S&T Bancorp, Inc. Announces Fourth Quarter and Full Year 2021 Results

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INDIANA, Pa., Jan. 27, 2022 /PRNewswire/ -- S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Bank, with operations in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio, and Upstate New York, announced its fourth quarter and full year 2021 earnings. Net income was $22.5 million, or $0.57 per diluted share, for the fourth quarter compared to net income of $27.6 million, or $0.70 per diluted share, for the third quarter of 2021, and $24.2 million, or $0.62 per diluted share, for the fourth quarter of 2020.

S&T Bancorp, Inc. (PRNewsfoto/S&T Bancorp, Inc.)
S&T Bancorp, Inc. (PRNewsfoto/S&T Bancorp, Inc.)

Net income was $110.3 million, or $2.81 per diluted share, for the year ended December 31, 2021 compared to net income of $21.0 million, or $0.53 per diluted share, for 2020. Net income for 2020 was impacted by a customer fraud that reduced net income by $46.3 million, or $1.19 per diluted share.

Fourth Quarter of 2021 Highlights:

  • Return on average assets (ROA) was 0.94%, return on average equity (ROE) was 7.39% and return on average tangible equity (ROTE) (non-GAAP) was 10.95%.

  • Pre-tax pre-provision to average assets (PTPP) (non-GAAP) was 1.44%.

  • Net interest income, excluding Paycheck Protection Program (PPP), increased by $0.8 million compared to the third quarter of 2021.

  • Net interest margin (FTE) (non-GAAP) was relatively unchanged at 3.12% compared to 3.14% for the third quarter of 2021.

  • Total portfolio loans, excluding PPP, increased $122.6 million, or 7.2% annualized, compared to September 30, 2021.

  • Broad-based loan growth across nearly all loan categories. Commercial loans, excluding PPP, increased $75.3 million, or 5.7% annualized and consumer loans increased $47.3 million, or 12.1% annualized, compared to September 30, 2021.

  • Total deposit growth of $51.4 million with an improved deposit mix and strong noninterest-bearing demand growth compared to September 30, 2021.

  • The allowance for credit losses to total portfolio loans was 1.41% at December 31, 2021 compared to 1.55% at September 30, 2021.

  • S&T's Board of Directors declared a $0.29 per share dividend compared to $0.28 per share in the same period last year.

Full Year 2021 Highlights:

  • Record net income of $110.3 million.

  • ROA was 1.18%, ROE was 9.30% and ROTE (non-GAAP) was 13.85%.

  • PTPP (non-GAAP) was 1.62%.

  • Total portfolio loans, excluding PPP, increased $150.8 million, or 2.2% compared to December 31, 2020.

  • Total deposit growth of $576.0 million, or 7.8%, with an improved deposit mix and strong noninterest-bearing demand growth compared to December 31, 2020.

  • Strong core customer fee growth, including service charges, card income and wealth management, of $7.2 million, or 18.7% compared to 2020.

  • Full year 2021 dividends declared increased to $1.13 compared to $1.12 in 2020.

"2021 was a year of transition and significant change for S&T." said Chris McComish, chief executive officer of S&T. "I am extremely proud of our entire team, as exemplified by their resilience, teamwork and commitment to the customers and communities that we serve. The S&T team is focused and engaged around our priorities to deliver results and achieve our growth goals. Our fourth quarter was highlighted by broad based loan growth and solid deposit growth giving us great momentum as we enter 2022."

Fourth Quarter of 2021 Results (three months ended December 31, 2021)

Net Interest Income

Net interest income decreased $0.3 million to $68.4 million compared to $68.7 million in the third quarter of 2021. Net interest income, excluding PPP, increased by $0.8 million compared to the prior quarter. Net interest income related to PPP loans decreased $1.1 million to $3.1 million compared to $4.2 million in the prior quarter. Average PPP loans decreased by $92.7 million compared to the third quarter of 2021. Average loans, excluding PPP, increased $128.8 million compared to the prior quarter. Net interest margin on a fully taxable equivalent basis (FTE) (non-GAAP) decreased 2 basis points to 3.12% compared to 3.14% in the prior quarter. The decline in NIM (FTE) (non-GAAP) was primarily due to lower loan and security yields.

Asset Quality

Total nonperforming loans decreased by 40.4% or $45.0 million to $66.3 million, or 0.95% of total loans, at December 31, 2021 compared to $111.3 million, or 1.60% of total loans at September 30, 2021. The decrease in nonperforming loans primarily related to the return to performing status of $22.1 million of hotel loans and due to loan charge-offs.The provision for credit losses increased $3.7 million to $7.1 million for the fourth quarter of 2021 compared to $3.4 million in the third quarter of 2021. Net loan charge-offs were $17.7 million for the fourth quarter of 2021 compared to $3.6 million in the third quarter of 2021. Higher net charge-offs related to two commercial and industrial (C&I) relationships. A $10.3 million charge-off was taken on a relationship that moved to nonperforming during the third quarter of 2021 and had a specific reserve of $9.3 million at September 30, 2021. Additionally, a $5.6 million charge-off was taken related to a nonperforming relationship. The allowance for credit losses was 1.41% of total portfolio loans at December 31, 2021 compared to 1.55% at September 30, 2021.

Noninterest Income and Expense

Noninterest income increased $0.3 million to $16.1 million in the fourth quarter of 2021 compared to $15.8 million in the third quarter of 2021. The increase in noninterest income primarily related to higher commercial loan swap income of $0.4 million and other income of $0.7 million which was related to market value adjustments. Offsetting this increase was a decline in mortgage banking income of $0.6 million due to lower refinance activity compared to the third quarter of 2021. Noninterest expense increased $3.0 million to $50.2 million in the fourth quarter of 2021 compared to $47.2 million in the third quarter of 2021. Salaries and employee benefits increased $1.9 million compared to the prior quarter primarily due to higher incentives. Data processing increased $0.7 million due to increased activity and new products and services and marketing increased $0.5 million due to the timing of marketing initiatives.

Financial Condition

Total assets increased $52.5 million to $9.5 billion at December 31, 2021 compared to $9.4 billion at September 30, 2021. Portfolio loans, excluding PPP, increased $122.6 million, or 7.2% annualized, compared to September 30, 2021. Loan growth was in all categories except commercial construction. Commercial loans, excluding PPP, increased $75.3 million, or 5.7% annualized, which primarily consisted of C&I growth, excluding PPP, of $122.9 million, or 32.1% annualized. Consumer loans increased $47.3 million, or 12.1% annualized, which primarily consisted of home equity growth of $15.8 million, or 11.5% annualized, and residential mortgage growth of $12.0 million, or 5.4% annualized. PPP loans were $88.3 million at December 31, 2021 with $92.7 million of forgiveness during the fourth quarter of 2021. Securities increased $40.7 million compared to September 30, 2021 due to cash being redeployed to higher yielding assets. Total deposits increased $51.4 million mainly due to increases in noninterest-bearing demand of $96.3 million, savings of $35.3 million and money market of $25.3 million offset by a decrease in certificates of deposit of $113.2 million compared to September 30, 2021. S&T continues to maintain a strong capital position with all capital ratios above the well-capitalized thresholds of federal bank regulatory agencies.

Full Year 2021 Results (twelve months ended December 31, 2021)

Full year net income was a record $110.3 million, or $2.81 per diluted share, for the year ended December 31, 2021 compared to net income of $21.0 million, or $0.53 per diluted share, for 2020. Net income for 2020 was impacted by a customer fraud that reduced net income by $46.3 million, or $1.19 per diluted share.

Net interest income decreased $3.3 million compared to 2020 primarily due to the impact of a full year in a low interest rate environment. Net interest income was further impacted by the effects of the pandemic on loan growth throughout 2021 which resulted in a decrease in average loan balances of $325.8 million. Net interest margin (FTE) (non-GAAP) decreased 16 basis points to 3.22% compared to 3.38% for 2020.

Noninterest income increased $4.9 million compared to the prior year. Wealth management income increased $2.9 million due to customer growth and improved market conditions. Debit and credit card fees increased $2.9 million and service charges on deposit accounts increased $1.4 million due to increased customer activity. These were offset by lower commercial loan swap income of $3.6 million and mortgage banking income of $1.2 million. Noninterest expense increased $2.2 million compared to 2020. Salaries and employee benefits increased $10.1 million primarily due to higher payroll incentives. Data processing and information technology increased $1.2 million due to new products and services in 2021. These higher expenses were offset by decreases in marketing of $1.4 million and merger related expenses of $2.3 million. The efficiency ratio (non-GAAP) for 2021 was 55.05% compared to 53.86% for 2020.

The provision for credit losses decreased $115.2 million to $16.2 million for 2021 compared to $131.4 million for 2020. Excluding the customer fraud loss of $58.7 million, the provision was $72.7 million for 2020. The provision for credit losses decreased significantly in 2021 due to lower net charge-offs and an improved outlook for the economy and our loan portfolio. Net loan charge-offs were $34.5 million for 2021 compared to $103.4 million for 2020. Excluding the customer fraud, net charge-offs were $44.7 million for 2020. Total nonperforming loans decreased $80.5 million to $66.3 million, or 0.95% of total loans, at December 31, 2021 compared to $146.8 million, or 2.03% of total loans at December 31, 2020. The allowance for credit losses was 1.41% of total portfolio loans as of December 31, 2021 compared to 1.63% at December 31, 2020.

Dividend

S&T's Board of Directors approved a quarterly cash dividend of $0.29 per share on January 24, 2022. This dividend compares to $0.28 per share dividend declared in the same period in the prior year. The dividend is payable February 24, 2022 to shareholders of record on February 10, 2022. Dividends declared in 2021 increased $0.01 to $1.13 compared to $1.12 for 2020.

Non-GAAP Financial Measures

This release presents certain non-GAAP financial measures. For a reconciliation to the most directly comparable GAAP measures, see "Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures" in the accompanying tables.

Conference Call

S&T will host its fourth quarter 2021 earnings conference call live over the Internet at 1:00 p.m. ET on Thursday, January 27, 2022. To access the webcast, go to S&T's webpage at www.stbancorp.com and click on "Events & Presentations." Select "4th Quarter 2021 Earnings Conference Call" and follow the instructions. After the live presentation, the webcast will be archived on this website for at least 90 days. A replay of the call will also be available until February 3, 2022, by dialing 1.877.481.4010; the Conference ID is 44007.

About S&T Bancorp, Inc.

S&T Bancorp, Inc. is a $9.5 billion bank holding company that is headquartered in Indiana, Pennsylvania and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank was established in 1902 and operates in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio, and Upstate New York. For more information visit stbancorp.com or stbank.com. Follow us on Facebook, Instagram, and LinkedIn.

This information contains or incorporates statements that we believe are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting S&T and its future business and operations. Forward-looking statements are typically identified by words or phrases such as "will likely result", "expect", "anticipate", "estimate", "forecast", "project", "intend", " believe", "assume", "strategy", "trend", "plan", "outlook", "outcome", "continue", "remain", "potential", "opportunity", "comfortable", "current", "position", "maintain", "sustain", "seek", "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses; cyber-security concerns; rapid technological developments and changes; operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our reputational risks; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; the transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those requirements; unanticipated changes in our liquidity position; changes in accounting policies, practices, or guidance; legislation affecting the financial services industry as a whole, and S&T, in particular; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions, cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party provider; our ability to attract and retain talented executives and employees; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; the duration and severity of the coronavirus ("COVID-19") pandemic, both in our principal area of operations and nationally, including the ultimate impact of the pandemic on the economy generally and on our operations; our participation in the Paycheck Protection Program; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described in our Annual Report on Form 10-K for the year ended December 31, 2020, including Part I, Item 1A-"Risk Factors" and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited





2021


2021


2020




Fourth

Quarter


Third

Quarter


Fourth

Quarter


(dollars in thousands, except per share data)





INTEREST AND DIVIDEND INCOME








Loans, including fees


$66,373


$66,914


$71,148


Investment securities:








Taxable


4,173


4,176


3,371


Tax-exempt


495


595


851


Dividends


94


84


178


Total Interest and Dividend Income


71,135


71,769


75,548










INTEREST EXPENSE








Deposits


2,186


2,439


4,795


Borrowings and junior subordinated debt securities


511


619


824


Total Interest Expense


2,697


3,058


5,619










NET INTEREST INCOME


68,438


68,711


69,929


Provision for credit losses


7,128


3,388


7,130


Net Interest Income After Provision for Credit Losses


61,310


65,323


62,799










NONINTEREST INCOME








Gain (loss) on sale of securities





Debit and credit card fees


4,467


4,579


3,830


Service charges on deposit accounts


4,001


3,923


3,492


Wealth management


3,314


3,464


2,486


Mortgage banking


1,528


2,162


3,100


Commercial loan swap income


569


184


812


Other


2,225


1,534


1,889


Total Noninterest Income


16,104


15,846


15,609










NONINTEREST EXPENSE








Salaries and employee benefits


27,144


25,228


22,789


Data processing and information technology


4,668


4,001


3,835


Net occupancy


3,624


3,660


4,068


Furniture, equipment and software


2,897


2,745


2,904


Professional services and legal


1,650


1,550


1,503


Other taxes


1,545


1,830


1,806


Marketing


1,346


890


2,113


FDIC insurance


1,044


1,210


1,372


Other


6,271


6,127


8,138


Total Noninterest Expense


50,189


47,241


48,528










Income Before Taxes


27,225


33,928


29,880


Income Tax Expense


4,748


6,330


5,703










Net Income


$22,477


$27,598


$24,177










Per Share Data:








Shares outstanding at end of period


39,351,194


39,367,847


39,298,007


Average diluted shares outstanding


39,082,285


39,062,080


39,021,008


Diluted earnings per share


$0.57


$0.70


$0.62


Dividends declared per share


$0.29


$0.28


$0.28


Dividend yield (annualized)


3.68%


3.80%


4.51%


Dividends paid to net income


50.64%


39.83%


45.40%


Book value


$30.66


$30.52


$29.38


Tangible book value (1)


$21.03


$20.89


$19.71


Market value


$31.52


$29.47


$24.84










Profitability Ratios (annualized)








Return on average assets


0.94%


1.15%


1.05%


Return on average shareholders' equity


7.39%


9.13%


8.35%


Return on average tangible shareholders' equity (2)


10.95%


13.53%


12.71%


Pre-tax pre-provision income/ average assets (3)


1.44%


1.56%


1.61%


Efficiency ratio (FTE) (4)


59.01%


55.50%


56.26%


S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited




For the Twelve Months Ended December 31,


(dollars in thousands, except per share data)


2021


2020


INTEREST AND DIVIDEND INCOME






Loans, including fees


$270,460


$300,960


Investment securities:






Taxable


15,706


14,918


Tax-exempt


2,593


3,497


Dividends


503


1,089


Total Interest and Dividend Income


289,262


320,464








INTEREST EXPENSE






Deposits


10,757


35,986


Borrowings and junior subordinated debt securities


2,393


5,090


Total Interest Expense


13,150


41,076








NET INTEREST INCOME


276,112


279,388


Provision for credit losses


16,215


131,424


Net Interest Income After Provision for Credit Losses


259,897


147,964








NONINTEREST INCOME






Net gain on sale of securities


29


142


Debit and credit card


17,952


15,093


Service charges on deposit accounts


15,040


13,597


Wealth management


12,889


9,957


Mortgage banking


9,734


10,923


Commercial loan swap income


1,146


4,740


Other


7,820


5,267


Total Noninterest Income


64,610


59,719








NONINTEREST EXPENSE






Salaries and employee benefits


100,214


90,115


Data processing and information technology


16,681


15,499


Net occupancy


14,544


14,529


Furniture, equipment and software


10,684


11,050


Other taxes


6,644


6,622


Professional services and legal


6,368


6,394


Marketing


4,553


5,996


FDIC insurance


4,224


5,089


Merger related expenses



2,342


Other


24,927


29,008


Total Noninterest Expense


188,839


186,644








Income Before Taxes


135,668


21,039


Income taxes (benefit) expense


25,325


(1)








Net Income


$110,343


$21,040








Per Share Data:






Average diluted shares outstanding


39,052,961


39,073,219


Diluted earnings per share


$2.81


$0.53


Dividends declared per share


$1.13


$1.12


Dividends paid to net income


40.18%


200.89%

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