S&T Bancorp, Inc. (STBA) Bundle
Understanding S&T Bancorp, Inc. (STBA) Revenue Streams
Understanding S&T Bancorp, Inc.’s Revenue Streams
The primary revenue sources for the company include interest income from loans and securities, as well as noninterest income from various financial services. The breakdown of revenue sources is as follows:
- Net Interest Income: $251.5 million for the nine months ended September 30, 2024.
- Noninterest Income: $37.1 million for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The company reported a year-over-year revenue decline in net interest income:
- Net Interest Income Decrease: $12.8 million, or 4.8%, for the nine months ended September 30, 2024 compared to the same period in 2023.
- Noninterest Income Decrease: $1.5 million, or 3.91%, for the nine months ended September 30, 2024 compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contributions of various segments to overall revenue:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $251.5 | 87.5% |
| Noninterest Income | $37.1 | 12.5% |
Analysis of Significant Changes in Revenue Streams
There were notable changes in revenue streams due to economic conditions and business strategies:
- Interest Income Increase: Increased by $37.0 million for the nine months ended September 30, 2024, primarily due to higher interest rates on interest-earning assets.
- Interest Expense Increase: Increased $49.6 million for the nine months ended September 30, 2024, primarily due to higher interest rates.
- Provision for Credit Losses: Decreased to a negative $2.6 million for the nine months ended September 30, 2024, compared to $16.9 million in 2023.
Summary of Revenue Changes for 2024
The financial performance for S&T Bancorp, Inc. demonstrates a complex interaction between revenue streams influenced by external economic factors:
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Net Interest Income | $251.5 million | $264.3 million | -4.8% |
| Noninterest Income | $37.1 million | $38.6 million | -3.91% |
| Total Revenue | $288.6 million | $302.9 million | -4.7% |
A Deep Dive into S&T Bancorp, Inc. (STBA) Profitability
A Deep Dive into S&T Bancorp's Profitability
Gross Profit Margin: As of September 30, 2024, the net interest income on a fully taxable equivalent (FTE) basis was $253.6 million, down from $266.2 million at the same time in 2023. The net interest margin (NIM) decreased to 3.84% from 4.21% year-over-year.
Operating Profit Margin: For the three months ended September 30, 2024, operating profit was $41.4 million, compared to $41.3 million in the same period of 2023. The operating profit margin was approximately 49.0%.
Net Profit Margin: The company reported net income of $32.6 million for the three months ended September 30, 2024, resulting in a net profit margin of 39.0%. This is a slight decrease from the $33.5 million reported for the same period in 2023.
Trends in Profitability Over Time
Over the past year, profitability metrics have shown a downward trend. The return on average assets (ROAA) was 1.35% for the nine months ended September 30, 2024, compared to 1.56% for the same period in 2023. The return on average shareholders' equity (ROE) also declined from 11.80% to 9.97%.
Comparison of Profitability Ratios with Industry Averages
The following table compares key profitability ratios of S&T Bancorp with industry averages:
| Metric | S&T Bancorp (2024) | Industry Average |
|---|---|---|
| Net Interest Margin | 3.84% | 3.50% |
| Return on Average Assets | 1.35% | 1.25% |
| Return on Average Equity | 9.97% | 10.00% |
Analysis of Operational Efficiency
The decrease in net interest income of $12.8 million or 4.8% for the nine months ended September 30, 2024, can be attributed to higher interest rates impacting interest-bearing liabilities. The cost of interest-bearing liabilities increased by 64 basis points to 3.10% over the same period.
Noninterest income also saw a slight decrease of $1.5 million or 3.91% for the same period, primarily due to a loss on the sale of securities amounting to $5.3 million.
The following table summarizes key profitability metrics over the last two years:
| Metric | 2024 (YTD) | 2023 (YTD) |
|---|---|---|
| Net Income | $98.2 million | $107.7 million |
| Earnings per Share (Diluted) | $2.55 | $2.78 |
| Total Assets | $9.6 billion | $9.2 billion |
Debt vs. Equity: How S&T Bancorp, Inc. (STBA) Finances Its Growth
Debt vs. Equity: How S&T Bancorp, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total borrowings for the company amounted to $338.4 million, a decrease of $165.2 million from $503.6 million at December 31, 2023. This includes:
| Type of Borrowing | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Short-term borrowings | $225.0 million | $415.0 million | ($190.0 million) |
| Long-term borrowings | $64.0 million | $39.3 million | $24.7 million |
| Junior subordinated debt securities | $49.4 million | $49.4 million | $0.0 million |
The company’s short-term borrowings decreased significantly due to strong growth in customer deposits. The long-term borrowings increased as part of their strategy to manage funding costs and maintain liquidity.
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, stands at 0.25, calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Where:
- Total Debt: $338.4 million
- Total Equity: $1.4 billion
This ratio is significantly lower than the industry average of approximately 0.5, indicating a conservative approach to leveraging debt for growth.
Recent Debt Issuances and Credit Ratings
As of September 30, 2024, the company has not issued any new securities under its shelf registration statement. The credit ratings remain stable, with a strong emphasis on maintaining a solid capital position. The leverage ratio is 11.70%, well above the regulatory minimum of 5.00%.
Balancing Debt Financing and Equity Funding
The company strategically balances its funding sources by focusing on increasing customer deposits, which grew by $333.4 million or 4.7% in the first nine months of 2024. This growth in deposits allows the company to reduce reliance on higher-cost borrowings, thus improving its overall funding mix.
Moreover, the company maintains a strong capital position with a common equity tier 1 ratio of 14.37% as of September 30, 2024, compared to 13.37% at the end of 2023. This signifies a robust equity base that supports its operations and growth initiatives while minimizing the risks associated with higher debt levels.
The following table summarizes key financial metrics related to the company's debt and equity structure:
| Metric | Value |
|---|---|
| Total Debt | $338.4 million |
| Total Equity | $1.4 billion |
| Debt-to-Equity Ratio | 0.25 |
| Leverage Ratio | 11.70% |
| Common Equity Tier 1 Ratio | 14.37% |
Assessing S&T Bancorp, Inc. (STBA) Liquidity
Assessing S&T Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.04, indicating a strong ability to cover short-term liabilities with current assets.
Quick Ratio: The quick ratio is 0.94, showing that the company can cover its immediate liabilities without relying on inventory.
Analysis of Working Capital Trends
Working capital increased to $134.5 million as of September 30, 2024, compared to $108.6 million at December 31, 2023. This reflects an improvement in the company's operational efficiency and liquidity management.
Cash Flow Statements Overview
The condensed consolidated statements of cash flows for the nine months ended September 30, 2024 are as follows:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $118,585 | $140,874 |
| Net Cash Used in Investing Activities | ($53,117) | ($337,633) |
| Net Cash (Used in) Provided by Financing Activities | ($70,990) | $225,203 |
Potential Liquidity Concerns or Strengths
At September 30, 2024, the company held $682.5 million in highly liquid assets, which is approximately 7.1% of total assets. This level of liquidity provides a robust cushion against potential financial stress.
Total borrowings decreased to $338.4 million from $503.6 million at December 31, 2023, highlighting a reduced reliance on external funding sources due to strong customer deposit growth.
Uninsured deposits totaled $2.6 billion, representing 34% of the total deposit base as of September 30, 2024, compared to 30% at December 31, 2023, indicating a slight increase in potential liquidity risk.
The capital position remains strong with a leverage ratio of 11.70% as of September 30, 2024, exceeding the well-capitalized regulatory guideline of 5.00%.
Is S&T Bancorp, Inc. (STBA) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of S&T Bancorp, Inc. (STBA), various valuation ratios provide significant insights into whether the company is overvalued or undervalued. The primary ratios to consider include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA).
Price-to-Earnings (P/E) Ratio
The current P/E ratio for S&T Bancorp is 12.76, based on a trailing twelve months (TTM) earnings per share (EPS) of $2.55 and a stock price of $32.50.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.45, calculated using a book value per share of $22.41.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 8.25, with an enterprise value of $1.26 billion and EBITDA of $152 million.
Stock Price Trends
Over the past 12 months, the stock price of S&T Bancorp has shown a steady upward trend, increasing from $27.00 to the current price of $32.50, representing a growth of approximately 20.37%.
Dividend Yield and Payout Ratios
The dividend yield is currently 3.05%, with annual dividends declared at $0.99 per share. The payout ratio stands at 38.82%, indicating a sustainable dividend policy.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for S&T Bancorp's stock is a Hold, with a target price of $34.00, suggesting a potential upside of 4.63% from the current price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 12.76 |
| P/B Ratio | 1.45 |
| EV/EBITDA Ratio | 8.25 |
| Current Stock Price | $32.50 |
| 12-Month Price Change | 20.37% |
| Dividend Yield | 3.05% |
| Payout Ratio | 38.82% |
| Analyst Consensus | Hold |
| Target Price | $34.00 |
Key Risks Facing S&T Bancorp, Inc. (STBA)
Key Risks Facing S&T Bancorp, Inc.
Industry Competition: The financial services industry is highly competitive, with numerous players vying for market share. S&T Bancorp faces competition from both traditional banks and non-bank financial institutions. As of September 30, 2024, the bank's total loans stood at $7.7 billion, with 68.4% of these being commercial loans.
Regulatory Changes: The banking sector is subject to extensive regulation. Changes in regulations can impact capital requirements, lending practices, and operational costs. For instance, the Common Equity Tier 1 ratio was 14.37% at September 30, 2024, reflecting a strong capital position above the regulatory minimum of 6.50%.
Market Conditions: Economic downturns can adversely affect loan performance, leading to increased default rates. The allowance for credit losses decreased to 1.36% of total portfolio loans as of September 30, 2024, down from 1.41% at the end of 2023, indicating improvements in asset quality.
Operational Risks: The bank's operations are subject to risks including fraud, system failures, and data breaches. Net loan charge-offs were $8.3 million, or 0.15% of average loans, for the nine months ended September 30, 2024, down from 0.18% in 2023.
Financial Risks: Interest rate fluctuations impact net interest income and margins. For the three months ended September 30, 2024, net interest income decreased by $2.9 million, or 3.3%, compared to the same period in 2023. The net interest margin on a tax-equivalent basis was 3.84%, down from 4.21%.
Strategic Risks: The bank's growth strategy heavily relies on expanding its deposit base and managing its loan portfolio effectively. Total deposits increased by $133.1 million, with customer deposits up by 4.7% at September 30, 2024.
Mitigation Strategies: To counteract these risks, S&T Bancorp has focused on enhancing its deposit franchise and improving asset quality. The bank achieved a significant reduction in brokered deposits, down 53.3% to $175.0 million at September 30, 2024. Additionally, the bank maintains a strong capital position, with a leverage ratio of 11.70%.
| Risk Type | Current Metrics | Comparison to Previous Period |
|---|---|---|
| Net Loan Charge-offs | $8.3 million (0.15% of average loans) | Decreased from 0.18% |
| Common Equity Tier 1 Ratio | 14.37% | Increased from 13.37% |
| Net Interest Margin | 3.84% | Decreased from 4.21% |
| Total Deposits | $9.6 billion | Increased by $133.1 million |
| Brokered Deposits | $175.0 million | Decreased by 53.3% |
Future Growth Prospects for S&T Bancorp, Inc. (STBA)
Growth Opportunities
Future growth prospects for S&T Bancorp, Inc. are driven by several key factors, including product innovations, market expansions, and strategic acquisitions. Below is a detailed analysis of these growth drivers:
Key Growth Drivers
- Product Innovations: The bank has focused on enhancing its product offerings, particularly in digital banking solutions, which have seen increased adoption among customers. This has resulted in improved customer engagement and retention.
- Market Expansions: S&T Bancorp is actively expanding its footprint in Pennsylvania and Ohio, targeting new customer segments and increasing market share. The total assets were reported at $9.6 billion as of September 30, 2024.
- Acquisitions: The bank has been exploring potential acquisitions to enhance its service capabilities and geographic reach. The focus on strategic acquisitions is expected to complement organic growth initiatives.
Future Revenue Growth Projections
Revenue growth projections indicate a positive trajectory, with expectations of increased interest income driven by rising interest rates. For the nine months ended September 30, 2024, interest income on a fully taxable equivalent (FTE) basis increased by $37.0 million, reflecting higher interest rates on interest-earning assets.
Earnings Estimates
The bank reported net income of $98.2 million for the nine months ended September 30, 2024, down from $107.7 million in the same period of 2023. Earnings per share (EPS) for the same period was $2.55 compared to $2.78.
Strategic Initiatives
S&T Bancorp has undertaken several strategic initiatives aimed at enhancing growth:
- Strengthening Deposit Franchise: Total deposits increased by $133.1 million, with customer deposits rising by $333.4 million or 4.7% at September 30, 2024.
- Improving Asset Quality: The provision for credit losses decreased, indicating an improvement in asset quality, which is expected to support future profitability.
Competitive Advantages
S&T Bancorp's competitive advantages include a strong capital position and a diversified loan portfolio:
- Capital Ratios: The Common Equity Tier 1 ratio was reported at 14.37% as of September 30, 2024, exceeding the regulatory guideline of 6.50%.
- Diverse Loan Portfolio: Total portfolio loans stood at $7.7 billion with a well-managed risk profile.
Financial Data Summary
| Metric | Value |
|---|---|
| Total Assets | $9.6 billion |
| Net Income (9M 2024) | $98.2 million |
| Earnings Per Share (9M 2024) | $2.55 |
| Total Deposits | $7.65 billion |
| Common Equity Tier 1 Ratio | 14.37% |
| Provision for Credit Losses (9M 2024) | $2.6 million |
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Article updated on 8 Nov 2024
Resources:
- S&T Bancorp, Inc. (STBA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of S&T Bancorp, Inc. (STBA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View S&T Bancorp, Inc. (STBA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.