temporary program was intended to help assure depositors that their institutions have an additional source of liquidity to meet their needs. Under the program, any collateral eligible for purchase by the Federal Reserve Banks in open market operations could be pledged, including U.S. Treasury securities, U.S. Agencies and U.S. Agency mortgage-backed securities. Collateral advances were 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 BTFP ceased making new loans as scheduled on March 11, 2024.

Available borrowing capacity exceeds uninsured deposits of $2.3 billion. The following table summarizes funding sources available as of the dates presented:

(dollars in thousands)

We have contractual obligations representing required future payments on certificates of deposit, junior subordinated debt securities, short-term borrowings, long-term borrowings, operating and capital leases, funding commitments on tax credit equity investments and purchase obligations. See the Liquidity and Capital Resources portion of our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K for more information on these future cash outflows. Customer certificates of deposit increased $61.8 million to $1.5 billion at March 31, 2024, compared to December 31, 2023 and short-term borrowings decreased $130.0 million to $285.0 million at March 31, 2024, compared to December 31, 2023. Other than these changes, there have been no material changes to the contractual obligations previously disclosed in our 2023 Form 10-K.

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 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 March 31, 2024, S&T Bank had $711.0 million in highly liquid assets, which consisted primarily of $143.3 million in interest-bearing deposits with banks and $567.7 million in unpledged securities. This resulted in a highly liquid assets to total assets ratio of 7.5 percent at March 31, 2024.

We continue to maintain a strong capital position with our leverage ratio at 11.30 percent at March 31, 2024, compared to 11.21 percent at December 31, 2023, both in excess of the well-capitalized regulatory guideline of 5.00 percent. We continue to be well-capitalized with a risk-based Common Equity Tier 1 ratio of 13.59 percent at March 31, 2024, compared to 13.37 percent at December 31, 2023, both in excess of the well-capitalized regulatory guideline of 6.50 percent.

The following table summarizes capital amounts and ratios for S&T and S&T Bank as of the dates presented:

(dollars in thousands)

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 due to the COVID-19 pandemic. The IFR provides financial institutions that adopted 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.

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 March 31, 2024, we had not issued any securities pursuant to this shelf registration statement.

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.

40

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 more improvement in the percentage change in pretax net interest income in the rates up scenarios when comparing March 31, 2024 to December 31, 2023 primarily due to changes in our funding mix. The percentage change in pretax net interest income in the rates down scenario shows a decline when comparing March 31, 2024 to December 31, 2023 primarily due to changes in our funding mix. Our EVE analyses remain relatively unchanged in the rates up scenarios. The percentage change in our EVE show improvement in rates down scenarios when comparing March 31, 2024 to December 31, 2023. These changes are mainly the result of changes to our funding mix.

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.

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, respectively), management has evaluated the effectiveness of the design and operation of S&T’s disclosure controls and procedures as of March 31, 2024. 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.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2024, there were no changes made to S&T’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, S&T’s internal control over financial reporting.

PART II

OTHER INFORMATION

There have been no material changes to the risk factors that we have previously disclosed in Part I, Item 1A – “Risk Factors” in our 2023 Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 27, 2024.