INDIANA, Pa., Jan. 30 S&T Bancorp, Inc. (Nasdaq: STBA - News) today announced earnings for the fourth quarter and the year ended December 31, 2008. Diluted earnings per share for the fourth quarter of 2008 increased 6 percent to $0.57 per share compared to $0.54 per share in the fourth quarter of 2007. Net income for the fourth quarter of 2008 increased 19 percent to $15.8 million as compared to $13.3 million in the comparable period one year ago.
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For the year ended December 31, 2008, diluted earnings per share increased 1 percent to $2.28 from $2.26 in 2007, and net income increased 7 percent to $60.2 million from $56.1 million in 2007. Return on average assets and return on average equity for 2008 were 1.52 percent and 14.77 percent, respectively, compared to 1.68 percent and 16.97 percent in 2007.
The differences between percentage changes for net income and earnings per share is primarily due to the 2.8 million shares issued as partial payment for the IBT acquisition in the second quarter of 2008.
Todd D. Brice, president and chief executive officer, commented, "Our markets continue to present unique challenges, as well as opportunities, for banks like us in this ongoing economic crisis. I am extremely proud how well our folks have recognized and have taken advantage of the opportunities, as evidenced by our record loan growth and earnings performance in 2008."
Net interest income, on a fully taxable equivalent basis, increased approximately $10.8 million or 35 percent for the quarter ending December 31, 2008, and increased $27.9 million or 23 percent for the 12 months of 2008, as compared to the same periods of 2007. Net interest margin on a fully taxable equivalent basis was 4.07 percent, 4.13 percent and 4.07 percent for the third quarter, fourth quarter and full year of 2008, respectively. For the same periods of 2007, the net margin on a fully taxable equivalent basis was 3.86 percent, 3.94 percent and 3.87 percent, respectively.
Earning assets have increased $875.4 million over the past 12 months, primarily driven by $752.0 million acquired in the IBT merger, a $253.0 million or 12 percent organic increase in commercial lending and a $27.6 million or 4 percent organic increase in consumer lending. Investment securities increased over the 12-month period by $103.6 million, primarily due to the IBT merger, offset by $125.3 million of matured investment securities that were not replaced during the period and the sale of $130.6 million of securities from the restructuring of the IBT bond portfolio in the second quarter of 2008. Brice added, "The growth that we have experienced in our commercial and retail lines of business are a direct result of our relationship banking focus. Furthermore, the current environment has provided opportunities to develop new relationships, as well as to enhance our pricing and credit structure on new business. The IBT acquisition, which was consummated in the second quarter of 2008, has enabled us to expand our presence in Westmoreland and Allegheny Counties and is contributing to our organic growth. This in-market expansion will strengthen our strategic positioning in these markets."
Overall deposits increased $33.0 million during the past 12 months, excluding $573.6 million of deposits that were acquired with the IBT merger. Brice added, "While core deposits are our most stable and lowest cost of funds overall, from time to time, we may experience periods like we are in today where borrowings have a slight pricing advantage. We are willing to accept slightly less robust deposit growth in the short run to take advantage of these unique circumstances. We know that we have excellent and very competitive deposit products, especially our cash management services and electronic delivery channels which we believe will continue to keep us competitive and serve our customers' needs well into the future. Particularly encouraging is the $78.9 million or 13 percent organic growth in our demand deposit accounts."
Noninterest income, excluding investment security gains, increased $2.3 million for the 12-month period ended December 31, 2008, as compared to 2007, primarily due to increases of $2.2 million for deposit fees, $1.2 million of debit/credit card activities, $0.9 million of commercial swap revenue, $0.8 million of insurance revenues, $0.6 million of brokerage commissions and a $0.4 million non-recurring gain from the VISA initial public offering in the first quarter of 2008. Deposit fees and debit/credit card revenues were favorably affected by the recent IBT merger. These increases were partially offset by the reclassification of investment securities held in the deferred compensation plan trust to a trading classification from available-for-sale classification. The reclassification generated a one-time favorable adjustment to other noninterest income of $1.2 million or approximately $0.03 earnings per share in the third quarter of 2007. Also reducing noninterest income by $1.6 million is the current year market adjustment for the deferred compensation plans with an offsetting reduction to salaries and employee benefit expenses, and decreases in mortgage banking and letters of credit fees of $1.0 million and $0.3 million, respectively.
Investment security losses for 2008 were $1.7 million, a $5.5 million decrease from the $3.8 million of gains realized during 2007. Included in the 2008 results is $0.7 million of realized losses from restructuring the IBT bond portfolio in the second quarter 2008, and $4.3 million of other-than-temporary impairment charges on seven bank equity holdings. Two of these charges totaling $0.4 million occurred in the fourth quarter 2008. Partially offsetting the realized losses and impairments were $3.3 million of realized equity security gains for 2008. The equity securities portfolio currently has a market value of $14.9 million at December 31, 2008, as compared to $41.3 million at December 31, 2007. During the past two years, S&T has implemented a strategy to methodically sell holdings in this portfolio and only retain strategic positions in bank holding companies within our market area.
Noninterest expense increased $10.3 million or 14 percent for the full year 2008 as compared to the 2007 period. Salaries and employee benefits increased $2.3 million primarily due to the addition of 93 average full-time equivalent staff, mostly due to the IBT acquisition, and normal merit increases that occur each year-end. Salaries and employee benefits were also positively affected by the aforementioned current year market adjustment for the deferred compensation plans. Other significant factors contributing to the increase include $1.1 million of nonrecurring merger expenses, a $1.4 million other-than-temporary impairment charge for affordable housing limited partnerships and $1.4 million increased reserves for unfunded loan commitments and letters of credit, most of which occurred in the second quarter of 2008. Occupancy, equipment and data processing costs increased during the last 12 months, primarily through the net acquisition of eight new branches with the IBT merger, and one denova branch opening by S&T.
The efficiency ratio, which measures noninterest expense to noninterest income, excluding net security gains, plus net interest income on a fully taxable equivalent basis, was 45 percent and 47 percent for the twelve-month periods ended December 31, 2008 and 2007, respectively.
Nonperforming assets totaled $43.3 million or 0.98 percent of total assets at December 31, 2008 as compared to $33.9 million or 0.76 percent at September 30, 2008 and $17.3 million or 0.51 percent at December 31, 2007. During the fourth quarter of 2008, three significant relationships were placed into non-performing status, including a $3.5 million commercial mixed use loan and a $4.0 million retail strip center; at this time, collateral for both loans appears to be sufficient to satisfy the outstanding loan balance. As previously disclosed, on January 14, 2009 we discovered that a commercial customer with loans outstanding of $6.7 million was misappropriating construction funds. An investigation was conducted to determine our current collateral position. As a result of our investigation, we have recognized a $4.6 million charge-off in the fourth quarter of 2008. The residual amount of $2.1 million appears to be adequately collateralized and is classified as nonperforming pending foreclosure or sale. Net loan charge-offs for the full year were $10.0 million or 0.31 percent of average loans compared to $4.7 million or 0.17 percent for 2007.
The allowance for loan losses at December 31, 2008 was $42.7 million or 1.20 percent of total loans as compared to $34.3 million or 1.23 percent at December 31, 2007. In the fourth quarter of 2008, S&T recorded a provision for loan loss of $5.6 million, including $4.6 million related to the commercial loan fraud, as compared to $1.2 million in the fourth quarter of 2007. For the 12 months ended December 31, 2008, the provision for loan loss was $12.9 million as compared to $5.8 million for the 12 months ended December 31, 2007. The provision for loan losses is based upon management's detailed quarterly analysis of the adequacy of the allowance for loan losses. Brice added, "2008 was certainly an unprecedented period of economic uncertainty for businesses and consumers. Asset quality is one of the biggest risks that we manage, and we are emphasizing its importance throughout our organization in 2009. We will not be immune to the overall decline in the economy, but I do believe that our conservative underwriting practices will serve us well during this challenging period."
On December 23, 2008, S&T Bancorp, Inc. announced that the U.S. Treasury approved S&T for participation in the Capital Purchase Program. The goal of this new legislation is to promote lending by healthy banks to individuals and businesses in order to stimulate the economy. S&T received $108.6 million under this program on January 16, 2009. Brice commented, "I am pleased that S&T was among selected banks approved by the U.S. Treasury to participate in this program. The additional funds will strengthen our already well capitalized balance sheet and enable us to continue to meet the credit needs of our customers."
S&T Bancorp, Inc. declared a common stock quarterly dividend of $0.31 per share on December 15, 2008 which was payable on January 23, 2009 to shareholders of record as of December 31, 2008. This dividend represents a 3.5 percent projected annual yield utilizing the December 31, 2008 closing market price of $35.50.
About S&T Bancorp, Inc.
Headquartered in Indiana, PA, S&T Bancorp, Inc. operates 55 offices within Allegheny, Armstrong, Blair, Butler, Cambria, Clarion, Clearfield, Indiana, Jefferson and Westmoreland counties. With assets of $4.4 billion, S&T Bancorp stock trades on the NASDAQ Global Select Market under the symbol STBA.
This information may contain forward-looking statements regarding future financial performance which are not historical facts and which involve risks and uncertainties. Actual results and performance could differ materially from those anticipated by these forward-looking statements. Factors that could cause such a difference include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, asset quality, including real estate and other collateral values, and competition. This information should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K for S&T Bancorp, Inc. and subsidiaries.
S&T Bancorp, Inc.
Consolidated Selected Financial Data
December 31, 2008
(Dollars in thousands, except per share data)
2007
----
March June September December
For the period: 1Q 2Q 3Q 4Q
-- -- -- --
Interest Income $52,934 $54,274 $54,761 $53,637
Interest Expense 24,725 25,321 25,485 23,636
------ ------ ------ ------
Net Interest Income 28,209 28,953 29,276 30,001
Taxable Equivalent
Adjustment 1,186 1,216 1,170 1,156
----- ----- ----- -----
Net Interest Income
(FTE) 29,395 30,169 30,446 31,157
Provision For Loan Losses 2,178 1,305 1,142 1,187
----- ----- ----- -----
Net Interest Income
After Provisions (FTE) 27,217 28,864 29,304 29,970
------ ------ ------ ------
Security Gains and
Losses, Net 1,656 481 1,129 579
Service Charges and Fees 2,343 2,529 2,605 2,647
Wealth Management 1,855 1,978 1,751 1,886
Insurance 1,894 1,792 1,874 1,726
Other 2,424 2,744 4,270 2,443
----- ----- ----- -----
Total Noninterest
Income 8,516 9,043 10,500 8,702
Salaries and Employee
Benefits 9,934 10,073 9,910 10,470
Occupancy and Equip.
Expense, Net 2,261 2,447 2,423 2,452
Data Processing Expense 1,234 1,301 1,179 1,166
FDIC Expense 76 77 74 75
Other 4,084 4,163 4,543 5,518
----- ----- ----- -----
Total Noninterest
Expense 17,589 18,061 18,129 19,681
------ ------ ------ ------
Income Before Taxes 19,800 20,327 22,804 19,570
Taxable Equivalent
Adjustment 1,186 1,216 1,170 1,156
Applicable Income Taxes 5,316 5,235 5,973 5,103
----- ----- ----- -----
Net Income $13,298 $13,876 $15,661 $13,311
======= ======= ======= =======
Per Common Share Data:
Shares Outstanding
at End of Period 24,897,787 24,468,671 24,543,177 24,551,087
Average Shares
Outstanding -Diluted 25,389,584 24,847,410 24,690,735 24,677,720
Net Income - Diluted $0.52 $0.56 $0.63 $0.54
Dividends Declared $0.30 $0.30 $0.30 $0.31
Book Value $13.16 $12.98 $13.36 $13.75
Market Value $33.04 $32.90 $32.09 $27.64
2008
----
March June September December
For the period: 1Q 2Q 3Q 4Q
-- -- -- --
Interest Income $50,458 $50,433 $57,416 $57,811
Interest Expense 19,909 16,791 18,245 17,226
------ ------ ------ ------
Net Interest Income 30,549 33,642 39,171 40,585
Taxable Equivalent
Adjustment 1,148 1,227 1,385 1,388
----- ----- ----- -----
Net Interest Income
(FTE) 31,697 34,869 40,556 41,973
Provision For Loan Losses 1,279 (118) 6,156 5,561
----- ---- ----- -----
Net Interest Income
After Provisions (FTE) 30,418 34,987 34,400 36,412
------ ------ ------ ------
Security Gains and Losses,
Net 611 (1,829) (341) (92)
Service Charges and Fees 2,402 2,754 3,599 3,567
Wealth Management 1,862 1,907 2,118 2,081
Insurance 1,997 2,042 2,073 1,984
Other 2,638 3,100 2,811 2,168
----- ----- ----- -----
Total Noninterest
Income 8,899 9,803 10,601 9,800
Salaries and Employee
Benefits 10,060 10,514 11,725 10,409
Occupancy and Equip.
Expense, Net 2,660 2,636 2,761 2,838
Data Processing Expense 1,071 1,668 1,365 1,384
FDIC Expense 75 74 131 129
Other 4,089 7,492 6,358 6,363
----- ----- ----- -----
Total Noninterest
Expense 17,955 22,384 22,340 21,123
------ ------ ------ ------
Income Before Taxes 21,973 20,577 22,320 24,997
Taxable Equivalent
Adjustment 1,148 1,227 1,385 1,388
Applicable Income Taxes 5,969 5,489 5,249 7,809
----- ----- ----- -----
Net Income $14,856 $13,861 $15,686 $15,800
======= ======= ======= =======
Per Common Share Data:
Shares Outstanding at
End of Period 24,615,136 27,408,633 27,588,510 27,632,928
Average Shares
Outstanding -
Diluted 24,680,484 25,503,920 27,602,216 27,722,550
Net Income - Diluted $0.60 $0.54 $0.57 $0.57
Dividends Declared $0.31 $0.31 $0.31 $0.31
Book Value $14.18 $16.00 $16.34 $16.24
Market Value $32.17 $29.06 $36.83 $35.50
Year-to-date
------------
December December
For the period: 2008 2007
---- ----
Interest Income $216,118 $215,605
Interest Expense 72,171 99,167
------ ------
Net Interest Income 143,947 116,438
Taxable Equivalent Adjustment 5,147 4,727
----- -----
Net Interest Income (FTE) 149,094 121,165
Provision For Loan Losses 12,878 5,812
------ -----
Net Interest Income
After Provisions (FTE) 136,216 115,353
------- -------
Security Gains and Losses, Net (1,651) 3,844
Service Charges and Fees 12,322 10,124
Wealth Management 7,967 7,470
Insurance 8,096 7,285
Other 10,718 11,882
------ ------
Total Noninterest Income 39,103 36,761
Salaries and Employee Benefits 42,708 40,387
Occupancy and Equip. Expense, Net 10,895 9,583
Data Processing Expense 5,488 4,880
FDIC Expense 409 302
Other 24,301 18,308
------ ------
Total Noninterest Expense 83,801 73,460
------ ------
Income Before Taxes 89,867 82,498
Taxable Equivalent Adjustment 5,147 4,727
Applicable Income Taxes 24,517 21,627
------ ------
Net Income $60,203 $56,144
======= =======
Per Common Share Data:
Shares Outstanding at End of
Period 27,632,928 24,551,087
Average Shares Outstanding -
Diluted 26,384,309 24,888,574
Net Income - Diluted $2.28 $2.26
Dividends Declared $1.24 $1.21
Book Value $16.24 $13.75
Market Value $35.50 $27.64
S&T Bancorp, Inc.
Consolidated Selected Financial Data
December 31, 2008
(Dollars in thousands)
2007
----
March June September December
Asset Quality Data 1Q 2Q 3Q 4Q
------------------ -- -- -- --
Nonaccrual Loans and
Nonperforming Loans $19,854 $14,944 $14,445 $16,798
Assets acquired through
foreclosure or
repossession 606 610 869 488
Nonperforming Assets 20,460 15,554 15,314 17,286
Allowance for Loan Losses 35,319 35,808 34,144 34,345
Nonperforming Loans / Loans 0.73% 0.54% 0.52% 0.60%
Allowance for Loan
Losses /Loans 1.29% 1.31% 1.24% 1.23%
Allowance for Loan
Losses / Nonperforming Loans 178% 240% 236% 204%
Net Loan Charge-offs
(Recoveries) 78 817 2,806 986
Net Loan Charge-offs
(Recoveries)
(annualized)/Average Loans 0.01% 0.12% 0.41% 0.14%
Balance Sheet (Period-End)
--------------------------
Assets $3,361,963 $3,368,761 $3,348,096 $3,407,621
Earning Assets 3,146,934 3,141,844 3,126,714 3,169,594
Securities 412,384 398,612 375,151 372,655
Loans, Gross 2,734,550 2,743,232 2,751,564 2,796,939
Total Deposits 2,576,887 2,624,495 2,620,176 2,621,825
Non-Interest Bearing
Deposits 444,525 446,455 451,196 459,708
NOW, Money Market &
Savings 1,204,833 1,230,290 1,233,969 1,243,061
CD's $100,000 and over 259,390 258,311 250,011 249,643
Other Time Deposits 668,139 689,439 685,000 669,413
Short-term borrowings 169,552 144,342 125,809 180,258
Long-term Debt 246,715 246,487 236,255 226,021
Shareholders' Equity 327,559 317,707 327,863 337,560
Balance Sheet (Daily
Averages)
--------------------
Assets $3,312,784 $3,344,544 $3,339,979 $3,346,685
Earning Assets 3,108,328 3,134,253 3,127,103 3,137,967
Securities 420,645 403,351 384,405 370,100
Loans, Gross 2,687,564 2,730,618 2,740,458 2,767,615
Deposits 2,550,819 2,578,878 2,623,770 2,620,448
Shareholders' Equity 339,168 325,966 324,124 333,880
2008
----
March June September December
Asset Quality Data 1Q 2Q 3Q 4Q
------------------ -- -- -- --
Nonaccrual Loans and
Nonperforming Loans $23,212 $15,959 $32,793 $42,466
Assets acquired through
foreclosure or repossession 630 1,884 1,111 851
Nonperforming Assets 23,842 17,843 33,904 43,317
Allowance for Loan Losses 35,717 38,796 43,235 42,689
Nonperforming Loans / Loans 0.81% 0.46% 0.92% 1.19%
Allowance for Loan
Losses / Loans 1.25% 1.12% 1.21% 1.20%
Allowance for Loan Losses /
Nonperforming Loans 154% 243% 132% 101%
Net Loan Charge-offs
(Recoveries) (94) 2,224 1,717 6,107
Net Loan Charge-offs
(Recoveries)
(annualized)/
Average Loans -0.01% 0.29% 0.20% 0.68%
Balance Sheet (Period-End)
--------------------------
Assets $3,463,806 $4,353,568 $4,461,085 $4,438,368
Earning Assets 3,212,919 3,934,187 4,075,431 4,044,970
Securities 362,053 466,524 496,844 476,255
Loans, Gross 2,850,866 3,467,663 3,578,587 3,568,716
Total Deposits 2,605,187 3,114,560 3,131,882 3,228,416
Non-Interest Bearing
Deposits 471,040 593,339 600,246 600,282
NOW, Money Market &
Savings 1,203,833 1,325,755 1,280,816 1,334,324
CD's $100,000 and over 250,489 329,087 353,167 377,748
Other Time Deposits 679,825 866,379 897,653 916,062
Short-term borrowings 211,391 472,045 552,505 421,894
Long-term Debt 246,403 281,163 280,921 270,950
Shareholders' Equity 349,073 438,499 450,717 448,694
Balance Sheet (Daily
Averages)
--------------------
Assets $3,407,665 $3,701,389 $4,346,481 $4,419,465
Earning Assets 3,198,279 3,434,268 3,961,327 4,042,118
Securities 369,400 386,243 472,293 490,754
Loans, Gross 2,828,762 3,048,024 3,488,843 3,551,179
Deposits 2,579,321 2,712,198 3,086,428 3,205,711
Shareholders' Equity 345,939 377,160 447,941 458,600
S&T Bancorp, Inc.
Consolidated Selected Financial Data
December 31, 2008
(Dollars in thousands, except per share data)
2007
----
Profitability Ratios March June September December
(annualized) 1Q 2Q 3Q 4Q
-------------------- -- -- -- --
Return on Average Assets 1.63% 1.66% 1.86% 1.58%
Return on Average
Shareholders' Equity 15.90% 17.07% 19.17% 15.82%
Yield on Earning Assets (FTE) 7.06% 7.10% 7.10% 6.93%
Cost of Interest Bearing
Funds 4.00% 4.01% 3.99% 3.70%
Net Interest Margin (FTE)(4) 3.84% 3.86% 3.86% 3.94%
Efficiency Ratio (FTE)(1) 46.40% 46.06% 44.28% 49.38%
Capitalization Ratios
---------------------
Dividends Paid to Net
Income 57.21% 53.92% 46.86% 55.31%
Shareholders' Equity to
Assets (Period End) 9.74% 9.43% 9.79% 9.91%
Leverage Ratio (2) 8.38% 8.06% 8.38% 8.57%
Risk Based Capital -
Tier I (3) 9.23% 8.94% 9.35% 9.50%
Risk Based Capital -
Tier II (3) 11.45% 11.15% 11.50% 11.64%
2008
----
Profitability Ratios March June September December
(annualized) 1Q 2Q 3Q 4Q
-------------------- -- -- -- --
Return on Average Assets 1.75% 1.51% 1.44% 1.42%
Return on Average
Shareholders' Equity 17.27% 14.78% 13.93% 13.71%
Yield on Earning Assets
(FTE) 6.49% 6.05% 5.92% 5.83%
Cost of Interest Bearing
Funds 3.10% 2.43% 2.23% 2.06%
Net Interest Margin (FTE)(4) 3.99% 4.08% 4.07% 4.13%
Efficiency Ratio (FTE)(1) 44.23% 50.11% 43.67% 40.80%
Capitalization Ratios
---------------------
Dividends Paid to Net
Income 51.23% 55.05% 54.17% 54.13%
Shareholders' Equity
to Assets (Period End) 10.08% 10.07% 10.10% 10.11%
Leverage Ratio (2) 9.28% 8.05% 7.15% 7.30%
Risk Based Capital -
Tier I (3) 10.29% 7.99% 8.23% 8.65%
Risk Based Capital -
Tier II (3) 12.46% 11.12% 11.40% 11.82%
Year-to-date
------------
Profitability Ratios December December
(annualized) 2008 2007
-------------------- ---- ----
Return on Average Assets 1.52% 1.68%
Return on Average
Shareholders' Equity 14.77% 16.97%
Yield on Earning
Assets (FTE) 6.05% 7.05%
Cost of Interest Bearing
Funds 2.41% 3.92%
Net Interest Margin
(FTE)(4) 4.07% 3.87%
Efficiency Ratio (FTE)(1) 44.53% 46.52%
-----
Definitions:
------------
(1) Recurring non-interest expense divided by recurring non-
interest income plus net interest income, on a fully taxable
equivalent basis.
(2) Equity less goodwill to total assets and allowance for
loan losses.
(3) Effective October 1, 1998, banking regulators require
financial institutions to include 45% of the pretax net unrealized
holding gains on available for sale equity securities in Tier 2
capital.
(4) Net interest income, on a fully taxable equivalent basis,
annualized divided by quarter-to-date average earning assets.
