S&T BANCORP INC - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-12508

______________________________________

S&T BANCORP INC.

(Exact name of registrant as specified in its charter)

______________________________________

Pennsylvania

25-1434426

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

800 Philadelphia Street

Indiana

15701

(Address of principal executive offices)

(zip code)

800-325-2265

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $2.50 par value	STBA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $2.50 Par Value - 39,311,317 shares as of April 29, 2022

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

INDEX

S&T BANCORP, INC. AND SUBSIDIARIES


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets	2

	Condensed Consolidated Statements of Comprehensive Income (Loss)	3

	Consolidated Statements of Changes in Shareholders' Equity	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

	Signatures	48

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S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2022			December 31, 2021
(in thousands, except share and per share data)	(Unaudited)			(Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $751,378 and $857,192 at March 31, 2022 and December 31, 2021		$	823,757		$	922,215
Securities, at fair value		1,028,218			910,793
Loans held for sale		1,346			1,522
Portfolio loans, net of unearned income		6,963,911			6,999,990
Allowance for credit losses		(99,915)			(98,576)
Portfolio loans, net		6,863,996			6,901,414
Bank owned life insurance		84,093			83,685
Premises and equipment, net		51,671			52,632
Federal Home Loan Bank and other restricted stock, at cost		9,349			9,519
Goodwill		373,424			373,424
Other intangible assets, net		6,497			6,895
Other assets		189,930			226,430
Total Assets		$	9,432,281		$	9,488,529
LIABILITIES
Deposits:
Noninterest-bearing demand		$	2,740,315		$	2,748,586
Interest-bearing demand		1,070,656			979,133
Money market		1,992,916			2,070,579
Savings		1,117,985			1,110,155
Certificates of deposit		1,038,586			1,088,071

Total Deposits		7,960,458			7,996,524
Securities sold under repurchase agreements		70,112			84,491

Long-term borrowings		22,171			22,430
Junior subordinated debt securities		54,408			54,393

Other liabilities		140,182			124,237
Total Liabilities		8,247,331			8,282,075
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value) Authorized—50,000,000 shares Issued—41,449,444 shares at March 31, 2022 and December 31, 2021 Outstanding—39,351,688 shares at March 31, 2022 and 39,351,194 shares at December 31, 2021		103,623			103,623
Additional paid-in capital		403,841			403,095
Retained earnings		791,345			773,659
Accumulated other comprehensive loss		(47,043)			(7,090)
Treasury stock — 2,097,756 shares at March 31, 2022 and 2,098,250 shares at December 31, 2021, at cost		(66,816)			(66,833)
Total Shareholders’ Equity		1,184,950			1,206,454
Total Liabilities and Shareholders’ Equity		$	9,432,281		$	9,488,529

See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended March 31,
(dollars in thousands, except per share data)		2022	2021
INTEREST AND DIVIDEND INCOME
Loans, including fees			$	64,593	$	70,232
Investment Securities:
Taxable			4,936		3,563
Tax-exempt			482		813
Dividends			98		173
Total Interest and Dividend Income			70,109		74,781
INTEREST EXPENSE
Deposits			1,853		3,481
Borrowings and junior subordinated debt securities			523		641
Total Interest Expense			2,376		4,122
NET INTEREST INCOME			67,733		70,659
Provision for credit losses			(512)		3,137
Net Interest Income After Provision for Credit Losses			68,245		67,522
NONINTEREST INCOME

Debit and credit card			5,063		4,162
Service charges on deposit accounts			3,974		3,474
Wealth management			3,242		2,944
Mortgage banking			1,015		4,310

Other			1,932		2,346
Total Noninterest Income			15,226		17,236
NONINTEREST EXPENSE
Salaries and employee benefits			23,712		23,327
Data processing and information technology			4,435		4,225
Occupancy			3,882		3,827
Furniture, equipment and software			2,777		2,640
Professional services and legal			1,949		1,531
Other taxes			1,537		1,436
Marketing			1,361		1,322
FDIC insurance			937		1,046

Other			6,824		6,226
Total Noninterest Expense			47,414		45,580
Income Before Taxes			36,057		39,178
Income tax expense			6,914		7,276
Net Income			$	29,143	$	31,902
Earnings per share—basic			$	0.74	$	0.81
Earnings per share—diluted			$	0.74	$	0.81
Dividends declared per share			$	0.29	$	0.28
Comprehensive Income (Loss)			$	(10,810)	$	23,992

See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)


	For the Three Months Ended March 31, 2021
(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
Balance at January 1, 2021		$	103,623		$	400,668		$	710,061		$	8,971		$	(68,612)		$	1,154,711
Net income for the three months ended March 31, 2021		—			—			31,902			—			—			31,902
Other comprehensive loss, net of tax		—			—			—			(7,910)			—			(7,910)

Cash dividends declared ($0.28 per share)		—			—			(10,975)			—			—			(10,975)
Forfeitures of restricted stock, net of issuances (30,840 shares, net of issuance of 1,192)		—			—			730			—			(865)			(135)

Recognition of restricted stock compensation expense		—			685			—			—			—			685
Balance at March 31, 2021		$	103,623		$	401,353		$	731,718		$	1,061		$	(69,477)		$	1,168,278
See Notes to Consolidated Financial Statements
	For the Three Months Ended March 31, 2022
(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at January 1, 2022		$	103,623		$	403,095		$	773,659		$	(7,090)		$	(66,833)		$	1,206,454
Net income for the three months ended March 31, 2022		—			—			29,143			—			—			29,143
Other comprehensive loss, net of tax		—			—			—			(39,953)			—			(39,953)

Cash dividends declared ($0.29 per share)		—			—			(11,384)			—			—			(11,384)
Treasury stock issued for restricted stock awards (4,250 shares, net of forfeitures of 3,756 shares)		—			—			(73)			—			17			(56)

Recognition of restricted stock compensation expense		—			746			—			—			—			746
Balance at March 31, 2022		$	103,623		$	403,841		$	791,345		$	(47,043)		$	(66,816)		$	1,184,950
See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
OPERATING ACTIVITIES























Net Cash Provided by Operating Activities		$	86,596	$	90,000
INVESTING ACTIVITIES
Purchases of securities		(211,265)		(89,038)
Proceeds from maturities, prepayments and calls of securities		44,025		34,715
Proceeds from redemption of FHLB stock		5,818		3,988
Purchases of FHLB stock		(5,648)		(3,157)
Net decrease in loans		38,449		33,937
Proceeds from sale of portfolio loans		—		640
Proceeds from sale of other real estate owned		6,285		145
Purchases of premises and equipment		(660)		(811)
Proceeds from the sale of premises and equipment		56		74



Net Cash Used in Investing Activities		(122,940)		(19,507)
FINANCING ACTIVITIES
Net increase in core deposits		13,419		522,528
Net decrease in certificates of deposit		(49,465)		(67,003)
Net (decrease) increase in securities sold under repurchase agreements		(14,379)		2,254
Net decrease in short-term borrowings		—		(75,000)

Repayments on long-term borrowings		(259)		(399)

Treasury shares issued-net		(56)		(135)

Cash dividends paid to common shareholders		(11,374)		(10,975)



Net Cash (Used in) Provided by Financing Activities		(62,114)		371,270
Net (decrease) increase in cash and cash equivalents		(98,458)		441,763
Cash and cash equivalents at beginning of period		922,215		229,666
Cash and Cash Equivalents at End of Period		$	823,757	$	671,429

Supplemental Disclosures
Loans transferred to held for sale		$	—	$	2,798



Cash paid for interest		$	2,507	$	5,368
Cash paid for income taxes, net of refunds		$	75	$	197

Transfers of loans to other real estate owned		$	—	$	77

See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Principles of Consolidation

The interim Consolidated Financial Statements include the accounts of S&T Bancorp, Inc., or S&T, and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments of 20 percent to 50 percent of the outstanding common stock of investees are accounted for using the equity method of accounting.

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements of S&T have been prepared in accordance with generally accepted accounting principles, or GAAP, in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission, or SEC, on February 28, 2022. In the opinion of management, the accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position and the results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period.

Reclassification

Amounts in prior period financial statements and footnotes are reclassified whenever necessary to conform to the current period presentation. Reclassifications had no effect on our results of operations or financial condition.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Accounting Policy for Derivative Instruments and Hedging Activities

During the three months ended March 31, 2022, we entered into four interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing variable rate assets. We have updated our accounting policy for derivative instruments and hedging activities to include hedge accounting.

All derivatives are evaluated at inception to determine whether it is a hedging or non-hedging activity. The accounting for changes in the fair value of derivatives depends on whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. As long as the cash flow hedge continues to qualify for hedge accounting, the entire change in the fair value of the hedging instrument is recorded in Accumulated Other Comprehensive Income (Loss), or AOCI, and recognized in earnings as the hedged transaction affects earnings.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022, for our complete Accounting Policy for Derivative Instruments and Hedging Activities.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 1. BASIS OF PRESENTATION - continued

Recently Adopted Accounting Standards Updates, or ASU or Updated

Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Addendum (Topic 848) which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. We adopted ASU 2020-04 and ASU 2021-01 on January 1, 2022. We are utilizing the LIBOR transition relief as contract modifications are made during the course of the reference rate reform transition period. ASU 2020-04 and ASU 2021-01 did not have a material impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Accounting Policy for Troubled Debt Restructurings and Vintage Disclosure

In March 2022, the FASB issued ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures. The guidance eliminates the “once a TDR, always a TDR” requirement for loan disclosures and requires disclosures about the performance of modified loans to borrowers experiencing financial difficulty in the 12 months following the modification.

The amendments eliminate the recognition and measurement guidance related to TDRs for creditors that have adopted ASC 326 Financial Instruments - Credit Losses. We adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020. Once applying ASC 326, the required accounting and disclosures for a loan modified in a TDR no longer provide decision-useful information. ASC 326 requires the recognition of lifetime expected credit losses when a loan is originated or acquired, so the effect of credit losses that occur in loans modified in TDRs is already included in the allowance for credit losses.

ASU 2022-02 requires a creditor to apply the loan refinancing and restructuring guidance in ASC 310-205 (consistent with the accounting for other loan modifications) to determine whether a modification results in a new loan or a continuation of an existing loan. It also requires enhanced disclosures for modifications in the form of interest rate reductions, principal forgiveness, other-than-insignificant payment delays, or term extensions (or combinations thereof) of loans made to borrowers experiencing financial difficulty. Disclosures are required regardless of whether a modification of a loan to a borrower experiencing financial difficulty results in a new loan. The objective of the disclosures is to provide information about the type and magnitude of modifications and the degree of their success in mitigating potential credit losses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, and interim periods therein. We are evaluating the impact of this ASU, but do not expect it to have a material impact on our consolidated financial statements.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 2. EARNINGS PER SHARE

Diluted earnings per share is calculated using both the two-class and the treasury stock methods with the more dilutive method used to determine earnings per share. The two-class method was used to determine earnings per share for the three months ended March 31, 2022 and 2021. The following table reconciles the numerators and denominators of basic and diluted earnings per share calculations for the periods presented:


	Three Months Ended March 31,
(in thousands, except share and per share data)	2022			2021
Numerator for Earnings per Share—Basic and Diluted:
Net income		$	29,143		$	31,902
Less: Income allocated to participating shares		109			141
Net Income Allocated to Shareholders		$	29,034		$	31,761
Denominator for Earnings per Share - Basic and Diluted:
Weighted Average Shares Outstanding—Basic		39,073,754			39,021,208
Add: Average participating shares outstanding		16,179			—
Denominator for Two-Class Method—Diluted		39,089,933			39,021,208

Earnings per share—basic		$	0.74		$	0.81
Earnings per share—diluted		$	0.74		$	0.81


Restricted stock considered anti-dilutive excluded from potentially dilutive shares		—			165

NOTE 3. FAIR VALUE MEASUREMENTS

We use fair value measurements when recording and disclosing certain financial assets and liabilities. Debt securities, equity securities and derivative financial instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as loans held for sale, individually assessed loans, other real estate owned, or OREO, and other repossessed assets, mortgage servicing rights, or MSRs, and certain other assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. In determining fair value, we use various valuation approaches, including market, income and cost approaches. The fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data that we have obtained from independent sources. Unobservable inputs reflect our estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1: valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.

Level 2: valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data.

Level 3: valuation is derived from other valuation methodologies, including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our policy is to recognize transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued

There have been no changes in our valuation methodologies during the three months ended March 31, 2022. Refer to Note 1 of our Annual Report on Form 10-K for the year ended December 31, 2021 for more information on the valuation methodologies that we use for financial instruments recorded at fair value on a recurring or nonrecurring basis.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at the dates presented:


	March 31, 2022
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities	$	129,994	$	—	$	—	$	129,994
Obligations of U.S. government corporations and agencies	—		58,493		—		58,493
Collateralized mortgage obligations of U.S. government corporations and agencies	—		385,602		—		385,602
Residential mortgage-backed securities of U.S. government corporations and agencies	—		50,446		—		50,446
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		330,811		—		330,811
Corporate obligations	—		500		—		500
Obligations of states and political subdivisions	—		71,234		—		71,234
Total Available-for-sale Debt Securities	129,994		897,086		—		1,027,080
Marketable equity securities	1,060		78		—		1,138
Total Securities	131,054		897,164		—		1,028,218
Securities held in a deferred compensation plan	8,888		—		—		8,888
Derivative financial assets:
Interest rate swaps - commercial loans	—		29,056		—		29,056
Interest rate lock commitments	—		—		185		185
Forward sale contracts - mortgage loans	—		—		192		192
Interest rate swaps - cash flow hedge	—		135		—		135
Total Assets	$	139,942	$	926,355	$	377	$	1,066,674
LIABILITIES
Derivative financial liabilities:
Interest rate swaps - commercial loans	$	—	$	29,092	$	—	$	29,092

Interest rate swaps - cash flow hedge	—		2,600		—		2,600
Total Liabilities	$	—	$	31,692	$	—	$	31,692

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued


	December 31, 2021
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities	$	95,327	$	—	$	—	$	95,327
Obligations of U.S. government corporations and agencies	—		70,348		—		70,348
Collateralized mortgage obligations of U.S. government corporations and agencies	—		270,294		—		270,294
Residential mortgage-backed securities of U.S. government corporations and agencies	—		56,793		—		56,793
Commercial mortgage-backed securities of U.S. government corporations and agencies	—		341,300		—		341,300
Corporate obligations	—		500		—		500
Obligations of states and political subdivisions	—		75,089		—		75,089
Total Available-for-sale Debt Securities	95,327		814,324		—		909,651
Marketable equity securities	1,061		81		—		1,142
Total Securities	96,388		814,405		—		910,793
Securities held in a deferred compensation plan	10,230		—		—		10,230
Derivative financial assets:
Interest rate swaps - commercial loans	—		33,528		—		33,528
Interest rate lock commitments	—		—		401		401
Forward sale contracts - mortgage loans	—		—		4		4

Interest rate swaps - cash flow hedge	—		—		—		—
Total Assets	$	106,618	$	847,933	$	405	$	954,956
LIABILITIES
Derivative financial liabilities:
Interest rate swaps - commercial loans	$	—	$	33,631	$	—	$	33,631



Total Liabilities	$	—	$	33,631	$	—	$	33,631

Assets Recorded at Fair Value on a Nonrecurring Basis

We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our consolidated financial statements. There were no liabilities measured at fair value on a nonrecurring basis at either March 31, 2022 or December 31, 2021.

For Level 3 assets measured at fair value on a nonrecurring basis as of March 31, 2022 and December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:


	March 31, 2022		Valuation Technique	Significant Unobservable Inputs	Range			Weighted Average (1)
(dollars in thousands)
Loans individually evaluated	$	5,919	Collateral method	Appraisal adjustment	0%	-	10.00%	0.96%




Total Assets	$	5,919

(1) Weighted averages for loans individually evaluated were weighted by loan amounts.


	December 31, 2021		Valuation Technique	Significant Unobservable Inputs	Range			Weighted Average (1) (2)
(dollars in thousands)
Loans individually evaluated	$	7,268	Collateral method	Appraisal adjustment	0%	-	20%	4.48%
Other real estate owned	1,011		Collateral method	Appraisal adjustment	2.53%			2.53%



Total Assets	$	8,279
(1) Weighted averages for loans individually evaluated were weighted by loan amounts. (2) Weighted averages for other real estate owned were weighted by OREO balances.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued

The following tables present the carrying values and fair values of our financial instruments at the dates presented:


	Carrying Value(1)		Fair Value Measurements at March 31, 2022
(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	823,757	$	823,757	$	823,757	$	—	$	—
Securities	1,028,218		1,028,218		131,054		897,164		—
Loans held for sale	1,346		1,346		—		—		1,346
Portfolio loans, net	6,863,996		6,671,212		—		—		6,671,212
Collateral receivable	—		—		—		—		—
Securities held in a deferred compensation plan	8,888		8,888		8,888		—		—
Mortgage servicing rights	7,789		9,791		—		—		9,791
Interest rate swaps - commercial loans	29,056		29,056		—		29,056		—
Interest rate swaps - cash flow hedge	135		135		—		135		—
Interest rate lock commitments	185		185		—		—		185
Forward sale contracts	192		192		—		—		192
LIABILITIES
Deposits	$	7,960,458	$	7,947,434	$	6,921,872	$	1,025,562	$	—
Collateral payable	23,501		23,501		23,501		—		—
Securities sold under repurchase agreements	70,112		70,112		70,112		—		—

Long-term borrowings	22,172		21,954		4,249		17,705		—
Junior subordinated debt securities	54,408		54,408		54,408		—		—
Interest rate swaps - commercial loans	29,092		29,092		—		29,092		—
Interest rate swaps - cash flow hedge	2,600		2,600		—		2,600		—

(1) As reported in the Consolidated Balance Sheets


	Carrying Value(1)		Fair Value Measurements at December 31, 2021
(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	922,215	$	922,215	$	922,215	$	—	$	—
Securities	910,793		910,793		96,388		814,405		—
Loans held for sale	1,522		1,522		—		—		1,522
Portfolio loans, net	6,901,414		6,815,468		—		—		6,815,468
Collateral receivable	37,363		37,363		37,363		—		—
Securities held in a deferred compensation plan	10,230		10,230		10,230		—		—
Mortgage servicing rights	7,677		7,677		—		—		7,677
Interest rate swaps	33,528		33,528		—		33,528		—
Interest rate lock commitments	401		401		—		—		401
Forward sale contracts	4		4		—		—		4
LIABILITIES
Deposits	$	7,996,524	$	7,992,942	$	6,908,453	$	1,084,489	$	—

Securities sold under repurchase agreements	84,491		84,491		84,491		—		—
Short-term borrowings	—		—		—		—		—
Long-term borrowings	22,430		22,678		4,300		18,378		—
Junior subordinated debt securities	54,393		54,393		54,393		—		—
Interest rate swaps - commercial loans	33,631		33,631		—		33,631		—

(1) As reported in the Consolidated Balance Sheets

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4. SECURITIES

The following table presents the fair values of our securities portfolio at the dates presented:


(dollars in thousands)	March 31, 2022			December 31, 2021
Available-for-sale debt securities		$	1,027,080		$	909,651
Marketable equity securities		1,138			1,142
Total Securities		$	1,028,218		$	910,793

Available-for-Sale Debt Securities

The following tables present the amortized cost and fair value of available-for-sale debt securities as of the dates presented:


	March 31, 2022												December 31, 2021
(dollars in thousands)	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
U.S. Treasury securities		$	136,695		$	41		$	(6,742)		$	129,994		$	95,954		$	115		$	(742)		$	95,327
Obligations of U.S. government corporations and agencies		58,570			179			(256)			58,493			68,599			1,749			—			70,348
Collateralized mortgage obligations of U.S. government corporations and agencies		404,626			179			(19,203)			385,602			270,696			2,408			(2,810)			270,294
Residential mortgage-backed securities of U.S. government corporations and agencies		54,444			52			(4,050)			50,446			57,029			392			(628)			56,793
Commercial mortgage-backed securities of U.S. government corporations and agencies		340,886			169			(10,244)			330,811			336,918			5,969			(1,587)			341,300
Corporate obligations		500			—			—			500			500			—			—			500
Obligations of states and political subdivisions		70,206			1,028			—			71,234			70,539			4,550			—			75,089
Total Available-for-Sale Debt Securities (1)		$	1,065,927		$	1,648		$	(40,495)		$	1,027,080		$	900,235		$	15,183		$	(5,767)		$	909,651

(1) Excludes interest receivable of $3.5 million at March 31, 2022 and $3.3 million at December 31, 2021. Interest receivable is included in other assets in the Consolidated Balance Sheets.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4. SECURITIES – continued

The following tables present the fair value and the age of gross unrealized losses on available-for-sale debt securities by investment category as of the dates presented:


	March 31, 2022
	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
U.S. Treasury securities	12	$	119,959	$	(6,742)	—	$	—	$	—	12	$	119,959	$	(6,742)
Obligations of U.S. government corporations and agencies	2	15,296		(256)		—	—		—		2	15,296		(256)
Collateralized mortgage obligations of U.S. government corporations and agencies	39	309,426		(15,367)		4	36,986		(3,836)		43	346,412		(19,203)
Residential mortgage-backed securities of U.S. government corporations and agencies	9	8,171		(269)		2	39,357		(3,781)		11	47,528		(4,050)
Commercial mortgage-backed securities of U.S. government corporations and agencies	29	274,993		(10,244)		—	—		—		29	274,993		(10,244)
Corporate bonds	—	—		—		—	—		—		—	—		—
Obligations of states and political subdivisions	—	—		—		—	—		—		—	—		—


Total	91	$	727,845	$	(32,878)	6	$	76,343	$	(7,617)	97	$	804,188	$	(40,495)


	December 31, 2021
	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
U.S. Treasury securities	8	$	85,221	$	(742)	—	$	—	$	—	8	$	85,221	$	(742)
Obligations of U.S. government corporations and agencies	—	—		—		—	—		—		—	—		—
Collateralized mortgage obligations of U.S. government corporations and agencies	12	141,204		(2,436)		1	8,933		(374)		13	150,137		(2,810)
Residential mortgage-backed securities of U.S. government corporations and agencies	3	46,042		(628)		—	—		—		3	46,042		(628)
Commercial mortgage-backed securities of U.S. government corporations and agencies	7	100,032		(1,587)		—	—		—		7	100,032		(1,587)
Corporate bonds	—	—		—		—	—		—		—	—		—
Obligations of states and political subdivisions	—	—		—		—	—		—		—	—		—


Total	30	$	372,499	$	(5,393)	1	$	8,933	$	(374)	31	$	381,432	$	(5,767)

We evaluate securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit losses or other factors. There were 97 debt securities in an unrealized loss position at March 31, 2022 and 31 at December 31, 2021. We do not intend to sell and it is more likely than not that we will not be required to sell the securities in an unrealized loss position before recovery of their amortized cost. The unrealized losses on the debt securities were attributable to changes in interest rates and not related to the credit quality of the issuers. All debt securities were determined to be investment grade and paying principal and interest according to the contractual terms of the security.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4. SECURITIES – continued

The following table presents net unrealized gains and losses, net of tax, on available-for-sale debt securities included in accumulated other comprehensive (loss)/income, for the periods presented:


	March 31, 2022						December 31, 2021
(dollars in thousands)	Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Losses		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains
Total unrealized gains (losses) on available-for-sale debt securities	$	1,648	$	(40,495)	$	(38,847)	$	15,183	$	(5,767)	$	9,416
Income tax (expense) benefit	(354)		8,698		8,344		(3,215)		1,221		(1,994)
Net Unrealized (Losses) Gains, Net of Tax Included in Accumulated Other Comprehensive Income (Loss)	$	1,294	$	(31,797)	$	(30,503)	$	11,968	$	(4,546)	$	7,422

The amortized cost and fair value of available-for-sale debt securities at March 31, 2022 by contractual maturity are included in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2022
(dollars in thousands)	Amortized Cost		Fair Value
Obligations of the U.S. Treasury, U.S. government corporations and agencies, and obligations of states and political subdivisions
Due in one year or less	$	35,616	$	35,824
Due after one year through five years	102,542		101,364
Due after five years through ten years	106,550		101,506
Due after ten years	20,763		21,027
Available-for-Sale Debt Securities With Fixed Maturities	265,471		259,721
Debt Securities without a single maturity date
Collateralized mortgage obligations of U.S. government corporations and agencies	404,626		385,602
Residential mortgage-backed securities of U.S. government corporations and agencies	54,444		50,446
Commercial mortgage-backed securities of U.S. government corporations and agencies	340,886		330,811
Corporate Securities	500		500


Total Available-for-Sale Debt Securities	$	1,065,927	$	1,027,080

Debt securities with carrying values of $441.8 million at March 31, 2022 and $466.9 million at December 31, 2021 were pledged for various regulatory and legal requirements.

Marketable Equity Securities

The following table presents realized and unrealized net gains and losses for our marketable equity securities for the periods presented:


	Three Months Ended March 31,
(dollars in thousands)	2022		2021
Marketable Equity Securities
Net market (losses) gains recognized	$	(5)	$	116
Less: Net gains recognized for equity securities sold	—		—
Unrealized (Losses) Gains on Equity Securities Still Held	$	(5)	$	116

Total unrealized gains and losses on marketable equity securities recognized during the current period are included in other noninterest income on the Condensed Consolidated Statements of Comprehensive Income (Loss).

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE

Loans are presented net of unearned income of $10.1 million at March 31, 2022 and $14.1 million at December 31, 2021 and net of a discount related to purchase accounting fair value adjustments of $5.7 million at March 31, 2022 and $6.7 million at December 31, 2021. The following table presents loans as of the dates presented:


(dollars in thousands)	March 31, 2022		December 31, 2021
Commercial
Commercial real estate	$	3,257,955	$	3,236,653
Commercial and industrial	1,675,316		1,728,969
Commercial construction	398,592		440,962
Total Commercial Loans	5,331,863		5,406,584
Consumer
Consumer real estate	1,519,751		1,485,478
Other consumer	112,297		107,928
Total Consumer Loans	1,632,048		1,593,406
Total Portfolio Loans	6,963,911		6,999,990
Loans held for sale	1,346		1,522
Total Loans (1)	$	6,965,257	$	7,001,512

(1) Excludes interest receivable of $18.7 million at both March 31, 2022 and December 31, 2021. Interest receivable is included in other assets in the Consolidated Balance Sheets.

Commercial and industrial loans, or C&I, included $41.9 million of loans originated under the Paycheck Protection Program, or PPP, at March 31, 2022 compared to $88.3 million at December 31, 2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law. The CARES Act included the PPP, a program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. The loans are 100 percent guaranteed by the Small Business Administration, or SBA.

Our business banking segment was $1.1 billion at March 31, 2022 and December 31, 2021. Business banking consists of commercial loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. Business banking consisted of $552.2 million of commercial real estate loans, $216.7 million of C&I loans of which $20.6 million are PPP loans, $15.4 million of commercial construction loans and $357.0 million of consumer real estate loans at March 31, 2022. At December 31, 2021 business banking consisted of $546.1 million of commercial real estate loans, $215.4 million of C&I loans of which $39.7 million are PPP loans, $16.2 million of commercial construction loans and $357.9 million of consumer real estate loans.

We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry and actively managing concentrations. When concentrations exist in certain segments, we mitigate this risk by reviewing the relevant economic indicators and internal risk rating trends and through stress testing of the loans in these segments to determine if additional ACL is needed. Total commercial loans represented 76.6 percent of total portfolio loans at March 31, 2022 compared to 77.2 percent at December 31, 2021. Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 68.6 percent, of total commercial loans and 52.5 percent of total portfolio loans at March 31, 2022 and $3.7 billion, or 68.0 percent, of total commercial loans and 52.5 percent of total portfolio loans at December 31, 2021.

We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in this geography, resulting in a concentration. We believe our knowledge and familiarity with customers and conditions locally outweighs this geographic concentration risk. The conditions of the local and regional economies are monitored closely through publicly available data and information supplied by our customers. We also use subscription services for additional geographic and industry specific information. Our CRE and commercial construction portfolios have exposure outside of this geography of 6.1 percent of the combined portfolios and 3.2 percent of total portfolio loans at March 31, 2022. This compares to 5.7 percent of the combined portfolios and 3.0 percent of total portfolio loans at December 31, 2021.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE - continued

We individually evaluate all substandard and nonaccrual commercial loans that have experienced a forbearance or change in terms agreement, and all substandard consumer and residential mortgage loans that entered into an agreement to modify their existing loan, to determine if they should be designated as troubled debt restructurings, or TDRs.

TDRs can be returned to accruing status if the ultimate collectability of all contractual amounts due, according to the restructured agreement, is not in doubt and there is a period of a minimum of six months of satisfactory payment performance by the borrower either immediately before or after the restructuring.

The following tables summarize TDRs as of the dates presented:


	March 31, 2022						December 31, 2021
(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		Performing TDRs		Nonperforming TDRs		Total TDRs
Commercial real estate	$	—	$	969	$	969	$	—	$	1,697	$	1,697
Commercial and industrial	721		10,225		10,946		748		14,889		15,637
Commercial construction	2,167		480		2,647		2,190		2,087		4,277
Business banking	987		1,586		2,573		858		1,696		2,554
Consumer real estate	6,861		2,129		8,990		6,122		1,405		7,527
Other consumer	3		—		3		3		—		3
Total	$	10,739	$	15,389	$	26,128	$	9,921	$	21,774	$	31,695

There were no TDR's that returned to accruing status during the three months ended March 31, 2022 and March 31, 2021.

The following tables present the TDRs by portfolio segment and by type of concession for the periods presented:


	Three Months Ended March 31, 2022
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	—	—		—		—		—		—		—		—
Commercial construction	—	—		—		—		—		—		—		—
Business banking	—	—		—		—		—		—		—		—
Consumer real estate	7	766		—		1,112		—		—		1,878		1,928
Other consumer	—	—		—		—		—		—		—		—
Total	7	$	766	$	—	$	1,112	$	—	$	—	$	1,878	$	1,928
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed. (2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE - continued


	Three Months Ended March 31, 2021
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	2	—		—		821		—		5,475		6,296		6,304
Commercial construction	—	—		—		—		—		—		—		—
Business banking	—	—		—		—		—		—		—		—
Consumer real estate	11	340		80		—		—		148		568		609
Other consumer	1	1		—		—		—		—		1		1
Total	14	$	341	$	80	$	821	$	—	$	5,623	$	6,865	$	6,914
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed. (2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.

As of March 31, 2022, we had 12 commitments to lend an additional $0.8 million on TDRs compared to 20 commitments to lend an additional $0.8 million as of March 31, 2021. Defaulted TDRs are defined as loans having a payment default of 90 days or more after the restructuring takes place. There were no TDRs that defaulted during the three months ended March 31, 2022 and March 31, 2021.

The following table is a summary of nonperforming assets as of the dates presented:


	Nonperforming Assets
(dollars in thousands)	March 31, 2022			December 31, 2021
Nonperforming Assets
Nonaccrual loans		$	37,135		$	44,517
Nonaccrual TDRs		15,389			21,774
Total Nonaccrual Loans		52,524			66,291
OREO		7,028			13,313
Total Nonperforming Assets		$	59,552		$	79,604

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES

We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) Commercial Real Estate, or CRE, 2) Commercial and Industrial, or C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.

The following are key risks within each portfolio segment:

CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.

C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.

Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction/development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and business.

Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines and credits cards. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Management monitors various credit quality indicators for the commercial, business banking and consumer loan portfolios, including changes in risk ratings, nonperforming status and delinquency on a monthly basis.

We monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.

Our risk ratings are consistent with regulatory guidance and are as follows:

Pass—The loan is currently performing and is of high quality.

Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The following tables present loan balances by year of origination and internally assigned risk rating for our portfolio segments as of the dates presented:


	March 31, 2022
	Risk Rating
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	92,158	$	367,329	$	333,477	$	423,653	$	308,371	$	878,459	$	34,981	$	—	$	2,438,428
Special mention	—		—		304		25,293		2,634		100,061		—		—		128,292
Substandard	—		—		1,343		13,865		17,707		104,659		1,500		—		139,074
Doubtful	—		—		—		—		—		5		—		—		5
Total commercial real estate	92,158		367,329		335,124		462,811		328,712		1,083,184		36,481		—		2,705,799

Commercial and industrial
Pass	42,350		369,064		106,684		94,211		75,757		157,096		569,064		—		1,414,226
Special mention	—		44		816		4,012		2,366		1,137		9,862		—		18,237
Substandard	—		—		—		10,654		1,288		4,072		5,523		—		21,537
Doubtful	—		—		—		4,506		—		—		—		—		4,506
Total commercial and industrial	42,350		369,108		107,500		113,383		79,411		162,305		584,449		—		1,458,506

Commercial construction
Pass	24,551		161,638		70,185		73,539		4,984		4,281		31,026		—		370,204
Special mention	—		—		—		3,578		—		4,423		—		—		8,001
Substandard	—		—		2,157		480		4		2,391		—		—		5,032
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial construction	24,551		161,638		72,342		77,597		4,988		11,095		31,026		—		383,237

Business banking
Pass	66,205		255,051		104,999		129,574		100,316		336,209		109,505		505		1,102,364
Special mention	—		98		193		2,926		2,853		5,959		161		110		12,300
Substandard	—		2		103		2,648		3,150		19,129		927		613		26,572
Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	66,205		255,151		105,295		135,148		106,319		361,297		110,593		1,228		1,141,236

Consumer real estate
Pass	56,244		141,404		96,932		84,920		35,181		223,298		482,845		23,510		1,144,334
Special mention	—		—		—		—		—		923		—		—		923
Substandard	40		82		139		286		1,735		11,402		1,004		2,912		17,600
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	56,284		141,486		97,071		85,206		36,916		235,623		483,849		26,422		1,162,857

Other consumer
Pass	6,035		15,522		8,176		5,931		2,448		1,349		71,494		1,273		112,228
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		17		4		2		—		25		48
Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	6,035		15,522		8,176		5,948		2,452		1,351		71,494		1,298		112,276

Pass	287,543		1,310,008		720,453		811,828		527,057		1,600,692		1,298,915		25,288		6,581,784
Special mention	—		142		1,313		35,809		7,853		112,503		10,023		110		167,753
Substandard	40		84		3,742		27,950		23,888		141,655		8,954		3,550		209,863
Doubtful	—		—		—		4,506		—		5		—		—		4,511
Total	$	287,583	$	1,310,234	$	725,508	$	880,093	$	558,798	$	1,854,855	$	1,317,892	$	28,948	$	6,963,911

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	December 31, 2021
	Risk Rating
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	385,347	$	316,003	$	412,191	$	314,303	$	213,019	$	698,992	$	35,448	$	—	$	2,375,303
Special mention	—		—		37,786		6,401		40,445		75,938		—		—		160,570
Substandard	—		1,356		18,743		14,039		12,555		106,461		1,500		—		154,654
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and industrial
Pass	437,483		126,371		115,359		83,030		37,176		132,182		536,554		—		1,468,155
Special mention	46		—		3,060		2,546		72		832		8,887		—		15,443
Substandard	—		—		14,221		1,336		4,174		3,456		4,961		—		28,148
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total commercial and industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial construction
Pass	142,321		108,405		111,512		16,838		989		3,539		30,036		—		413,640
Special mention	—		—		—		—		—		4,458		—		—		4,458
Substandard	—		2,157		2,020		—		—		2,480		—		—		6,657
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

Business banking
Pass	257,264		107,791		141,411		110,586		79,187		293,215		107,093		443		1,096,990
Special mention	104		151		1,986		1,365		1,057		5,929		160		111		10,863
Substandard	41		106		1,579		3,277		1,645		19,591		977		625		27,841
Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer real estate
Pass	137,465		100,995		91,981		48,531		39,029		231,861		442,530		23,391		1,115,783
Special mention	—		—		—		—		—		937		—		—		937
Substandard	—		—		184		1,625		1,355		5,664		876		1,161		10,865
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

Other consumer
Pass	19,976		9,396		7,120		2,878		613		2,037		57,702		1,130		100,852
Special mention	—		—		—		—		—		—		—		—		—
Substandard	83		52		141		215		408		4,407		201		1,547		7,054
Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906


Pass	1,379,856		768,961		879,574		576,166		370,013		1,361,826		1,209,363		24,964		6,570,723
Special Mention	150		151		42,832		10,312		41,574		88,094		9,047		111		192,271
Substandard	124		3,671		36,888		20,492		20,137		142,059		8,515		3,333		235,219
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The following tables present loan balances by year of origination and performing and nonperforming status for our portfolio segments as of the dates presented:


	March 31, 2022
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	92,158	$	367,329	$	335,124	$	460,353	$	326,451	$	1,062,113	$	36,481	$	—	$	2,680,009
Nonperforming	—		—		—		2,458		2,261		21,071		—		—		25,790
Total commercial real estate	92,158		367,329		335,124		462,811		328,712		1,083,184		36,481		—		2,705,799

Commercial and industrial
Performing	42,350		369,108		107,500		104,858		79,353		162,248		582,519		—		1,447,936
Nonperforming	—		—		—		8,525		58		57		1,930		—		10,570
Total commercial and industrial	42,350		369,108		107,500		113,383		79,411		162,305		584,449		—		1,458,506

Commercial construction
Performing	24,551		161,638		72,342		77,117		4,988		10,711		31,026		—		382,373
Nonperforming	—		—		—		480		—		384		—		—		864
Total commercial construction	24,551		161,638		72,342		77,597		4,988		11,095		31,026		—		383,237

Business banking
Performing	66,205		255,149		105,295		134,873		104,917		355,063		110,565		1,172		1,133,239
Nonperforming	—		2		—		275		1,402		6,234		28		56		7,997
Total business banking	66,205		255,151		105,295		135,148		106,319		361,297		110,593		1,228		1,141,236

Consumer real estate
Performing	56,284		141,486		96,167		84,952		36,674		230,971		483,658		25,487		1,155,679
Nonperforming	—		—		904		254		242		4,652		191		935		7,178
Total consumer real estate	56,284		141,486		97,071		85,206		36,916		235,623		483,849		26,422		1,162,857

Other consumer
Performing	6,035		15,522		8,051		5,948		2,452		1,351		71,494		1,298		112,151
Nonperforming	—		—		125		—		—		—		—		—		125
Total other consumer	6,035		15,522		8,176		5,948		2,452		1,351		71,494		1,298		112,276

Performing	287,583		1,310,232		724,479		868,101		554,835		1,822,457		1,315,743		27,957		6,911,387
Nonperforming	—		2		1,029		11,992		3,963		32,398		2,149		991		52,524
Total	$	287,583	$	1,310,234	$	725,508	$	880,093	$	558,798	$	1,854,855	$	1,317,892	$	28,948	$	6,963,911

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	December 31, 2021
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	385,347	$	317,359	$	461,613	$	332,482	$	259,723	$	865,567	$	36,948	$	—	$	2,659,039
Nonperforming	—				7,107		2,261		6,296		15,824		—		—		31,488
Total commercial real estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and industrial
Performing	437,529		126,371		123,944		86,852		38,540		136,427		548,622		—		1,498,285
Nonperforming	—		—		10,473		60		2,882		43		1,780		—		15,239
Total commercial and industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial construction
Performing	142,321		110,562		111,445		16,838		989		10,093		30,036		—		422,284
Nonperforming	—		—		2,087		—		—		384		—		—		2,471
Total commercial construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

Business banking
Performing	257,368		107,984		144,689		113,820		81,195		311,673		108,202		1,122		1,126,052
Nonperforming	41		64		287		1,408		694		7,062		28		57		9,641
Total business banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer real estate
Performing	137,465		100,253		91,689		49,853		39,657		234,297		443,238		23,839		1,120,291
Nonperforming	—		742		476		303		727		4,165		168		713		7,294
Total consumer real estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

Other consumer
Performing	20,059		9,290		7,261		3,093		1,021		6,444		57,903		2,677		107,748
Nonperforming	—		158		—		—		—		—		—		—		158
Total other consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906

Performing	1,380,089		771,819		940,641		602,938		421,125		1,564,501		1,224,949		27,638		6,933,699
Nonperforming	41		964		20,430		4,032		10,599		27,478		1,976		770		66,291
Total	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

The following tables present the age analysis of past due loans segregated by class of loans as of the dates presented:


	March 31, 2022
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90+ Days Still Accruing(2)		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,680,009	$	—	$	—	$	—	$	25,790	$	25,790	$	2,705,799
Commercial and industrial	1,447,404		3		—		529		10,570		11,102		1,458,506
Commercial construction	382,373		—		—		—		864		864		383,237
Business banking	1,130,830		1,409		413		587		7,997		10,406		1,141,236
Consumer real estate	1,152,858		2,693		128		—		7,178		9,999		1,162,857
Other consumer	111,765		176		210		—		125		511		112,276
Total(1)	$	6,905,239	$	4,281	$	751	$	1,116	$	52,524	$	58,672	$	6,963,911

(1) We had three loans that were modified totaling $12.5 million under the CARES Act at March 31, 2022. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modifications, this delinquency table may not accurately reflect the credit risk associated with these loans.

(2) We had five loans that were originated under the PPP program totaling $1.1 million at March 31, 2022 that were 90 days or greater past due. These loans were in process of forgiveness and were not considered as nonperforming loans due to the terms of the SBA guarantee.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	December 31, 2021
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90+ Days Still Accruing		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,659,040	$	—	$	—	$	—	$	31,488	$	31,488	$	2,690,528
Commercial and industrial	1,497,755		529		—		—		15,239		15,768		1,513,523
Commercial construction	421,834		450		—		—		2,471		2,921		424,755
Business banking	1,124,748		813		491		—		9,641		10,945		1,135,693
Consumer real estate	1,117,074		1,087		2,130		—		7,294		10,511		1,127,585
Other consumer	107,492		206		50		—		158		414		107,906
Total(1)	$	6,927,943	$	3,085	$	2,671	$	—	$	66,291	$	72,047	$	6,999,990
(1) We had eight loans that were modified totaling $28.8 million under the CARES Act at December 31, 2021. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modification program, this delinquency table may not accurately reflect the credit risk associated with these loans.

The following tables present loans on nonaccrual status by class of loan for the periods presented:


										For the Three Months Ended
	March 31, 2022								March 31, 2022
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing (2)			Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	31,488	$	25,790	$	21,058	$	—		$	32
Commercial and industrial	15,239		10,570		1,700		529			32
Commercial construction	2,471		864		480		—			—
Business banking	9,641		7,997		1,586		587			48
Consumer real estate	7,294		7,178		—		—			61
Other consumer	158		125		—		—			—
Total	$	66,291	$	52,524	$	24,824	$	1,116		$	173

(1) Represents only cash payments received and applied to interest on nonaccrual loans.


									For the Twelve Months Ended
	December 31, 2021								December 31, 2021
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	101,070	$	31,488	$	28,046	$	—	$	158
Commercial and industrial	16,985		15,239		5,707		—		74
Commercial construction	384		2,471		2,020		—		(28)
Business banking	17,122		9,641		1,696		—		427
Consumer real estate	11,117		7,294		—		—		496
Other consumer	96		158		—		—		1
Total	$	146,774	$	66,291	$	37,469	$	—	$	1,128

(1) Represents only cash payments received and applied to interest on nonaccrual loans.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The following tables present collateral-dependent loans by class of loan as of the dates presented:


	March 31, 2022
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	21,058	$	—	$	—	$	571
Commercial and industrial	259		721		—		9,859
Commercial construction	2,167		—		—		480
Business banking	1,028		1,537		—		—
Consumer real estate	965		—		—		—

Total	$	25,477	$	2,258	$	—	$	10,910


	December 31, 2021
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	28,046	$	—	$	—	$	—
Commercial and industrial	259		4,905		—		10,473
Commercial construction	4,210		—		—		—
Business banking	910		1,636		—		—
Consumer real estate	1,031		—		—		—

Total	$	34,456	$	6,541	$	—	$	10,473

The following tables present activity in the ACL for the periods presented:


	Three Months Ended March 31, 2022
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	50,700	$	19,727	$	5,355	$	11,338	$	8,733	$	2,723	$	98,576
Provision for credit losses on loans(1)	(1,996)		(206)		(27)		765		426		340		(698)
Charge-offs	—		—		—		(606)		(78)		(298)		(982)
Recoveries	199		2,716		1		—		37		66		3,019
Net Recoveries/(Charge-offs)	199		2,716		1		(606)		(41)		(232)		2,037
Balance at End of Period	$	48,903	$	22,237	$	5,329	$	11,497	$	9,118	$	2,831	$	99,915
(1) Excludes the provision for credits losses for unfunded commitments


	Three Months Ended March 31, 2021
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612

Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301
Charge-offs	(810)		(4,302)		—		(917)		(271)		(232)		(6,532)
Recoveries	—		137		1		166		82		334		720
Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)
Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101

(1) Excludes the provision for credit losses for unfunded commitments

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The C&I portfolio included $41.9 million of loans originated under the PPP program at March 31, 2022 compared to $499.1 million for the same period in 2021.The loans are 100 percent guaranteed by the SBA, therefore, we have not assigned any ACL.

NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivatives Not Designated as Hedging Instruments

Interest Rate Contracts with Customers

Interest rate swaps with customers are contracts in which a series of cash flows (fixed and variable) are exchanged over a prescribed period. The notional amounts on which the interest payments are based are not exchanged. These derivative positions relate to transactions in which we enter into an interest rate swap with a commercial customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate loan with us receiving a variable rate. These agreements could have floors or caps on the contracted interest rates.

Interest rate swaps with customers are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives are recorded in current earnings and included in other noninterest income in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Interest Rate Lock Commitments and Forward Sale Contracts

In the normal course of business, we sell originated mortgage loans into the secondary mortgage loan market. We also offer interest rate lock commitments to potential borrowers. The commitments are generally for a period of 60 days and guarantee a specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower to close on the loan. Accordingly, some commitments expire prior to becoming loans. We may encounter pricing risks if interest rates increase significantly before the loan can be closed and sold. We may utilize forward sale contracts in order to mitigate this pricing risk. Whenever a customer desires these products, a mortgage originator quotes a secondary market rate guaranteed for that day by the investor. The rate lock is executed between the mortgagee and us and in turn a forward sale contract may be executed between us and the investor. Both the rate lock commitment and the corresponding forward sale contract for each customer are considered derivatives but are not accounted for using hedge accounting. As such, changes in estimated fair value of the derivatives during the commitment period are recorded in current earnings and included in mortgage banking in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Derivatives Designated as Hedging Instruments

Cash Flow Hedges of Interest Rate Risk

As part of our interest rate risk management strategy, we use interest rate swaps to add stability to interest income and to manage exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for making variable rate payments over the life of the agreements without exchange of the underlying notional amount.

During the three months ended March 31, 2022, we entered into four interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing variable-rate assets. These contacts each have a notional value of $50.0 million and extend out over the next five years.

For designated derivatives that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received on variable rate assets. During the next twelve months, we estimate that an additional $0.6 million will be reclassified as an increase to interest income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – continued

The following table indicates the amounts representing the value of derivative assets and derivative liabilities for the dates presented:


	Derivative Assets (Included in Other Assets)								Derivative Liabilities (Included in Other Liabilities)
	March 31, 2022				December 31, 2021				March 31, 2022				December 31, 2021
(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives Designated as Hedging Instruments
Interest rate swap contracts - cash flow hedge	$	50,000	$	135			$	—	$	150,000	$	2,600			$	—
Total Derivatives Designated as Hedging Instruments			$	135			$	—			$	2,600			$	—

Derivatives Not Designated as Hedging Instruments
Interest rate swap contracts - commercial customers	$	1,034,249	$	29,056	$	1,017,178	$	33,528	$	1,034,249	$	29,092	$	1,017,178	$	33,361
Interest rate lock commitments - mortgage loans	13,901		185		12,148		401		—		—				—
Forward sales contracts - mortgage loans	13,503		192		8,436		4		—		—				—
Total Derivatives Not Designated as Hedging Instruments			$	29,433			$	33,933			$	29,092			$	33,361

Total Derivatives			$	29,568			$	33,933			$	31,692			$	33,631

The following table indicates the gross amounts of interest rate swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets at March 31, 2022:


	Derivatives (included in Other Assets)				Derivatives (included in Other Liabilities)
(dollars in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Gross amounts recognized	$	34,957	$	37,289	$	37,402	$	37,392
Gross amounts offset	(5,766)		(3,761)		(5,710)		(3,761)
Net amounts presented in the Consolidated Balance Sheets	29,191		33,528		31,692		33,631
Cash collateral received/pledged(1)	(23,501)		—		—		(33,631)
Net Amount	$	5,690	$	33,528	$	31,692	$	—
(1) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above.

The following table presents the effect of the cash flow hedges on OCI and on the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021.


	Amount of Gain or (Loss) Recognized in Other Comprehensive Income						Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Income
(dollars in thousands)	March 31, 2022			March 31, 2021			March 31, 2022			March 31, 2021
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge		$	(2,601)		$	—		$	137		$	—

Total		$	(2,601)		$	—		$	137		$	—

The following table indicates the gain or loss recognized in income on derivatives for the periods presented:

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – continued


	Three Months Ended March 31,
(dollars in thousands)	2022			2021
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial customers		$	68		$	310
Interest rate lock commitments—mortgage loans		(217)			(1,759)
Forward sale contracts—mortgage loans		188			979
Total Derivatives Gain/(Loss)		$	39		$	(470)

NOTE 8. COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. Our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers. Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

The following table sets forth our commitments and letters of credit as of the dates presented:


(dollars in thousands)	March 31, 2022			December 31, 2021
Commitments to extend credit		$	2,481,275		$	2,583,957
Standby letters of credit		79,550			87,335
Total		$	2,560,825		$	2,671,292

Allowance for Credit Losses on Unfunded Loan Commitments

We maintain an allowance for credit losses on unfunded commercial and consumer lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Condensed Consolidated Statements of Comprehensive Income (Loss). The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

The following table presents activity in the allowance for credit losses on unfunded loan commitments as of the dates presented:


	Three Months Ended March 31,
(dollars in thousands)	2022			2021
Balance at beginning of period		$	5,189		$	4,467


Provision for credit losses		186			(164)
Total		$	5,375		$	4,303

Litigation

In the normal course of business, we are subject to various legal and administrative proceedings and claims. While any type of litigation contains a level of uncertainty, we believe that the outcome of such proceedings or claims pending will not have a material adverse effect on our consolidated financial position or results of operations.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 9. OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the change in components of other comprehensive income (loss) for the periods presented, net of tax effects.


	Three Months Ended March 31, 2022									Three Months Ended March 31, 2021
(dollars in thousands)	Pre-Tax Amount			Tax Benefit (Expense)			Net of Tax Amount			Pre-Tax Amount			Tax Benefit (Expense)			Net of Tax Amount
Change in net unrealized (losses) gains on debt securities available-for-sale		$	(48,261)		$	10,332		$	(37,929)		$	(9,712)		$	2,072		$	(7,640)
Change in interest rate swap		(2,601)			557			(2,044)			—			—			—
Adjustment to funded status of employee benefit plans		(12)			32			20			(343)			73			(270)
Other Comprehensive Loss		$	(50,874)		$	10,921		$	(39,953)		$	(10,055)		$	2,145		$	(7,910)

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of our consolidated results of operations and financial condition and highlights material changes in our financial condition and results of operations for the three month periods ended March 31, 2022 and 2021. Our MD&A should be read in conjunction with our Consolidated Financial Statements and Notes. The results of operations reported in the accompanying Consolidated Financial Statements are not necessarily indicative of results to be expected in future periods.

Important Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q 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, or ACL; 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; climate change and related legislative and regulatory initiatives; 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, particularly in light of the strong competition in the marketplace; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; macroeconomic conditions including inflation and economic uncertainty; the duration and severity of the coronavirus, or 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 elsewhere in this report, and in our Annual Report on Form 10-K for the year ended December 31, 2021, including Part II, 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.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

We view critical accounting policies to be those which are highly dependent on subjective or complex estimates, assumptions and judgments and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements. Further, we view critical accounting estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our critical accounting policies and estimates as of March 31, 2022 remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, 2021 under Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Overview

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.4 billion at March 31, 2022. We operate in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio and Upstate New York. We provide a full range of financial services with retail and commercial banking products, cash management services, trust and brokerage services. Our common stock trades on the NASDAQ Global Select Market under the symbol “STBA”.

We earn revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers. We incur expenses for the cost of deposits and other funding sources, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, occupancy and tax expense.

On August 23, 2021, Christopher McComish joined S&T as our new chief executive officer. He brings over 34 years of proven banking leadership with a track record of growth and transformation of commercial, consumer and wealth businesses. Additionally, we have elevated both proven internal leaders and attracted external talent from larger banking institutions to position us for future growth. Our priorities for 2022 and beyond include pursuing high impact growth initiatives, ensuring rigorous credit risk and enterprise governance practices, advancing strategic infrastructure and platform investments, including enhancing our digital platform, investing in organization talent and performance and promoting strategic clarity and effective communications. Organic loan growth continues to be our top priority within our current footprint and through market expansion. Our growth strategy includes a collaborative model that combines expertise from all areas of our business and focuses on satisfying each customer’s individual financial objectives. We also actively evaluate acquisition opportunities that align with our strategic objectives as another source of growth.

Earnings Summary

We recognized net income of $29.1 million, or $0.74 per diluted share for the three months ended March 31, 2022 compared to a net income of $31.9 million, or $0.81 per diluted share for the same period in 2021. The $2.8 million decrease in net income for the three months ended March 31, 2022 was primarily due to decreases in net interest income of $2.9 million and noninterest income of $2.0 million and increases in noninterest expenses of $1.8 million offset by a significant decrease in our provision for credit losses of $3.6 million compared to the same period in 2021.

Net interest income decreased $2.9 million to $67.7 million for the three months ended March 31, 2022 compared to $70.6 million during the same period in 2021. The decline was primarily due to reduced PPP revenue of $4.1 million compared to the prior period. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 31 basis points for the three months ended March 31, 2022 compared to the same period in 2021. Increased interest-bearing deposits with banks negatively impacted the net interest margin on an FTE basis (non-GAAP) by 16 basis points and reduced revenue from PPP loans negatively impacted the net interest margin on an FTE basis (non-GAAP) by 4 basis points for the three months ended March 31, 2022 compared to the prior period.

The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, decreased $3.6 million to a negative $0.5 million for the three months ended March 31, 2022 compared to $3.1 million for the same period in 2021. The significant decrease in the provision for credit losses during the three months ended March 31, 2022 was mainly due to a $2.5 million recovery on a C&I relationship during the first quarter of 2022 and improvement in economic conditions resulting in declines in our criticized and classified assets and nonperforming loans.

Noninterest income decreased $2.0 million for the three months ended March 31, 2022 compared to the same period in 2021. The decrease in noninterest income primarily related to a decrease of $3.3 million in mortgage banking due to a lower volume of loans originated for sale in the secondary market. Partially offsetting this decrease was higher debit and credit card fees of $0.9 million and service charges on deposit accounts of $0.5 million due to the improving economic environment resulting in increased customer activity.

Noninterest expense increased $1.8 million to $47.4 million for the three months ended March 31, 2022 compared to $45.6 million for the same periods in 2021. Professional services and legal increased by $0.4 million due to increased legal expenses as compared to the same period in 2021. Salaries and employee benefits increased $0.4 million due to base rate and

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

incentive increases partially offset by lower pension and medical expense. Other noninterest expense increased $0.6 million mainly due to higher other real estate owned, or OREO, expense compared to the same period in 2021.

The provision for income taxes decreased $0.4 million to $6.9 million for the three months ended March 31, 2022 compared to $7.3 million for the same period in 2021. The decrease in income tax expense was primarily due to the decrease in pretax income of $3.1 million compared to the same period in 2021. Our effective tax rate was 19.2 percent for the three months ended March 31, 2022 compared to 18.6 percent for the same period in 2021. The change in our effective tax rate for the three months ended March 31, 2022 was primarily due to decreased tax benefits associated with low income housing tax credits in 2022 compared to 2021.

Explanation of Use of Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles, or GAAP, in the United States, management uses, and this quarterly report references, net interest income and net interest margin, each on a fully taxable equivalent, or FTE, basis, which are non-GAAP financial measures. Management believes net interest income and net interest margin on an FTE basis provide information useful to investors in understanding our underlying business, operational performance and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although management believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies.

We believe the presentation of net interest income and net interest margin on an FTE basis ensures the comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (GAAP) per the Condensed Consolidated Statements of Comprehensive Income (Loss) is reconciled to net interest income adjusted on an FTE basis and net interest margin adjusted on an FTE basis in the "Results of Operations - Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021 - Net Interest Income" section of this MD&A.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three Months Ended March 31, 2022 Compared to

Three Months Ended March 31, 2021

Net Interest Income

Our principal source of revenue is net interest income. Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and spreads. The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee, or ALCO, in order to mitigate interest rate and liquidity risks of the balance sheet. A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what we believe is an acceptable level of net interest income.

The interest income on interest-earning assets and the net interest margin are presented on an FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities and the dividend-received deduction for equity securities using the federal statutory tax rate of 21 percent for each period. We believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between taxable and non-taxable sources of interest income.

The following table reconciles interest income per the Condensed Consolidated Statements of Comprehensive Income (Loss) to net interest income and net interest margin on an FTE basis for the periods presented:


	Three Months Ended March 31,
(dollars in thousands)	2022				2021
Total interest and dividend income		$	70,109			$	74,781
Total interest expense		2,376				4,122
Net Interest Income per Condensed Consolidated Statements of Comprehensive Income (Loss)		67,733				70,659
Adjustment to FTE basis		493				663
Net Interest Income on an FTE Basis (Non-GAAP)		$	68,226			$	71,322
Net interest margin		3.14		%		3.44		%
Adjustment to FTE basis		0.02		%		0.03		%
Net Interest Margin on an FTE Basis (Non-GAAP)		3.16		%		3.47		%

Income amounts are annualized for rate calculations.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Average Balance Sheet and Net Interest Income Analysis (FTE)

The following tables provide information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the periods presented:


	Three Months Ended March 31, 2022							Three Months Ended March 31, 2021
(dollars in thousands)	Average Balance		Interest			Rate		Average Balance		Interest			Rate
ASSETS
Interest-bearing deposits with banks	$	756,141		$	303	0.16	%	$	302,219		$	65	0.09	%
Securities, at fair value(1)(2)	1,002,212			5,265		2.10	%	782,118			4,566		2.34	%
Loans held for sale	1,545			14		3.51	%	6,360			45		2.83	%
Commercial real estate	3,257,238			29,345		3.65	%	3,253,641			30,136		3.76	%
Commercial and industrial	1,712,865			16,827		3.98	%	1,957,459			20,817		4.31	%
Commercial construction	409,264			3,329		3.30	%	485,269			4,034		3.37	%
Total Commercial Loans	5,379,367			49,501		3.73	%	5,696,369			54,987		3.91	%
Residential mortgage	896,268			8,962		4.02	%	897,427			9,416		4.22	%
Home equity	570,781			4,823		3.43	%	532,708			4,791		3.65	%
Installment and other consumer	109,972			1,475		5.44	%	79,907			1,247		6.33	%
Consumer construction	21,833			181		3.37	%	15,908			188		4.79	%
Total Consumer Loans	1,598,854			15,441		3.90	%	1,525,950			15,642		4.14	%
Total Portfolio Loans	6,978,221			64,942		3.77	%	7,222,319			70,630		3.96	%
Total Loans(1)(3)	6,979,765			64,955		3.77	%	7,228,679			70,675		3.96	%
Federal Home Loan Bank and other restricted stock	9,280			79		3.40	%	11,242			139		4.94	%
Total Interest-earning Assets	8,747,398			70,602		3.27	%	8,324,259			75,445		3.67	%
Noninterest-earning assets	709,246							756,273
Total Assets	$	9,456,644						$	9,080,532
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	$	986,639		$	185	0.08	%	$	895,891		$	222	0.10	%
Money market	2,055,857			746		0.15	%	1,968,779			943		0.19	%
Savings	1,109,048			78		0.03	%	995,228			152		0.06	%
Certificates of deposit	1,070,189			844		0.32	%	1,344,604			2,165		0.65	%
Total Interest-bearing Deposits	5,221,733			1,853		0.14	%	5,204,503			3,481		0.27	%
Securities sold under repurchase agreements	81,790			20		0.10	%	64,653			25		0.15	%
Short-term borrowings	—			—		—	%	25,556			12		0.19	%
Long-term borrowings	22,310			107		1.95	%	23,471			116		2.00	%
Junior subordinated debt securities	54,398			395		2.95	%	64,088			488		3.09	%
Total Borrowings	158,498			523		1.34	%	177,768			641		1.46	%
Total Interest-bearing Liabilities	5,380,231			2,376		0.18	%	5,382,271			4,123		0.31	%
Noninterest-bearing liabilities	2,879,718							2,538,149
Shareholders' equity	1,196,694							1,160,113
Total Liabilities and Shareholders' Equity	$	9,456,644						$	9,080,532
Net Interest Income (1)(2)				$	68,226						$	71,322
Net Interest Margin (1)(2)						3.16	%						3.47	%

(1) Tax-exempt interest income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent.

(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

(3) Nonaccruing loans are included in the daily average loan amounts outstanding.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net interest income on an FTE basis (non-GAAP) decreased $3.1 million for the three months ended March 31, 2022 compared to the same period in 2021. The decline was primarily due to reduced PPP revenue of $4.1 million compared to the prior period. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 31 basis points for the three months ended March 31, 2022 compared to the same period in 2021. Increased interest-bearing deposits with banks negatively impacted the net interest margin on an FTE basis (non-GAAP) by 16 basis points and reduced revenue from PPP loans negatively impacted the net interest margin on an FTE basis (non-GAAP) by 4 basis points for the three months ended March 31, 2022 compared to the prior period.

Interest income on an FTE basis (non-GAAP) decreased $4.8 million for the three months ended March 31, 2022 compared to the same period in 2021. The decrease in interest income was primarily due to reduced PPP revenue. Average PPP loans decreased $394.3 million compared to the three months ended March 31, 2021. Average loan balances, excluding PPP loans, increased $145.4 million for the three months ended March 31, 2022 compared to the same period in 2021. Average securities increased $220.1 million for the three months ended March 31, 2022 compared to the same period in 2021. Securities increased due to interest-bearing deposits with banks being redeployed to higher yielding assets. Average interest-bearing deposits with banks increased $453.9 million for the three months ended March 31, 2022 compared to the same period in 2021 due to PPP forgiveness and a significant increase in average deposits as a result of customer PPP loans and stimulus payments along with customers' liquidity preferences in 2021. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 40 basis points for the three months ended March 31, 2022 compared to the same period in 2021.

Interest expense decreased $1.7 million for the three months ended March 31, 2022 compared to the same period in 2021. The decrease was primarily due to lower average rates paid on interest-bearing deposits compared to the same period in 2021. Average interest-bearing deposits increased $17.2 million for the three months ended March 31, 2022 compared to the same period in 2021. The average rate paid on interest-bearing deposits decreased 13 basis points compared to the same period in 2021 primarily due to maturities of higher costing certificates of deposit. Average demand deposits increased $372.3 million for the three months ended March 31, 2022 compared to the same period in 2021. We experienced demand deposit growth throughout 2021 due to customer PPP loans and stimulus payments along with customers' liquidity preferences. Average brokered deposits decreased $40.7 million and average total borrowings decreased $19.3 million for the three months ended March 31, 2022 compared to the same period in 2021 due to maturities and a reduced need for wholesale funding. Overall, the cost of interest-bearing liabilities decreased 13 basis points for the three months ended March 31, 2022 compared to the same period in 2021.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates:


	Three Months Ended March 31, 2022 Compared to March 31, 2021
(dollars in thousands)		Volume (4)		Rate (4)		Total
Interest earned on:
Interest-bearing deposits with banks		$	98	$	140	$	238
Securities, at fair value(1)(2)		1,285		(586)		699
Loans held for sale		(34)		3		(31)
Commercial real estate		33		(825)		(791)
Commercial and industrial		(2,601)		(1,389)		(3,990)
Commercial construction		(632)		(73)		(704)
Total Commercial Loans		(3,200)		(2,287)		(5,486)
Residential mortgage		(12)		(442)		(454)
Home equity		342		(311)		31
Installment and other consumer		469		(242)		227
Consumer construction		70		(77)		(7)
Total Consumer Loans		870		(1,071)		(202)
Total Portfolio Loans		(2,330)		(3,358)		(5,688)
Total Loans (1)(3)		(2,364)		(3,355)		(5,719)
Federal Home Loan Bank and other restricted stock		(24)		(36)		(60)
Change in Interest Earned on Interest-earning Assets		$	(1,006)	$	(3,836)	$	(4,842)
Interest paid on:
Interest-bearing demand		$	22	$	(59)	$	(36)
Money market		42		(239)		(197)
Savings		17		(91)		(74)
Certificates of deposit		(442)		(879)		(1,321)
Total Interest-bearing Deposits		(360)		(1,268)		(1,628)
Securities sold under repurchase agreements		7		(11)		(4)
Short-term borrowings		(12)		—		(12)
Long-term borrowings		(6)		(3)		(9)
Junior subordinated debt securities		(74)		(19)		(93)
Total Borrowings		(85)		(33)		(118)
Change in Interest Paid on Interest-bearing Liabilities		(445)		(1,301)		(1,746)
Change in Net Interest Income		$	(561)	$	(2,536)	$	(3,096)

(1) Tax-exempt income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent.

(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

(3) Nonaccruing loans are included in the daily average loan amounts outstanding.

(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Provision for Credit Losses

The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected credit losses in the portfolio at the balance sheet date. The provision for credit losses decreased $3.6 million to a negative $0.5 million for the three months ended March 31, 2022 compared to $3.1 million for the same period in 2021.

The decrease in the provision for credit losses of $3.6 million for the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to a $2.5 million recovery on a C&I relationship during the first quarter of 2022 and improvement in economic conditions resulting in an improved forecast and declines in our criticized and classified assets and nonperforming loans.

Net loan recoveries were $2.0 million for the three months ended March 31, 2022 compared to net loan charge-offs of $5.8 million for the same period in 2021. The net recoveries were primarily due to the above mentioned recovery that occurred during the first quarter of 2022.

Refer to the "Allowance for Credit Losses" section of this MD&A for further details.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Noninterest Income


	Three Months Ended March 31,
(dollars in thousands)		2022	2021	$ Change			% Change
Net gain on sale of securities					$	—		$	—	$	—	$	—
Debit and credit card					5,063			4,162		901		21.6		%
Service charges on deposit accounts					3,974			3,474		500		14.4		%
Wealth management					3,242			2,944		298		10.1		%
Mortgage banking					1,015			4,310		(3,295)		(76.5)		%

Other					1,932			2,346		(414)		(17.6)		%
Total Noninterest Income					$	15,226		$	17,236	$	(2,010)	(11.7)		%

Noninterest income decreased $2.0 million to $15.2 million for the three months ended March 31, 2022 as compared to the same period in 2021. The decrease in noninterest income primarily related to a decrease of $3.3 million in mortgage banking due to the lower volume of loans originated for sale in the secondary market. Other noninterest income also decreased $0.4 million primarily due to a change in the valuation of our deferred compensation plan, which has a corresponding offset in salaries and employee benefits resulting in no impact to net income compared to the first quarter of 2021. The improving economic environment drove higher customer activity resulting in increased debit and credit card fees of $0.9 million, service charges on deposit accounts of $0.5 million and wealth management income of $0.3 million compared to 2021.

Noninterest Expense


	Three Months Ended March 31,
(dollars in thousands)	2022			2021			$ Change			% Change
Salaries and employee benefits		$	23,712		$	23,327		$	385		1.7	%
Data processing and information technology		4,435			4,225			210			5.0	%
Occupancy		3,882			3,827			55			1.4	%
Furniture, equipment and software		2,777			2,640			137			5.2	%
Professional services and legal		1,949			1,531			418			27.3	%
Other taxes		1,537			1,436			101			7.0	%
Marketing		1,361			1,322			39			3.0	%
FDIC insurance		937			1,046			(109)			(10.4)	%

Other noninterest expense		6,824			6,226			598			9.6	%
Total Noninterest Expense		$	47,414		$	45,580		$	1,834		4.0	%

Noninterest expense increased $1.8 million to $47.4 million for the three months ended March 31, 2022 as compared to the same period in 2021. Professional services and legal increased by $0.4 million due to increased legal expenses as compared to the same period in 2021. Salaries and employee benefits increased $0.4 million due to base rate and incentive increases partially offset by lower pension and medical expense. The decrease in pension expense related to retirees electing lump-sum distributions causing settlement accounting in the same period in 2021. Other noninterest expense increased $0.6 million mainly due to higher other real estate owned, or OREO, expense compared to the same period in 2021.

Provision for Income Taxes

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition as of March 31, 2022

Total assets decreased $56.2 million to $9.4 billion at March 31, 2022 compared to $9.5 billion at December 31, 2021. Cash and due from banks decreased $98.5 million to $823.8 million at March 31, 2022 compared to $922.2 million at December 31, 2021 due to an increase of $117.4 million in securities. Total portfolio loans decreased $36.1 million to $7.0 billion at March 31, 2022 and December 31, 2021. The commercial loan portfolio decreased $74.7 million compared to December 31, 2021. C&I loans decreased $53.7 million which mainly related to a decline in PPP loans of $46.4 million since December 31, 2021. The consumer loan portfolio increased $38.6 million with increases in residential mortgage of $12.6 million, consumer construction of $4.1 million, home equity of $17.6 million, and other consumer of $4.3 million. Excluding the PPP loans, portfolio loans increased $10.3 million compared to December 31, 2021.

Securities increased $117.4 million to $1.0 billion at March 31, 2022 from $910.8 million at December 31, 2021. The increase in securities is primarily due to interest-bearing deposits with banks being redeployed to higher yielding assets. The bond portfolio had a net unrealized loss of $38.8 million at March 31, 2022 compared to a net unrealized gain of $9.4 million at December 31, 2021 due to higher interest rates.

Our deposits decreased $36.1 million, with total deposits of $8.0 billion at both March 31, 2022 and December 31, 2021. Deposits remain stable with an improvement in the overall deposit mix to lower costing products compared to December 31, 2021.

Total borrowings decreased $14.6 million to $146.7 million at March 31, 2022 compared to $161.3 million at December 31, 2021. The decrease in borrowings is primarily related to a decline in securities sold under repurchase agreements of $14.4 million compared to December 31, 2021.

Total shareholders’ equity decreased by $21.5 million to $1.2 billion at March 31, 2022, compared to $1.2 billion at December 31, 2021. The decrease was due to other comprehensive losses of $39.9 million and dividends of $11.4 million offset by net income of $29.1 million. Accumulated other comprehensive loss of $7.1 million at December 31, 2021 increased to $47.0 at March 31, 2022. The $39.9 million increase in accumulated other comprehensive loss was primarily due to net unrealized losses of $38.8 million on our available-for-sale bond portfolio due to interest rate increases from December 31, 2021 to March 31, 2022.

Securities Activity


(dollars in thousands)	March 31, 2022			December 31, 2021			$ Change
U.S. Treasury securities		$	129,994		$	95,327		$	34,667
Obligations of U.S. government corporations and agencies		58,493			70,348			(11,855)
Collateralized mortgage obligations of U.S. government corporations and agencies		385,602			270,294			115,308
Residential mortgage-backed securities of U.S. government corporations and agencies		50,446			56,793			(6,347)
Commercial mortgage-backed securities of U.S. government corporations and agencies		330,811			341,300			(10,489)
Corporate obligations		500			500			—
Obligations of states and political subdivisions		71,234			75,089			(3,855)
Available-for-Sale Debt Securities		1,027,080			909,651			117,429
Marketable equity securities		1,138			1,142			(4)
Total Securities		$	1,028,218		$	910,793		$	117,425

We invest in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of ALCO to reposition the balance sheet for interest rate risk purposes. Securities are subject to market risks that could negatively affect the level of liquidity available to us. Security purchases are subject to an investment policy approved annually by our Board of Directors and administered through ALCO and our treasury function. Securities increased $117.4 million to $1.0 billion at March 31, 2022 from $910.8 million at December 31, 2021. The increase in securities was primarily due to investing interest-bearing deposits with bank into higher yielding assets.

At March 31, 2022 our bond portfolio was in a net unrealized loss position of $38.9 million compared to a net unrealized gain position of $9.4 million at December 31, 2021. At March 31, 2022 total gross unrealized gains in the bond portfolio were $1.6 million offset by gross unrealized losses of $40.5 million compared to December 31, 2021, when total gross unrealized gains were $15.2 million offset by gross unrealized losses of $5.8 million. The decrease in the net unrealized gain position was primarily due to an increase in interest rates from December 31, 2021, to March 31, 2022.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Loan Composition


	March 31, 2022				December 31, 2021
(dollars in thousands)	Amount		% of Loans		Amount		% of Loans		$ Change		% Change
Commercial
Commercial real estate	$	3,257,955	46.8	%	$	3,236,653	46.2	%	$	21,302	0.7	%
Commercial and industrial	1,675,316		24.1	%	1,728,969		24.7	%	(53,653)		(3.1)	%
Commercial construction	398,592		5.7	%	440,962		6.3	%	(42,370)		(9.6)	%

Total Commercial Loans	5,331,863		76.6	%	5,406,584		77.2	%	(74,721)		(1.4)	%
Consumer
Consumer real estate	1,519,751		21.8	%	1,485,478		21.2	%	34,273		2.3	%
Other consumer	112,297		1.6	%	107,928		1.5	%	4,369		4.0	%
Total Consumer Loans	1,632,048		23.4	%	1,593,406		22.8	%	38,642		2.4	%
Total Portfolio Loans	6,963,911		100.0	%	6,999,990		100.0	%	(36,079)		(0.5)	%
Loans held for sale	1,346				1,522				(176)		(11.6)	%
Total Loans	$	6,965,257			$	7,001,512			$	(36,255)	(0.5)	%

The loan portfolio represents the most significant source of interest income for us. The risk that borrowers will be unable to pay such obligations is inherent in the loan portfolio. Other conditions such as downturns in the borrower’s industry or the overall economic climate can significantly impact the borrower’s ability to pay.

Total portfolio loans decreased $36.1 million to $7.0 billion at March 31, 2022 compared to December 31, 2021. Portfolio loans excluding PPP loans increased $10.3 million compared to December 31, 2021. As of March 31, 2022, 74 percent of our total loans are variable rate loans and 26 percent are fixed rate loans.

Commercial loans, including CRE, C&I and commercial construction, comprised 76.6 percent of total portfolio loans at March 31, 2022 and 77.2 percent at December 31, 2021. The commercial loan portfolio decreased $74.7 million at March 31, 2022 compared to December 31, 2021. C&I loans decreased $53.7 million at March 31, 2022 which mainly related to a PPP loan decline of $46.4 million since December 31, 2021.

As of March 31, 2022, we had $41.9 million of PPP loans included in C&I compared to $88.3 million at December 31, 2021. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. These loans carry a fixed rate of 1 percent and a term of two years, or five years for loans approved by the SBA on or after June 5, 2020. Payments are deferred for the first six months of the loan. The loans are 100 percent guaranteed by the SBA. The SBA pays us a processing fee ranging from 1 percent to 5 percent based on the size of the loan.

Consumer loans represent 23.4 percent of our total portfolio loans at March 31, 2022 and 22.8 percent at December 31, 2021. The consumer loan portfolio increased $38.6 million at March 31, 2022 with increases in consumer real estate of $34.3 million and other consumer of $4.4 million compared to December 31, 2021.

Allowance for Credit Losses

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents activity in the ACL for the periods presented:


	Three Months Ended March 31, 2022
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	50,700	$	19,727	$	5,355	$	11,338	$	8,733	$	2,723	$	98,576
Provision for credit losses on loans(1)	(1,996)		(206)		(27)		765		426		340		(698)
Charge-offs	—		—		—		(606)		(78)		(298)		(982)
Recoveries	199		2,716		1		—		37		66		3,019
Net Recoveries/(Charge-offs)	199		2,716		1		(606)		(41)		(232)		2,037
Balance at End of Period	$	48,903	$	22,237	$	5,329	$	11,497	$	9,118	$	2,831	$	99,915
(1) Excludes the provision for credit losses for unfunded commitments.

The following table presents key ACL ratios for the periods presented:


	March 31, 2022		December 31, 2021
Ratio of net charge-offs to average loans outstanding(1)	(0.12)	%	0.49	%
Allowance for credit losses as a percentage of total portfolio loans	1.43	%	1.41	%
Allowance for loan losses as a percentage of total portfolio loans - excluding PPP loans	1.44	%	1.43	%
Allowance for credit losses to nonperforming loans	190	%	149	%

(1) Annualized

The ACL was $99.9 million, or 1.43 percent of total portfolio loans, at March 31, 2022 compared to $98.6 million, or 1.41 percent of total portfolio loans, at December 31, 2021. The increase in the ACL of $1.3 million was due to a $2.7 million increase in specific reserves on loans individually assessed and a $2.0 million increase in the overall qualitative reserve. The increase in specific reserves on loans individually assessed was due to a $2.7 million increase for a C&I relationship due to continued market deterioration in the estimated enterprise value of the company. The increase in the overall qualitative reserve was the result of additional segment allocations made in our healthcare and C&I portfolios due to continued uncertainty related to the COVID-19 variant and an increase in our economic forecast due primarily to concerns with rising inflation and macroeconomic conditions. Offsetting this increase was a $3.4 million decrease in the quantitative reserve due primarily to improving trends in our hotel portfolio.

Net loan recoveries were $2.0 million, or (0.12) percent annualized as a percentage of average loans, for the three months ended March 31, 2022. The net recoveries primarily related to a $2.5 million recovery on a C&I relationship during the first quarter of 2022.

Substandard loans decreased $25.4 million to $209.8 million at March 31, 2022 compared to $235.2 million at December 31, 2021. The decrease in substandard loans was primarily due to $19.7 million of loan upgrades in our hotel portfolio and $12.0 million of various loan payoffs and pay downs. The decrease in substandard loans was partially offset by the addition of a $10.5 million CRE relationship, which was downgraded to substandard due to financial deterioration that led to cash flow shortfalls. Special mention loans decreased $24.5 million to $167.8 million at March 31, 2022 compared to $192.3 million at December 31, 2021. The decrease in special mention loans was primarily due to the upgrade of three hotel relationships totaling $21.4 million.

Troubled debt restructurings, or TDRs, decreased $5.6 million to $26.1 million at March 31, 2022 compared to $31.7 million at December 31, 2021. The decrease in TDRs was primarily due to the payoff of a $4.2 million C&I relationship and other loan pay downs. Total TDRs of $26.1 million included $10.7 million, or 41.0 percent, that were performing and $15.4 million, or 59.0 percent, that were nonperforming at March 31, 2022.

Our allowance for credit losses on unfunded commercial lending commitments and letters of credit provide for the risk of expected loss in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Condensed Consolidated Statements of Comprehensive Income (Loss). The allowance for unfunded loan commitments increased $0.2 million to $5.4 million at March 31, 2022 compared to $5.2 million at December 31, 2021. This change was primarily due to higher loss rates in the construction portfolio. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nonperforming assets consist of nonaccrual loans, nonaccrual TDRs and OREO. The following table summarizes nonperforming assets for the dates presented:


(dollars in thousands)	March 31, 2022				December 31, 2021				$ Change
Nonperforming Loans (Excluding TDRs)
Commercial real estate		$	24,821			$	29,791			$	(4,970)
Commercial and industrial		345				350				(5)
Commercial construction		384				384				—
Business banking		6,411				7,945				(1,534)
Consumer real estate		5,049				5,889				(840)
Other Consumer		125				158				(33)
Total Nonperforming Loans (Excluding TDRs)		37,135				44,517				(7,382)
Nonperforming Troubled Debt Restructurings
Commercial real estate		969				1,697				(728)
Commercial and industrial		10,225				14,889				(4,664)
Commercial construction		480				2,087				(1,607)
Business banking		1,586				1,696				(110)
Consumer real estate		2,129				1,405				724
Other Consumer		—				—				—
Total Nonperforming Troubled Debt Restructurings		15,389				21,774				(6,385)
Total Nonperforming Loans		52,524				66,291				(13,767)
OREO		7,028				13,313				(6,285)
Total Nonperforming Assets		$	59,552			$	79,604			$	(20,052)
Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans		0.75		%		0.95		%
Nonperforming assets as a percent of total portfolio loans plus OREO		0.85		%		1.13		%

Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or generally when interest or principal payments are 90 days or more past the contractual due date. Nonperforming loans decreased $13.8 million, or 20.8 percent, to $52.5 million at March 31, 2022 compared to $66.3 million at December 31, 2021. The significant decrease in nonperforming loans primarily related to the payoff of a $4.2 million C&I relationship and the return to performing status of three hotel loans totaling $4.6 million. The decrease in OREO during the first quarter of 2022 related to the sale of a property for $6.3 million.

Deposits


(dollars in thousands)	March 31, 2022			December 31, 2021			$ Change

Noninterest-bearing demand		$	2,740,315		$	2,748,586		$	(8,271)
Interest-bearing demand		1,070,656			979,133			91,523
Money market		1,992,916			2,070,579			(77,663)
Savings		1,117,985			1,110,155			7,830
Certificates of deposit		1,038,586			1,088,071			(49,485)







Total Deposits		$	7,960,458		$	7,996,524		$	(36,066)

Deposits are our primary source of funds. We believe that our deposit base is stable and that we have the ability to attract new deposits. Total deposits decreased $36.1 million, or 0.5%, with an improving mix to lower yielding deposit-products compared to December 31, 2021.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Borrowings


(dollars in thousands)	March 31, 2022			December 31, 2021			$ Change
Securities sold under repurchase agreements		$	70,112		$	84,491		$	(14,379)

Long-term borrowings		22,171			22,430			(259)
Junior subordinated debt securities		54,408			54,393			15
Total Borrowings		$	146,691		$	161,314		$	(14,623)

Borrowings are an additional source of funding for us. Total borrowings decreased $14.6 million compared to December 31, 2021 related to securities sold under repurchase agreements due to normal customer activity.

Information pertaining to short-term borrowings is summarized in the tables below for the three months ended March 31, 2022 and for the twelve months ended December 31, 2021.


	Securities Sold Under Repurchase Agreements
(dollars in thousands)	March 31, 2022			December 31, 2021
Balance at the period end	$	70,112		$	84,491
Average balance during the period	$	81,790		$	69,964
Average interest rate during the period	0.10		%	0.11		%
Maximum month-end balance during the period	$	89,366		$	84,491
Average interest rate at the period end	0.10		%	0.10		%

Information pertaining to long-term borrowings is summarized in the tables below for the three months ended March 31, 2022 and for the twelve months ended December 31, 2021.


	Long-Term Borrowings
(dollars in thousands)	March 31, 2022			December 31, 2021
Balance at the period end	$	22,171		$	22,430
Average balance during the period	$	22,310		$	22,995
Average interest rate during the period	1.95		%	1.99		%
Maximum month-end balance during the period	$	22,344		$	23,549
Average interest rate at the period end	1.94		%	1.94		%

	Junior Subordinated Debt Securities
(dollars in thousands)	March 31, 2022			December 31, 2021
Balance at the period end	$	54,408		$	54,393
Average balance during the period	$	54,398		$	61,653
Average interest rate during the period	2.95		%	2.99		%
Maximum month-end balance during the period	$	54,408		$	64,128
Average interest rate at the period end	3.26		%	2.69		%

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. Our primary future cash needs are centered on the ability to (i) satisfy the financial needs of depositors who may want to withdraw funds or of borrowers needing to access funds to meet their credit needs and (ii) to meet our future cash commitments under contractual obligations with third parties. In order to manage liquidity risk, our Board of Directors has delegated authority to ALCO for the formulation, implementation, and oversight of liquidity risk management for S&T. The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events. The ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and having a detailed contingency funding plan. The ALCO policy guidelines define graduated risk tolerance levels. If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position.

Our primary funding and liquidity source is a stable customer deposit base. We believe S&T has the ability to retain existing and attract new deposits, mitigating any funding dependency on other more volatile sources. Refer to the "Financial Condition as of March 31, 2022-Deposits" section of this MD&A, for additional discussion on deposits. Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified. Additional funding sources accessible to S&T include borrowing availability at the Federal Home Loan Bank, or FHLB, of Pittsburgh, federal funds lines with other financial institutions, the brokered deposit market and borrowing availability through the Federal Reserve Borrower-In-Custody program.

An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets. Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate, and high. At March 31, 2022, we had $1.3 billion in highly liquid assets, which consisted of $750.9 million in interest-bearing deposits with banks, $585.4 million in unpledged securities, and $1.4 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of 14.2 percent at March 31, 2022. Also, at March 31, 2022, we had remaining borrowing availability of $2.6 billion with the FHLB of Pittsburgh. For more information regarding our outstanding borrowings refer to the "Financial Condition as of March 31, 2022- Borrowings" section of this MD&A for more details.

The following table summarizes capital amounts and ratios for S&T and S&T Bank for the dates presented:


(dollars in thousands)	Adequately Capitalized		Well- Capitalized		March 31, 2022				December 31, 2021
					Amount		Ratio		Amount		Ratio
S&T Bancorp, Inc.
Tier 1 leverage	4.00	%	5.00	%	$	897,995	9.85	%	$	889,785	9.74	%
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	868,995		12.26	%	860,785		12.03	%
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	897,995		12.67	%	889,785		12.43	%
Total capital to risk-weighted assets	8.00	%	10.00	%	1,004,902		14.18	%	987,420		13.79	%
S&T Bank
Tier 1 leverage	4.00	%	5.00	%	$	870,269	9.55	%	$	864,127	9.46	%
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	870,269		12.29	%	864,127		12.09	%
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	870,269		12.29	%	864,127		12.09	%
Total capital to risk-weighted assets	8.00	%	10.00	%	977,177		13.79	%	961,762		13.45	%

On March 27, 2020, the regulators issued interim final rule, or IFR, “Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity due to the COVID-19 pandemic. The IFR provides financial institutions that adopted CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). We adopted CECL effective January 1, 2020 and elected to implement the five-year transition.

We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended, with the SEC, which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and warrants. We may use the proceeds from the sale of securities for general corporate purposes, which could include investments at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases. As of March 31, 2022, we had not issued any securities pursuant to this shelf registration statement.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

S&T is monitoring and will continue to monitor the impact of the pandemic and has taken and will continue to take steps to mitigate the potential risks and impact on our liquidity and capital resources. Due to the economic uncertainty, we are taking a prudent approach to capital management.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is defined as the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity prices can adversely affect a financial institution’s earnings or capital. For most financial institutions, including S&T, market risk primarily reflects exposures to changes in interest rates. Interest rate fluctuations affect earnings by changing net interest income and other interest-sensitive income and expense levels. Interest rate changes also affect capital by changing the net present value of a bank’s future cash flows, and the cash flows themselves, as rates change. Accepting this risk is a normal part of banking and can be an important source of profitability and enhancing shareholder value. However, excessive interest rate risk can threaten a bank’s earnings, capital, liquidity and solvency. Our sensitivity to changes in interest rate movements is continually monitored by the ALCO. The ALCO monitors and manages market risk through rate shock analyses, economic value of equity, or EVE, analyses and by performing stress tests and simulations to mitigate earnings and market value fluctuations due to changes in interest rates.

Rate shock analyses results are compared to a base case to provide an estimate of the impact that market rate changes may have on 12 and 24 months of pretax net interest income. The base case and rate shock analyses are performed on a static balance sheet. A static balance sheet is a no growth balance sheet in which all maturing and/or repricing cash flows are reinvested in the same product at the existing product spread. Rate shock analyses assume an immediate parallel shift in market interest rates and also include management assumptions regarding the impact of interest rate changes on non-maturity deposit products (noninterest-bearing demand, interest-bearing demand, money market and savings) and changes in the prepayment behavior of loans and securities with optionality. S&T policy guidelines limit the change in pretax net interest income over 12 and 24 month horizons using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in pretax net interest income by graduated risk tolerance levels of minimal, moderate and high. We have temporarily suspended the analyses on downward rate shocks of 200 basis points or more because they do not provide meaningful insight into our interest rate risk position.

In order to monitor interest rate risk beyond the 24 month time horizon of rate shocks on pretax net interest income, we also perform EVE analyses. EVE represents the present value of all asset cash flows minus the present value of all liability cash flows. EVE change results are compared to a base case to determine the impact that market rate changes may have on our EVE. As with rate shock analyses on pretax net interest income, EVE analyses incorporate management assumptions regarding prepayment behavior of fixed rate loans and securities with optionality and the behavior and value of non-maturity deposit products. S&T policy guidelines limit the change in EVE using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in EVE by graduated risk tolerance levels of minimal, moderate and high. We have also temporarily suspended the downward rate shocks of 200 basis points or more for EVE.

The table below reflects the rate shock analyses results for the 1-12 and 13-24 month periods of pretax net interest income and EVE.


	March 31, 2022			December 31, 2021
	1 - 12 Months	13 - 24 Months	% Change in EVE	1 - 12 Months	13 - 24 Months	% Change in EVE
Change in Interest Rate (basis points)	% Change in Pretax Net Interest Income	% Change in Pretax Net Interest Income		% Change in Pretax Net Interest Income	% Change in Pretax Net Interest Income
400	37.7	44.2	6.4	30.4	40.3	18.4
300	28.2	33.2	10.4	22.5	30.0	19.9
200	18.7	22.2	11.1	14.9	20.2	18.4
100	9.1	10.9	7.7	7.0	9.9	11.9
-100	(6.5)	(9.1)	(18.9)	(4.6)	(8.4)	(26.3)

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The results from the rate shock analyses on net interest income are consistent with having an asset sensitive balance sheet. Having an asset sensitive balance sheet means more assets than liabilities will reprice during the measured time frames. The implications of an asset sensitive balance sheet will differ depending upon the change in market interest rates. For example, with an asset sensitive balance sheet in a declining interest rate environment, more assets than liabilities will decrease in rate. This situation could result in a decrease in net interest income and operating income. Conversely, with an asset sensitive balance sheet in a rising interest rate environment, more assets than liabilities will increase in rate. This situation could result in an increase in net interest income and operating income.

Our rate shock analyses show an improvement in the percentage change in pretax net interest income in the rates up scenarios and a decline in the rates down scenarios when comparing March 31, 2022 to December 31, 2021. We have become more asset sensitive due to the discontinuation of our indexed money market deposit product. Our EVE analyses show a decline in the percentage change in EVE in the rates up scenarios and an improvement in the rates down scenario when comparing March 31, 2022 to December 31, 2021. The EVE decline is due to the impact of a steepened yield curve on the value of non-maturity deposits.

In addition to rate shocks and EVE analyses, we perform a market risk stress test at least annually. The market risk stress test includes sensitivity analyses and simulations. Sensitivity analyses are performed to help us identify which model assumptions cause the greatest impact on pretax net interest income. Sensitivity analyses may include changing prepayment behavior of loans and securities with optionality and the impact of interest rate changes on non-maturity deposit products. Simulation analyses may include the potential impact of rate changes other than the policy guidelines, yield curve shape changes, significant balance mix changes and various growth scenarios.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of S&T’s Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO (its principal executive officer and principal financial officer, respectively), management has evaluated the effectiveness of the design and operation of S&T’s disclosure controls and procedures as of March 31, 2022. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission, or the SEC, and that such information is accumulated and communicated to S&T’s management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Based on and as of the date of such evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were effective in all material respects, as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2022, there were no changes made to S&T’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, S&T’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There have been no material changes to the risk factors that we have previously disclosed in Part I, Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022 other than the risks described below.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 1A. Risk Factors - continued

Russia’s invasion of Ukraine has created significant economic and financial disruptions and uncertainties, which could adversely affect our business, financial condition, and results of operations

In late February 2022, Russia launched a large-scale military attack on Ukraine. In response to the military action by Russia, government actions, including broad-ranging economic sanctions against Russia, have been taken by the United States, the United Kingdom, the European Union, and other countries. The U.S. and global markets are experiencing volatility and disruption following the start of this military conflict and imposition of sanctions, impacting the financial and commodities markets. The continued impact on financial markets, including the level and volatility of interest rates, could impact our earnings. Furthermore, continued increases in commodity prices contributing to higher inflation could negatively impact our customers and our earnings. Russian military actions and the resulting sanctions could further adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. In addition, Russia may take retaliatory actions and other counter measures including cyberattacks against the U.S., its government, infrastructure, and businesses, including S&T. Although the extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations remains uncertain, these consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations, and the price of our common stock to be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities

The following table is a summary of our purchases of common stock during the first quarter of 2022:


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plan(1)	Approximate dollar value of shares that may yet be purchased under the plan
				$37,441,683
01/01/2022 - 01/31/2022	—	$—	—	37,441,683

02/01/2022 - 02/28/2022	—	—	—	37,441,683

03/01/2022 - 03/31/2022	—	—	—	37,441,683
Total	—	$—	—	$37,441,683

(1) On March 21, 2022, our Board of Directors authorized an extension of the $50 million share repurchase plan, which was set to expire March 31, 2022. This authorization extended the expiration date of the repurchase plan through March 31, 2023. The plan permits S&T to repurchase from time to time up to the previously authorized $50 million in aggregate value of shares of S&T's common stock, with $37.4 million of capacity remaining at March 31, 2022, through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions, the trading price of common stock, legal and contractual requirements, applicable securities laws and S&T's financial performance. The repurchase plan does not obligate us to repurchase any particular number of shares. We expect to fund repurchases from cash on hand and internally generated funds. Share repurchases will not occur unless permissible under applicable laws.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 6. Exhibits





2.1			Agreement and Plan of Merger, dated June 5, 2019, by and between DNB Financial Corporation and S&T Bancorp, Inc. Filed as Exhibit 2.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 5, 2019, and incorporated herein by reference.
31.1			Rule 13a-14(a) Certification of the Chief Executive Officer.
31.2			Rule 13a-14(a) Certification of the Chief Financial Officer.
32			Rule 13a-14(b) Certification of the Chief Executive Officer and Chief Financial Officer.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema
101.CAL			XBRL Taxonomy Extension Calculation Linkbase
101.DEF			XBRL Taxonomy Extension Definition Linkbase
101.LAB			XBRL Taxonomy Extension Label Linkbase
101.PRE			XBRL Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

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S&T BANCORP, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			S&T Bancorp, Inc. (Registrant)

May 4, 2022			/s Mark Kochvar
			Mark Kochvar Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)