S&T Bancorp, Inc. Announces Fourth Quarter and Full Year 2017 Results

Fourth Quarter of 2017 Results

Net Interest Income

Net interest income increased $0.3 million to $57.8 million compared to $57.5 million in the third quarter of 2017. Net interest margin on a fully taxable equivalent basis (FTE) (non-GAAP) declined one basis point to 3.58% compared to 3.59% in the prior quarter.  The increase in net interest income is due to an increase in average loans of $49.6 million and higher short-term rates.

Asset Quality

Asset quality trends continued to be favorable during the fourth quarter of 2017. Total nonperforming loans decreased 19% to $23.9 million, or 0.42% of total loans, at December 31, 2017 compared to $29.5 million, or 0.50% of total loans, at September 30, 2017. Net charge-offs were $1.3 million, or 0.09% of average loans on an annualized basis in the fourth quarter of 2017 compared to net charge-offs of $1.5 million, or 0.10% of average loans on an annualized basis, in the third quarter of 2017.  As a result of improving asset quality, the provision for loan losses decreased $1.9 million to $1.0 million in the fourth quarter of 2017 compared to $2.9 million in the third quarter of 2017. The allowance for loan losses was $56.4 million, or 0.98% of total portfolio loans, at December 31, 2017 compared to $56.7 million, or 0.97% of total portfolio loans, at September 30, 2017.

Noninterest Income and Expense

Noninterest income decreased $0.9 million in the fourth quarter of 2017 to $12.7 million compared to $13.6 million in the third quarter of 2017.  Securities were sold resulting in a $1.0 million loss during the fourth quarter of 2017. Bank owned life insurance decreased $0.7 million due to a claim in the third quarter of 2017. Offsetting these decreases was an increase in other income from a $1.0 million gain on the sale of a branch during the fourth quarter of 2017.

Noninterest expense increased $1.4 million in the fourth quarter of 2017 to $37.9 million from $36.5 million in the third quarter of 2017.  Professional services and legal expenses increased $0.4 million mainly related to selling majority ownership of our insurance business that closed on January 1, 2018.  Marketing expense increased $0.4 million due to normal timing of marketing campaigns. Other expense increased $0.8 million primarily due to higher loan related costs.

Financial Condition

Total assets were $7.1 billion at December 31, 2017 compared to $7.2 billion at September 30, 2017. During the fourth quarter of 2017, $41.1 million of loans and $37.8 million of deposits were sold related to a branch sale. Total portfolio loans decreased $59.3 million compared to the third quarter of 2017 primarily due to higher loan payoffs. S&T's risk-based capital ratios were relatively unchanged compared to the third quarter of 2017. All capital ratios remain significantly above the well-capitalized thresholds of federal bank regulatory agencies.

Full Year 2017 Results

Full year 2017 net income increased to $73.0 million and diluted earnings per share was $2.09. Excluding the net DTA re-measurement of $13.4 million, or $0.38 per diluted share, net income increased 21% to $86.4 million (non-GAAP) and diluted earnings per share was $2.47 (non-GAAP). Net interest income increased $22.5 million, or 11%, in 2017 due to average loan growth of $438 million, or 8.2%, and higher short-term rates. Net interest margin (FTE) (non-GAAP) increased to 3.56% compared to 3.47% for 2016. Asset quality improved throughout the year resulting in a $4.1 million decline in the provision for loan losses to $13.9 million. Nonperforming loans decreased $18.7 million, or 44%, and net loan charge-offs to average loans decreased to 0.18% compared to 0.25% in 2016.  Expenses were well controlled during 2017 with an efficiency ratio (non-GAAP) of 51.77% compared to 54.06% for 2016. To view an infographic featuring 2017 highlights, click here.

Dividend

The Board of Directors of S&T declared a $0.22 per share cash dividend at its regular meeting held January 22, 2018. This is an increase of 10% compared to a common stock dividend of $0.20 per share declared in the same period in the prior year. The dividend is payable February 22, 2018 to shareholders of record on February 8, 2018. Dividends declared in 2017 increased $0.05, or 6.5%, to $0.82 compared to $0.77 for 2016.

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 2017 earnings conference call live over the Internet at 1:00 p.m. ET on Thursday, January 25, 2018. To access the webcast, go to S&T's webpage at www.stbancorp.com and click on "Events & Presentations." Select "4th Quarter 2017 Conference Call" and follow the instructions.

About S&T Bancorp, Inc.

S&T Bancorp, Inc. is a $7.1 billion bank holding company that is headquartered in Indiana, Pa. and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank, was established in 1902, and operates locations in Pennsylvania, Ohio and New York. For more information visit www.stbancorp.com or www.stbank.com.

This information contains certain 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", "believe", "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; cyber-security concerns; rapid technological developments and changes; 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; regulatory supervision and oversight; 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; general economic or business conditions; 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; 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 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
	2017			2017			2016
	Fourth			Third			Fourth
(dollars in thousands, except per share data)	Quarter			Quarter			Quarter
INTEREST INCOME
Loans, including fees	$63,407			$62,450			$55,168
Investment securities:
Taxable	3,164			2,988			2,636
Tax-exempt	871			896			894
Dividends	413			389			398
Total Interest Income	67,855			66,723			59,096
INTEREST EXPENSE
Deposits	7,227			6,748			5,289
Borrowings and junior subordinated debt securities	2,800			2,519			1,349
Total Interest Expense	10,027			9,267			6,638
NET INTEREST INCOME	57,828			57,456			52,458
Provision for loan losses	982			2,850			5,586
Net Interest Income After Provision for Loan Losses	56,846			54,606			46,872
NONINTEREST INCOME
Securities (losses) gains, net	(986)			—			—
Service charges on deposit accounts	3,240			3,207			3,240
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