S&T Bancorp Inc. (NASDAQ:STBA) Q2 2018 Earnings Conference Call - Final Transcript

Jul 19, 2018 • 01:00 pm ET


S&T Bancorp Inc. (NASDAQ:STBA) Q2 2018 Earnings Conference Call - Final Transcript


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Greetings, and welcome to the S&T Bancorp Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Kochvar, SEVP and CFO.

Thank you, Mr. Kochvar, you may begin.

Mark Kochvar

Great. Thanks very much. Good afternoon and thanks for participating in today's conference call.

(Forward-Looking Cautionary Statements)

A copy of the second quarter earnings release can be obtained by clicking on the press release link on your screen or by visiting our Investor Relations website at www.stbancorp.com.

I would now like to introduce Todd Brice, S&T's President and CEO, who will provide an overview of S&T's second quarter results.

Todd Brice

Speaker C-Todd Brice

Well, thank you, Mark, and good afternoon, everyone. Overall we're pleased with our core operating performance this quarter and announced net income of $21.4 million or $0.61 per share versus $22.8 million or $0.65 per share in the second quarter of 2017 and $26.2 million or $0.75 per share in the first quarter of this year. Our performance metrics for return on assets, return on equity, and return on tangible common equity were 1.22%, 9.52%, and 14.14% respectively. The big variance in net income this quarter was primarily primarily impacted by $5.2 million loss on a single commercial credit due to fraudulent activity. The net impact to EPS was approximately $0.12 per share.

For the quarter, portfolio loans increased by $55.5 million or just under 4% annualized and we're also experiencing higher yields in our portfolio due to the recent Fed moves and higher rates on new business. As a result, our net interest margin increased by 5 basis points compared to the first quarter and our strategic focus on controlling expenses was also evident as our efficiency ratio declined from -- to 50.09% versus 51.48% in the second quarter of 2017. We continue to evaluate all areas of the organization for opportunities to control expenses, a one item of note in Q3 is we're closing our location in New York, PA. But we do expect to maintain a large portion of deposits associated with the branch.

Credit metrics for the quarter were mixed with net charge-offs of $7.8 million of which $5.2 million again is attributed to the fraud that was previously disclosed in our 8-K filing. Total delinquency declined by 1 basis point for the quarter from 0.53% to 0.52% and also non-performing loans of $21.4 million were essentially flat for the quarter and represent 0.37% of the total portfolio.

We are moving forward with our efforts to remediate the material weaknesses that was disclosed in our 10-K, an independent third-party has been engaged and phase one of the review has been completed. This encompasses a review of our policies, procedures and processes as well as an in-depth examination of the support for judging and supply the risk rating conclusions. We anticipate the rest of