S&T Bancorp, Inc. (STBA): Boston Consulting Group Matrix [10-2024 Updated]

In the dynamic landscape of banking, understanding where a company stands can be crucial for investors and stakeholders alike. This blog post delves into the Boston Consulting Group Matrix as applied to S&T Bancorp, Inc. (STBA) in 2024, categorizing its business segments into Stars, Cash Cows, Dogs, and Question Marks. Discover how STBA's robust capital position and diverse revenue streams contrast with challenges such as declining net interest income and the need for innovation in consumer lending. Join us as we explore the strategic implications of these classifications and what they mean for the bank's future.

Background of S&T Bancorp, Inc. (STBA)

S&T Bancorp, Inc. is a bank holding company headquartered in Indiana, Pennsylvania. As of September 30, 2024, the company reported total assets of approximately $9.6 billion. S&T Bancorp operates primarily in Pennsylvania and Ohio, offering a comprehensive range of financial services that include retail and commercial banking products, cash management services, as well as trust and brokerage services. The company’s common stock is traded on the NASDAQ Global Select Market under the symbol “STBA”.

The bank earns its revenue mainly from interest on loans and securities, alongside fees for financial services provided to its customers. Key expenses include the costs associated with deposits and other funding sources, provisions for credit losses, and various operating costs such as salaries, employee benefits, data processing, occupancy, and tax expenses.

S&T Bancorp's mission emphasizes building a better future through a people-forward banking approach. The company believes in fostering personal relationships with customers, which are rooted in trust and enhanced through exceptional service. For 2024 and beyond, its strategic priorities focus on strengthening its deposit franchise, enhancing core profitability, maintaining asset quality, and improving talent engagement.

As of September 30, 2024, S&T Bancorp reported a net income of $32.6 million, or $0.85 per diluted share, for the three months ended September 30, 2024, compared to $33.5 million, or $0.87 per diluted share, for the same period in 2023. For the nine months ended September 30, 2024, net income was $98.2 million, or $2.55 per diluted share.

The bank continues to maintain a robust capital position, with a leverage ratio of 11.70% as of September 30, 2024, which exceeds the regulatory guideline of 5.00%. The risk-based Common Equity Tier 1 ratio stood at 14.37%, also above the well-capitalized threshold of 6.50%.

S&T Bancorp has strategically increased its customer deposits, which rose by $333.4 million or 4.7% as of September 30, 2024, while brokered deposits saw a significant decline. This growth in deposits has allowed the bank to reduce its reliance on more volatile funding sources.

S&T Bancorp, Inc. (STBA) - BCG Matrix: Stars

Strong Capital Position

S&T Bancorp maintains a strong capital position with a Tier 1 leverage ratio of 11.70% as of September 30, 2024, compared to 11.21% at December 31, 2023. Both ratios exceed the well-capitalized regulatory guideline of 5.00%.

The Common Equity Tier 1 ratio stands at 14.37% as of the same date, up from 13.37% at year-end 2023, also above the regulatory threshold of 6.50%.

Capital Amounts and Ratios	September 30, 2024	December 31, 2023
Tier 1 Leverage Ratio	11.70%	11.21%
Common Equity Tier 1 Ratio	14.37%	13.37%
Tier 1 Capital to Risk-Weighted Assets	14.70%	13.69%
Total Capital to Risk-Weighted Assets	16.28%	15.27%

Consistent Net Income Generation

S&T Bancorp reported $32.6 million in net income for Q3 2024, compared to $33.5 million in Q3 2023. For the nine months ended September 30, 2024, net income totaled $98.2 million, down from $107.7 million in the same period of 2023.

The earnings per share for Q3 2024 were $0.85, slightly lower than $0.87 in Q3 2023. The return on average assets was 1.35% for Q3 2024, compared to 1.42% for Q3 2023.

Earnings Summary	Q3 2024	Q3 2023	9M 2024	9M 2023
Net Income	$32.6 million	$33.5 million	$98.2 million	$107.7 million
Earnings per Share (Diluted)	$0.85	$0.87	$2.55	$2.78
Return on Average Assets	1.35%	1.42%	1.37%	1.56%

Diverse Revenue Streams

The company generates revenue through multiple channels, including commercial and retail banking, cash management, and securities. In Q3 2024, total interest and dividend income reached $131.5 million, up from $123.0 million in Q3 2023, driven by higher interest rates.

High-Quality Loan Portfolio

S&T Bancorp's loan portfolio is characterized by high quality, with a significant portion rated as 'Pass'. As of September 30, 2024, total loans amounted to $7.69 billion, with commercial real estate loans at $2.66 billion and consumer real estate loans at $1.89 billion.

Loan Portfolio Composition	September 30, 2024	December 31, 2023
Commercial Real Estate	$2.66 billion	$2.66 billion
Commercial and Industrial	$1.36 billion	$1.44 billion
Consumer Real Estate	$1.89 billion	$1.73 billion
Total Portfolio Loans	$7.69 billion	$7.65 billion

Focus on Core Profitability and Asset Quality

The strategic priorities for S&T Bancorp include maintaining core profitability and ensuring asset quality. The provision for credit losses decreased to a negative $0.5 million for Q3 2024, indicating improved asset quality compared to $5.5 million in Q3 2023.

Provision for Credit Losses	Q3 2024	Q3 2023
Provision for Credit Losses	$(0.5 million)	$5.5 million

S&T Bancorp, Inc. (STBA) - BCG Matrix: Cash Cows

Established customer base in Pennsylvania and Ohio, driving stable deposits.

As of September 30, 2024, S&T Bancorp reported total deposits of $7.65 billion, reflecting an increase of $133.1 million or 1.8% compared to December 31, 2023. Customer deposits specifically increased by $333.4 million, or 4.7%, during the same period.

Net interest margin of 3.84% (FTE) for Q3 2024, reflecting effective interest rate management.

The net interest margin (NIM) on a fully taxable equivalent (FTE) basis for Q3 2024 was 3.84%, down from 4.21% for Q3 2023. This decrease was attributed to higher interest rates impacting interest-bearing liabilities, although higher rates also positively affected interest income.

Consistent cash dividends declared, increasing to $0.33 per share in Q3 2024.

S&T Bancorp declared cash dividends of $0.33 per share for Q3 2024, up from $0.32 per share in Q3 2023.

Significant growth in average loan balances, up by $260 million in Q3 2024 compared to Q3 2023.

Average loan balances increased by $260 million for Q3 2024 compared to Q3 2023, contributing to a total loan portfolio of $7.69 billion.

Strong performance in business banking, contributing to net income stability.

Net income for the three months ended September 30, 2024, was $32.59 million, compared to $33.47 million for the same period in 2023. The return on average tangible shareholders' equity was 13.35%.

Financial Metric	Q3 2024	Q3 2023	Change
Total Deposits	$7.65 billion	$7.52 billion	+$133.1 million
Customer Deposits	$7.48 billion	$7.15 billion	+$333.4 million
Net Interest Margin (FTE)	3.84%	4.21%	-0.37%
Cash Dividends per Share	$0.33	$0.32	+$0.01
Average Loan Balances	Increased by $260 million	N/A	N/A
Net Income	$32.59 million	$33.47 million	-2.64%

S&T Bancorp, Inc. (STBA) - BCG Matrix: Dogs

Declining net interest income

Net interest income decreased by 3.3% year-over-year for Q3 2024, amounting to $84.5 million compared to $87.4 million in Q3 2023.

Increased interest expenses impacting profitability

Interest expenses rose to $47.0 million in Q3 2024, up from $35.6 million in the same period of the previous year, reflecting an increase of 32.4%. This rise necessitates careful management to sustain profitability amidst higher costs of funds.

Nonaccrual loans have risen

Nonaccrual loans increased to $31.9 million as of September 30, 2024, compared to $22.9 million at December 31, 2023, marking an increase of $9.0 million. This trend indicates potential risks in the loan portfolio and may impact the bank's overall asset quality.

Limited growth in the commercial loan portfolio

The commercial loan portfolio experienced a decline of $100.4 million, decreasing from $7.8 billion at December 31, 2023, to $7.7 billion at September 30, 2024. This contraction reflects a challenging lending environment and reduced demand for commercial loans.

Accumulated other comprehensive loss

As of September 30, 2024, S&T Bancorp reported an accumulated other comprehensive loss of $60.5 million, an improvement from $90.9 million at the end of Q2 2024. However, the persistent losses highlight the ongoing challenges faced by the bank in managing its investment portfolio.

Financial Metric	Q3 2024	Q3 2023	Change
Net Interest Income	$84.5 million	$87.4 million	-3.3%
Interest Expenses	$47.0 million	$35.6 million	+32.4%
Nonaccrual Loans	$31.9 million	$22.9 million	+9.0 million
Commercial Loan Portfolio	$7.7 billion	$7.8 billion	-100.4 million
Accumulated Other Comprehensive Loss	$60.5 million	$90.9 million	Improvement

S&T Bancorp, Inc. (STBA) - BCG Matrix: Question Marks

Potential for growth in consumer lending, with total consumer loans of $2.4 billion but facing economic pressures.

Total consumer loans for S&T Bancorp, Inc. reached $2.426 billion as of September 30, 2024, reflecting a 5.9% increase from $2.290 billion at the same time in 2023. However, the company is currently experiencing economic pressures that may impact loan performance.

Commercial construction loans showing variability, indicating market sensitivity.

Commercial construction loans represented $382.2 million of the total loan portfolio as of September 30, 2024. This segment has shown variability, suggesting sensitivity to market conditions, with an average interest rate of 7.78%.

Exploration of new markets beyond Pennsylvania and Ohio could enhance growth prospects.

S&T Bancorp primarily operates in Pennsylvania and Ohio, but the management has indicated potential growth by exploring markets beyond these states. The total assets of the company stood at $9.6 billion as of September 30, 2024. Expanding geographically could provide opportunities for market share growth in underserved regions.

The impact of fluctuating economic conditions on loan performance remains a concern.

The fluctuating economic conditions have led to concerns regarding loan performance, particularly in light of higher interest rates affecting the cost of borrowing. The net interest margin (NIM) on an FTE basis decreased to 3.84% for the three months ended September 30, 2024, down from 4.21% in the same period last year.

Need for innovation in financial products to capture younger demographics and tech-savvy clients.

To attract younger and more tech-savvy clients, S&T Bancorp needs to innovate its financial products. The demand for digital banking solutions is increasing, and the company must adapt to meet these expectations to enhance market share in a competitive landscape.

Metric	Q3 2024	Q3 2023	Change
Total Consumer Loans	$2.426 billion	$2.290 billion	+5.9%
Commercial Construction Loans	$382.2 million	Data Not Available	Data Not Available
Total Assets	$9.6 billion	Data Not Available	Data Not Available
Net Interest Margin (FTE)	3.84%	4.21%	-0.37%

In summary, S&T Bancorp, Inc. (STBA) showcases a robust financial landscape as evidenced by its strong capital position and diverse revenue streams, categorizing it as a Star. However, challenges such as declining net interest income and rising nonaccrual loans place it in the Dog quadrant. Meanwhile, its established presence in Pennsylvania and Ohio underpins stable operations as a Cash Cow, while opportunities in consumer lending and market expansion mark it as a Question Mark. The strategic focus on innovation and careful risk management will be pivotal in navigating these dynamics moving forward.

Article updated on 8 Nov 2024

Resources:

1. 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.
2. 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.