S&T Bancorp, Inc. 2021 Form 10-K Summary
Business Context and Reporting Period
S&T Bancorp, Inc. is a Pennsylvania-based bank holding company operating through S&T Bank and related insurance, wealth management, investment advisory and other subsidiaries. S&T Bank serves Western and Eastern Pennsylvania, Northeast Ohio, Central Ohio and Upstate New York through 73 branches and five loan production offices. The filing covers the fiscal year ended December 31, 2021, and compares results primarily with 2020.
At year-end, the company reported approximately $9.5 billion of assets, $7.0 billion of portfolio loans, $8.0 billion of deposits and $1.2 billion of shareholders’ equity. Wealth management assets under administration, which are not included in consolidated assets, were $2.3 billion.
Financial Performance and Key Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net income | $110.3 million | $21.0 million | +$89.3 million |
| Diluted EPS | $2.81 | $0.53 | +$2.28 |
| Net interest income | $276.1 million | $279.4 million | -$3.3 million |
| Net interest margin, FTE | 3.22% | 3.38% | -16 basis points |
| Noninterest income | $64.6 million | $59.7 million | +8.2% |
| Noninterest expense | $188.8 million | $186.6 million | +1.2% |
| Efficiency ratio | 55.05% | 53.86% | Higher by 119 basis points |
| Provision for credit losses | $16.2 million | $131.4 million | -$115.2 million |
| Net charge-offs | $34.5 million | $103.4 million | -$68.9 million |
| Return on average assets | 1.18% | 0.23% | Higher |
| Return on average equity | 9.30% | 1.80% | Higher |
Net income benefited substantially from the lower credit-loss provision and the absence of the $58.7 million pretax customer fraud loss recognized in 2020. Net interest income declined because of lower average loan balances and a low-rate environment, partly offset by lower funding costs and $17.3 million of PPP-related net interest income.
Cash and cash equivalents increased by $692.5 million to $922.2 million. Net cash provided by operating activities was $216.1 million, investing activities provided $12.0 million, and financing activities provided $464.5 million. Deposits increased $576.0 million to $8.0 billion, while total borrowings decreased $66.6 million to $161.3 million.
Balance Sheet, Credit Quality and Capital
- Total assets increased $520.6 million, or approximately 5.8%, to $9.49 billion.
- Portfolio loans decreased $225.9 million, or 3.1%, to $7.00 billion. Excluding PPP loans, portfolio loans increased $151.3 million.
- Commercial loans represented 77.2% of portfolio loans; commercial real estate and construction exposure totaled approximately $3.7 billion.
- Deposits increased 7.8%, primarily from customer liquidity preferences, government stimulus programs and PPP-related balances. Noninterest-bearing demand deposits increased $486.6 million.
- The allowance for credit losses declined to $98.6 million, or 1.41% of portfolio loans, from $117.6 million, or 1.63%, at year-end 2020.
- Nonperforming assets declined to $79.6 million, or 1.13% of loans plus OREO, from $148.9 million, or 2.06%. Nonperforming loans declined to $66.3 million from $146.8 million.
- Highly liquid assets totaled $1.3 billion, or 13.7% of total assets. Remaining borrowing availability at the Federal Home Loan Bank of Pittsburgh was $2.5 billion.
- S&T and S&T Bank were classified as well-capitalized. S&T reported a 9.74% leverage ratio, 12.03% common equity Tier 1 ratio, 12.43% Tier 1 ratio and 13.79% total capital ratio.
Material Changes Versus the Prior Comparable Period
- Profitability rebounded sharply from the 2020 customer fraud loss and pandemic-related credit provisioning.
- Credit metrics improved, including lower charge-offs, nonperforming loans and nonperforming assets; however, the portfolio remains concentrated in commercial lending, commercial real estate and regional markets in Pennsylvania and neighboring states.
- Net interest margin compressed as excess liquidity was held in lower-yielding cash and short-term rates remained low. Management described the balance sheet as asset sensitive, with potential benefit from rising rates.
- Noninterest income improved through higher wealth management, card and deposit service fees, partially offset by lower mortgage banking and commercial loan swap income.
- Noninterest expense increased modestly, driven mainly by salaries, incentives, restricted stock, pension expense and technology spending. Merger-related expenses ceased in 2021.
- The securities portfolio increased to $910.8 million, while net unrealized gains declined to $9.4 million from $33.4 million as interest rates rose. Management attributed unrealized losses primarily to rate changes rather than credit deterioration.
- The company appointed Christopher J. McComish as CEO effective August 23, 2021. Management’s 2022 priorities include organic loan growth, credit and enterprise governance, technology and infrastructure investment, talent development and evaluation of aligned acquisitions.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal quantitative earnings or revenue guidance. Management prioritizes organic loan growth, market expansion and selective acquisitions, while emphasizing disciplined credit risk management and strategic investment.
- COVID-19 remains a risk to borrower performance, particularly in hotel, healthcare and commercial and industrial portfolios. Only $28.8 million of commercial loans and no consumer loans remained under payment deferral at year-end.
- The company originated $771.5 million of PPP loans during 2020 and 2021; $88.3 million remained outstanding at December 31, 2021 and was fully SBA-guaranteed.
- The allowance for credit losses depends on forecasts, collateral values, portfolio concentrations and other judgmental assumptions. Management stated that a severely adverse stress scenario would have increased the ACL by approximately 80%.
- Interest-rate risk is material. A 100-basis-point increase was estimated to increase pretax net interest income by 7.0% over 12 months and 9.9% over 13 to 24 months; a 100-basis-point decrease was estimated to reduce it by 4.6% and 8.4%, respectively.
- Key operational risks include cybersecurity, fraud, technology failures, third-party service providers, regulatory compliance and reputational damage. The company previously recognized a $58.7 million pretax loss from a 2020 check-kiting fraud and continues to pursue recovery sources.
- LIBOR transition remains relevant because certain loans, derivatives and borrowings reference LIBOR. The company has established a transition committee and is revising fallback language.
- Dividend payments remain subject to capital, earnings, regulatory and legal constraints. The board approved a quarterly dividend of $0.29 per share in January 2022. The $50 million repurchase authorization had $37.4 million remaining at year-end, but no shares were repurchased during 2021.
- The company reported no material pending legal proceedings. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Most Important Facts for Investors to Verify
- Whether commercial real estate, hotel, healthcare and commercial and industrial credit quality continues to improve and whether charge-offs remain below the 2020 levels.
- Whether loan growth excluding PPP balances accelerates without materially increasing the ACL or nonperforming assets.
- How rising interest rates affect net interest margin, deposit pricing, securities values and accumulated other comprehensive income.
- Whether the elevated cash and deposit balances persist after PPP forgiveness and normalization of customer liquidity preferences.
- Progress in the CEO transition, organic growth initiatives, technology investments and any acquisition activity.
- Execution of LIBOR replacement, cybersecurity controls, fraud-prevention enhancements and third-party technology oversight.
- The sustainability of the dividend and any future share repurchases in light of earnings, capital ratios and regulatory requirements.