S&T Bancorp Inc. Reports Operating Results (10-Q)
S & T BANCORP INC. is a bank holding company which is engaged in general banking business. The Bank is a full service bank with its main office in Indiana Pennsylvania providing service to its customers through a branch of 34 offices located in Armstrong Allegheny Indiana Jefferson Clearfield and Westmoreland counties. The Bank's services include accepting time and demand deposit accounts making secured and unsecured commercial and consumer loans providing letters of credit and offering discount brokerage services personal financial planning and credit card services. S&T Bancorp Inc. has a market cap of $487 million; its shares were traded at around $17.62 with a P/E ratio of 11.2 and P/S ratio of 1.9. The dividend yield of S&T Bancorp Inc. stocks is 7%. S&T Bancorp Inc. had an annual average earning growth of 4.5% over the past 10 years. GuruFocus rated S&T Bancorp Inc. the business predictability rank of 3-star. Highlight of Business Operations: Total assets averaged $4.4 billion in the first three months of 2009 and $4.0 billion for the 2008 full year average. Average loans increased $303.3 million and average securities, other investments and federal funds sold increased $16.1 million in the first three months of 2009 as compared to the 2008 full year average. Average deposits increased $354.3 million and average borrowings decreased $119.1 million during the three months ended March 31, 2009 as compared to the 2008 full year average.
Average loans increased $303.3 million to $3.5 billion during the three months ended March 31, 2009 as compared to the 2008 full year average. Changes in the composition of the average loan portfolio included increases of $103.6 million of residential mortgages and home equity loans, $238.5 million of commercial real estate loans, $2.7 million of consumer loans, offset by a decrease of $41.5 million in commercial and industrial loans. S&T acquired $278.5 million of average loans with the IBT acquisition. The composition of the average acquired loan portfolio included $26.7 million of commercial and industrial loans, $119.2 million of residential mortgages and home equity loans, $125.8 million of commercial real estate loans and $6.8 million of consumer loans. Average organic loan growth, or average loan growth not associated with the IBT acquisition was $24.8 million. The composition of the average organic loan growth included an increase of $112.7 million of commercial real estate loans, offset by decreases of $15.6 million of residential mortgages and home equity loans, $4.1 million of consumer loans and $68.2 million of commercial and industrial loans.
The components of the increase of $16.1 million include $28.3 million in mortgage-backed securities, $14.7 million in obligations of state and political subdivisions and $2.8 million in other investments. Offsetting these increases are decreases of $15.8 million in marketable equity securities, $12.8 million in U.S. government corporations and agencies and $2.0 million in other securities. The increase of $2.8 million in other investments in the first three months of 2009 compared to the 2008 full year average are comprised of Federal Home Loan Bank (FHLB) stock that is a membership and borrowing requirement and is recorded at historical cost. The amount of S&Ts investment in FHLB stock depends upon S&Ts borrowing availability and level from the FHLB. S&T was notified this quarter by the FHLB that they have suspended the payment of dividends and the repurchase of excess capital stock until further notice. Average federal funds sold increased $0.9 million in the first three months of 2009 compared to the 2008 full year average. At March 31, 2009, the equity securities portfolio had total market value of $13.2 million compared to $14.9 million at December 31, 2008 and net unrealized losses of $4.0 million at March 31, 2009 compared to net unrealized losses of $3.6 million at December 31, 2008. The equity securities portfolio consists of securities traded on the various stock markets and is subject to changes in market value.
The balance in the allowance for loan losses was $59.8 million or 1.70 percent of total loans at March 31, 2009 as compared to $42.7 million or 1.20 percent of total loans at December 31, 2008. The increase in the allowance for loan losses is primarily a result of increases of $12.0 million in specific reserves and $5.1 million in general reserves during the first quarter of 2009. S&Ts allowance for lending-related commitments such as unfunded commercial real estate, commercial and industrial term loan commitments and letters of credit totaled $1.4 million at March 31, 2009 and $1.3 million at December 31, 2008. The allowance for lending-related commitments is included in other liabilities.
Net loan charge-offs during the first three months of 2009 were primarily impacted by a $2.7 million charge-off for a $3.5 million loan on a mixed use commercial property that lost a major tenant, and a $1.1 million charge-off for a $2.4 million office building that was foreclosed and sold during the first quarter of 2009. The balance of nonperforming loans, which included loans past due 90 days or more, at March 31, 2009 was $92.0 million or 2.62 percent of total loans. This compares to nonperforming loans of $42.5 million or 1.19 percent of total loans at December 31, 2008. Nonperforming assets totaled $93.5 million or 2.17 percent of total assets at March 31, 2009 and $43.3 million or 0.98 percent of total assets at December 31, 2008. There are no loans 90 days past due and still accruing interest. The provision for loan losses was $21.4 million for the first three months of 2009, as compared to $1.3 million for the same period of 2008. The increased provision was the result of managements detailed analysis of the adequacy of the allowance for loan losses and is consistent with the increase in nonperforming loans, loan charge-off levels, the unfavorable credit experience with out of market loans, the effects of more conservative economic factors used in the allowance for loan losses model to be reflective of a deteriorating economy and the level of specific reserves established for impaired commercial loan relationships, offset by the resolution of the two aforementioned commercial loan relationships.
Average total deposits increased by $354.3 million, or 12 percent, during the three months ended March 31, 2009 as compared to the 2008 full year average. Changes in the average deposit mix include increases of $250.9 million in certificates of deposit, $62.0 million in demand deposits, $72.6 million in money market accounts and $37.2 million in NOW accounts. Offsetting these increases is a decrease of $68.4 million in savings accounts. S&T acquired $326.0 million of average deposits with the IBT acquisition. The composition of these acquired deposits included $159.4 million in certificates of deposit, $79.2 million in demand and NOW accounts, $46.2 million of money market accounts and $41.2 million of savings accounts. Average organic deposit growth, or average deposit increases not associated with the IBT acquisition was $28.3 million. During the three month period organic demand deposit growth increased $20.0 million and is an important source of funding, customer relationships and fees for S&T. The organic increase in certificates of deposits of $91.5 million is primarily attributable to a pricing strategy to grow this product. The decrease in savings accounts is primarily attributable to S&T being less aggressive with external competitive pricing strategies during a period of fairly high liquidity levels. S&T Cash Management accounts totaled $538.9 million at March 31, 2009 and $601.9 million at December 31, 2008 and have an account pricing feature that allows S&T to better complement shifting interest rate sensitivity. Other important strategies include
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