S&T Bancorp, Inc. Announces First Quarter Results

INDIANA, Pa., April 26, 2011 /PRNewswire/ -- S&T Bancorp, Inc. (NASDAQ: STBA), a full-service financial institution with office locations in 10 Pennsylvania counties, has announced its first quarter earnings.  

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Todd D. Brice, president and chief executive officer of S&T Bancorp, Inc., offered the following highlights:

• First quarter earnings were $4.7 million with diluted earnings per common share of $0.17 compared to $0.31 in the fourth quarter of 2010 and $0.35 in the first quarter of 2010.
• Nonperforming assets increased to 2.67% of total loans plus OREO compared to 2.07% in the fourth quarter of 2010 and down from 2.94% in the first quarter of 2010.
• Net charge-offs were $0.4 million compared to $12.6 million in the fourth quarter of 2010 and $1.0 million in the first quarter of 2010.  

"Asset quality proved to be challenging this quarter with the addition of two large nonperforming relationships resulting in $6.0 million of specific loan loss reserve.  Due to the nature of our commercial loan portfolio, S&T's earnings may fluctuate as we work our way through these challenging economic times.  We remain focused on resolving these loans with the most positive economic results for the Bank," said Brice.  "At the same time, S&T remains well capitalized and solidly positioned to grow as the regional economy continues to recover."

Net Interest Income

Net interest income on a fully taxable equivalent (FTE) basis for the first quarter of 2011 was $35.9 million compared to $37.4 million in the fourth quarter of 2010 and $37.1 million in the first quarter of 2010.  Net interest income has decreased from the fourth quarter due to declines in average loan balances and rate and two fewer days in the first quarter versus the fourth quarter of 2010.  Average balances on loans decreased $36.2 million and the average interest rate on loans decreased to 4.92% from 5.02% in the fourth quarter of 2010.  Net interest margin (FTE) was 3.92% in the first quarter compared to 4.06% in the fourth quarter of 2010 and 4.00% in the first quarter of 2010.  The decrease in net interest margin (FTE) of 14 basis points is primarily a result of loan repricings, maturities and pay downs and higher excess funds held at the Federal Reserve.  Positively impacting net interest margin (FTE) was core deposit repricings at the end of 2010.

Asset Quality

Nonperforming assets increased to $88.5 million or 2.67% of total loans plus other real estate owned ("OREO") compared to $69.7 million or 2.07% in the fourth quarter of 2010 and down from $99.9 million or 2.94% in the first quarter of 2010.  Included in nonperforming assets were troubled debt restructurings (TDRs) of $34.9 million.  The increase in nonperforming assets relates to the aforementioned two large relationships that became impaired during the first quarter.  The first is a $12.1 million CRE relationship in the hospitality sector that has been experiencing declining cash flows.  A specific reserve of $3.1 million has been established.  The second is a $6.7 million C&I relationship for which a $2.9 million specific reserve has been established.  

The provision for loan losses was $10.6 million for the first quarter compared to $7.7 million for the fourth quarter of 2010 and $4.4 million in the first quarter of 2010.  The provision was elevated due to the aforementioned specific reserves of $6.0 million and a $5.4 million increase in the general reserve as a result of an increase in substandard assets. Net charge-offs were $0.4 million for the first quarter compared to $12.6 million in the fourth quarter of 2010 and $1.0 million in the first quarter of 2010.  

The allowance for loan losses at March 31, 2011 was $61.7 million or 1.87% of total loans, as compared to $51.4 million or 1.53% at December 31, 2010 and $63.0 million or 1.85% at March 31, 2010.  The allowance to nonperforming loans was 76% at March 31, 2011, 80% at December 31, 2010 and 65% at March 31, 2010.  Included in the allowance is $8.6 million of specific reserves compared to $3.6 million in the fourth quarter of 2010 and $20.3 million in the first quarter of 2010.

Noninterest Income

Noninterest income was $11.0 million compared to $12.0 million in the fourth quarter of 2010 and $11.2 million in the first quarter of 2010.  The decrease from the prior quarter primarily related to a decrease of $0.6 million in mortgage banking activities as a result of decreased volume in loan sales due to rising interest rates.  Service charges and fees and other fee income were down for the quarter including $0.2 million for NSF fees and $0.2 million of letter of credit fees.  Insurance activities made a positive contribution during the quarter including a $0.3 million increase in income primarily related to annual bonus commissions received.

Noninterest Expense

Noninterest expense for the first quarter was $27.4 million compared to $27.0 million for the fourth quarter of 2010 and $27.9 million for the first quarter of 2010.  The increase primarily relates to higher payroll taxes of $0.8 million due to timing and elevated consulting fees of $0.6 million.  Positively impacting noninterest expense for the quarter was $0.6 million of decreased expenses related to OREO compared to the fourth quarter and a $0.3 million reduction in legal expenses.

Financial Condition

Total assets were $4.1 billion at March 31, 2011, December 31, 2010 and March 31, 2010.  Total loans were $3.3 billion at March 31, 2011 compared to $3.4 billion at December 31, 2010 and March 31, 2010.  Total loans have decreased $59.6 million from the prior quarter including $31.3 million in consumer and $28.3 million in commercial. The decreases primarily relate to higher than expected pay downs during the quarter and soft loan demand within our market.

Total deposits were $3.3 billion at March 31, 2011, December 31, 2010 and March 31, 2010.  Noninterest-bearing demand deposits remain strong at $802.7 million as of March 31, 2011 compared to $765.8 million at December 31, 2010 and $709.4 million at March 31, 2010.  Securities increased $42.4 million to $352.8 compared to $310.4 as of December 31, 2010 and $352.3 million at March 31, 2010.  Security purchases made during the quarter are intended to deploy cash from loan pay downs and to improve asset liquidity.  

S&T's capital ratios continue to improve and exceed the "well capitalized" thresholds of federal bank regulatory agencies with a tier 1 leverage ratio of 11.19%, tier 1 risk-based capital ratio of 13.54% and total risk-based capital ratio of 16.99%.  The increase in capital ratios in the first quarter of 2011 is primarily attributable to a reduction in risk-weighted assets.  S&T's tangible common equity ratio was 7.70% compared to 7.61% for the fourth quarter of 2010 and 7.09% for the first quarter of 2010.  

About S&T Bancorp, Inc.

Headquartered in Indiana, PA, S&T Bancorp, Inc. operates 51 offices within Allegheny, Armstrong, Blair, Butler, Cambria, Clarion, Clearfield, Indiana, Jefferson and Westmoreland counties.  With assets of $4.1 billion, S&T Bancorp, Inc. stock trades on the NASDAQ Global Select Market System under the symbol STBA.

This information may contain forward-looking statements regarding future financial performance which are not historical facts and which involve risks and uncertainties. Actual results and performance could differ materially from those anticipated by these forward-looking statements.  Factors that could cause such a difference include, but are not limited to, general economic conditions, change in interest rates, deposit flows, loan demand, asset quality, including real estate and other collateral values and competition.  In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), S&T management uses and this press release contains or references, certain non-GAAP financial measures, such as net interest income on a fully taxable equivalent basis. S&T believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance and our business and performance trends as they facilitate comparisons with the performance of others in the financial services industry.  Although S&T believes that these non-GAAP financial measures enhance investors' understanding of S&T's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.  A reconciliation of these non-GAAP financial measures is presented in the attached consolidated selected financial data spreadsheet.  This information should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K for S&T Bancorp, Inc. and subsidiaries.