Regional banking company S&T Bancorp (NASDAQ:STBA) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 3.3% year on year to $93.75 million. Its non-GAAP profit of $0.87 per share was 16.3% above analysts’ consensus estimates.
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S&T Bancorp (STBA) Q1 CY2025 Highlights:
- Revenue: $93.75 million vs analyst estimates of $95.95 million (3.3% year-on-year decline, 2.3% miss)
- Adjusted EPS: $0.87 vs analyst estimates of $0.75 (16.3% beat)
- Market Capitalization: $1.38 billion
StockStory’s Take
S&T Bancorp’s first quarter was marked by a combination of resilient deposit growth and margin stability, even as revenue declined year over year and missed Wall Street’s expectations. Management attributed performance to a seventh consecutive quarter of customer deposit growth and ongoing improvements in net interest margin, supported by declining funding costs and targeted balance sheet actions. CEO Chris McComish highlighted that “customer deposit growth was over 7% annualized,” while President Dave Antolik pointed to the maturation of the company’s proprietary customer relationship sales process as a meaningful contributor to recent results.
Looking ahead, S&T Bancorp’s guidance is shaped by expectations of continued loan and deposit expansion, as well as the maintenance of stable margins, despite potential headwinds from macroeconomic uncertainty and regulatory changes. Management emphasized the impact of newly hired bankers on future loan growth, with Antolik noting, “Much of the second-half growth is expected to be driven by newly hired bankers as they build their pipelines.” CFO Mark Kochvar added, “We believe that we can maintain a relatively stable margin over the next several quarters even if the Fed gets more aggressive on rate cuts,” underscoring confidence in the company’s risk management strategies and balance sheet positioning.
Key Insights from Management’s Remarks
Management credited disciplined deposit gathering, targeted loan growth in select segments, and active margin management as key drivers of the quarter, while also addressing competitive dynamics and external economic pressures.
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Deposit franchise momentum: S&T Bancorp continued its streak of customer deposit growth, with momentum driven by a proprietary relationship sales process and the use of exception pricing platforms. Most new deposits flowed into money market accounts, reflecting both consumer and municipal activity as well as a shift from CDs and checking balances.
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Targeted loan growth: Commercial real estate and construction loans led the company’s loan portfolio expansion, while consumer loan growth stabilized. Antolik reported that the commercial loan pipeline grew nearly 40% since year-end, although commercial and industrial (C&I) balances saw some softness due to customer hesitancy amid economic uncertainty.
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Net interest margin management: CFO Mark Kochvar highlighted a four-basis-point expansion in net interest margin (NIM) to 3.81% as a result of lower funding costs and favorable asset repricing. Management’s efforts to maintain a neutral interest rate risk profile included utilizing swaps and managing the securities portfolio to provide stability even if the Federal Reserve changes rates.
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Credit risk monitoring: The company continued to closely monitor credit quality, especially among customers with international trade exposure. Enhanced underwriting focused on foreign trade risks, and a specific reserve release contributed to a reduction in overall allowance for credit losses. Criticized and classified loans remained stable quarter over quarter.
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Competitive and regulatory environment: Management noted increased competition in commercial real estate lending from larger regional banks, leading to some pressure on spreads. The team also addressed preparation for potential regulatory changes associated with surpassing the $10 billion asset threshold, emphasizing readiness for additional requirements.
Drivers of Future Performance
Management’s outlook for the remainder of the year centers on organic growth in loans and deposits, stable net interest margins, and ongoing risk management amid a volatile economic landscape.
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Pipeline-driven loan growth: The company expects mid-single-digit loan growth in the near term, accelerating in the second half of the year as newly hired bankers build their client pipelines. Management highlighted that commercial and consumer segments are the primary contributors, but acknowledged that macroeconomic uncertainty could impact actual pull-through rates.
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Margin stability amid rate changes: S&T Bancorp’s balance sheet is positioned to weather potential Federal Reserve rate cuts, with management projecting stable net interest margins supported by repricing opportunities and proactive management of deposit pricing. Kochvar noted that as certain swaps and securities mature, the company can adjust its position to maintain neutrality to interest rate changes.
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Credit and regulatory vigilance: Management identified loan growth and broader economic conditions as primary factors that could impact credit provisions, particularly in portfolios exposed to international trade or fluctuating construction costs. Preparations for additional regulatory oversight upon crossing the $10 billion asset threshold are expected to influence operational priorities in the coming quarters.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will watch (1) whether commercial and consumer loan pipelines convert into sustained balance sheet growth, (2) the company’s ability to maintain stable net interest margins as rate and deposit dynamics shift, and (3) the impact of crossing the $10 billion asset threshold on compliance costs and operational flexibility. Adjustments to hiring and risk management processes may also serve as key indicators of execution quality.
S&T Bancorp currently trades at $36.82, up from $36.18 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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