S&T Bancorp, Inc.

language acquired by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation. A copy of the third quarter 2023 earnings release, as well as this earnings supplement slide deck, can be obtained by clicking on the materials button in the low right section of your screen. This will open up a panel on the right where you can download these items. You can also obtain a copy of these materials by visiting our investor relations website at stbankcorp.com. With me today are Chris McCommish, S&T's CEO, and Dave Antolik, S&T's President. I'd now like to turn the call over to Chris.

Mark, thank you, and good afternoon, everybody, and welcome to our call. I certainly appreciate all the analysts being here with us this afternoon. We look forward to your questions. I also want to thank our shareholders and employees listening in on the call. It's our employee commitment and engagement that drives these results, and we're all proud to share them with you. Before I get into the numbers, I want to further emphasize how good I feel about the progress we're making to move S&T forward around what we have defined as our people forward purpose. This purpose is guided by our values that shape who we are as a company and is propelled by our key performance drivers. One, growth and health of our deposit franchise. Two, solid credit quality. Three, best in class quality. core profitability, and all of this is underpinned by our focus on enhancing employee engagement and talent. This work translates in delivering for both our customers and the communities that we serve in a differentiated way, and it's further evidenced by the efforts of all of our team and in the results that we'll discuss today. You'll see on the page highlighted that for the quarter, third quarter, we delivered 87 cents a share or just over $33 million in net income. That's driven by our fourth straight quarter of net interest income in the high $80 million range. We're very happy with our continued top quartile net interest margin at 4.09%, though it did decline. quarter to quarter to quarter. Our PPNR, again, is top quartile at just under 2% at 199, and our return metrics are also very strong, and that combined with our capital levels certainly position us well for the future. Net charge-offs were 20 basis points in the quarter, and our efficiency ratio remained well within our range at 52.68. Little bit up over Q2, we'll talk further about that, but still where we expected it to be. Moving forward, before I turn it over to Dave to talk about the loan side of our balance sheet, you can see the deposit mix basically stabilized for the quarter. We showed about flat customer deposits with mix shifting A little bit from our DDA balances and savings into CDs, that $80 million of customer CD growth was split between about $30 million of deposits new to the company and $50 million of shifts within the balance sheet. We continue to proactively work hard on customer relationships, expanding those deposit opportunities, protecting what we have while balancing growth and margin and cost and focusing, as I said, on our relationships. I'll turn it over today to talk about the loan side of our balance sheet, and I look forward to your questions in a little bit.

Well, thank you, Chris. And continuing this review of our balance sheet, we did see increased loan growth in Q3 of $196 million, or almost 11% annualized. This growth was driven by increases in both our residential mortgage and commercial real estate categories. Regarding our residential mortgage activities, we continue to see solid demand for construction and purchase related products and anticipate this demand and the pace of this growth to continue in the coming quarters. We are closely monitoring the pricing of these products and believe that keeping this activity on our balance sheet provides for the most favorable economic benefit for S&T. Our commercial real estate balances grew during the quarter. primarily as a result of new production in our multifamily storage, retail, and industrial segments. As a reminder, a few quarters back, we provided details on our office portfolio. We continue to remain comfortable with our exposure to the office segment, and as a reminder, that segment represents approximately 7% of our total loans. We have not seen changes in that segment since that disclosure and balances remain flat quarter over quarter. It's also worth mentioning that our healthcare-related exposure remains flat quarter over quarter, and we believe that we remain comfortable with that exposure as well. In our CNI book, we did not see significant changes in any of the core metrics that we measure, including things like utilization and collateral advance rates. We have seen reduced payoff levels in both our RESI mortgage and CRE books. primarily related to increased interest rates. And based on our current pipeline and these reduced payoff levels, we anticipate total loan growth in the mid-single-digit range for the coming quarters. Turning to asset quality, non-performing assets declined by $1.6 million to $16.4 million when compared to Q2. Net charge-offs for the quarter were $3.7 million, or $0.20 basis points of total loans. And primarily as a result of loan growth that I described earlier and the qualitative factors in our model, our ACL grew by $2.4 million during the quarter and remained at 1.44% of total loans.