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| 8-K - 8-K - S&T BANCORP INC | form8-k3q18investxpres.htm |
Third Quarter 2018 MEMBER FDIC
Forward Looking Statement and Risk Factors This presentation 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”, “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. Non-GAAP Financial Measures In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), S&T management uses and this presentation contains or references certain non-GAAP financial measures, such as net interest income on a fully taxable equivalent basis. S&T believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which 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. The non-GAAP financial measures contained therein should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K as well as the unaudited financial statements and analyses as presented in the respective Quarterly Reports on Forms 10-Q for S&T Bancorp, Inc. and subsidiaries. 1
Corporate Profile Corporate Profile • Headquartered in Indiana, PA • $7.1 billion in assets (as of 09.30.18) • $1.5 billion market cap (as of 09.30.18) • Locations in 5 regional markets • Stock symbol: STBA 2
STBA Investment Thesis STBA Investment Thesis The Right Size • Above peer performance • Big enough to: • Demonstrated expense discipline and • Provide full complement of products efficiency and services • Organic growth • Access technology • Strategic and effective mergers and • Access capital markets expansion • Attract talent • Stable regional markets with long-term • Expand - mergers and acquisitions/de oil and gas benefit novo • Sound asset quality • Small enough to: • Stay close to our customers • Understand our markets • Be responsive 3
Performance Return on Average Assets Return on Average Equity 1.8% 1.6% 1.50% 15.0% 1.4% 1.22% 1.22%(2) 12.5% 11.63% 1.13% (2) 1.2% 1.08% 9.71% 9.90% (1) 10.0% 8.94% 8.67% 1.0% Peer Peer(1) 1.03 7.5% 0.8% 8.37 0.6% 5.0% 0.4% 2.5% 0.2% 0.0% 0.0% 2014 2015 2016 2017 YTD 3Q18 (3) 2014 2015 2016 2017 YTD 3Q18 (3) Return on Average Tangible Equity 20.0% 17.25% 15.08%(2) 15.0% 14.02% 14.39% 13.71% Peer(1) 10.0% 12.77 5.0% 0.0% (3) 2014 2015 2016 2017 YTD 3Q18 (1) BHCPR Peer Group 2: Bank Holding Companies with $3-10 Billion of Assets through 2Q18 (2)This is a non-GAAP number that adjusts for the effects of a one-time, non-cash re-measurement of $13.4 million of our deferred tax asset in 2017. Refer to appendix for reconciliation of non-GAAP financial measures. 4 (3)Annualized
Expenses Noninterest Expense / Average Assets Efficiency Ratio(2) 3.5% 70% 3.0% 2.46% Peer(1) 2.5% 2.30% 58.67% Peer(1) 2.17% 2.10% 2.08% 60% 55.86% 2.0% 54.06% 51.77% 1.5% 50.59% 50% 1.0% 0.5% 0.0% 40% 2014 2015 2016 2017 YTD 3Q18 2014 2015 2016 2017 YTD 3Q18 (1) BHCPR Peer Group 2: Bank Holding Companies with $3-10 Billion of Assets through 2Q18 (2)Refer to appendix for reconciliation of Non-GAAP financial measures 5
Mergers and Expansion Integrity Bank North Shore Pittsburgh Mainline National Bank Gateway Bank acquired acquired LPO opened - acquired - March 9, 2012 August 13, 2012 March 4, 2015 November 16, 2016 Northeast Ohio Central Ohio LPO Western NY LPO S&T Bank branch Loan Production Office opened – January 21, 2014 opened – opens in Akron, OH opened – August 27, 2012 March 23, 2015 December 21, 2015 Total Assets $7,060 $7,105 $7,000 $6,943 $6,318 866 $6,000 ) s n o i l l i $4,965 7,060 7,105 M $5,000 6,943 ( $ n i $4,527 $4,533 126 242 5,452 $4,000 4,965 4,533 4,159 $3,000 2012 2013 2014 2015 2016 2017 3Q18 S&TBank Mainline Bank Gateway Bank Integrity Bank 6
Markets Loan Growth by Market 2012 S&T Operates in 5 Regional Markets Western NY MSAs Locations Deposits(2) Loans(2) Pittsburgh Southwestern PA(1) Altoona 50 $3,864 $2,863 Northeast OH Johnstown Southwestern Central PA PA Lancaster Central OH Central PA Harrisburg 7 665 828 York Western NY Western NY Other PA 118 388 Total PA 4,647 4,079 Northeast OH Southwester Northeast OH Southwestern n PA Central PA Akron PA Northeast OH 1 40 348 Central PA Cleveland 2018 Central OH Central OH Columbus 1 33 322 Other OH 19 192 Total OH 92 862 Western NY Rochester Western NY 1 11 385 Buffalo Other NY 12 145 Total NY 23 530 Northeast OH Southwestern PA Central PA Total Other States 705 341 Central OH Total $5,467 $5,812 (1) Includes Pittsburgh, Altoona & Johnstown MSAs and Indiana, Clearfield & Jefferson Counties (2) Based on customer residence Dollars in millions as of September 30, 2018 7
Asset Quality Nonperforming Loans / Total Loans Net Charge Offs / Average Loans 1.00% 0.60% 0.76% 0.50% 0.70% 0.75% 0.40% 0.30% 0.25% Peer(1) 0.22% 0.50% 0.42% 0.18% 0.19% 0.36% 0.20% 0.32% 0.10% 0.25% 0.00% Peer(1) 0.00% 0.00% -0.10% (2) 2014 2015 2016 2017 3Q18 2014 2015 2016 2017 YTD 3Q18 (1) BHCPR Peer Group 2: Bank Holding Companies with $3-10 Billion of Assets through 2Q18 (2)Annualized 8
Asset Quality Loan Mix As of 09.30.18 Amount % of Total CRE $2,827 49% C&I 1,451 25% Consumer 1,246 21% Construction 284 5% Total Portfolio Loans $5,808 100% Dollars in Millions 9
Rate Sensitivity Net Interest Margin Betas As of 09.30.18 3Q18 vs Balance 3Q16 3Q18 3Q16 Beta 3Q18(2) Fed Funds 0.50% 2.01% 1.51% Net Interest Margin - FTE(1) 3.46% 3.67% 0.21% 14% Total Interest Earning Assets 3.87% 4.55% 0.68% 45% $6.5 Total Costing Liabilities 0.56% 1.23% 0.67% 45% 4.6 Securities - FTE 2.46% 2.78% 0.32% 21% 0.7 Loans - FTE 4.08% 4.79% 0.71% 47% 5.7 Deposits (excludes DDA) 0.52% 1.07% 0.55% 36% 4.0 Borrowings 0.87% 2.35% 1.48% 98% 0.5 Total Deposits (includes DDA) 0.39% 0.79% 0.40% 26% 5.5 Core Deposits (excludes CDs) 0.16% 0.46% 0.30% 20% 3.9 (1) Refer to appendix for reconciliation of Non-GAAP financial measures appendix (2) Dollars in billions 10
Senior Management Senior Management Name Title Years in Banking Years with S&T Todd D. Brice President & CEO 33 33 Mark Kochvar Chief Financial Officer 32 26 David G. Antolik Chief Lending Officer 30 28 Ernest J. Draganza Chief Risk Officer 31 26 Patrick J. Haberfield Chief Credit Officer 31 8 David P. Ruddock Chief Operating Officer 33 33 Thomas J. Sposito, II Chief Corporate Develop Officer 33 6 Rebecca A. Stapleton Chief Banking Officer 30 30 11
Valuation Stock Performance Total Annualized Shareholder Return Includes reinvested dividends (Data as of 09.30.18) 1 YR 3 YR 5 YR 10 YR STBA 12.06% 12.70% 15.25% 4.61% S&P 600 Bank 7.23% 15.60% 14.75% 7.00% NASDAQ Bank 5.30% 15.74% 13.97% 7.54% S&P 500 17.95% 17.32% 13.95% 11.96% Source: Bloomberg Institutional Ownership 59.77% Insider Ownership 2.06% Employee 401K 1.47% Source: NASDAQ and internal data 12
Performance Performance Summary YTD 3Q18 2017 Excludes 2016 2015 2014 DTA(2) Net Income (in $ thousands) $78,480 $72,968 $86,401 $71,392 $67,081 $57,910 Diluted Earnings per Share $2.24 $2.09 $2.47 $2.05 $1.98 $1.95 Dividends Declared per Share $0.72 $0.82 $0.77 $0.73 $0.68 Total Assets (in $ millions) $7,105 $7,060 $6,943 $6,318 $4,965 Total Loans (in $ millions) $5,812 $5,766 $5,615 $5,063 $3,872 Total Deposits (in $ millions) $5,467 $5,428 $5,272 $4,877 $3,909 Return on Average Assets (annualized YTD) 1.50% 1.03% 1.22% 1.08% 1.13% 1.22% Return on Average Equity (annualized YTD) 11.63% 8.37% 9.90% 8.67% 8.94% 9.71% Return on Tangible Equity(1) (annualized YTD) 17.25% 12.77% 15.08% 13.71% 14.39% 14.02% Net Interest Margin (FTE)(1) 3.63% 3.56% 3.47% 3.56% 3.50% Nonperforming Assets/Loans+OREO 0.41% 0.42% 0.77% 0.71% 0.33% Allowance for Loan Losses/Total Portfolio Loans 1.04% 0.98% 0.94% 0.96% 1.24% Net Loan Charge-offs/Average Loans (annualized YTD) 0.19% 0.18% 0.25% 0.22% 0.00% Risk Based Capital-Total 13.27% 12.55% 11.86% 11.60% 14.27% Tangible Common Equity/Tangible Assets(1) 9.25% 8.72% 8.23% 8.24% 9.00% (1) Refer to appendix for reconciliation of Non-GAAP financial measures (2)These are non-GAAP numbers that adjust for the effects of a one-time, non-cash re-measurement of $13.4 million of our deferred tax asset in 2017. Refer to appendix for reconciliation of non-GAAP financial measures. 13
Financial Data Income Statement Balance Sheet Excludes 3Q18 2017 2016 2015 2014 YTD 3Q18 2017 DTA(1) 2016 2015 2014 Securities $682,535 $698,291 $693,487 $660,963 $640,273 Net Interest Income $174,596 $225,733 $203,259 $187,551 $148,042 Interest-bearing Balances 132,650 61,965 87,201 41,639 57,048 Noninterest Income 38,086 55,462 54,635 51,033 46,338 Loans, Net 5,751,458 5,709,544 5,562,437 5,014,786 3,823,805 Total Revenue 212,682 281,195 257,894 238,584 194,380 Other 538,720 590,455 599,928 600,966 443,560 Noninterest Expense 109,030 147,907 143,232 136,717 117,240 Total Assets $7,105,363 $7,060,255 $6,943,053 $6,318,354 $4,964,686 Provision for Loan Losses 12,279 13,883 17,965 10,388 1,715 Deposits $5,467,509 $5,427,891 $5,272,377 $4,876,611 $3,908,842 Net Income Before Taxes 91,373 119,405 96,697 91,479 75,425 Borrowings 671,253 683,081 771,164 580,748 385,666 Taxes 12,893 46,437 $33,004 25,305 24,398 17,515 Other Liabilities 46,820 65,252 57,556 68,758 61,789 Net Income $78,480 $72,968 $86,401 $71,392 $67,081 $57,910 Equity 919,781 884,031 841,956 792,237 608,389 Diluted Earnings per Share $2.24 $2.09 $2.47 $2.05 $1.98 $1.95 Total Liabilities & Equity $7,105,363 $7,060,255 $6,943,053 $6,318,354 $4,964,686 Dollars in thousands, except per share data (1)These are non-GAAP numbers that adjust for the effects of a one-time, non-cash re-measurement of $13.4 million of our deferred tax asset in 2017. Refer to appendix for reconciliation of non-GAAP financial measures. 14
Financial Data Net Interest Margin Loan Portfolio 3Q18 2017 2016 2015 2014 Dollars in thousands 3Q18 2017 2016 2015 2014 Commercial Securities - FTE 2.78% 2.48% 2.41% 2.48% 2.58% Commercial Real Estate $2,826,372 $2,685,994 $2,498,476 $2,166,603 $1,682,236 Loans - FTE 4.79% 4.32% 4.08% 4.09% 4.06% Commercial & Industrial 1,451,371 1,433,266 1,401,035 1,256,830 994,138 Construction 283,783 384,334 455,884 413,444 216,148 Total Interest-earning Assets - FTE 4.55% 4.09% 3.87% 3.86% 3.78% Total Commercial 4,561,526 4,503,594 4,355,395 3,836,877 2,892,522 Consumer Deposits 1.07% 0.62% 0.51% 0.37% 0.36% Residential Mortgage 699,867 698,774 701,982 639,372 489,586 Home Equity 472,451 487,326 482,284 470,845 418,563 Borrowings 2.35% 1.27% 0.86% 0.71% 0.91% Installment and Other Consumer 67,542 67,204 65,852 73,939 65,567 Total Costing Liabilities 1.23% 0.72% 0.55% 0.40% 0.41% Construction 6,421 4,551 5,906 6,579 2,508 Total Consumer 1,246,281 1,257,855 1,256,024 1,190,735 976,224 Total Portfolio Loans 5,807,807 5,761,449 5,611,419 5,027,612 3,868,746 Net Interest Margin – FTE(1) 3.63% 3.56% 3.47% 3.56% 3.50% Total Loans Held for Sale 4,207 4,485 3,793 35,321 2,970 Purchase Accounting NIM – FTE(1) 3.61% 3.53% 3.41% 3.44% 3.49% Total Loans $5,812,014 $5,765,934 $5,615,212 $5,062,933 $3,871,716 Asset Quality Capital Dollars in thousands 3Q18 2017 2016 2015 2014 3Q18 2017 2016 2015 2014 Total Nonperforming Loans $20,739 $23,938 $42,635 $35,382 $12,457 Leverage 10.13% 9.17% 8.98% 8.96% 9.80% Nonperforming Loans/ Total Loans 0.36% 0.42% 0.76% 0.70% 0.32% Common Tier 1 – Risk- Nonperforming Based Capital 11.42% 10.71% 10.04% 9.77% 11.81% Assets/Total Loans + OREO 0.41% 0.42% 0.77% 0.71% 0.33% Net Charge-offs Tier 1 – Risk-Based Capital 11.76% 11.06% 10.39% 10.15% 12.34% (Recoveries)(annualized YTD)/Average Loans 0.19% 0.18% 0.25% 0.22% 0.00% Allowance for Loan Total – Risk-Based Losses/Total Portfolio Capital 13.27% 12.55% 11.86% 11.60% 14.27% Loans 1.04% 0.98% 0.94% 0.96% 1.24% Allowance for Loan Tangible Common Losses/Nonperforming Equity/Tangible Assets Loans 292% 236% 124% 136% 385% (1) 9.25% 8.72% 8.23% 8.24% 9.00% (1) Refer to appendix for reconciliation of Non-GAAP financial measures 15
Appendix APPENDIX – Non-GAAP Measures Tangible shareholders' equity/tangible assets (non-GAAP) Efficiency ratio (YTD)(non-GAAP) YTD 3Q18 2017 2016 2015 2014 Efficiency ratio (YTD)(non-GAAP) YTD 3Q18 2017 2016 2015 2014 Total Shareholders’ Equity (GAAP basis) $919,781 $884,031 $841,956 $792,237 $608,389 Noninterest expense $109,030 $147,907 $143,232 $136,717 $117,240 Less: goodwill and other intangible assets (290,171) (295,347) (296,580) (298,289) (178,451) Net interest income 174,596 225,733 203,259 187,551 148,042 Tax effect of other intangible assets 572 1,287 1,719 2,284 921 Plus: taxable equivalent adjustment 2,830 7,493 7,043 6,123 5,461 Tangible shareholders' equity (non-GAAP) 630,182 589,971 547,095 496,232 430,859 Net interest income (FTE) (non-GAAP) 177,426 233,226 210,302 193,674 153,503 Total assets (GAAP basis) 7,105,363 7,060,255 6,943,053 6,318,354 4,964,686 Noninterest income 38,086 55,462 54,635 51,033 46,338 Less: goodwill and other intangible assets (290,171) (295,347) (296,580) (298,289) (178,451) Less: securities (gains) losses, net — (3,000) — 34 (41) Tax effect of other intangible assets 572 1,287 1,719 2,284 921 Net interest income (FTE) (non-GAAP) plus noninterest income $215,512 $285,688 $264,937 $244,741 $199,800 Tangible assets (non-GAAP) $6,815,764 $6,766,195 $6,648,192 $6,022,349 $4,787,156 Efficiency ratio (YTD)(non-GAAP) 50.59% 51.77% 54.06% 55.86% 58.67% Tangible shareholders' equity/tangible assets (non-GAAP) 9.25% 8.72% 8.23% 8.24% 9.00% Return on average tangible shareholders' equity (non-GAAP)(annualized YTD) Return on Average Equity Return on Tangible Shareholders' Equity YTD 3Q18 2017 2016 2015 2014 2017 2017 Net Income (annualized) $104,927 $72,968 $71,392 $67,081 $57,910 Net Income $72,968 Net Income $72,968 Plus: amortization of intangibles (annualized) 878 1,233 1,615 1,818 1,129 Plus: DTA re-measurement 13,433 Plus: DTA re-measurement 13,433 Adjusted net income (non-GAAP) 86,401 Adjusted net income (non-GAAP) 86,401 Tax effect of amortization of intangibles (annualized) (184) (432) (565) (636) (395) Net income before amortization of intangibles (annualized) 105,621 73,769 72,442 68,263 58,644 Average assets 872,130 Plus: amortization of intangibles 1,233 Total average shareholders’ equity (GAAP Basis) 902,146 872,130 823,607 750,069 596,155 Plus: DTA re-measurement 589 Tax effect of amortization of intangibles (432) Less: average goodwill and other intangible assets (290,493) (295,937) (297,377) (278,130) (178,990) Adjusted net income before amortization of Average assets (non-GAAP) 872,719 intangibles 87,202 Tax effect of other intangible assets 636 1,493 1,992 2,283 1,109 Return on average equity (non-GAAP) 9.90% Average total shareholders' equity 872,130 Tangible average shareholders' equity (non-GAAP) $612,290 $577,686 $528,222 $474,222 $418,274 Plus: DTA re-measurement 589 Return on average tangible shareholders' equity (non-GAAP) 17.25% 12.77% 13.71% 14.39% 14.02% Less: average goodwill and other intangible Net Interest Margin Rate (FTE) (Non-GAAP) assets (295,937) YTD 3Q18 2017 2016 2015 2014 Return on Average Assets Tax effect of average goodwill and other intangible assets 1,493 Total interest income $213,237 $260,642 $227,774 $203,548 $160,523 2017 Average tangible equity (non-GAAP) $578,275 Less: interest expense (38,641) (34,909) (24,515) (15,997) (12,481) Net Income $72,968 Return on average tangible equity (non-GAAP) 15.08% Net interest income per consolidated statements of net income 174,596 225,733 203,259 187,551 148,042 Plus: DTA re-measurement 13,433 Plus: taxable equivalent adjustment 2,830 7,493 7,043 6,123 5,461 Adjusted net income (non-GAAP) 86,401 Diluted Earnings Per Share Net interest income (FTE) (non-GAAP) 177,426 233,226 210,302 193,674 153,503 Diluted Earnings Per Share Purchase accounting adjustment (1,072) (1,839) (2,952) (6,202) (109) Average assets $7,060,232 Net Income $72,968 Purchase accounting net interest income (FTE) (non-GAAP) $176,354 $231,387 $207,350 $187,472 $153,394 Plus: DTA re-measurement 589 Plus: DTA re-measurement 13,433 Average interest earning assets $6,525,278 $6,549,821 $6,067,151 $5,432,862 $4,386,799 Average assets (non-GAAP) 7,060,821 Adjusted net income (non-GAAP) 86,401 Net Interest Margin 3.58% 3.45% 3.35% 3.45% 3.37% Return on average assets (non-GAAP) 1.22% Average shares outstanding - diluted 34,955 Adjustment to FTE Basis 0.05% 0.11% 0.12% 0.11% 0.13% Diluted earnings per share (non-GAAP) $2.47 Net Interest Margin (FTE) (non-GAAP) 3.63% 3.56% 3.47% 3.56% 3.50% Purchase accounting adjustment -0.02% -0.03% -0.06% -0.12% -0.01% Purchase accounting NIM – FTE (non-GAAP) 3.61% 3.53% 3.41% 3.44% 3.49% 16
Third Quarter 2018 MEMBER FDIC