S&T Bancorp Inc: Form 10-Q for the period ended Sep 30, 2025

(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) increased $4.7 million, or 5.5 percent, and $7.4 million, or 2.9 percent, for the three and nine months ended September 30, 2025 compared to the same periods in 2024. The NIM on an FTE basis (non-GAAP) increased 11 and 3 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024. These improvements in both net interest income and NIM on an FTE basis (non-GAAP) were primarily due to the impact of lower interest rates on interest bearing liabilities, an improvement in our overall funding mix and strong earnings retention. Customer deposit growth in 2024 and 2025 has reduced our levels of borrowings and brokered deposits.

Interest income on an FTE basis (non-GAAP) remained relatively unchanged for the three months ended September 30, 2025 and decreased $2.9 million for the nine months ended September 30, 2025 compared to the same periods in 2024. The decrease in interest income on an FTE basis (non-GAAP) for the nine months ended September 30, 2025 was primarily due to lower interest rates. The average yield on loan balances decreased 26 basis points for both the three and nine months ended September 30, 2025 compared to the same periods in 2024. Average loan balances increased $276.9 million and $187.7 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024. Offsetting the lower interest income on loans was higher interest income on securities primarily due to the repositioning of $193.6 million of securities during 2024 and 2025. The average yield on securities increased 68 and 77 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024. Overall, the FTE rate (non-GAAP) on interest-earning assets decreased 16 and 15 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Interest expense decreased $4.6 million and $10.2 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024. The decrease in interest expense was primarily due to lower levels of borrowings and decreased interest rates. Average interest-bearing deposits increased $224.0 million and $254.6 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024 primarily due to increases in certificates of deposit and money market balances. Average borrowings decreased $118.4 million and $170.4 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024 primarily due to increased customer deposits. Overall, the cost of interest-bearing liabilities decreased 36 and 26 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

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)

(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, loan risk ratings, net loan charge-offs and recoveries, the macro environment and our CECL forecast.

The provision for credit losses increased $3.2 million to $2.8 million for the three months ended September 30, 2025 compared to a negative $0.4 million for the same period in 2024. The increase was primarily due to an increase in specific reserves for loans individually evaluated and an increase in the reserve for unfunded loan commitments due to higher unused commitments and loss rates in the construction portfolio. The provision for credit losses decreased $0.9 million to $1.7 million for the nine months ended September 30, 2025 compared to $2.6 million for the same period in 2024. The decrease in the provision for credit losses was due to a lower level of ACL related to improved asset quality and lower net charge-offs, which were partially offset by an increase in the reserve for unfunded loan commitments related to an increase in unused commitments and loss rates in the construction portfolio.

Net loan charge-offs were $2.4 million and $3.5 million for the three and nine months ended September 30, 2025 compared to net loan charge-offs of $2.1 million and $8.3 million for the same periods in 2024.

Refer to the "Allowance for Credit Losses" section of this MD&A for further details.

Noninterest Income

(dollars in thousands)

Noninterest income increased $1.9 million for the three months ended September 30, 2025 and decreased $0.3 million for the nine months ended September 30, 2025 compared to the same periods in 2024. The increase of $1.9 million for the three months ended September 30, 2025 was due to no security losses recognized for the three months ended September 30, 2025 compared to $2.2 million of losses recognized in the same period in 2024, offset by a decrease of $0.4 million in other noninterest income in 2025. The decrease of $0.3 million in noninterest income for the nine months ended September 30, 2025 was primarily related to the repositioning of the securities portfolio resulting in higher losses in 2024 of $3.0 million. These losses were offset by a fair value adjustment of $3.2 million for the Visa exchange offer in 2024 with no similar activity in 2025.

Noninterest Expense

(dollars in thousands)

Noninterest expense increased $1.0 million and $6.1 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024. Salaries and employee benefits increased $0.9 million and $3.8 million for the three and nine months ended September 30, 2025 primarily due to annual merit increases, higher incentives and increased medical costs. Data processing and information technology increased $0.5 million for the nine months ended September 30, 2025 due to additional services provided through our third party vendor. Occupancy increased $1.0 million for the nine months ended September 30, 2025 due to increased maintenance and utility costs. Other noninterest expense increased $1.0 million for the nine months ended September 30, 2025 primarily related to higher recruitment and loan collection expenses. Other taxes increased $0.5 million for the nine months ended September 30, 2025 due to higher shares tax expense as compared to the same period in 2024.

Provision for Income Taxes

The provision for income taxes remained unchanged at $8.9 million and $25.3 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024. Our effective tax rate was 20.2 percent and 20.1 percent for the three and nine months ended September 30, 2025 compared to 21.4 percent and 20.5 percent for the same periods in 2024. The decrease in our effective tax rate for the three and nine month periods ended September 30, 2025 was primarily due to an increase in low-income housing tax credits partially offset by a decrease in tax-exempt interest income compared to the same periods in 2024.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” was signed into law. The Act extends many of the key provisions of the 2017 Tax Cuts and Jobs Act, or TCJA, which were previously set to expire at the end of this year, and introduces several new tax measures. We do not expect the Act to have a material impact on our consolidated financial statements.

Financial Condition as of September 30, 2025

Total assets increased $159.5 million to $9.8 billion at September 30, 2025 compared to $9.7 billion at December 31, 2024. Total portfolio loans increased $238.0 million to $8.0 billion at September 30, 2025 compared to December 31, 2024. The commercial loan portfolio increased $158.8 million and the consumer loan portfolio increased $79.3 million compared to December 31, 2024.

Securities increased $13.6 million to $1.0 billion at September 30, 2025 compared to December 31, 2024 mainly due to a decrease in unrealized losses. The securities portfolio was in a net unrealized loss position of $38.8 million at September 30, 2025 compared to a net unrealized loss position of $71.7 million at December 31, 2024. The improvement in the net unrealized loss position of the securities portfolio of $32.9 million was primarily due to a decline in interest rates from December 31, 2024.

Total deposits increased $138.8 million to $7.9 billion at September 30, 2025 compared to $7.8 billion at December 31, 2024 as a result of our continued focus on growing our deposit franchise. Customer deposits increased $163.6 million to $7.7 billion at September 30, 2025 compared to $7.6 billion at December 31, 2024. Brokered deposits decreased $24.8 million to $200.5 million at September 30, 2025 compared to $225.3 million at December 31, 2024.

Total borrowings decreased $15.0 million to $235.3 million at September 30, 2025 compared to $250.3 million at December 31, 2024.

Total shareholders’ equity increased by $95.2 million to $1.5 billion at September 30, 2025 compared to December 31, 2024. The increase was primarily due to net income of $100.3 million and other comprehensive income of $31.8 million offset by dividends of $39.3 million. The increase in other comprehensive income is primarily due to improvement in the net unrealized loss position of the securities portfolio of $32.9 million which is related to a decline in interest rates from December 31, 2024.

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.

The securities portfolio increased $13.6 million to $1.0 billion at September 30, 2025 compared to December 31, 2024. The increase in the debt securities portfolio was primarily related to an improvement in unrealized losses of $32.9 million at September 30, 2025 compared to December 31, 2024 as a result of lower interest rates. Additionally, we had $2.3 million million of realized losses due to the repositioning of $49.3 million of our securities portfolio into longer duration, higher-yielding securities during the nine months ended September 30, 2025.

Our debt securities portfolio was in a net unrealized loss position of $38.8 million at September 30, 2025 compared to a net unrealized loss position of $71.7 million at December 31, 2024. At September 30, 2025, our debt securities portfolio had gross unrealized losses of $46.1 million offset by $7.3 million of gross unrealized gains compared to gross unrealized losses of $72.7 million offset by gross unrealized gains of $1.0 million at December 31, 2024.

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 were $8.0 billion at September 30, 2025 compared to $7.7 billion at December 31, 2024. As of September 30, 2025, 23 percent of our total loans were adjustable rate, 37 percent were floating rate and 40 percent were fixed rate compared to 24 percent adjustable rate loans, 37 percent floating rate loans and 39 percent fixed rate loans at December 31, 2024.

Commercial loans, including CRE, C&I and commercial construction comprised 68.2 percent of total portfolio loans at both September 30, 2025 and December 31, 2024. The commercial loan portfolio increased $158.8 million at September 30, 2025 compared to December 31, 2024 due to an increase of $265.8 million in CRE offset by decreases of $74.3 million in C&I and $32.7 million in commercial construction.

Consumer loans represent 31.8 percent of our total portfolio loans at September 30, 2025 and December 31, 2024. The consumer loan portfolio increased $79.3 million at September 30, 2025 compared to December 31, 2024 primarily due to growth in our consumer real estate portfolio of $81.5 million.

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 period presented:

(dollars in thousands)

37

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

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

The ACL decreased $3.3 million to $98.2 million, or 1.23 percent of total portfolio loans, at September 30, 2025 compared to $101.5 million, or 1.31 percent of total portfolio loans, at December 31, 2024. The decrease in the ACL was primarily due to a reduction of $1.5 million in specific reserves for loans individually evaluated and a lower level of qualitative reserve and C&I segment specific reserve.

Substandard loans increased $24.6 million to $134.4 million at September 30, 2025 compared to $109.8 million at December 31, 2024 and remain at a manageable level. The increase in the amount of substandard loans was primarily due to the addition of three commercial relationships totaling $28.4 million that were downgraded to substandard during the three months ended September 30, 2025. Special mention loans decreased $9.9 million to $89.0 million at September 30, 2025 compared to $98.9 million at December 31, 2024.

Nonperforming assets, or NPAs, consist of nonaccrual loans and OREO. The following represents NPAs 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 $21.7 million to $49.6 million at September 30, 2025 compared to $27.9 million at December 31, 2024. Nonaccrual loans have increased from an exceptionally low level and remain manageable. The increase in nonaccrual loans was primarily due to the addition of two CRE relationships totaling $23.4 million and a C&I relationship totaling $5.0 million that moved to nonaccrual during the three months ended September 30, 2025.

Deposits

Deposits are our primary source of funds. The following table presents the mix of deposits as of the dates presented:

(dollars in thousands)

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

(dollars in thousands)

Total deposits increased $138.8 million, or 1.8 percent, at September 30, 2025 compared to December 31, 2024 as a result of our continued focus on growing our deposit franchise. Customer deposits increased $163.6 million, or 2.2 percent compared to December 31, 2024. Total brokered deposits decreased $24.8 million from December 31, 2024. 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 certificates of deposit balances in excess of the FDIC insurance limits. IntraFi balances were $292.4 million at September 30, 2025 compared to $324.8 million at December 31, 2024.

We had total uninsured deposits of $2.7 billion, or 34.5 percent of our total deposit base, at September 30, 2025 compared to $2.6 billion, or 33.5 percent of our total deposit base, at December 31, 2024.

Borrowings

Borrowings are an additional source of funding for us. Short-term borrowings are for terms under or equal to one year at September 30, 2025 and are comprised of FHLB Advances. Long-term borrowings are for original terms greater than one year and are comprised of FHLB advances and finance leases. Total borrowings were $235.3 million at September 30, 2025 compared to $250.3 million at December 31, 2024.

(dollars in thousands)

39

Information pertaining to short-term borrowings is summarized in the table below for the nine months ended September 30, 2025 and for the twelve months ended December 31, 2024.

(dollars in thousands)

Information pertaining to long-term borrowings and junior subordinated debt securities is summarized in the tables below for the nine months ended September 30, 2025 and for the twelve months ended December 31, 2024.

(dollars in thousands)

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. 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. ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and having a detailed contingency funding plan. 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 September 30, 2025 - 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 FHLB, federal funds lines with other financial institutions and the brokered deposit market. We also have borrowing availability at the Federal Reserve Discount Window through the Borrower-in-Custody Program.

Available borrowing capacity exceeds uninsured deposits of $2.7 billion at September 30, 2025. 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" section presented in our Form 2024 10-K under Part II, Item 7- "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for more information on these future cash outflows. There have been no material changes to the contractual obligations previously disclosed in our 2024 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 September 30, 2025, S&T Bank had $872.8 million in highly liquid assets, which consisted primarily of $121.2 million in interest-bearing deposits with banks and $751.6 million in unpledged securities. This resulted in a highly liquid assets to total assets ratio of 8.9 percent at September 30, 2025.

We continue to maintain a strong capital position with our capital ratios in excess of the well-capitalized regulatory guidelines. The following table summarizes capital amounts and ratios for S&T and S&T Bank as of the dates presented:

(dollars in thousands)

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. We have not issued any securities pursuant to this shelf registration statement at September 30, 2025.

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 ALCO. 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.

The results from the rate shock analyses on net interest income are generally 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 remain relatively unchanged in the percentage change in pretax net interest income in the rates up scenarios when comparing September 30, 2025 to December 31, 2024. The percentage change in pretax net interest income in the rates down scenarios has improved when comparing September 30, 2025 to December 31, 2024 primarily due to updates of our deposit beta and loan prepayment assumptions. Our EVE analyses show an improvement in the rates up scenarios and a decline in the rates down scenarios when comparing September 30, 2025 to December 31, 2024 primarily due to an updated analysis that shows that our deposit retention is expected to be stronger than previously modeled.

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 September 30, 2025. 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 September 30, 2025, 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 2024 Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 3, 2025.