S&T Bancorp, Inc. (STBA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with increased noninterest income and a significant share repurchase plan, which are positive catalysts. Despite higher expenses, the company maintains a solid capital position and expects steady loan growth, supported by internal deposits. The Q&A reveals confidence in managing competitive pressures and M&A activities, though some responses lacked detail. Overall, positive guidance and strategic initiatives, along with a small-cap market cap, suggest a positive stock price movement of 2% to 8%.
Key Financial Performance
Earnings Per Share (EPS) $3.49 per share for the year, reflecting strong returns and financial performance.
Net Income (Annual) Just under $135 million for the year, supported by a 3.9% net interest margin. Reasons include controlled expenses, loan growth over 4%, and customer deposit growth just under 3%.
Net Interest Margin (NIM) 3.99% for Q4, up 6 basis points quarter-over-quarter, attributed to a decrease in cost of funds and pricing discipline.
Loan Growth (Annual) Over 4% for the year, driven by commercial banking, including C&I and CRE portfolios.
Customer Deposit Growth (Annual) Just under 3% for the year, with a strong deposit mix (27% DDAs).
Net Charge-Offs (Annual) 18 basis points, reflecting improved asset quality over three years.
Allowance for Credit Losses (ACL) Declined 16 basis points year-over-year for the year and 8 basis points quarter-over-quarter in Q4, due to specific reserve releases and reduced criticized and classified loans.
Net Income (Quarterly) $34 million for Q4, equating to $0.89 per share, slightly down from Q3.
Return on Assets (ROA) 1.37% for Q4, indicating strong return metrics.
Pre-Provision Net Revenue (PPNR) 1.95% for Q4, up 6 basis points quarter-over-quarter.
Commercial Loan Growth (Quarterly) $100 million for Q4, with $53 million from C&I and $34 million from CRE, driven by new customer acquisition and construction funding.
Criticized and Classified Loans Reduced by $30 million or 13% in Q4, marking a 50% reduction over three years.
Net Interest Income (Quarterly) Increased by $1.8 million or just under 2% in Q4, driven by margin expansion and reduced cost of funds.
Noninterest Income (Quarterly) Increased by $0.5 million in Q4, due to improvements in customer fee categories and timing-related activities.
Noninterest Expenses (Quarterly) Increased by $800,000 in Q4, primarily due to higher medical costs, salaries, and marketing expenses.
Share Repurchases (Quarterly) 948,000 shares repurchased in Q4 at an average price of $38.20, totaling $36.2 million.
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Operating Highlights
Loan Growth: Loan growth was just under $100 million for the quarter at 4.5%, led by Commercial Banking with growth in C&I and CRE portfolios. C&I growth was driven by increased revolving balances and new customer acquisition, while CRE growth was driven by construction funding for multifamily, warehouse, storage, and industrial asset classes.
Customer Deposit Growth: Customer deposit growth was just under $60 million at 2.9%, with a strong deposit mix where DDAs represent 27% of total balances.
Net Interest Margin (NIM): NIM rose to 3.99%, up 6 basis points quarter-over-quarter, the best performance since Q2 2023.
Asset Quality: Asset quality was mixed with higher charge-offs due to NPA resolutions, but the ACL declined 8 basis points due to specific reserve releases and a reduction in criticized and classified loans.
Noninterest Income: Noninterest income increased by $0.5 million in Q4, with improvements in major customer fee categories.
Expenses: Expenses increased by $800,000 in Q4, driven by higher medical costs, salaries, and marketing expenses.
Share Repurchase Authorization: A new $100 million share repurchase authorization was announced, reflecting robust capital levels and flexibility for M&A opportunities.
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Risk or Challenges
Asset Quality: Higher charge-offs associated with some NPA resolutions and an increase in new NPL formations caused overall NPAs to rise by $6 million. This reflects potential challenges in maintaining asset quality.
Loan Growth: While loan growth was strong, the pipelines reduced slightly heading into Q1 2026, indicating potential challenges in sustaining growth momentum.
Allowance for Credit Losses: The allowance for credit losses declined from 1.23% to 1.15%, which could pose risks if economic conditions worsen or if new problem loans emerge.
Net Interest Margin (NIM): Although NIM improved to 3.99%, there is a dependency on stable interest rate conditions. Any adverse rate changes could impact margins.
Nonperforming Loans (NPLs): New NPL formations and increased NPAs highlight ongoing risks in credit quality, despite resolution strategies being in place.
Capital Management: The TCE ratio decreased due to share repurchases, which, while strategic, could limit flexibility in adverse market conditions.
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Guidance & Outlook
Loan Growth Guidance for 2026: Mid-single-digit growth is achievable while maintaining asset quality. Growth is expected to come primarily from C&I and CRE segments, supported by investments in team leadership and banker talent, as well as consumer home equity growth.
Asset Quality Outlook for 2026: Full year 2026 asset quality results are anticipated to perform similarly to 2025, with a focus on reducing NPLs and maintaining lower levels of criticized and classified loans.
Net Interest Margin (NIM) and Net Interest Income (NII) Expectations for 2026: NIM is expected to remain stable in the mid- to high 3.9% range. Net interest income growth will be driven by earning asset growth.
Noninterest Income Expectations for 2026: Expected to remain at approximately $13 million to $14 million per quarter.
Noninterest Expense Management for 2026: Year-over-year increase expected to be around 3%, implying a quarterly run rate of approximately $58 million.
Capital Management and Share Repurchase Program: A new $100 million share repurchase authorization has been announced. Even with this program, the company expects to maintain sufficient capital for both organic and inorganic growth opportunities.
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Shareholder Return Plan
Share Repurchase Authorization: A new $100 million share repurchase authorization was announced, approved by the Board of Directors. This authorization is supported by the company's robust capital levels, allowing for share repurchases without impeding other opportunities such as M&A.
Q4 Share Repurchases: 948,000 shares were repurchased in Q4 at an average price of $38.20, totaling $36.2 million. This activity decreased the TCE ratio by 29 basis points.
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Key Q&A
Q:What factors are holding back loan growth from ramping to mid- to high single-digit pace?
A:The management emphasized ensuring asset quality of onboarded new customers to maintain lower levels of criticized and classified loans (CNCs). They are also adding bankers to ensure adequate market coverage. Additionally, they are cautious about predicting growth beyond what is organically available in the markets they serve, considering the overall state of the economy.
Q:What is the top priority for hiring efforts?
A:The top priority is hiring in the commercial space, specifically in both Commercial and Industrial (C&I) and Commercial Real Estate (CRE) sectors. They are also focusing on deposit gathering and developing new relationships in the business banking space.
Q:How has the competitive pressure on funding costs been trending?
A:The competitive pressure on funding costs has eased as rates dropped. Competitors were initially slow to bring rates down, but the market has since adjusted. The management is confident in maintaining current Net Interest Margin (NIM) levels.
Q:What is the update on M&A activities?
A:The company is in active dialogue across geographies and continues to prioritize M&A. However, they are also focused on executing daily operations and leveraging their stock repurchase authorization without it inhibiting M&A activities.
Q:Will loan growth be fully funded with deposits?
A:The management expects to fully fund loan growth internally through deposit growth. They are focusing on driving core deposit growth through investments in technology, people, and campaigns.
Q:What are the implied deposit betas in the margin guidance?
A:The implied deposit betas are approximately in the 30% range overall.
Q:Is there a desire to keep asset growth under $10 billion to avoid the Durbin Amendment impact?
A:No, the management is not focused on staying under $10 billion. They anticipate crossing the $10 billion threshold and are prepared to manage the relatively small Durbin impact of $6 million to $7 million.
Q:What drove the $11 million in charge-offs this quarter?
A:The charge-offs were directly related to previously identified credits in the CRE and C&I sectors. The company resolved these issues, recognized the charge, and reduced specific reserves accordingly.
Q:What is the expected expense growth and efficiency ratio outlook?
A:The management expects a 3% year-over-year expense growth, primarily in production-related roles. They aim to maintain the efficiency ratio in the mid-50s range.
Q:What are the roll-on yields versus roll-off yields, and expectations for back book repricing in 2026?
A:The company is still seeing some positive roll-on yields, particularly in fixed products, with about 25 basis points of benefit. Approximately $1 billion in fixed loans will reprice annually, with a mix of fixed and floating rates.
Q:What is the updated cost of funds across deposits?
A:As of December, CDs were at 3.82%, and overall interest-bearing deposits were at 2.50%.
Q:What AI tools is the company using, and how might they impact the P&L?
A:The company uses AI tools for fraud protection, regulatory compliance, underwriting, portfolio management, and communication enhancements. While these tools save millions in fraud prevention, they are not yet significantly impacting the P&L.
Q:How did loan production compare to payoffs this quarter?
A:Loan originations were strong in Q4, but elevated payoffs, particularly in the construction cycle, offset some of the growth. The company is rebuilding its pipeline and aims to originate $1.5 billion to $1.6 billion annually to achieve 5% to 7% net loan growth.
Q:Are there specific geographies targeted for hiring bankers?
A:The company is agnostic about geography but is focused on adding C&I and CRE bankers, as well as treasury management officers, to enhance customer acquisition and deposit growth.
Q:What are the competitive factors on the deposit side?
A:The competitive pressure on deposits has eased, with competitors becoming more rational in their pricing. The company uses an exception pricing process to attract and retain deposits effectively.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the pace of M&A discussions, the exact geographies targeted for expansion, and the timeline for AI tools to significantly impact the P&L. Additionally, their responses on deposit growth and funding strategies lacked detailed numerical guidance.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACL basis
Asset quality
Bancorp Full
Banking CI
CC asset
CC loan
CI activity
CI increase
CI retail
CRE ability
CRE construction
CRE line
CRE portfolio
Categories CI
DDAs balance
Directors yesterday
Full Conference
Kochvar Senior
Loan Commercial
Loan customer
NIM basis
NPA resolution
NPLs level
Page
attention
authorization
charge offs
loan CI
loan resolution
minute
period
problem loan
reduction loan
STBA Transcript
S&T Bancorp, Inc. (STBA) Q4 2025 Earnings Call Transcript
Positive1-22
The earnings call summary indicates strong financial performance with increased noninterest income and a significant share repurchase plan, which are positive catalysts. Despite higher expenses, the company maintains a solid capital position and expects steady loan growth, supported by internal deposits. The Q&A reveals confidence in managing competitive pressures and M&A activities, though some responses lacked detail. Overall, positive guidance and strategic initiatives, along with a small-cap market cap, suggest a positive stock price movement of 2% to 8%.
S&T Bancorp, Inc. (STBA) Q3 2025 Earnings Call Transcript
Unknown10-23
The earnings call summary shows a stable financial performance with expectations of loan growth and stable net interest margins. However, the Q&A reveals uncertainties regarding competition in the deposit market and M&A activity. The company's strategy to stay under the $10 billion threshold and plans for share repurchases are positive, but management's lack of clarity on nonperforming credits and M&A targets adds uncertainty. Overall, the mixed signals lead to a neutral sentiment rating.
S&T Bancorp, Inc. (STBA) Q2 2025 Earnings Call Transcript
Positive7-24
The earnings call indicates strong financial performance with EPS exceeding estimates and stable NIM. Loan growth and deposit strategies are promising, and M&A activity is progressing positively. While there are concerns about funding costs, the company has strategies to mitigate these. The Q&A reveals confidence in growth and stable credit quality. The market cap suggests a moderate reaction, leading to a positive outlook.
Earnings call transcript: S&T Bancorp beats Q1 2025 EPS expectations
Positive4-24
The company reported strong financial performance with EPS and net income exceeding expectations, alongside continued customer deposit and loan growth. Despite some market uncertainties and competitive pressures, the stable net interest margin and improved capital position are positive indicators. The Q&A session revealed proactive growth strategies and cautious risk management, albeit with some hesitancy in addressing tariff impacts. Given the market cap, this combination of strong performance and strategic planning suggests a positive stock price movement in the short term.
STBA Slides
STBA Report
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