UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-12508

______________________________________

S&T BANCORP INC.

(Exact name of registrant as specified in its charter)

______________________________________

Pennsylvania

25-1434426

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

800 Philadelphia Street

Indiana

15701

(Address of principal executive offices)

(zip code)

~~800~~-~~325-2265~~800-325-2265

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $2.50 par value	STBA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer		☒		Accelerated filer		☐

Non-accelerated filer	☐		Smaller reporting company		☐
				Emerging growth company		☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $2.50 Par Value - ~~39,242,510~~39,360,750 shares as of ~~May 8, 2020~~April 30, 2021

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

INDEX

S&T BANCORP, INC. AND SUBSIDIARIES


				Page No.
PART I. FINANCIAL INFORMATION

Item 1.			Financial Statements	~~Page No.~~
~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements~~

	Consolidated Balance Sheets - March 31, ~~2020~~2021 and December 31, ~~2019~~2020	2

			Consolidated Statements of Comprehensive Income - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	3

			Consolidated Statements of Changes in Shareholders' Equity - Three ~~Months~~ Ended March 31, ~~2020~~2021 and ~~2019~~2020	4

			Consolidated Statements of Cash Flows - Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020	5

			Notes to Consolidated Financial Statements	6

Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations	4337

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	5953

Item 4.			Controls and Procedures	6055

PART II. OTHER INFORMATION

Item 1.			Legal Proceedings	6155

Item 1A.			Risk Factors	6155

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	6256

Item 3.			Defaults Upon Senior Securities	6256

Item 4.			Mine Safety Disclosures	6257

Item 5.			Other Information	6257

Item 6.			Exhibits	6257

			Signatures	6358

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2021			December 31, 2020
( in thousands, except share and per share data)	(Unaudited)			(Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $601,134 and $158,903 at March 31, 2021 and December 31, 2020		$	671,429		$	229,666
Securities, at fair value		817,299			773,693
Loans held for sale		12,794			18,528
Portfolio loans, net of unearned income		7,183,168			7,225,860
Allowance for credit losses on loans		(115,101)			(117,612)
Portfolio loans, net		7,068,067			7,108,248
Bank owned life insurance		82,677			82,303
Premises and equipment, net		54,720			55,614
Federal Home Loan Bank and other restricted stock, at cost		12,199			13,030
Goodwill		373,424			373,424
Other intangible assets, net		8,211			8,675
Other assets		228,159			304,716
Total Assets		$	9,328,979		$	8,967,897
LIABILITIES
Deposits:
Noninterest-bearing demand		$	2,539,594		$	2,261,994
Interest-bearing demand		976,225			864,510
Money market		2,002,857			1,937,063
Savings		1,036,927			969,508
Certificates of deposit		1,320,425			1,387,463

Total Deposits		7,876,028			7,420,538
Securities sold under repurchase agreements		67,417			65,163
Short-term borrowings		0			75,000
Long-term borrowings		23,282			23,681
Junior subordinated debt securities		64,097			64,083

Other liabilities		129,877			164,721
Total Liabilities		8,160,701			7,813,186
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value) Authorized—50,000,000 shares Issued—41,449,444 shares at March 31, 2021 and December 31, 2020 Outstanding—39,268,359 shares at March 31, 2021 and 39,298,007 shares at December 31, 2020		103,623			103,623
Additional paid-in capital		401,353			400,668
Retained earnings		731,718			710,061
Accumulated other comprehensive income		1,061			8,971
Treasury stock — 2,181,085 shares at March 31, 2021 and 2,151,437 shares at December 31, 2020, at cost		(69,477)			(68,612)
Total Shareholders’ Equity		1,168,278			1,154,711
Total Liabilities and Shareholders’ Equity		$	9,328,979		$	8,967,897

March 31, 2020 December 31, 2019
(dollars in thousands, except per share data) (Unaudited) (Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $113,505 and $124,491 at March 31, 2020 and December 31, 2019 $ 187,684
$ 197,823
Securities, at fair value 799,532
784,283
Loans held for sale 7,309
5,256
Portfolio loans, net of unearned income 7,246,745
7,137,152
Allowance for credit losses on loans (96,850 ) (62,224 )
Portfolio loans, net 7,149,895
7,074,928
Bank owned life insurance 80,978
80,473
Premises and equipment, net 56,659
56,940
Federal Home Loan Bank and other restricted stock, at cost 28,253
22,977
Goodwill 374,270
371,621
Other intangible assets, net 10,287
10,919
Other assets 310,629
159,429
Total Assets $ 9,005,496
$ 8,764,649
LIABILITIES
Deposits:
Noninterest-bearing demand $ 1,702,960
$ 1,698,082
Interest-bearing demand 962,937
962,331
Money market 1,967,692
1,949,811
Savings 836,237
830,919
Certificates of deposit 1,588,053
1,595,433
Total Deposits 7,057,879
7,036,576
Securities sold under repurchase agreements 69,644
19,888
Short-term borrowings 410,240
281,319
Long-term borrowings 50,180
50,868
Junior subordinated debt securities 64,038
64,277
Other liabilities 177,264
119,723
Total Liabilities 7,829,245
7,572,651
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value)
Authorized—50,000,000 shares
Issued—41,449,444 shares at March 31, 2020 and December 31, 2019
Outstanding— 39,125,425 shares at March 31, 2020 and 39,560,304 shares at December 31, 2019 103,623
103,623
Additional paid-in capital 400,387
399,944
Retained earnings 740,726
761,083
Accumulated other comprehensive loss 5,672
(11,670 )
Treasury stock (2,324,019 shares at March 31, 2020 and 1,889,140 shares at December 31, 2019, at cost) (74,157 ) (60,982 )
Total Shareholders’ Equity 1,176,251
1,191,998
Total Liabilities and Shareholders’ Equity $ 9,005,496
$ 8,764,649

See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,								Three months ended March 31,
(dollars in thousands, except per share data)	2020				2019			(dollars in thousands, except per share data)	2021			2020
INTEREST AND DIVIDEND INCOME								INTEREST AND DIVIDEND INCOME
Loans, including fees		$	82,051			$	73,392	Loans, including fees		$	70,232		$	82,051
Investment Securities:								Investment Securities:
Taxable		4,215				3,790		Taxable		3,563			4,215
Tax-exempt		870				844		Tax-exempt		813			870
Dividends		453				564		Dividends		173			453
Total Interest and Dividend Income		87,589				78,590		Total Interest and Dividend Income		74,781			87,589
INTEREST EXPENSE								INTEREST EXPENSE
Deposits		15,338				14,981		Deposits		3,481			15,338
Borrowings and junior subordinated debt securities		2,215				3,253		Borrowings and junior subordinated debt securities		641			2,215
Total Interest Expense		17,553				18,234		Total Interest Expense		4,122			17,553
NET INTEREST INCOME		70,036				60,356		NET INTEREST INCOME		70,659			70,036
Provision for credit losses		20,050				5,684		Provision for credit losses		3,137			20,050
Net Interest Income After Provision for Credit Losses		49,986				54,672		Net Interest Income After Provision for Credit Losses		67,522			49,986
NONINTEREST INCOME								NONINTEREST INCOME
Net gain on sale of securities		—				—		Net gain on sale of securities		0			0
Mortgage banking								Mortgage banking		4,310			1,236
Debit and credit card								Debit and credit card		4,162			3,482
Service charges on deposit accounts		3,558				3,153		Service charges on deposit accounts		3,474			4,008
Debit and credit card		3,482				2,974
Wealth management								Wealth management		2,944			2,362
Commercial loan swap income		2,484				581		Commercial loan swap income		95			2,484
Wealth management		2,362				2,048
Mortgage banking		1,236				494
Other		(719		)		2,112		Other		2,252			(1,169)
Total Noninterest Income		12,403				11,362		Total Noninterest Income		17,236			12,403
NONINTEREST EXPENSE								NONINTEREST EXPENSE
Salaries and employee benefits		21,335				20,910		Salaries and employee benefits		23,327			21,335
Data processing and information technology		3,868				3,233		Data processing and information technology		4,225			3,868
Net occupancy		3,765				3,036
Occupancy								Occupancy		3,827			3,765
Furniture, equipment and software		2,519				2,230		Furniture, equipment and software		2,640			2,519
Professional services and legal								Professional services and legal		1,531			1,048
Other Taxes								Other Taxes		1,436			1,600
Marketing								Marketing		1,322			1,111
FDIC Insurance								FDIC Insurance		1,046			770
Merger related expenses		2,342				—		Merger related expenses		0			2,342
Other taxes		1,600				1,185
Marketing		1,111				1,141
Professional services and legal		1,048				1,184
FDIC insurance		770				516
Other		8,033				5,449		Other		6,226			8,033
Total Noninterest Expense		46,391				38,884		Total Noninterest Expense		45,580			46,391
Income Before Taxes		15,998				27,150		Income Before Taxes		39,178			15,998
Provision for income taxes		2,767				4,222
Income tax expense								Income tax expense		7,276			2,767
Net Income		$	13,231			$	22,928	Net Income		$	31,902		$	13,231
Earnings per share—basic		$	0.34			$	0.67	Earnings per share—basic		$	0.81		$	0.34
Earnings per share—diluted		$	0.34			$	0.66	Earnings per share—diluted		$	0.81		$	0.34
Dividends declared per share		$	0.28			$	0.27	Dividends declared per share		$	0.28		$	0.28
Comprehensive Income		$	30,573			$	29,104	Comprehensive Income		$	23,992		$	30,573

See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

For the three months ended March 31, 2019
(dollars in thousands, except share and per share data)
Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive (Loss)/Income

Treasury
Stock
Total
Balance at January 1, 2019 $ 90,326
$ 210,345
$ 701,819
$ (23,107 ) $ (43,622 ) $ 935,761
Net income for the three months ended March 31, 2019 —
—
22,928
—
—
22,928
Other comprehensive income (loss), net of tax —
—
—
6,176
—
6,176
Adoption of accounting standard - Leases —
—
167
—
—
167
Cash dividends declared ($0.27 per share) —
—
(9,317 ) —
—
(9,317 )
Treasury stock issued for restricted stock awards (0 shares, net of forfeitures of 39,834 shares) —
—
481
—
(1,357 ) (876 )
Repurchase of S&T Stock (313,904 shares) —
—
—
—
(12,287 ) (12,287 )
Recognition of restricted stock compensation expense —
604
—
—
—
604
Balance at March 31, 2019 $ 90,326
$ 210,949
$ 716,078
$ (16,931 ) $ (57,266 ) $ 943,156

For the three months ended March 31, 2020
(dollars in thousands, except share and per share data)
Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive (Loss)/Income

Treasury
Stock
Total
Balance at January 1, 2020 $ 103,623
$ 399,944
$ 761,083
$ (11,670 ) $ (60,982 ) $ 1,191,998
Net income for the three months ended March 31, 2020 —
—
13,231
—
—
13,231
Other comprehensive income (loss), net of tax —
—
—
17,342
—
17,342
Adoption of accounting standard - credit losses —
—
(22,590 ) —
—
(22,590 )
Cash dividends declared ($0.28 per share) —
—
(11,051 ) —
—
(11,051 )
Treasury stock issued for restricted stock awards (3,290 shares, net of forfeitures of 26,739 shares) —
—
53
—
(616 ) (563 )
Repurchase of S&T Stock (411,430 shares) —
—
—
—
(12,559 ) (12,559 )
Recognition of restricted stock compensation expense —
443
—
—
—
443
Balance at March 31, 2020 $ 103,623
$ 400,387
$ 740,726
$ 5,672
$ (74,157 ) $ 1,176,251


	For the three months ended March 31, 2020
(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total
Balance at January 1, 2020		$	103,623		$	399,944		$	761,083		$	(11,670)		$	(60,982)		$	1,191,998
Net income for the three months ended March 31, 2020		—			—			13,231			—			—			13,231
Other comprehensive income, net of tax		—			—			—			17,342			—			17,342
Adoption of accounting standard - credit losses		—			—			(22,590)			—			—			(22,590)
Cash dividends declared ($0.28 per share)		—			—			(11,051)			—			—			(11,051)
Forfeitures of restricted stock, net of issuances (26,739 shares, net of issuance of 3,290 shares)		—			—			53			—			(616)			(563)

Repurchase of common stock (411,430 shares)		—			—			—			—			(12,559)			(12,559)
Recognition of restricted stock compensation expense		—			443			—			—			—			443
Balance at March 31, 2020		$	103,623		$	400,387		$	740,726		$	5,672		$	(74,157)		$	1,176,251
See Notes to Consolidated Financial Statements
	For the three months ended March 31, 2021
(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
Balance at January 1, 2021		$	103,623		$	400,668		$	710,061		$	8,971		$	(68,612)		$	1,154,711
Net income for the three months ended March 31, 2021		—			—			31,902			—			—			31,902
Other comprehensive loss, net of tax		—			—			—			(7,910)			—			(7,910)

Cash dividends declared ($0.28 per share)		—			—			(10,975)			—			—			(10,975)
Forfeitures of restricted stock, net of issuances (30,840 shares, net of issuance of 1,192 shares)		—			—			730			—			(865)			(135)

Recognition of restricted stock compensation expense		—			685			—			—			—			685
Balance at March 31, 2021		$	103,623		$	401,353		$	731,718		$	1,061		$	(69,477)		$	1,168,278
See Notes to Consolidated Financial Statements

~~See Notes to Consolidated Financial Statements~~

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended March 31,
(dollars in thousands) 2020 2019
OPERATING ACTIVITIES
Net income $ 13,231
$ 22,928
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 20,050
5,649
Provision for unfunded loan commitments —
35
Net depreciation, amortization and accretion 1,171
1,420
Net amortization of discounts and premiums on securities 1,154
776
Stock-based compensation expense 443
604
Gain on the sale of mortgage loans, net (536 ) (293 )
Mortgage loans originated for sale (37,332 ) (14,506 )
Proceeds from the sale of mortgage loans 35,358
14,464
Net change in:
Interest receivable 26
(1,963 )
Interest payable (242 ) (789 )
Other assets (149,186 ) (3,466 )
Other liabilities 55,902
5,600
Net Cash (Used in) Provided by Operating Activities (59,961 ) 30,459
INVESTING ACTIVITIES
Purchases of securities (30,292 ) (9,437 )
Proceeds from maturities, prepayments and calls of securities 33,869
20,193
Net (purchases of) proceeds from sales of Federal Home Loan Bank stock (5,277 ) 9,477
Net (increase) decrease in loans (122,507 ) 4,760
Proceeds from sale of loans not originated for resale —
465
Purchases of premises and equipment (1,429 ) (1,757 )
Net Cash (Used in) Provided by Investing Activities (125,636 ) 23,701
FINANCING ACTIVITIES
Net increase in core deposits 28,684
170,744
Net decrease in certificates of deposit (7,042 ) (11,241 )
Net increase in securities sold under repurchase agreements 49,756
5,044
Net increase (decrease) in short-term borrowings 128,921
(235,000 )
Proceeds from long-term borrowings —
104
Repayments on long-term borrowings (688 ) —
Treasury shares issued-net (563 ) (876 )
Cash dividends paid to common shareholders (11,051 ) (9,317 )
Repurchase of common stock (12,559 ) (12,287 )
Net Cash Provided by (Used in) Financing Activities 175,458
(92,829 )
Net decrease in cash and cash equivalents (10,139 ) (38,669 )
Cash and cash equivalents at beginning of period 197,823
155,489
Cash and Cash Equivalents at End of Period $ 187,684
$ 116,820
Supplemental Disclosures
Leased right-of-use operating assets and lease liabilities added to the balance sheet $ 91
$ 35,686
Interest paid $ 17,795
$ 19,023
Income taxes paid, net of refunds $ 210
$ 1,432
Transfers of loans to other real estate owned $ 110
$ 80


	Three Months Ended March 31,
(dollars in thousands)		2021		2020
























Net Cash Provided by (Used in) Operating Activities		$	90,145	$	(59,961)

INVESTING ACTIVITIES
Purchases of securities		(89,038)		(30,292)
Proceeds from maturities, prepayments and calls of securities		34,715		33,869

Net proceeds from sales (purchases of) of Federal Home Loan Bank stock		831		(5,277)
Net decrease (increase) in loans		33,937		(122,507)
Proceeds from sale of loans not originated for resale		640		0
Purchases of premises and equipment		(811)		(1,429)
Proceeds from the sale of premises and equipment		74		0


Net Cash Used in Investing Activities		(19,652)		(125,636)
FINANCING ACTIVITIES
Net increase in core deposits		522,528		28,684
Net decrease in certificates of deposit		(67,003)		(7,042)
Net increase in securities sold under repurchase agreements		2,254		49,756
Net decrease (increase) in short-term borrowings		(75,000)		128,921

Repayments on long-term borrowings		(399)		(688)

Treasury shares issued-net		(135)		(563)

Cash dividends paid to common shareholders		(10,975)		(11,051)
Repurchase of common stock		0		(12,559)


Net Cash Provided by Financing Activities		371,270		175,458
Net increase (decrease) in cash and cash equivalents		441,763		(10,139)
Cash and cash equivalents at beginning of period		229,666		197,823
Cash and Cash Equivalents at End of Period		$	671,429	$	187,684
Supplemental Disclosures
Loans transferred to held for sale		$	2,798	$	0


Leased right-of-use operating assets and lease liabilities		$	0	$	91
Interest paid		$	5,368	$	17,795
Income taxes paid, net of refunds		$	197	$	210

Transfers of loans to other real estate owned		$	77	$	110

See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Principles of Consolidation

The interim Consolidated Financial Statements include the accounts of S&T Bancorp, Inc., or S&T, and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments of 20 percent to 50 percent of the outstanding common stock of investees are accounted for using the equity method of accounting.

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements of S&T have been prepared in accordance with generally accepted accounting principles, or GAAP, in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission, or SEC, on March ~~2, 2020.~~1, 2021. In the opinion of management, the accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position and the results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period.

On June 5, 2019 we entered into an agreement to acquire DNB Financial Corporation, or DNB, and the transaction was completed on November 30, 2019. Refer to Note 2, Business Combinations in our Annual Report on Form 10-K for the year ended December 31, 2020 for further details on the merger.

Reclassification

Amounts in prior period financial statements and footnotes are reclassified whenever necessary to conform to the current period presentation. Reclassifications had no effect on our results of operations or financial condition.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Recently Adopted Accounting Standards Updates, or ASU or Update

~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~Income Taxes (Topic 740): ~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~Income Taxes

In ~~August 2018,~~December 2019, the ~~Financial Accounting Standards Board, or~~ FASB issued ASU No. ~~2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~2019-12, Income Taxes (Topic 740): ~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.~~Income Taxes. The amendments in this ASU ~~apply to an entity that is a customer in a hosting arrangement that is a service contract. These amendments relate to~~simplify the accounting for ~~implementation costs (e.g., implementation, setup~~income taxes by removing certain exceptions and improve the consistent application of GAAP by clarifying and amending other upfront costs). These amendments require an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which costs to capitalize and which costs to expense. These amendments require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. This ASU is effective for annual and interim periods beginning after December 15, 2019.existing guidance. We adopted this ASU on January 1, ~~2020.~~2021. The amendments in this ASU did not ~~materially~~ impact our Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.

~~Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement~~

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU remove certain disclosures from Topic 820, modify disclosures and/or require additional disclosures. The amendments in this Update required us to change our Fair Value disclosures beginning with the disclosures included in this Form 10-Q for the period ended March 31, 2020. We adopted this ASU on January 1, 2020. The amendments in this ASU did not materially impact our Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income. Refer to Note 4. Fair Value Measurements.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 1. BASIS OF PRESENTATION - continued

~~Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment~~

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment (Topic 350). The main objective of this ASU is to simplify the current requirements for testing goodwill for impairment by eliminating step two from the goodwill impairment test. The amendments are expected to reduce the complexity and costs associated with performing the goodwill impairment test, which could result in recording impairment charges sooner. This Update is effective for any interim and annual impairment tests in reporting periods in fiscal years beginning after December 15, 2019. We adopted the amendments of this ASU on January 1, 2020. The amendments in this ASU did not have any impact on our Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.

~~Financial Instruments - Credit Losses~~

On January 1, 2020, we adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology for determining our provision for credit losses, and allowance for credit losses, or ACL, with an expected loss methodology that is referred to as the Current Expected Credit Loss, or CECL, model. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including our loans and off-balance sheet credit exposures. In addition, ASU 2016-13 made changes to the accounting for available-for-sale debt securities. Credit losses related to available-for-sale debt securities (regardless of whether the impairment is considered to be other-than-temporary) will be measured in a manner similar to the present, except that such losses will be recorded as allowances rather than as reductions in the amortized cost of the related securities.

We adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

We made the accounting policy election to not measure an ACL for accrued interest receivables for loans and securities. Accrued interest deemed uncollectible will be written off through interest income.

~~The majority of our available-for-sale debt securities are government agency-backed securities for which the risk of loss is minimal, and accordingly the ACL is immaterial.~~

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. Refer to Note 7 Allowance for Credit Losses for further discussion of these portfolio segments. Our new segmentation breaks out business banking loans from our other loan segments: Commercial Real Estate, or CRE, Commercial and Industrial, or C&I , Commercial Construction, Consumer Real Estate and Other Consumer. Business banking loans are commercial loans made to small businesses that are standard, non-complex products and evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards.

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~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 1. BASIS OF PRESENTATION - continued~~

~~The following table details the impact of ASU 2016-13 and the reclassification of loans for the identification of new portfolio loan segments under CECL:~~

January 1, 2020
(dollars in thousands) As Reported Under ASU 2016-13 Pre-ASU 2016-13 Impact of ASU 2016-13 Adoption
Assets:
Loans held for investment (outstanding balance)
Commercial real estate $ 2,946,319
$ 3,416,518
$ (470,199 )
Commercial and industrial 1,458,541
1,720,833
(262,292 )
Commercial construction 345,263
375,445
(30,182 )
Business banking 1,092,908
—
1,092,908
Consumer real estate 1,235,352
1,545,323
(309,971 )
Other consumer 58,769
79,033
(20,264 )
Allowance for credit losses on loans (89,577 ) (62,224 ) (27,353 )
Total loans held for investment, net $ 7,047,575
$ 7,074,928
$ (27,353 )
Net deferred tax asset $ 19,317
$ 13,206
$ 6,111
Liabilities:
Allowance for credit losses on unfunded loan commitments $ 4,462
$ 3,113
$ 1,349
Equity:
Retained earnings $ 738,493
$ 761,083
$ (22,590 )

The adoption of ASU 2016-13 resulted in an increase to our ACL of $27.4 million on January 1, 2020. The increase included $8.2 million for S&T legacy loans and $9.3 million for acquired loans from the DNB merger. Under the previously applicable accounting guidance, a credit reserve was not recorded for acquired loans upon acquisition, however, ASU 2016-13 requires an ACL to be recognized for acquired loan similar to originated loans. We also recorded a day one adjustment of $9.9 million primarily related to a Commercial and Industrial, or C&I, relationship that was charged off in the first quarter of 2020. We obtained information on the relationship subsequent to filing our December 31, 2019 Form 10-K, but before the end of the first quarter of 2020. The updated information supported a loss existed at January 1, 2020. As of January 1, 2020, we recorded a cumulative-effect adjustment of $22.6 million to decrease retained earnings related to the adoption of ASU 2016-13.

~~Allowance for Credit Losses Policy~~

The ACL is a valuation reserve established and maintained by charges against operating income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The ACL for homogeneous loans is calculated using a life-time loss rate methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. The ACL model is comprised of six distinct portfolio segments: 1) Construction, 2) Commercial Real Estate, or CRE, 3) C&I, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer. Each segment has a distinct set of risk characteristics monitored by management. We further evaluate the ACL at a disaggregated level which includes type of collateral, loan participations, non-owner occupied and our internal risk rating system for the commercial segments and type of collateral, lien position, and FICO score, for the consumer segments. Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on the unemployment forecast and management judgment. For periods beyond our two year reasonable and supportable forecast, we revert to the historical loss rate. We revert to historical loss rates utilizing a straight-line method over a one year reversion period. The qualitative adjustments for current conditions are based upon changes in lending policies and practices, experience and ability of lending staff, quality of the bank’s loan review system, value of underlying

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~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 1. BASIS OF PRESENTATION - continued~~

collateral for collateral dependent loans, the existence of and changes in concentrations and other external factors. These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve. A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit, and any needed reserve is recorded in other liabilities.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans greater than $0.5 million that meet the following criteria: 1) when it is determined that foreclosure is probable, 2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, 3) any commercial troubled debt restructuring, or TDR, or any loan reasonably expected to become a TDR whether on accrual or nonaccrual status and 4) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.

Although we believe our process for determining the ACL appropriately considers all the factors that would likely result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual losses are higher than management estimates, additional provision for credit losses could be required and could adversely affect our earnings or financial position in future periods.

Accounting Standards Issued But Not Yet Adopted

~~Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans~~

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU apply to all employers that sponsor defined benefit pension or other postretirement plans. These amendments remove certain disclosures from Topic 715-20 and require additional disclosures. The amendments in this ASU will require S&T to update our employee benefits disclosures beginning with our Form 10-Q for the period ended March 31, 2021. The amendments in this ASU will have no impact on our consolidated financial statements.

~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplifies the accounting for income taxes by removing certain exceptions and improves the consistent application of GAAP by clarifying and amending other existing guidance. The amendments in this ASU will be effective on January 1, 2021 and are not expected to have any impact on our consolidated financial statements.

Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. Modified contracts that meet certain scope guidance are eligible for relief from the modification accounting requirements in US GAAP. The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. We are evaluating the ~~impacts~~impact of this ASU and ~~have~~we do not ~~yet determined whether LIBOR transition and~~expect the amendments in this ASU ~~will have material effects on~~to materially impact our ~~business operations and consolidated financial statements.~~

Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.

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~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 2. BUSINESS COMBINATIONS~~

On November 30, 2019, we completed our acquisition of DNB Financial Corporation, or DNB, and DNB First National Association, its wholly-owned bank subsidiary, located in Downingtown, Pennsylvania. The acquisition of DNB expanded our Eastern Pennsylvania market by adding 14 banking locations, in an all-stock transaction structured as a merger of DNB with and into S&T, with S&T being the surviving entity. The related systems conversion of DNB into S&T Bank occurred on February 7, 2020.

DNB shareholders received, without interest, 1.22 shares of S&T common stock for each share of DNB common stock. The total purchase price was approximately $201.0 million, which included $0.4 million of cash and 5,318,964 S&T common shares at a fair value of $37.72 per share. The fair value of $37.72 per share of S&T common stock was based on the November 30, 2019 closing price.

The Merger was accounted for under the acquisition method of accounting and our Consolidated Financial Statements include all DNB Bank transactions beginning on December 1, 2019. Goodwill of $86.0 million at March 31, 2020 was calculated as the excess of the consideration exchanged over the fair value of the identifiable net assets acquired. All of the goodwill was assigned to our Community Banking segment. The goodwill recognized is not deductible for tax purposes.

The following table provides a summary of the assets acquired and liabilities assumed by DNB, the preliminary estimates of the fair value adjustments necessary to adjust those acquired assets and assumed liabilities to estimated fair value and the preliminary estimates of the resultant fair values of those assets and liabilities by S&T at November 30, 2019, the acquisition date. Preliminary estimates were adjusted by $1.8 million during the three months ended March 31, 2020. These measurement period adjustments primarily related to $2.5 million reduction in the fair value of loans, $0.3 million reduction in the fair value of borrowings and $0.3 million in deferred taxes related to these valuation adjustments. Preliminary fair value adjustments continue to be evaluated by management and may be subject to further adjustment during the measurement period, which may not extend beyond one year following the acquisition.

~~The following table presents the preliminary fair value adjustments and the measurement period adjustments as of the dates presented:~~

November 30, 2019 March 31, 2020
As Recorded by DNB
Preliminary Fair Value Adjustments⁽¹⁾
As Recorded by S&T Measurement Period Adjustments As Recorded by S&T
Fair Value of Assets Acquired
Cash and cash equivalents $ 64,119
$ —
$ 64,119
$ —
$ 64,119
Securities and other investments 108,715
183
108,898
—
108,898
Loans 917,127
(8,143 ) 908,984
(2,496 ) 906,488
Allowance for credit losses (6,487 ) 6,487
—
—
—
Goodwill 15,525
(15,525 ) —
—
—
Premises and equipment 6,782
8,090
14,872
—
14,872
Accrued interest receivable 4,138
—
4,138
—
4,138
Deferred income taxes 2,017
(3,298 ) (1,281 ) 311
(970 )
Core deposits and other intangible assets 269
(269 ) —
—
—
Other assets 24,883
(4,278 ) 20,605
40
20,645
Total Assets Acquired 1,137,088
(16,753 ) 1,120,335
(2,145 ) 1,118,190
Fair Value of Liabilities Assumed
Deposits 966,263
1,002
967,265
(12 ) 967,253
Borrowings 37,617
(276 ) 37,341
(257 ) 37,084
Accrued interest payable and other liabilities 11,157
(3,184 ) 7,973
(68 ) 7,905
Total Liabilities Assumed 1,015,037
(2,458 ) 1,012,579
(337 ) 1,012,242
Total Net Assets Acquired $ 122,051
$ (14,295 ) $ 107,756
$ (1,808 ) $ 105,948
Core Deposit Intangible Asset $ 7,288
$ —
$ 7,288
Wealth Management Intangible Asset 1,772
—
1,772
Total Fair Value of Net Assets Acquired and Identified $ 116,816
$ (1,808 ) $ 115,008
Consideration Paid
Cash $ 360
$ —
$ 360
Common stock 200,631
—
200,631
Fair Value of Total Consideration $ 200,991
$ —
$ 200,991
Goodwill $ 84,175
$ 1,808
$ 85,983

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~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 2. BUSINESS COMBINATIONS – continued~~

⁽¹⁾Management is continuing to evaluate the purchase accounting fair value adjustments related to loans, including loan classification, deferred and current income taxes until the final valuations are complete and final tax returns are filed. Any changes in preliminary estimates will be adjusted in goodwill in subsequent periods, but not extending beyond one year from the date of acquisition.

Loans acquired in the Merger were recorded at fair value with 0 carryover of the related ACL from DNB. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. The preliminary fair value of the loans acquired was estimated at $909.0 million, net of a $10.5 million discount. The discount is accreted to interest income over the remaining contractual life of the loans. During the three month period ended March 31, 2020, the fair value of acquired loans was reduced by an additional $2.5 million as we continue to finalize our evaluation of the loan portfolio.

As of March 31, 2020, direct costs related to the DNB merger of $13.7 million were recognized and expensed as incurred. During the three months ended March 31, 2020, we recognized $2.3 million of merger related expenses including $0.2 million in legal and professional fees, $1.4 million in severance payments and stay-bonuses, $0.4 million for data processing, and $0.3 million in other expenses. As of December 31, 2019, we recognized $11.4 million of merger related expenses, including $4.7 million for data processing contract termination and system conversion costs, $2.8 million in legal and professional expenses, $3.4 million in severance payments and $0.5 million in other expenses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3.2. EARNINGS PER SHARE

Diluted earnings per share is calculated using both the two-class and the treasury stock methods with the more dilutive method used to determine diluted earnings per share. For the three months ended March 31, 2021 and 2020, diluted EPS was reported using the two-class method. The following table reconciles the numerators and denominators of basic and diluted earnings per share calculations for the periods presented.

Three Months Ended March 31,
(in thousands, except share and per share data) 2020 2019
Numerator for Earnings per Share—Basic:
Net income $ 13,231
$ 22,928
Less: Income allocated to participating shares 29
62
Net Income Allocated to Shareholders $ 13,202
$ 22,866

Numerator for Earnings per Share—Diluted:
Net income $ 13,231
$ 22,928
Net Income Available to Shareholders $ 13,231
$ 22,928

Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic 39,271,540
34,414,555
Add: Potentially dilutive shares 108,116
128,256
Denominator for Treasury Stock Method—Diluted 39,379,656
34,542,811

Weighted Average Shares Outstanding—Basic 39,271,540
34,414,555
Add: Average participating shares outstanding 54,398
92,659
Denominator for Two-Class Method—Diluted 39,325,938
34,507,214

Earnings per share—basic $ 0.34
$ 0.67
Earnings per share—diluted $ 0.34
$ 0.66
Restricted stock considered anti-dilutive excluded from potentially dilutive shares 41
68,314


	Three months ended March 31,
(in thousands, except share and per share data)	2021			2020
Numerator for Earnings per Share—Basic:
Net income		$	31,902		$	13,231
Less: Income allocated to participating shares		141			29
Net Income Allocated to Shareholders		$	31,761		$	13,202

Numerator for Earnings per Share—Diluted:
Net income		$	31,902		$	13,231
Net Income Available to Shareholders		$	31,902		$	13,231

Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic		39,021,208			39,271,540
Add: Potentially dilutive shares		99,922			108,116
Denominator for Treasury Stock Method—Diluted		39,121,130			39,379,656

Weighted Average Shares Outstanding—Basic		39,021,208			39,271,540
Add: Average participating shares outstanding		0			54,398
Denominator for Two-Class Method—Diluted		39,021,208			39,325,938

Earnings per share—basic		$	0.81		$	0.34
Earnings per share—diluted		$	0.81		$	0.34


Restricted stock considered anti-dilutive excluded from potentially dilutive shares		165			41

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS

We use fair value measurements when recording and disclosing certain financial assets and liabilities. Debt securities, equity securities and derivative financial instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as loans held for sale, individually assessed loans, ~~held for investment,~~ other real estate owned, or OREO, and other repossessed assets, mortgage servicing rights, or MSRs, and certain other assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. In determining fair value, we use various valuation approaches, including market, income and cost approaches. The fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data that we have obtained from independent sources. Unobservable inputs reflect our estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1: valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.

Level 2: valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data.

Level 3: valuation is derived from other valuation methodologies, including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our policy is to recognize transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.

The following are descriptions of the valuation methodologies that we use for financial instruments recorded at fair value on either a recurring or nonrecurring basis.

Recurring Basis

Available-for-Sale Debt Securities

We obtain fair values for debt securities from a third-party pricing service which utilizes several sources for valuing fixed-income securities. We validate prices received from our pricing service through comparison to a secondary pricing service and broker quotes. We review the methodologies of the pricing services which provide us with a sufficient understanding of the valuation models, assumptions, inputs and pricing to reasonably measure the fair value of our debt securities. The market valuation sources for debt securities include observable inputs rather than significant unobservable inputs and are classified as Level 2. The service provider utilizes pricing models that vary by asset class and include available trade, bid and other market information. Generally, the methodologies include broker quotes, proprietary models, vast descriptive terms and conditions databases and extensive quality control programs.

Equity Securities

Marketable equity securities that have an active, quotable market are classified as Level 1. Marketable equity securities that are quotable, but are thinly traded or inactive, are classified as Level 2. Marketable equity securities that are not readily traded and do not have a quotable market are classified as Level 3.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

Securities Held in a Deferred Compensation Plan ~~Assets~~

We use quoted market prices to determine the fair value of our equity security assets. These securities are reported at fair value with the gains and losses included in noninterest income in our Consolidated Statements of Comprehensive Income. These assets are held in a deferred compensation plan and are invested in readily quoted mutual funds. Accordingly, these assets are classified as Level 1. Deferred compensation plan assets are reported in other assets in the Consolidated Balance Sheets.

Derivative Financial Instruments

We use derivative instruments, including interest rate swaps for commercial loans with our customers, interest rate lock commitments and the sale of mortgage loans in the secondary market. We calculate the fair value for derivatives using accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Each valuation considers the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and implied volatilities. Accordingly, derivatives are classified as Level 2. We incorporate credit valuation adjustments into the valuation models to appropriately reflect both our own nonperformance risk and the respective counterparties’ nonperformance risk in calculating fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements and collateral postings.

Nonrecurring Basis

Loans Held for Sale

Loans held for sale consist of 1-4 family residential loans originated for sale in the secondary market and, from time to time, certain loans are transferred from the loan portfolio to loans held for sale, all of which are carried at the lower of cost or fair value. The fair value of 1-4 family residential loans is based on the principal or most advantageous market currently offered for similar loans using observable market data. The fair value of the loans transferred from the loan portfolio is based on the amounts offered for these loans in currently pending sales transactions. Loans held for sale carried at fair value are classified as Level 3.

Loans ~~Held for Investment~~Individually Evaluated

Loans that are individually evaluated to determine whether a specific allocation of ACL is needed are reported at fair value. Fair value is determined using the following methods: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral less estimated selling costs when the loan is collateral dependent and we expect to liquidate the collateral. However, if repayment is expected to come from the operation of the collateral, rather than liquidation, then we do not consider estimated selling costs in determining the fair value of the collateral. Collateral values are generally based upon appraisals by approved, independent state certified appraisers. Appraisals may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or our knowledge of the borrower and the borrower’s business. Loans carried at fair value are classified as Level 3.

OREO and Other Repossessed Assets

OREO and other repossessed assets obtained in partial or total satisfaction of a loan are recorded at the lower of recorded investment in the loan or fair value less cost to sell. Subsequent to foreclosure, these assets are carried at the lower of the amount recorded at acquisition date or fair value less cost to sell. Accordingly, it may be necessary to record nonrecurring fair value adjustments. Fair value, when recorded, is generally based upon appraisals by approved, independent state certified appraisers. Appraisals on OREO may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or other information available to us. OREO and other repossessed assets carried at fair value are classified as Level 3.

OREO and other repossessed assets are reported in other assets in the Consolidated Balance Sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

Mortgage Servicing Rights

~~The~~MSRs are reported pursuant to the amortization method and evaluated for impairment quarterly by comparing the carrying to the fair value of the MSRs. Fair value of MSRs is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value. Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3. MSRs are reported in other assets in the Consolidated Balance Sheets and are amortized into mortgage banking income in the Consolidated Statements of Comprehensive Income.

~~Other Assets~~

We measure certain other assets at fair value on a nonrecurring basis. Fair value is based on the application of lower of cost or fair value accounting, or write-downs of individual assets. Valuation methodologies used to measure fair value are consistent with overall principles of fair value accounting and consistent with those described above.

Financial Instruments

In addition to financial instruments recorded at fair value in our financial statements, fair value accounting guidance requires disclosure of the fair value of all of an entity’s assets and liabilities that are considered financial instruments. The majority of our assets and liabilities are considered financial instruments. Many of these instruments lack an available trading market as characterized by a willing buyer and a willing seller engaged in an exchange transaction. Also, it is our general practice and intent to hold our financial instruments to maturity and to not engage in trading or sales activities with respect to such financial instruments. For fair value disclosure purposes, we substantially utilize the fair value measurement criteria as required and explained above. In cases where quoted fair values are not available, we use present value methods to determine the fair value of our financial instruments.

Cash and Cash Equivalents

The carrying amounts reported in the Consolidated Balance Sheets for cash and due from banks, including interest-bearing deposits, approximate fair value.

Loans

Our methodology to fair value loans includes an exit price notion. The fair value of variable rate loans that may reprice frequently at short-term market rates is based on carrying values adjusted for liquidity and credit risk. The fair value of variable rate loans that reprice at intervals of one year or longer, such as adjustable rate mortgage products, is estimated using discounted cash flow analyses that utilize interest rates currently being offered for similar loans and adjusted for liquidity and credit risk. The fair value of fixed rate loans is estimated using a discounted cash flow analysis that utilizes interest rates currently being offered for similar loans adjusted for liquidity and credit risk.

Bank Owned Life Insurance

Fair value approximates net cash surrender value of bank owned life insurance, or BOLI.

Federal Home Loan Bank, or FHLB, and Other Restricted Stock

It is not practical to determine the fair value of our FHLB and other restricted stock due to the restrictions placed on the transferability of these stocks; it is presented at carrying value.

Collateral Receivable

The carrying amount included in other assets on our Consolidated Balance Sheets approximates fair value.

Deposits

The fair values disclosed for deposits without defined maturities (e.g., noninterest and interest-bearing demand, money market and savings accounts) are by definition equal to the amounts payable on demand. The carrying amounts for variable rate, fixed-term time deposits approximate their fair values. Estimated fair values for fixed rate and other time deposits are based on discounted cash flow analysis using interest rates currently offered for time deposits with similar terms. The carrying amount of accrued interest approximates fair value.

1511

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

Short-Term Borrowings

The carrying amounts of securities sold under repurchase agreements, or REPOs, and other short-term borrowings approximate their fair values.

Long-Term Borrowings

The fair values disclosed for fixed rate long-term borrowings are determined by discounting their contractual cash flows using current interest rates for long-term borrowings of similar remaining maturities. The carrying amounts of variable rate long-term borrowings approximate their fair values.

Junior Subordinated Debt Securities

The interest rate on the variable rate junior subordinated debt securities is reset quarterly; therefore, the carrying values approximate their fair values.

Loan Commitments and Standby Letters of Credit

Off-balance sheet financial instruments consist of commitments to extend credit and letters of credit. Except for interest rate lock commitments, estimates of the fair value of these off-balance sheet items are not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

Other

Estimates of fair value are not made for items that are not defined as financial instruments, including such items as our core deposit intangibles and the value of our trust operations.

1612

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at March 31, ~~2020~~2021 and December 31, ~~2019. There were 0 transfers between Level 1 and Level 2 for items measured at fair value on a recurring basis during the periods presented.~~2020.


	March 31, 2021
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities	$	0	$	63,268	$	0	$	63,268
Obligations of U.S. government corporations and agencies	0		82,028		0		82,028
Collateralized mortgage obligations of U.S. government corporations and agencies	0		217,916		0		217,916
Residential mortgage-backed securities of U.S. government corporations and agencies	0		63,911		0		63,911
Commercial mortgage-backed securities of U.S. government corporations and agencies	0		277,253		0		277,253
Corporate obligations	0		2,002		0		2,002
Obligations of states and political subdivisions	0		107,505		0		107,505
Total Available-for-sale Debt Securities	0		813,883		0		813,883
Marketable equity securities	3,328		88		0		3,416
Total Securities	3,328		813,971		0		817,299
Securities held in a deferred compensation plan	7,178		0		0		7,178
Derivative financial assets:
Interest rate swaps	0		40,415		0		40,415
Interest rate lock commitments	0		0		1,509		1,509
Forward sale contracts	0		0		226		226
Total Assets	$	10,506	$	854,386	$	1,735	$	866,627
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	0	$	40,818	$	—	$	40,818

Total Liabilities	$	0	$	40,818	$	0	$	40,818


	December 31, 2020
(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities	$	0	$	10,282	$	0	$	10,282
Obligations of U.S. government corporations and agencies	0		82,904		0		82,904
Collateralized mortgage obligations of U.S. government corporations and agencies	0		209,296		0		209,296
Residential mortgage-backed securities of U.S. government corporations and agencies	0		67,778		0		67,778
Commercial mortgage-backed securities of U.S. government corporations and agencies	0		273,681		0		273,681
Corporate obligations	0		2,025		0		2,025
Obligations of states and political subdivisions	0		124,427		0		124,427
Total Available-for-sale Debt Securities	0		770,393		0		770,393
Marketable equity securities	3,228		72		0		3,300
Total Securities	3,228		770,465		0		773,693
Securities held in a deferred compensation plan	6,794		0		0		6,794
Derivative financial assets:
Interest rate swaps	0		78,319		0		78,319
Interest rate lock commitments	0		0		2,900		2,900

Total Assets	$	10,022	$	848,784	$	2,900	$	861,706
LIABILITIES
Derivative financial liabilities:
Interest rate swaps	$	0	$	79,033	$	0	$	79,033
Forward sale contracts	0		385		0		385
Total Liabilities	$	0	$	79,418	$	0	$	79,418

March 31, 2020
(dollars in thousands) Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities $ —
$ 10,372
$ —
$ 10,372
Obligations of U.S. government corporations and agencies —
137,982
—
137,982
Collateralized mortgage obligations of U.S. government corporations and agencies —
189,472
—
189,472
Residential mortgage-backed securities of U.S. government corporations and agencies —
21,193
—
21,193
Commercial mortgage-backed securities of U.S. government corporations and agencies —
284,679
—
284,679
Corporate Bonds —
7,551
—
7,551
Obligations of states and political subdivisions —
144,717
—
144,717
Total Available-for-sale Debt Securities —
795,966
—
795,966
Marketable equity securities 3,504
62
—
3,566
Total Securities 3,504
796,028
—
799,532
Securities held in a deferred compensation plan 4,782
—
—
4,782
Derivative financial assets:
Interest rate swaps —
88,135
—
88,135
Interest rate lock commitments —
2,927
—
2,927
Total Assets $ 8,286
$ 887,090
$ —
$ 895,376
LIABILITIES
Derivative financial liabilities:
Interest rate swaps $ —
$ 87,989
$ —
$ 87,989
Forward sale contracts —
1,292
—
1,292
Total Liabilities $ —
$ 89,281
$ —
$ 89,281

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

December 31, 2019
(dollars in thousands) Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities $ —
$ 10,040
$ —
$ 10,040
Obligations of U.S. government corporations and agencies —
157,697
—
157,697
Collateralized mortgage obligations of U.S. government corporations and agencies —
189,348
—
189,348
Residential mortgage-backed securities of U.S. government corporations and agencies —
22,418
—
22,418
Commercial mortgage-backed securities of U.S. government corporations and agencies —
275,870
—
275,870
Corporate Bonds —
7,627
—
7,627
Obligations of states and political subdivisions —
116,133
—
116,133
Total Available-for-Sale Debt Securities —
779,133
—
779,133
Marketable equity securities 5,078
72
—
5,150
Total Securities 5,078
779,205
—
784,283
Securities held in a deferred compensation plan 5,987
—
—
5,987
Derivative financial assets:
Interest rate swaps —
25,647
—
25,647
Interest rate lock commitments —
321
—
321
Forward sale contracts —
1
—
1
Total Assets $ 11,065
$ 805,174
$ —
$ 816,239
LIABILITIES
Derivative financial liabilities:
Interest rate swaps $ —
$ 25,615
$ —
$ 25,615
Total Liabilities $ —
$ 25,615
$ —
$ 25,615

There were no transfers between Level 1, Level 2 and Level 3 for the three months ended March 31, 2021. Interest rate lock commitments to borrowers were transferred from Level 2 to Level 3 during the year ended December 31, 2020 due to pull-through factors being a significant unobservable input.

Assets Recorded at Fair Value on a Nonrecurring Basis

We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our financial statements. There were 0 liabilities measured at fair value on a nonrecurring basis at either March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

For Level 3 assets measured at fair value on a nonrecurring basis as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the significant unobservable inputs used in the fair value measurements were as follows:


	March 31, 2021		Valuation Technique	Significant Unobservable Inputs	Range			Weighted Average (1) (2) (3)
(dollars in thousands)
Loans individually evaluated	$	78,186	Collateral method	Appraisal adjustment	0%	-	47%	16.91%
Other real estate owned	1,563		Collateral method	Costs to sell	4%	-	7.00%	5.06%
Mortgage servicing rights	6,590		Discounted cash flow method	Discount rate	9.02%	-	13.77%	9.40%
				Constant prepayment rates	9.24%	-	12.54%	11.08%
Loans held for sale	2,798		Contractual agreement	None	NA			NA
Total Assets	$	89,137


	March 31, 2020		Valuation Technique(s)		Significant Unobservable Inputs	Range		December 31, 2020		Valuation Technique		Significant Unobservable Inputs		Range			Weighted Average (1) (2) (3)
(dollars in thousands)							(dollars in thousands)
Loans held for investment	$	20,926	Collateral Method	Third party appraisal	Costs to sell	0% - 17%
			Discounted cash flow method	Discount rate	Contractual loan rate	3.25%
Loans individually evaluated							Loans individually evaluated	$	67,402	Collateral method			Appraisal adjustment		0%	-	47%	16.90%
Other real estate owned	3,045		Collateral method	Third party appraisal	Costs to sell	7%	Other real estate owned	1,953		Collateral method		Costs to sell		4%	-	7.00%	4.92%
Mortgage servicing rights	3,929		Discounted cash flow method	Third party service provider	Discount rate	9.39% - 12.54%	Mortgage servicing rights	4,976		Discounted cash flow method		Discount rate		9.24%	-	12.55%	9.42%
					Constant prepayment rates	7.46% - 12.74%
Mortgage servicing rights							Mortgage servicing rights	4,976			Discounted cash flow method		Constant prepayment rates		8.82%	-	14.58%	13.37%
												None		NA			NA
Total Assets	$	27,900					Total Assets	$	74,917
NA - not applicable							NA - not applicable
(1) Weighted averages for loans held for investment were weighted by loan amounts. (2) Weighted averages for other real estate owned were weighted by OREO balances. (3) Weighted averages for mortgage services rights discount rate and prepayment rates are based on note rate tranches and voluntary constant prepayment rates.							(1) Weighted averages for loans held for investment were weighted by loan amounts. (2) Weighted averages for other real estate owned were weighted by OREO balances. (3) Weighted averages for mortgage services rights discount rate and prepayment rates are based on note rate tranches and voluntary constant prepayment rates.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4.3. FAIR VALUE MEASUREMENTS - continued

The carrying values and fair values of our financial instruments at March 31, 2021 and December 31, 2020 are presented in the following tables:


	Carrying Value(1)		Fair Value Measurements at March 31, 2021
(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	671,429	$	671,429	$	671,429	$	0	$	0
Securities	817,299		817,299		0		817,299		0
Loans held for sale	12,794		12,794		0		0		12,794
Portfolio loans, net	7,068,067		6,976,120		0		0		6,976,120
Bank owned life insurance	82,677		82,677		0		82,677		0
FHLB and other restricted stock	12,199		12,199		0		0		12,199
Collateral receivable	43,343		43,343		43,343		0		0
Securities held in a deferred compensation plan	7,178		7,178		7,178		0		0
Mortgage servicing rights	6,590		6,590		0		0		6,590
Interest rate swaps	40,415		40,415		0		40,415		0
Interest rate lock commitments	1,509		1,509		0		0		1,509
Forward sale contracts	226		226		0		0		226
LIABILITIES
Deposits	$	7,876,028	$	7,876,232	$	6,555,603	$	1,320,629	$	0
Securities sold under repurchase agreements	67,417		67,417		67,417		0		0
Short-term borrowings	0		0		0		0		0
Long-term borrowings	23,282		23,903		4,447		19,456		0
Junior subordinated debt securities	64,097		64,097		64,097		0		0
Interest rate swaps	40,818		40,818		0		40,818		0

(1) As reported in the Consolidated Balance Sheets


	Carrying Value(1)		Fair Value Measurements at December 31, 2020
(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	229,666	$	229,666	$	229,666	$	0	$	0
Securities	773,693		773,693		3,228		770,465		0
Loans held for sale	18,528		18,528		0		0		18,528
Portfolio loans, net	7,108,248		7,028,446		0		0		7,028,446
Bank owned life insurance	82,303		82,303		0		82,303		0
FHLB and other restricted stock	13,030		13,030		0		0		13,030
Collateral receivable	77,936		77,936		77,936		0		0
Securities held in a deferred compensation plan	6,794		6,794		6,794		0		0
Mortgage servicing rights	4,976		4,976		0		0		4,976
Interest rate swaps	78,319		78,319		0		78,319		0
Interest rate lock commitments	2,900		2,900		0		0		2,900

LIABILITIES
Deposits	$	7,420,538	$	7,422,894	$	6,033,075	$	1,389,819	$	0
Securities sold under repurchase agreements	65,163		65,163		65,163		0		0
Short-term borrowings	75,000		75,000		75,000		0		0
Long-term borrowings	23,681		24,545		4,494		20,051		0
Junior subordinated debt securities	64,083		64,083		64,083		0		0
Interest rate swaps	79,033		79,033		0		79,033		0
Forward sale contracts	385		385		0		385		0
(1) As reported in the Consolidated Balance Sheets

December 31, 2019 Valuation Technique(s) Significant Unobservable Inputs Range
(dollars in thousands)
Impaired loans $ 38,697
Collateral Method Third party appraisal Costs to sell 0% - 20%
Discounted cash flow method Discount rate Contractual loan rate 4.75% - 5.50%
Other real estate owned 3,231
Collateral method Third party appraisal Costs to sell 7%
Mortgage servicing rights 1,134
Discounted cash flow method Third party service provider Discount rate 9.39% - 12.54%
Constant prepayment rates 7.46% - 12.74%
Total Assets $ 43,062

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4. ~~FAIR VALUE MEASUREMENTS - continued~~

SECURITIES

~~The carrying values and fair values of our financial instruments at March 31, 2020 and December 31, 2019 are presented in the following tables:~~

Carrying
Value⁽¹⁾
Fair Value Measurements at March 31, 2020
(dollars in thousands) Total Level 1 Level 2 Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits $ 187,684
$ 187,684
$ 187,684
$ —
$ —
Securities 799,532
799,532
3,504
796,028
—
Loans held for sale 7,309
7,309
—
—
7,309
Portfolio loans, net 7,149,895
7,090,570
—
—
7,090,570
Bank owned life insurance 80,978
80,798
—
80,798
—
FHLB and other restricted stock 28,253
28,253
—
—
28,253
Securities held in a deferred compensation plan 4,782
4,782
4,782
—
—
Mortgage servicing rights 3,979
3,982
—
—
3,982
Interest rate swaps 88,135
88,135
—
88,135
—
Interest rate lock commitments 2,927
2,927
—
2,927
—
LIABILITIES

Deposits $ 7,057,879
$ 7,065,896
$ 5,469,826
$ 1,596,070
$ —
Securities sold under repurchase agreements 69,644
69,644
69,644
—
—
Short-term borrowings 410,240
410,240
410,240
—
—
Long-term borrowings 50,180
51,675
4,630
47,045
—
Junior subordinated debt securities 64,038
64,038
64,038
—
—
Interest rate swaps 87,989
87,989
—
87,989
—
Forward sales contracts 1,292
1,292
—
1,292
—
⁽¹⁾ As reported in the Consolidated Balance Sheets

Carrying
Value⁽¹⁾
Fair Value Measurements at December 31, 2019
(dollars in thousands) Total Level 1 Level 2 Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits $ 197,823
$ 197,823
$ 197,823
$ —
$ —
Securities 784,283
784,283
5,078
779,205
—
Loans held for sale 5,256
5,256
—
—
5,256
Portfolio loans, net 7,074,928
6,940,875
—
—
6,940,875
Bank owned life insurance 80,473
80,473
—
80,473
—
FHLB and other restricted stock 22,977
22,977
—
—
22,977
Securities held in a Deferred Compensation Plan 5,987
5,987
5,987
—
—
Mortgage servicing rights 4,662
4,650
—
—
4,650
Interest rate swaps 25,647
25,647
—
25,647
—
Interest rate lock commitments 321
321
—
321
—
Forward sale contracts 1
1
—
1
—
LIABILITIES
Deposits $ 7,036,576
$ 7,034,595
$ 5,441,143
$ 1,593,452
$ —
Securities sold under repurchase agreements 19,888
19,888
19,888
—
—
Short-term borrowings 281,319
281,319
281,319
—
—
Long-term borrowings 50,868
51,339
4,678
46,661
—
Junior subordinated debt securities 64,277
64,277
64,277
—
—
Interest rate swaps 25,615
25,615
—
25,615
—
⁽¹⁾ As reported in the Consolidated Balance Sheets

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 5. SECURITIES~~

The following table presents the fair values of our securities portfolio at the dates presented:

(dollars in thousands) March 31, 2020 December 31, 2019
Available-for-sale debt securities $ 795,966
$ 779,133
Marketable equity securities 3,566
5,150
Total Securities $ 799,532
$ 784,283


(dollars in thousands)	March 31, 2021			December 31, 2020
Available-for-sale debt securities		$	813,883		$	770,393
Marketable equity securities		3,416			3,300
Total Securities		$	817,299		$	773,693

Available-for-Sale Debt Securities

The following tables present the amortized cost and fair value of available-for-sale debt securities as of the dates presented:

March 31, 2020 December 31, 2019
(dollars in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

U.S. Treasury securities $ 9,972
$ 400
$ —
$ 10,372
$ 9,969
$ 71
$ —
$ 10,040
Obligations of U.S. government corporations and agencies 132,938
5,044
—
137,982
155,969
1,773
(45 ) 157,697
Collateralized mortgage obligations of U.S. government corporations and agencies 180,682
8,790
—
189,472
186,879
2,773
(304 ) 189,348
Residential mortgage-backed securities of U.S. government corporations and agencies 20,391
802
—
21,193
22,120
321
(23 ) 22,418
Commercial mortgage-backed securities of U.S. government corporations and agencies 272,651
12,028
—
284,679
273,771
2,680
(581 ) 275,870
Corporate obligations 7,532
30
(11 ) 7,551
7,603
24
—
7,627
Obligations of states and political subdivisions 139,530
5,187
—
144,717
112,116
4,017
—
116,133
Total Available-for-Sale Debt Securities ⁽¹⁾
$ 763,696
$ 32,281
$ (11 ) $ 795,966
$ 768,427
$ 11,659
$ (953 ) $ 779,133


	March 31, 2021												December 31, 2020
(dollars in thousands)	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
U.S. Treasury securities		$	63,361		$	259		$	(352)		$	63,268		$	9,980		$	302		$	0		$	10,282
Obligations of U.S. government corporations and agencies		78,715			3,313			0			82,028			78,755			4,149			0			82,904
Collateralized mortgage obligations of U.S. government corporations and agencies		213,394			5,716			(1,194)			217,916			202,975			6,410			(89)			209,296
Residential mortgage-backed securities of U.S. government corporations and agencies		64,496			632			(1,217)			63,911			66,960			818			0			67,778
Commercial mortgage-backed securities of U.S. government corporations and agencies		266,292			11,085			(124)			277,253			258,875			14,806			0			273,681
Corporate obligations		2,001			2			(1)			2,002			2,021			5			(1)			2,025
Obligations of states and political subdivisions		101,949			5,556			0			107,505			117,439			6,988			0			124,427
Total Available-for-Sale Debt Securities (1)		$	790,208		$	26,563		$	(2,888)		$	813,883		$	737,005		$	33,478		$	(90)		$	770,393

⁽¹⁾Excludes interest receivable of ~~$3.5~~$3.2 million at March 31, ~~2020 and~~2021and $3.4 million at December 31, ~~2019.~~2020. Interest receivable is included in other assets in the consolidated balance sheets.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5.4. SECURITIES – continued

The following tables present the fair value and the age of gross unrealized losses on available-for-sale debt securities by investment category as of the dates presented:

March 31, 2020
Less Than 12 Months 12 Months or More Total
(dollars in thousands) Number of Securities Fair Value
Unrealized
Losses
Number of Securities Fair Value
Unrealized
Losses
Number of Securities Fair Value
Unrealized
Losses
U.S. Treasury securities — $ —
$ —
— $ —
$ —
— $ —
$ —
Obligations of U.S. government corporations and agencies — —
—
— —
—
— —
—
Collateralized mortgage obligations of U.S. government corporations and agencies — —
—
— —
—
— —
—
Residential mortgage-backed securities of U.S. government corporations and agencies — —
—
— —
—
— —
—
Commercial mortgage-backed securities of U.S. government corporations and agencies — —
—
— —
—
— —
—
Corporate bonds 2 2,989
(11 ) — —
—
2 2,989
(11 )
Obligations of states and political subdivisions — —
—
— —
—
— —
—
Total 2 $ 2,989
$ (11 ) — $ —
$ —
2 $ 2,989
$ (11 )


	March 31, 2021
	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
U.S. Treasury securities	5	$	53,026	$	(352)	0	$	0	$	0	5	$	53,026	$	(352)
Obligations of U.S. government corporations and agencies	0	0		0		0	0		0		0	0		0
Collateralized mortgage obligations of U.S. government corporations and agencies	1	10,785		(124)		0	0		0		1	10,785		(124)
Residential mortgage-backed securities of U.S. government corporations and agencies	2	49,860		(1,217)		0	0		0		2	49,860		(1,217)
Commercial mortgage-backed securities of U.S. government corporations and agencies	5	68,629		(1,194)		0	0		0		5	68,629		(1,194)
Corporate bonds	1	499		(1)		0	0		0		1	499		(1)
Obligations of states and political subdivisions	0	0		0		0	0		0		0	0		0


Total	14	$	182,799	$	(2,888)	0	$	0	$	0	14	$	182,799	$	(2,888)

December 31, 2019
Less Than 12 Months 12 Months or More Total
(dollars in thousands) Number of Securities Fair Value
Unrealized
Losses
Number of Securities Fair Value
Unrealized
Losses
Number of Securities Fair Value
Unrealized
Losses
U.S. Treasury securities — $ —
$ —
— $ —
$ —
— $ —
$ —
Obligations of U.S. government corporations and agencies 3 22,638
(45 ) — —
—
3 22,638
(45 )
Collateralized mortgage obligations of U.S. government corporations and agencies 6 23,393
(73 ) 6 25,254
(231 ) 12 48,647
(304 )
Residential mortgage-backed securities of U.S. government corporations and agencies 1 982
(2 ) 1 2,534
(21 ) 2 3,516
(23 )
Commercial mortgage-backed securities of U.S. government corporations and agencies 9 90,005
(581 ) — —
—
9 90,005
(581 )
Corporate bonds 1 79
—
— —
—
1 79
—
Obligations of states and political subdivisions — —
—
— —
—
— —
—
Total Temporarily Impaired Debt Securities 20 $ 137,097
$ (701 ) 7 $ 27,788
$ (252 ) 27 $ 164,885
$ (953 )


	December 31, 2020
	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
U.S. Treasury securities	0	$	0	$	0	0	$	0	$	0	0	$	0	$	0
Obligations of U.S. government corporations and agencies	0	0		0		0	0		0		0	0		0
Collateralized mortgage obligations of U.S. government corporations and agencies	2	35,697		(89)		0	0		0		2	35,697		(89)
Residential mortgage-backed securities of U.S. government corporations and agencies	0	0		0		0	0		0		0	0		0
Commercial mortgage-backed securities of U.S. government corporations and agencies	0	0		0		0	0		0		0	0		0
Corporate bonds	1	499		(1)		0	0		0		1	499		(1)
Obligations of states and political subdivisions	0	0		0		0	0		0		0	0		0


Total	3	$	36,196	$	(90)	0	$	0	$	0	3	$	36,196	$	(90)

We evaluate ~~quarterly~~ securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit losses or other factors. There ~~were 2~~was 14 debt securities in an unrealized loss position at March 31, ~~2020~~2021 and 273 debt securities in an unrealized loss position at December 31, ~~2019.~~2020. We do not intend to sell and it is more likely than not that we will not be required to sell ~~any of~~ the securities in an unrealized loss position before recovery of their amortized cost. The unrealized losses on the debt securities were attributable to changes in interest rates and not related to the credit quality of ~~these~~the issuers. All debt securities were determined to be investment grade and paying principal and interest according to the contractual terms of the security. We ~~concluded that~~did not record an ACL related to the ~~allowance for credit losses for debt~~ securities ~~was immaterial~~portfolio at March 31, ~~2020. Prior to the adoption of ASU 2016-13 there was 0 other than temporary impairment, or OTTI, recorded during the three months ended March~~2021 and December 31, ~~2019.~~2020.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5.4. SECURITIES – continued

The following table presents net unrealized gains and losses, net of tax, on available-for-sale debt securities included in accumulated other comprehensive income/(loss), for the periods presented:


	March 31, 2020									December 31, 2019										March 31, 2021						December 31, 2020
(dollars in thousands)	Gross Unrealized Gains			Gross Unrealized Losses			Net Unrealized Gains/(Losses)			Gross Unrealized Gains			Gross Unrealized Losses			Net Unrealized Gains/(Losses)			(dollars in thousands)	Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains/(Losses)		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains/(Losses)
Total unrealized gains/(losses) on available-for-sale debt securities	$	32,281		$	(11	)	$	32,270		$	11,659		$	(953	)	$	10,706		Total unrealized gains/(losses) on available-for-sale debt securities	$	26,563	$	(2,888)	$	23,675	$	33,478	$	(90)	$	33,388
Income tax (expense) benefit	(6,873		)	2			(6,871		)	(2,486		)	203			(2,283		)	Income tax (expense) benefit	(5,668)		615		(5,053)		(7,128)		19		(7,109)
Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss)	$	25,408		$	(9	)	$	25,399		$	9,173		$	(750	)	$	8,423		Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss)	$	20,895	$	(2,273)	$	18,622	$	26,350	$	(71)	$	26,279

The amortized cost and fair value of available-for-sale debt securities at March 31, ~~2020~~2021 by contractual maturity are included in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2020
(dollars in thousands)
Amortized
Cost

Fair Value
Obligations of the U.S. Treasury, U.S. government corporations and agencies, and obligations of states and political subdivisions

Due in one year or less $ 84,687
$ 85,259
Due after one year through five years 100,877
106,112
Due after five years through ten years 65,732
68,913
Due after ten years 31,144
32,786
Available-for-Sale Debt Securities With Maturities 282,440
293,070
Collateralized mortgage obligations of U.S. government corporations and agencies 180,682
189,473
Residential mortgage-backed securities of U.S. government corporations and agencies 20,391
21,193
Commercial mortgage-backed securities of U.S. government corporations and agencies 272,651
284,679
Corporate Securities 7,532
7,551
Total Available-for-Sale Debt Securities $ 763,696
$ 795,966


	March 31, 2021
(dollars in thousands)	Amortized Cost		Fair Value
Obligations of the U.S. Treasury, U.S. government corporations and agencies, and obligations of states and political subdivisions
Due in one year or less	$	40,399	$	40,813
Due after one year through five years	92,940		97,643
Due after five years through ten years	89,580		91,236
Due after ten years	21,106		23,109
Available-for-Sale Debt Securities With Maturities	244,025		252,801

Collateralized mortgage obligations of U.S. government corporations and agencies	213,394		217,916
Residential mortgage-backed securities of U.S. government corporations and agencies	64,496		63,911
Commercial mortgage-backed securities of U.S. government corporations and agencies	266,292		277,253
Corporate Securities	2,001		2,002


Total Available-for-Sale Debt Securities	$	790,208	$	813,883

Debt securities with carrying values of ~~$298.4~~$320 million at March 31, ~~2020~~2021 and ~~$286.0~~$308 million at December 31, ~~2019~~2020 were pledged for various regulatory and legal requirements.

Marketable Equity Securities

The following table presents realized and unrealized net gains and losses for our marketable equity securities for the periods presented:

Three Months Ended
March 31,
(dollars in thousands) 2020
2019
Marketable Equity Securities

Net gains and losses recognized during the period on equity securities $ (1,585 ) $ (318 )
Less: Net gains and losses recognized during the period on equity securities sold during the period —
—
Unrealized Losses/Gains Recognized During the Reporting Period on Equity Securities Still Held at the Reporting Date $ (1,585 ) $ (318 )


	Three Months Ended March 31,
(dollars in thousands)	2021		2020
Marketable Equity Securities
Net market gains/(losses) recognized	$	116	$	(1,585)
Less: Net gains recognized for equity securities sold	0		0
Unrealized (Losses)/Gains on Equity Securities Still Held	$	116	$	(1,585)

Total unrealized gains and losses on marketable equity securities recognized during the current period are included in other noninterest income on the Consolidated Statements of Comprehensive Income.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6.5. LOANS AND LOANS HELD FOR SALE

Loans are presented net of unearned income of ~~$5.0~~$14.0 million at March 31, ~~2020~~2021 and ~~$4.6~~$16.0 million at December 31, ~~2019~~2020 and net of a discount related to purchase accounting fair value adjustments of ~~$10.9 million and $12.3~~$7.5 million at March 31, ~~2020~~2021 and $8.6 million at December 31, ~~2019.~~2020. The following table presents loans as of the dates presented:

(dollars in thousands) March 31, 2020 December 31, 2019
Commercial
Commercial real estate $ 3,442,495
$ 3,416,518
Commercial and industrial 1,781,402
1,720,833
Commercial construction 396,518
375,445
Total Commercial Loans 5,620,415
5,512,796
Consumer
Residential mortgage 988,816
998,585
Home Equity 544,405
538,348
Installment and other consumer 79,887
79,033
Consumer construction 13,222
8,390
Total Consumer Loans 1,626,330
1,624,356
Total Portfolio Loans 7,246,745
7,137,152
Loans held for sale 7,309
5,256
Total Loans⁽¹⁾
$ 7,254,054
$ 7,142,408


(dollars in thousands)	March 31, 2021		December 31, 2020
Commercial
Commercial real estate	$	3,284,555	$	3,244,974
Commercial and industrial	1,931,711		1,954,453
Commercial construction	460,417		474,280
Total Commercial Loans	5,676,683		5,673,707
Consumer
Consumer real estate	1,425,839		1,471,238
Other consumer	80,646		80,915
Total Consumer Loans	1,506,485		1,552,153
Total Portfolio Loans	7,183,168		7,225,860
Loans held for sale	12,794		18,528
Total Loans (1)	$	7,195,962	$	7,244,388

⁽¹⁾Excludes interest receivable of ~~$22.1~~$23.4 million at ~~both~~ March 31, ~~2020~~2021 and $24.7 million at December 31, ~~2019.~~2020. Interest receivable is included in other assets in the consolidated balance sheets.

Commercial and industrial loans, or C&I, included $499.1 million of loans originated under the Paycheck Protection Program, or PPP, at March 31, 2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law. The CARES Act included the PPP, a program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. The loans are 100 percent guaranteed by the Small Business Administration, or SBA. These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA, on or after June 5, 2020. Payments are deferred for at least six months of the loan. The SBA pays us a processing fee ranging from 1 percent to 5 percent based on the size of the loan. Interest is accrued as earned and loan origination fees and direct costs are deferred and accreted or amortized into interest income over the life of the loan using the level yield method. When a PPP loan is paid off or forgiven by the SBA, the remaining unaccreted or unamortized net origination fees or costs will be immediately recognized into income.

At March 31, 2021, our business banking segment was $1.1 billion compared to $1.2 billion at December 31, 2020. Business banking consists of commercial loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. Business banking consisted of $504.2 million of commercial real estate loans, $232.1 million of C&I loans, $11.0 million of commercial construction loans, $321.8 million of consumer real estate loans that have a commercial purpose at March 31, 2021. At December 31, 2020 business banking consisted of $453.0 million of commercial real estate loans, $394.9 million of C&I loans, $8.2 million of commercial construction loans and $303.9 million of consumer real estate loans that have a commercial purpose. During the first quarter of 2021, $90.2 million of commercial loans and $23.2 million of consumer loans were reclassified into the business banking segment.

We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry and actively managing concentrations. When concentrations exist in certain segments, we mitigate this risk by reviewing the relevant economic indicators and internal risk rating trends and through stress testing of the loans in these segments. Total commercial loans represented ~~77.6~~79.0 percent of total portfolio loans at March 31, ~~2020~~2021 and ~~77.2~~78.5 percent at December 31, ~~2019.~~2020. Within our commercial portfolio, the CRE and ~~Commercial Construction~~commercial construction portfolios combined comprised ~~$3.8~~$3.7 billion, or ~~68.3~~66.0 percent, of total commercial loans at March 31, ~~2020~~2021 and ~~$3.8~~$3.7 billion, or ~~68.8~~65.6 percent, of total commercial loans at December 31, ~~2019~~2020 and ~~53.0~~52.1 percent of total portfolio loans at March 31, ~~2020~~2021 and ~~53.1~~51.5 percent at December 31, 2019. Further segmentation of the CRE and commercial construction portfolios by collateral type reveals 0 concentration in excess of 13.6 percent of both total CRE and commercial construction loans at March 31, 2020 and 11 percent at December 31, 2019.2020.

We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in this geography, resulting in a concentration. We believe our knowledge and familiarity with customers and conditions locally outweighs this geographic concentration risk. The conditions of the local and regional economies are monitored closely through publicly available data and information supplied by our customers. We also use subscription services for additional geographic and industry specific information. Our CRE and commercial construction portfolios have exposure outside of this geography of 5.4 percent of the combined portfolios and 2.8 percent of total portfolio loans at March 31, 2020. This compares to 5.4 percent of the combined portfolios and 2.9 percent of total portfolio loans at December 31, 2019.

We individually evaluate all substandard and nonaccrual commercial loans that have experienced a forbearance or change in terms agreement, and all substandard consumer and residential mortgage loans that entered into an agreement to modify their existing loan, to determine if they should be designated as troubled debt restructurings, or TDRs.

All TDRs will be reported as such for the remaining life of the loan, unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is fully expected that the remaining principal and interest will be collected according to the restructured agreement. TDRs can be returned to accruing status if the ultimate collectability of all contractual amounts due, according to the restructured agreement, is not in doubt and there is a period of a minimum of six months of satisfactory payment performance by the borrower either immediately before or after the restructuring.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6.5. LOANS AND LOANS HELD FOR SALE - continued

concentration risk. The conditions of the local and regional economies are monitored closely through publicly available data and information supplied by our customers. We also use subscription services for additional geographic and industry specific information. Our CRE and commercial construction portfolios have exposure outside of this geography of 5.7 percent of the combined portfolios and 3.0 percent of total portfolio loans at March 31, 2021. This compares to 5.9 percent of the combined portfolios and 3.0 percent of total portfolio loans at December 31, 2020.

The following tables summarize restructured loans as of the dates presented:


	March 31, 2021
(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs
Commercial real estate	$	9	$	15,754	$	15,762
Commercial and industrial	7,576		11,425		19,001
Commercial construction	3,245		0		3,245
Business banking	1,471		397		1,868
Consumer real estate	5,611		2,407		8,018
Other consumer	5		0		5
Total	$	17,916	$	29,983	$	47,899


	March 31, 2020							December 31, 2020
(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs
Commercial real estate	$	30	$	28,973	$	29,003	Commercial real estate	$	14	$	16,654	$	16,668
Commercial and industrial	4,566		4,665		9,231		Commercial and industrial	7,090		9,885		16,975
Commercial construction	3,316		—		3,316		Commercial construction	3,267		0		3,267
Business banking	1,524		352		1,876		Business banking	1,503		430		1,933
Consumer real estate	5,749		2,064		7,813		Consumer real estate	5,581		2,319		7,900
Other consumer	4		—		4		Other consumer	5		0		5
Total⁽¹⁾	$	15,189	$	36,055	$	51,243
Total							Total	$	17,460	$	29,288	$	46,748

⁽¹⁾Refer to Note 1, Basis of Presentation for details of reclassification of our portfolio segments related to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

December 31, 2019
(dollars in thousands)
Performing
TDRs

Nonperforming
TDRs

Total
TDRs
Commercial real estate $ 22,233
$ 6,713
$ 28,946
Commercial and industrial 6,909
695
7,604
Commercial construction 1,425
—
1,425
Residential mortgage 2,013
822
2,835
Home equity 4,371
678
5,049
Installment and other consumer 9
4
13
Total $ 36,960
$ 8,912
$ 45,872

The significant increase in nonperforming TDRs at March 31, 2020 compared to December 31, 2019 primarily related to a $20.9 million CRE relationship that became a performing TDR in the third quarter of 2019 and then moved to nonperforming in the first quarter of 2020 when the borrower experienced financial deterioration that led to cash flow issues. The relationship was individually assessed at March 31, 2020 resulting in no ACL due to the borrower being current on their payments under the modified terms and the relationship is fully collateralized.

There were 0 ~~TDRs~~TDR's that returned to accruing status during the three months ended March 31, ~~2020. There were 3 TDRs totaling $1.7 million that returned to accruing status during the three months ended~~2021 and March 31, ~~2019.~~

2020.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6.5. LOANS AND LOANS HELD FOR SALE - continued

The following tables present the restructured loans by portfolio segment and by type of concession for the ~~three months ended March 31, 2020 and 2019:~~periods presented:

Three Months Ended March 31, 2020
(dollars in thousands) Number of
Loans
Pre-Modification
Outstanding
Recorded
Investment⁽¹⁾

Post-Modification
Outstanding
Recorded
Investment⁽¹⁾
Total Difference
in Recorded
Investment
Totals by Loan Segment
Commercial Real Estate
Principal deferral and maturity date extension 1
$ 2,210
$ 2,210
$ —
Total Commercial Real Estate 1
2,210
2,210
—
Commercial and Industrial
Principal deferral and maturity date extension 5
3,780
3,780
—
Total Commercial and Industrial 5

3,780

3,780

—
Commercial Construction —

Maturity date extension 1
1,891
1,891
—
Total Commercial Construction 1
1,891
1,891
—
Consumer Real Estate
Consumer bankruptcy⁽²⁾
6
388
388
—
Maturity date extension and reduction in payment 1
27
27
—
Total Consumer Real Estate 7
415
415
—
Totals by Concession Type
Principal deferral and maturity date extension 6
5,991
5,991

—
Maturity date extension 1
1,891
1,891
—
Consumer bankruptcy⁽²⁾
6
388
388
—
Maturity date extension and payment reduction 1
27
27
—
Total⁽³⁾
14

$ 8,297

$ 8,297

$ —
⁽¹⁾ Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.
⁽²⁾ Consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.
⁽³⁾Refer to Note 1, Basis of Presentation for details of reclassification of our portfolio segments related to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.


	Three Months Ended March 31, 2021
	Number of Contracts	Type of Modification										Total Pre-Modification Outstanding Recorded Investment(2)		Total Post-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Forbearance		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial industrial	2	0		0		821		0		5,475		6,304		6,296
Commercial construction	0	0		0		0		0		0		0		0
Business banking	0	0		0		0		0		0		0		0
Consumer real estate	11	340		80		0		0		148		609		568
Other consumer	1	1		0		0		0		0		1		1
Total(2)	14	$	341	$	80	$	821	$	0	$	5,623	$	6,914	$	6,865
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed. (2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 6. LOANS AND LOANS HELD FOR SALE - continued~~

Three Months Ended March 31, 2019
(dollars in thousands) Number of
Loans
Pre-Modification
Outstanding
Recorded
Investment⁽¹⁾

Post-Modification
Outstanding
Recorded
Investment⁽¹⁾
Total Difference
in Recorded
Investment
Totals by Loan Segment
Commercial and Industrial
Maturity date extension and interest rate reduction 1
$ 5,201
$ 5,201
$ —
Principal deferral and maturity date extension —
—
—
—
Total Commercial and Industrial 1
5,201
5,201
—
Residential Mortgage
Consumer bankruptcy⁽²⁾
1
49
49
—
Total Residential Mortgage 1
49
49
—
Home Equity
Consumer bankruptcy⁽²⁾
7
191
168
(23 )
Interest rate reduction 1
81
81
—
Maturity date extension and reduction in payment —
—
—
—
Total Home Equity 8
272
249
(23 )
Totals by Concession Type
Maturity date extension and interest rate reduction 1
5,201
5,201
—
Consumer bankruptcy⁽²⁾
8
240
217
(23 )
Interest rate reduction 1
81
81
—
Total 10
$ 5,522
$ 5,499
$ (23 )
⁽¹⁾ Excludes loans that were fully paid-off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.
⁽²⁾ Consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.


	Three Months Ended March 31, 2020
	Number of Contracts	Type of Modification										Total Pre-Modification Outstanding Recorded Investment(2)		Total Post-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Forbearance		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commercial industrial	0	0		0		0		0		0		0		0
Commercial construction	1	0		0		1,891		0		0		1,891		1,806
Business banking	0	0		0		0		0		0		0		0
Consumer real estate	5	78		0		0		0		27		105		91
Other consumer	0	0		0		0		0		0		0		0
Total(2)	6	$	78	$	0	$	1,891	$	0	$	27	$	1,996	$	1,897
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed. (2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.

In response to the coronavirus, or COVID-19, pandemic and its economic impact toon our customers, we implemented a short-term modification program that complies with the ~~Coronavirus Aid, Relief, and Economic Security, or~~ CARES Act to provide temporary payment relief to those borrowers directly impacted by ~~COVID-19~~the pandemic who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days and up to a maximum of 180 days for our commercial customers. The customer remains responsible for deferred payments along with any additional interest accrued during ~~the deferral period are due and payable on the maturity date. For our consumer customers interest does not accrue during the deferral period and the maturity date is extended by the length of~~ the deferral period. Under the applicable guidance, none of these loans were considered restructured as of March 31, 2021. We had 40 commercial loans that were modified totaling $61.8 million at March 31, 2021 compared to 52 commercial loans that were modified totaling $195.6 million at December 31, 2020.

As of March 31, ~~2020,~~2021, we had 20 commitments to lend an additional ~~$2.3~~$0.8 million on TDRs. Defaulted TDRs are defined as loans having a payment default of 90 days or more after the restructuring takes place. There were 0 TDRs that defaulted during the three months ended March 31, 2021. There were 11 TDRs that defaulted during the three months ended March 31, 2020 totaling $21.1 million ~~and 0 TDRs that defaulted during the three months ended March 31, 2019~~ that were restructured within the last 12 months prior to defaulting. ~~The large increase in defaulted TDRs is related to one CRE customer with 5 notes totaling $20.9 million discussed above.~~

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6.5. LOANS AND LOANS HELD FOR SALE - continued

The following table is a summary of nonperforming assets as of the dates presented:


	Nonperforming Assets
(dollars in thousands)	March 31, 2021			December 31, 2020
Nonperforming Assets
Nonaccrual loans		$	102,430		$	117,485
Nonaccrual TDRs		29,983			29,289
Total Nonaccrual Loans(1)		132,413			146,774
OREO		1,620			2,155
Total Nonperforming Assets		$	134,033		$	148,929
(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

Nonperforming Assets
(dollars in thousands) March 31, 2020 December 31, 2019
Nonperforming Assets
Nonaccrual loans $ 37,744
$ 45,145
Nonaccrual TDRs 36,055
8,912
Total Nonaccrual Loans 73,799
54,057
OREO 3,389
3,525
Total Nonperforming Assets $ 77,188
$ 57,582

The ~~significant increase~~decrease in nonperforming ~~TDRs~~loans of $11.6 million at March 31, 2021 compared to December 31, 2020 was primarily related to the payoff of a ~~$20.9~~$4.6 million ~~CRE~~commercial real estate relationship ~~discussed above.~~and a $3.9 million charge off of an $11.1 million C&I relationship that was previously held in specific reserve.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7.6. ALLOWANCE FOR CREDIT LOSSES

We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) ~~Construction, 2)~~ Commercial Real Estate, or CRE, 3)2) Commercial and Industrial, or C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.

The following are key risks within each portfolio segment:

CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.

C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.

Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the ~~construction~~construction/development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and business.

Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and ~~lines and credit cards.~~lines. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Management monitors various credit quality indicators for the commercial, business banking and consumer loan portfolios, including changes in risk ratings, nonperforming status and delinquency on a monthly basis.

We monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.

Our risk ratings are consistent with regulatory guidance and are as follows:

Pass—The loan is currently performing and is of high quality.

2923

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7.6. ALLOWANCE FOR CREDIT LOSSES – continued

Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date.

Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The following ~~table~~tables presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of ~~March 31, 2020:~~the dates presented:


	March 31, 2021
	Risk Rating
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	96,988	$	319,206	$	444,668	$	376,347	$	258,362	$	850,342	$	44,872	0		$	2,390,785
Special mention	0		450		35,420		8,342		22,541		113,614		0		0		180,367
Substandard	0		0		17,259		15,772		19,894		146,624		1,482		0		201,030
Doubtful	0		0		645		0		0		7,499		0		0		8,144
Total commercial real estate	96,988		319,656		497,992		400,461		300,796		1,118,080		46,354		0		2,780,327

Commercial and industrial
Pass	252,427		478,363		168,546		110,278		55,096		179,887		361,828		0		1,606,425
Special mention	0		3,090		28,623		3,562		180		1,289		17,718		0		54,461
Substandard	5,476		0		6,165		4,415		5,778		12,715		4,153		0		38,701
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial and industrial	257,902		481,453		203,334		118,255		61,054		193,891		383,699		0		1,699,588

Commercial construction
Pass	24,730		127,643		195,245		53,248		2,059		10,856		13,232		0		427,012
Special mention	0		3,490		2,862		0		0		8,478		0		0		14,830
Substandard	0		0		4,148		0		501		2,967		0		0		7,616
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial construction	24,730		131,133		202,255		53,248		2,560		22,301		13,232		0		449,459

Business banking
Pass	34,568		121,017		167,764		134,358		89,027		362,534		110,572		265		1,020,105
Special mention	0		502		1,972		1,379		1,621		7,759		287		122		13,642
Substandard	0		72		1,267		3,777		2,990		25,409		1,141		674		35,330
Doubtful	0		0		0		0		0		0		0		0		0
Total business banking	34,568		121,591		171,003		139,513		93,638		395,703		112,001		1,061		1,069,078

Consumer real estate
Pass	20,000		116,640		110,942		58,166		55,435		267,411		436,449		23,550		1,088,594
Special mention	0		0		0		0		0		2,246		0		0		2,246
Substandard	0		0		186		2,089		1,506		7,896		503		1,080		13,260
Doubtful	0		0		0		0		0		0		0		0		0
Total consumer real estate	20,000		116,640		111,128		60,255		56,942		277,553		436,952		24,630		1,104,099

Other consumer
Pass	872		14,119		11,576		5,723		2,673		2,283		35,151		955		73,354
Special mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		109		125		104		4,968		374		1,579		7,260
Doubtful	0		0		0		0		0		4		0		0		4
Total other consumer	872		14,119		11,686		5,848		2,778		7,255		35,525		2,534		80,618

Pass	429,585		1,176,989		1,098,741		738,120		462,653		1,673,313		1,002,104		24,770		6,606,275
Special mention	0		7,532		68,876		13,283		24,342		133,387		18,005		122		265,547
Substandard	5,476		72		29,134		26,177		30,773		200,579		7,653		3,332		303,198
Doubtful	0		0		645		0		0		7,503		0		0		8,148
Total	$	435,060	$	1,184,593	$	1,197,397	$	777,580	$	517,769	$	2,014,783	$	1,027,762	$	28,225	$	7,183,168

Risk Rating
(dollars in thousands) 2020 2019 2018 2017 2016 2015 and Prior Revolving Revolving-Term Total

Commercial Real Estate
Pass $ 169,367
$ 483,699
$ 452,024
$ 359,553
$ 416,420
$ 882,326
$ 59,032
—
$ 2,822,421
Special Mention —
3,236
187
11,591
10,005
26,575
850
—
52,444
Substandard —
—
1,462
—
25,285
50,348
3,008
21
80,124
Total Commercial Real Estate 169,367
486,935
453,673
371,144
451,710
959,249
62,890
21
2,954,989

Commercial and Industrial
Pass 75,969
240,261
165,631
103,537
73,798
282,138
486,045
—
1,427,379
Special Mention —
6,239
3,525
947
1,883
9,437
31,890
—
53,921
Substandard —
5,666
2,301
3,785
1,621
12,232
17,316
—
42,921
Total Commercial and Industrial 75,969
252,166
171,457
108,269
77,302
303,807
535,251
—
1,524,221

Commercial Construction
Pass 23,004
179,956
117,527
17,122
18,986
11,586
11,992
—
380,173
Special Mention —
—
—
—
—
5,117
91
—
5,208
Substandard —
—
—
1,041
—
3,780
—
—
4,821
Total Commercial Construction 23,004
179,956
117,527
18,163
18,986
20,483
12,083
—
390,202

Business Banking
Pass 40,952
181,242
148,419
103,027
89,925
327,333
125,800
—
1,016,698
Special Mention —
62
1,496
1,775
1,181
7,902
737
—
13,153
Substandard —
382
3,111
3,646
4,006
27,803
1,665
—
40,613
Total Business Banking 40,952
181,686
153,026
108,448
95,112
363,038
128,202
—
1,070,464

Consumer Real Estate
Pass 33,737
149,942
86,463
83,402
92,013
316,169
432,274
20,966
1,214,966
Special Mention —
—
—
—
798
304
—
—
1,102
Substandard —
190
71
537
1,103
7,410
305
1,385
11,001
Total Consumer Real Estate 33,737
150,132
86,534
83,939
93,914
323,883
432,579
22,351
1,227,069

Other consumer
Pass 8,706
9,522
10,670
6,474
5,088
3,365
28,156
773
72,754
Special Mention —
—
—
—
—
—
—
—
—
Substandard —
488
132
132
594
4,252
322
1,126
7,046
Total Other Consumer 8,706
10,010
10,802
6,606
5,682
7,617
28,478
1,899
79,800

Total Loan Balance $ 351,735
$ 1,260,885
$ 993,019
$ 696,569
$ 742,706
$ 1,978,077
$ 1,199,483
$ 24,271
$ 7,246,745

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	December 31, 2020
	Risk Rating
(dollars in thousands)	2020		2019		2018		2017		2016		2015 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	334,086	$	422,800	$	394,963	$	277,724	$	307,321	$	615,217	$	46,330	$	0	$	2,398,441
Special mention	0		35,499		10,200		22,502		55,174		75,022		0		0		198,397
Substandard	0		17,259		12,781		19,914		50,700		83,792		1,500		0		185,946
Doubtful	0		645		0		0		1,989		6,529		0		0		9,163
Total commercial real estate	334,086		476,203		417,944		320,140		415,184		780,560		47,830		0		2,791,947

Commercial and industrial
Pass	454,131		199,453		140,049		68,607		27,645		206,782		383,082		0		1,479,749
Special mention	3,697		8,211		2,628		697		768		1,046		23,527		0		40,574
Substandard	0		7,793		2,613		8,544		75		13,781		2,022		0		34,828
Doubtful	0		0		0		4,401		0		0		0		0		4,401
Total commercial and industrial	457,828		215,457		145,290		82,249		28,488		221,609		408,631		0		1,559,552

Commercial construction
Pass	131,235		224,794		59,649		2,420		6,346		4,555		12,778		0		441,777
Special mention	1,578		2,533		3,886		0		0		8,593		0		0		16,590
Substandard	0		3,580		0		501		0		3,629		0		0		7,710
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial construction	132,813		230,907		63,535		2,921		6,346		16,777		12,778		0		466,077

Business banking
Pass	296,254		154,335		123,207		86,552		77,238		266,042		103,571		291		1,107,490
Special mention	0		1,060		1,147		1,602		1,084		6,866		637		123		12,519
Substandard	103		1,078		3,896		3,209		3,880		25,871		1,341		680		40,058
Doubtful	0		0		0		0		0		0		0		0		0
Total business banking	296,357		156,473		128,250		91,363		82,202		298,779		105,549		1,094		1,160,067

Consumer real estate
Pass	120,736		122,171		67,700		63,653		73,805		243,939		438,888		22,667		1,153,559
Special mention	0		0		1,489		0		0		150		132		0		1,771
Substandard	0		373		742		1,480		2,449		6,958		0		0		12,002
Doubtful	0		0		0		0		0		0		0		0		0
Total consumer real estate	120,736		122,544		69,931		65,133		76,254		251,047		439,020		22,667		1,167,332

Other consumer
Pass	18,849		13,162		6,784		3,395		2,082		687		26,647		2,767		74,373
Special mention	0		0		0		0		0		0		0		0		0
Substandard	15		0		0		0		0		3,367		744		2,386		6,512
Doubtful	0		0		0		0		0		0		0		0		0
Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885


Pass	1,355,291		1,136,715		792,352		502,350		494,436		1,337,221		1,011,297		25,726		6,655,389
Special Mention	5,274		47,302		19,350		24,802		57,026		91,677		24,296		123		269,851
Substandard	118		30,083		20,032		33,648		57,105		137,398		5,607		3,066		287,056
Doubtful	0		645		0		4,401		1,989		6,529		0		0		13,564
Total	$	1,360,684	$	1,214,746	$	831,734	$	565,201	$	610,556	$	1,572,826	$	1,041,199	$	28,914	$	7,225,860

We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7.6. ALLOWANCE FOR CREDIT LOSSES – continued

The following ~~table~~tables presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of March 31, 2021 and December 31, 2020:


	March 31, 2021
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	96,988	$	319,656	$	481,588	$	400,461	$	294,122	$	1,046,085	$	46,354	$	0	$	2,685,253
Nonperforming	0		0		16,404		0		6,674		71,995		0		0		95,074
Total commercial real estate	96,988		319,656		497,992		400,461		300,796		1,118,080		46,354		0		2,780,327

Commercial and industrial
Performing	252,427		481,453		203,334		117,623		55,366		193,614		383,355		0		1,687,172
Nonperforming(1)	5,476		0		0		631		5,689		276		344		0		12,416
Total commercial and industrial	257,902		481,453		203,334		118,255		61,054		193,891		383,699		0		1,699,588

Commercial construction
Performing	24,730		131,133		202,255		53,248		2,560		21,917		13,232		0		449,074
Nonperforming	0		0		0		0		0		384		0		0		384
Total commercial construction	24,730		131,133		202,255		53,248		2,560		22,301		13,232		0		449,459

Business Banking
Performing	34,568		121,591		170,640		137,748		92,837		384,332		111,932		1,004		1,054,651
Nonperforming	0		0		362		1,765		801		11,371		69		57		14,426
Total business banking	34,568		121,591		171,003		139,513		93,638		395,703		112,001		1,061		1,069,078

Consumer real estate
Performing	20,000		116,640		110,249		59,931		56,397		272,547		436,628		23,759		1,096,150
Nonperforming	0		0		880		324		545		5,006		324		871		7,949
Total consumer real estate	20,000		116,640		111,128		60,255		56,942		277,553		436,952		24,630		1,104,099

Other consumer
Performing	872		14,119		11,485		5,848		2,697		5,689		35,346		2,397		78,455
Nonperforming	0		0		201		0		81		1,566		179		137		2,163
Total other consumer	872		14,119		11,686		5,848		2,778		7,255		35,525		2,534		80,618

Performing	429,585		1,184,593		1,179,550		774,859		503,978		1,924,183		1,026,847		27,160		7,050,755
Nonperforming	5,476		0		17,847		2,720		13,790		90,599		915		1,065		132,413
Total	$	435,060	$	1,184,593	$	1,197,397	$	777,580	$	517,769	$	2,014,783	$	1,027,762	$	28,225	$	7,183,168
(1) In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

(dollars in thousands) 2020 2019 2018 2017 2016 2015 and Prior Revolving Revolving-Term Total

Commercial Real Estate
Performing $ 169,367
$ 486,935
$ 453,673
$ 371,144
$ 431,919
$ 935,536
$ 59,882
$ —
$ 2,908,456
Nonperforming —
—
—
—
19,791
23,713
3,008
21
46,533
Total Commercial Real Estate 169,367
486,935
453,673
371,144
451,710
959,249
62,890
21
2,954,989

Commercial and Industrial
Performing 75,969
252,166
171,093
108,269
76,593
303,745
531,881
—
1,519,716
Nonperforming —
—
364
—
709
62
3,370
—
4,505
Total Commercial and Industrial 75,969
252,166
171,457
108,269
77,302
303,807
535,251
—
1,524,221

Commercial Construction
Performing 23,004
179,956
117,527
18,055
18,986
20,020
12,083
—
389,631
Nonperforming —
—
—
108
—
463
—
—
571
Total Commercial Construction 23,004
179,956
117,527
18,163
18,986
20,483
12,083
—
390,202

Business Banking
Performing 40,952
181,576
151,933
107,176
94,230
355,259
128,022
—
1,059,148
Nonperforming —
110
1,093
1,272
882
7,779
180
—
11,316
Total Business Banking 40,952
181,686
153,026
108,448
95,112
363,038
128,202
—
1,070,464

Consumer Real Estate
Performing 33,737
149,942
86,401
83,526
90,151
318,926
432,403
21,367
1,216,453
Nonperforming —
190
133
413
3,763
4,957
176
984
10,616
Total Consumer Real Estate 33,737
150,132
86,534
83,939
93,914
323,883
432,579
22,351
1,227,069

Other Consumer
Performing 8,706
10,010
10,802
6,606
5,682
7,359
28,478
1,899
79,542
Nonperforming —
—
—
—
—
258
—
—
258
Total Other Consumer 8,706
10,010
10,802
6,606
5,682
7,617
28,478
1,899
79,800

Performing 351,735
1,260,585
991,429
694,776
717,561
1,940,845
1,192,749
23,266
7,172,946
Nonperforming —
300
1,590
1,793
25,145
37,232
6,734
1,005
73,799
Total Loan Balance $ 351,735
$ 1,260,885
$ 993,019
$ 696,569
$ 742,706
$ 1,978,077
$ 1,199,483
$ 24,271
$ 7,246,745

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	December 31, 2020
(dollars in thousands)	2020		2019		2018		2017		2016		2015 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	334,086	$	459,799	$	417,944	$	313,465	$	394,972	$	722,782	$	47,830	$	0	$	2,690,879
Nonperforming	0		16,404		0		6,675		20,212		57,778		0		0		101,070
Total commercial real estate	334,086		476,203		417,944		320,140		415,184		780,560		47,830		0		2,791,947

Commercial and industrial
Performing	457,828		214,144		143,706		69,411		28,426		220,701		408,350		0		1,542,566
Nonperforming	0		1,313		1,584		12,838		62		908		281		0		16,985
Total commercial and industrial	457,828		215,457		145,290		82,249		28,488		221,609		408,631		0		1,559,552

Commercial construction
Performing	132,813		230,907		63,535		2,921		6,346		16,393		12,778		0		465,692
Nonperforming	0		0		0		0		0		384		0		0		384
Total commercial construction	132,813		230,907		63,535		2,921		6,346		16,777		12,778		0		466,077

Business Banking
Performing	296,327		156,164		126,432		90,414		80,106		286,970		105,494		1,037		1,142,944
Nonperforming	30		309		1,818		949		2,096		11,809		55		57		17,123
Total business banking	296,357		156,473		128,250		91,363		82,202		298,779		105,549		1,094		1,160,067

Consumer real estate
Performing	120,736		122,315		69,225		63,647		74,690		245,331		438,702		21,572		1,156,216
Nonperforming	0		229		706		1,486		1,564		5,716		318		1,096		11,116
Total consumer real estate	120,736		122,544		69,931		65,133		76,254		251,047		439,020		22,667		1,167,332

Other consumer
Performing	18,864		13,162		6,784		3,395		2,082		3,958		27,391		5,153		80,789
Nonperforming	0		0		0		0		0		96		0		0		96
Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885

Performing	1,360,654		1,196,491		827,625		543,253		586,622		1,496,135		1,040,544		27,762		7,079,086
Nonperforming	30		18,254		4,108		21,948		23,934		76,691		654		1,153		146,774
Total	$	1,360,684	$	1,214,746	$	831,734	$	565,201	$	610,556	$	1,572,826	$	1,041,199	$	28,914	$	7,225,860

The following tables present the age analysis of past due loans segregated by class of loans as of the dates presented:


	March 31, 2021
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,685,253	$	0	$	0	$	95,074	$	95,074	$	2,780,327
Commercial and industrial(1)	1,687,172		0		0		12,416		12,416		1,699,588
Commercial construction	449,074		0		0		384		384		449,459
Business banking	1,053,430		1,191		30		14,426		15,647		1,069,078
Consumer real estate	1,094,601		1,444		104		7,949		9,498		1,104,099
Other consumer	78,314		102		39		2,163		2,304		80,618
Total(2)	$	7,047,844	$	2,737	$	174	$	132,413	$	135,324	$	7,183,168

March 31, 2020
(dollars in thousands) Current

30-59 Days
Past Due

60-89 Days
Past Due

90 Days Past Due⁽¹⁾

Non - performing

Total Past
Due Loans

Total Loans
Commercial real estate $ 2,901,375
$ 6,381
$ —
$ 700
$ 46,533
$ 53,614
$ 2,954,989
Commercial and industrial 1,516,639
463
—
2,615
4,505
7,582
1,524,221
Commercial construction 388,122
576
—
933
571
2,080
390,202
Business banking 1,048,241
6,758
3,381
768
11,316
22,223
1,070,464
Consumer real estate 1,211,865
3,859
646
83
10,616
15,203
1,227,069
Other consumer 79,083
174
91
195
258
717
79,800
Total $ 7,145,326
$ 18,211
$ 4,117
$ 5,294
$ 73,799
$ 101,419
$ 7,246,745

(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

⁽¹⁾(2)~~Refer to Note 1, Basis~~ We had 40 loans that were modified totaling $61.8 million under the CARES Act at March 31, 2021. These customers were not considered past due as a result of ~~Presentation for details~~their delayed payments. Upon exiting the loan modification deferral program, the measurement of ~~reclassification of our portfolio segments related~~loan delinquency will resume where it left off upon entry into the program. Due to the ~~adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument.~~modification program, this delinquency table may not accurately reflect the credit risk associated with these loans.

3128

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7.6. ALLOWANCE FOR CREDIT LOSSES – continued

December 31, 2019
(dollars in thousands) Current

30-59 Days
Past Due

60-89 Days
Past Due

90 Days Past Due⁽¹⁾

Non - performing
Total Past
Due Loans
Total Loans
Commercial real estate $ 3,025,505
$ 7,749
$ 71
$ 911
$ 25,356
$ 34,087
$ 3,059,592
Commercial and industrial 1,466,460
126
1,589
1,443
10,911
14,069
1,480,529
Commercial construction 367,204
956
1,163
—
737
2,856
370,060
Business banking 830,735
5,093
1,099
—
9,863
16,055
846,790
Consumer real estate 1,283,591
2,620
1,758
1,175
6,063
11,616
1,295,207
Other consumer 81,866
1,448
305
228
1,127
3,108
84,974
Total $ 7,055,361
$ 17,992
$ 5,985
$ 3,757
$ 54,057
$ 81,791
$ 7,137,152

⁽¹⁾~~Represents acquired loans that were recorded at fair value at the acquisition date and remain performing at March 31, 2020 and December 31, 2019.~~


	December 31, 2020
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due (2)		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,690,877	$	0	$	0	$	0	$	101,070	$	101,070	$	2,791,947
Commercial and industrial	1,542,567		0		0		0		16,985		16,985		1,559,552
Commercial construction	462,094		19		3,580		0		384		3,983		466,077
Business banking	1,140,581		1,614		379		371		17,122		19,486		1,160,067
Consumer real estate	1,153,028		1,087		1,968		132		11,117		14,304		1,167,332
Other consumer	80,583		168		37		0		96		302		80,885
Total(1)	$	7,069,730	$	2,888	$	5,965	$	503	$	146,774	$	156,130	$	7,225,860
(1) We had 52 loans that were modified totaling $195.6 million under the CARES Act at December 31, 2020. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modification program, this delinquency table may not accurately reflect the credit risk associated with these loans. (2) Represents acquired loans that were recorded at fair value at the acquisition date and remain performing at December 31, 2020.

The following table presents loans on nonaccrual status ~~and loans past due 90 days or more and still accruing~~ by class of loan:


									March 31, 2021
	March 31, 2021								For the three months ended
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	101,070	$	95,074	$	52,460	$	0	$	61
Commercial and industrial(2)	16,985		12,416		11,425		0		43
Commercial construction	384		384		0		0		0
Business banking	17,122		14,426		397		0		137
Consumer real estate	11,117		7,949		345		0		110
Other consumer	96		2,163		0		0		1
Total	$	146,774	$	132,413	$	64,628	$0		$	352

As or for the Three Months Ended March 31, 2020
(dollars in thousands) Beginning of Period Nonaccrual End of Period Nonaccrual Nonaccrual With No Related Allowance Past Due 90+ Days Still Accruing Interest Income Recognized on Nonaccrual
Commercial real estate
$25,356
$ 46,533

$39,454
$ 700

$684
Commercial and industrial 10,911
4,505
4,054
2,615
64
Commercial construction 737
571
285
933
—
Business banking 9,863
11,316
2,363
768
58
Consumer real estate 6,063
10,616
398
83
47
Other consumer 1,127
258
—
195
28
Total
$54,057

$73,799

$46,554
$ 5,294

$881
(1) Represents only cash payments received and applied to interest on nonaccrual loans.

(2)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.


									December 31, 2020
	December 31, 2020								For the twelve months ended
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	25,356	$	101,070	$	60,401	$	0	$	22
Commercial and industrial	10,911		16,985		6,436		0		101
Commercial construction	737		384		285		0		0
Business banking	9,863		17,122		3,890		371		275
Consumer real estate	6,063		11,117		398		132		423
Other consumer	1,127		96		0		0		4
Total	$	54,057	$	146,774	$	71,410	$	503	$	826

(1) Represents only cash payments received and applied to interest on nonaccrual loans.

~~The following table presents collateral-dependent loans by class of loan:~~

March 31, 2020
Type of Collateral
(dollars in thousands) Real Estate Blanket Lien Investment/Cash Other
Commercial real estate
$51,630

$—

$—

$—
Commercial and industrial 4,686
4,545
40
—
Commercial construction 3,602
—
—
—
Business banking 2,322
876
—
689
Consumer real estate —
—
—
—
Other consumer 398
—
—
—
Total
$62,638

$5,421

$40

$689
29

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 7.6. ALLOWANCE FOR CREDIT LOSSES – continued

The following tables present collateral-dependent loans by class of loan as of the dates presented:


	March 31, 2021
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	86,683	$	0	$	5,350	$	0
Commercial and industrial	335		11,968		0		0
Commercial construction	3,245		0		0		0
Business banking	1,856		12		0		0
Consumer real estate	345		0		0		0

Total	$	92,464	$	11,980	$	5,350	$	0


	December 31, 2020
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	100,450	$	0	$	0	$	0
Commercial and industrial	1,040		15,080		0		0
Commercial construction	3,552		0		0		0
Business banking	3,085		1,619		0		689
Consumer real estate	398		0		0		0

Total	$	108,525	$	16,699	$	0	$	689

The following ~~table presents~~tables present activity in the ACL for the ~~three months ended March 31, 2020:~~periods presented:


	Three Months Ended March 31, 2021
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612
Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301
Charge-offs	(810)		(4,302)		0		(917)		(271)		(232)		(6,532)
Recoveries	0		137		1		166		82		334		720
Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)
Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101
(1) Excludes unfunded commitments


	Three Months Ended March 31, 2020
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	30,577	$	15,681	$	7,900	$	0	$	6,337	$	1,729	$	62,224
Impact of CECL adoption	4,810		7,853		(3,376)		12,898		4,525		642		27,352
Provision for credit losses on loans(1)	7,639		6,196		2,309		1,194		472		620		18,430
Charge-offs	(442)		(9,879)		(229)		(460)		(172)		(248)		(11,430)
Recoveries	27		19		2		74		38		114		274
Net (Charge-offs)/Recoveries	(415)		(9,860)		(227)		(386)		(134)		(134)		(11,156)
Balance at End of Period	$	42,611	$	19,870	$	6,606	$	13,706	$	11,200	$	2,857	$	96,850

(1) Excludes unfunded commitments

Three Months Ended March 31, 2020
(dollars in thousands)
Commercial
Real Estate

Commercial and
Industrial

Commercial
Construction

Business Banking⁽¹⁾

Consumer
Real Estate

Other
Consumer

Total
Loans
Allowance for credit losses on loans:
Balance at beginning of period $ 30,577
$ 15,681
$ 7,900
$ —
$ 6,337
$ 1,729
$ 62,224
Impact of CECL adoption 4,810
7,853
(3,376 ) 12,898
4,525
642
27,352
Provision for credit losses on loans 7,639
6,196
2,309
1,194
472
620
18,430
Charge-offs (442 ) (9,879 ) (229 ) (460 ) (172 ) (248 ) (11,430 )
Recoveries 27
19
2
74
38
114
274
Net (Charge-offs)/Recoveries (415 ) (9,860 ) (227 ) (386 ) (134 ) (134 ) (11,156 )
Balance at End of Period $ 42,611
$ 19,870
$ 6,606
$ 13,706
$ 11,200
$ 2,857
$ 96,850

Table of Contents

⁽¹⁾ In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. Our new segmentation breaks out business banking loans from our other loan segments: CRE, C&I , commercial construction, consumer real estate and other consumer. The business banking allowance balance at the beginning of period is included in the other segments and reclassified to business banking through the impact of CECL adoption line.

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The adoption of ASU 2016-13 resulted in an increase to our ACL of $27.4 million on January 1, 2020. The increase included $8.2 million for S&T legacy loans and $9.3 million for acquired loans from the DNB merger. We also recorded a day one adjustment of $9.9 million primarily related to a C&I relationship that was charged off in the first quarter of 2020. We obtained information on the relationship subsequent to filing our December 31, 2019 10-K, but before the end of the first quarter of 2020. The updated information supported a loss existed at January 1, 2020.

The ~~significant increase~~provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date. The provision for credit losses decreased $16.9 million to $3.1 million for the three months ended

March 31, 2021 compared to $20.0 million for the same period in 2020. The decrease in the provision for credit losses of $16.9 million was primarily due to a significant increase in provision needed during the three months ended March 31, 2020 ~~was~~due to the negative impact of the COVID-19 pandemic and our adoption of CECL on January 1, 2020. The provision for credit losses for the three months ended March 31, 2020 included $14.3 million related to the economic forecast and other qualitative reserves established for the uncertainty of the pandemic. Our total qualitative reserve decreased $2.7 million for the three months ended March 31, 2021 compared to the same period in 2020 mainly due to a decrease of $3.1 million for the ~~COVID-19 pandemic. We added approximately $14.9~~economic forecast. Our economic forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at March 31, 2021 compared to the same time in 2020.

Net loan charge-offs were $5.8 million, or 0.33 percent annualized as a percentage of average loans at March 31, 2021 compared to $11.2 million, or 0.63 percent of average loans during the same period in 2020. Nonperforming loans increased $61.4 million to $135.2 million at March 31, 2021 compared to $73.8 million at March 31, 2020. The significant increase in nonperforming loans primarily related to the ~~ACL in~~addition of $53.6 million of hotel loans which moved to nonperforming during the ~~first~~fourth quarter of 2020 ~~related to qualitative factors. This included $11.2 million for~~as a ~~revised economic forecast and the impact~~result of ~~that forecast on certain loan portfolios~~continued deterioration due to the ~~COVID-19~~ pandemic. ~~Changes in current conditions resulted in an additional $3.7 million increase in the ACL.~~

Prior to the adoption of ASU 326 on January 1, 2020, we calculated our allowance for loan losses using an incurred loan loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

The ~~following table presents~~C&I portfolio included $499.1 million of loans originated under the ~~recorded investment in commercial loan classes~~PPP at March 31, 2021. The loans are 100 percent guaranteed by ~~internally~~the SBA, therefore, we have not assigned ~~risk ratings as of December~~any ACL to these loans at March 31, ~~2019:~~2021.

December 31, 2019
(dollars in thousands) Commercial
Real Estate % of
Total Commercial
and Industrial % of
Total Commercial
Construction % of
Total Total % of
Total
Pass $ 3,270,437
95.7 % $ 1,636,314
93.4 % $ 347,324
92.5 % $ 5,254,076
95.3 %
Special mention 57,285
1.7 % 36,484
1.7 % 10,109
2.7 % 103,878
1.9 %
Substandard 86,772
2.5 % 47,980
4.9 % 17,899
4.8 % 152,651
2.8 %
Doubtful 2,023
— % 55
— % 133
— % 2,191
— %
Total $ 3,416,518
100.0 % $ 1,720,833
100.0 % $ 375,445
100.0 % $ 5,512,796
100.0 %

~~The following table presents the recorded investment in consumer loan classes by performing and nonperforming status as of December 31, 2019:~~

December 31, 2019
(dollars in thousands)
Residential
Mortgage
% of
Total

Home
Equity
% of
Total

Installment
and Other
Consumer
% of
Total

Consumer
Construction
% of
Total
Total
% of
Total
Performing $ 991,066
99.2 % $ 535,709
99.5 % $ 78,993
99.9 % $ 8,390
100.0 % $ 1,614,158
99.4 %
Nonperforming 7,519
0.8 % 2,639
0.5 % 40
0.1 % —
— % 10,198
0.6 %
Total $ 998,585
100.0 % $ 538,348
100.0 % $ 79,033
100.0 % $ 8,390
100.0 % $ 1,624,356
100.0 %

~~The following table presents investments in loans considered to be impaired and related information on those impaired loans as of December 31, 2019:~~

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

~~NOTE 7. ALLOWANCE FOR CREDIT LOSSES – continued~~

December 31, 2019
(dollars in thousands) Recorded
Investment Unpaid
Principal
Balance Related
Allowance
With a related allowance recorded:
Commercial real estate $ 13,011
$ 14,322
$ 2,023
Commercial and industrial 10,001
10,001
55
Commercial construction 489
489
113
Consumer real estate —
—
—
Other consumer 9
9
9
Total with a Related Allowance Recorded 23,510
24,821
2,200
Without a related allowance recorded:
Commercial real estate 34,909
40,201
—
Commercial and industrial 7,605
10,358
—
Commercial construction 1,425
2,935
—
Consumer real estate 7,884
8,445
—
Other consumer 4
11
—
Total without a Related Allowance Recorded 51,827
61,950
—
Total:
Commercial real estate 47,920
54,523
2,023
Commercial and industrial 17,606
20,359
55
Commercial construction 1,914
3,424
113
Consumer real estate 7,884
8,445
—
Other consumer 13
20
9
Total $ 75,337
$ 86,771
$ 2,200

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 7. ALLOWANCE FOR CREDIT LOSSES – continued~~

~~The following table presents average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2019:~~

Three months ended
March 31, 2019
(dollars in thousands)
Average
Recorded
Investment

Interest
Income
Recognized
With a related allowance recorded:
Commercial real estate $ 15,107
$ 144
Commercial and industrial 12,780
209
Commercial construction 2,319
140
Consumer real estate 8,846
417
Other consumer 4
—
Total with a Related Allowance Recorded 39,056
910
Without a related allowance recorded:
Commercial real estate 12,983
400
Commercial and industrial 980
35
Commercial construction 489
—
Consumer real estate 14
1
Other consumer 10
1
Total without a Related Allowance Recorded 14,476
437
Total:
Commercial real estate 28,090
544
Commercial and industrial 13,760
244
Commercial construction 2,808
140
Consumer real estate 8,860
418
Other consumer 14
1
Total $ 53,532
$ 1,347

~~The following table details activity in the allowance for loan losses for the three months ended March 31, 2019:~~

Three Months Ended March 31, 2019
(dollars in thousands)
Commercial
Real Estate

Commercial and
Industrial

Commercial
Construction

Consumer
Real Estate

Other
Consumer

Total
Loans
Balance at beginning of period $ 33,707
$ 11,596
$ 7,983
$ 6,187
$ 1,494
$ 6,996
Charge-offs (1 ) (5,477 ) —
(162 ) (425 ) (6,023 )
Recoveries 122
417
—
148
169
787
Net (Charge-offs)/Recoveries 121
(5,060 ) —
(14 ) (256 ) (5,236 )
Provision for credit losses 1,075
5,460
(1,226 ) 5
249
5,649
Balance at End of Period $ 34,903
$ 11,996
$ 6,757
$ 6,178
$ 1,487
$ 61,409

~~The following tables present the allowance for loan losses and recorded investments in loans by category as of December 31,2019:~~

December 31, 2019
Allowance for Loan Losses Portfolio Loans
(dollars in thousands)
Individually
Evaluated for
Impairment

Collectively
Evaluated for
Impairment

Total

Individually
Evaluated for
Impairment

Collectively
Evaluated for
Impairment

Total
Commercial real estate $ 2,023
$ 28,554
$ 30,577
$ 47,920
$ 3,368,598
$ 3,416,518
Commercial and industrial 55
15,626
15,681
17,606
1,703,227
1,720,833
Commercial construction 113
7,787
7,900
1,914
373,531
375,445
Consumer real estate —
6,337
6,337
7,884
1,537,439
1,545,323
Other consumer 9
1,720
1,729
13
79,020
79,033
Total $ 2,200
$ 60,024
$ 62,224
$ 75,337
$ 7,061,815
$ 7,137,152

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

NOTE 8.7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Interest Rate Swaps

In accordance with applicable accounting guidance for derivatives and hedging, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value. Interest rate swaps are contracts in which a series of interest rate flows (fixed and variable) are exchanged over a prescribed period. The notional amounts on which the interest payments are based are not exchanged. These derivative positions relate to transactions in which we enter into an interest rate swap with a commercial customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate loan with us receiving a variable rate. These agreements could have floors or caps on the contracted interest rates.

Pursuant to our agreements with various financial institutions, we may receive collateral or may be required to post collateral based upon mark-to-market positions. Beyond unsecured threshold levels, collateral in the form of cash or securities may be made available to counterparties of interest rate swap transactions. Based upon our current positions and related future collateral requirements relating to them, we believe any effect on our cash flow or liquidity position to be immaterial.

Derivatives contain an element of credit risk, the possibility that we will incur a loss because a counterparty, which may be a financial institution or a customer, fails to meet its contractual obligations. All derivative contracts with financial institutions may be executed only with counterparties approved by our Asset and Liability Committee, or ALCO, and derivatives with customers may only be executed with customers within credit exposure limits approved by our Senior Loan Committee. Interest rate swaps are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives are recorded in current earnings and included in other noninterest income in the Consolidated Statements of Comprehensive Income.

Interest Rate Lock Commitments and Forward Sale Contracts

In the normal course of business, we sell originated mortgage loans into the secondary mortgage loan market. We also offer interest rate lock commitments to potential borrowers. The commitments are generally for a period of 60 days and guarantee a specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower to close on the loan. Accordingly, some commitments expire prior to becoming loans. We may encounter pricing risks if interest rates increase significantly before the loan can be closed and sold. We may utilize forward sale contracts in order to mitigate this pricing risk. Whenever a customer desires these products, a mortgage originator quotes a secondary market rate guaranteed for that day by the investor. The rate lock is executed between the mortgagee and us and in turn a forward sale contract may be executed between us and the investor. Both the rate lock commitment and the corresponding forward sale contract for each customer are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives during the commitment period are recorded in current earnings and included in mortgage banking in the Consolidated Statements of Comprehensive Income.

3632

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 8.7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – continued

The following table indicates the amounts representing the value of derivative assets and derivative liabilities as of the dates presented:

Derivatives
(included in Other Assets)
Derivatives
(included in Other Liabilities)
(dollars in thousands) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value $ 88,135
$ 25,647
$ 87,989
$ 25,615
Notional amount 918,481
740,762
918,481
740,762
Collateral posted —
—
86,720
26,127
Interest Rate Lock Commitments - Mortgage Loans

Fair value 2,927
321
—
—
Notional amount 86,674
9,829
—
—
Forward Sale Contracts - Mortgage Loans

Fair value —
1
1,292
—
Notional amount $ —
$ 12,750
$ 91,750
$ —


	Derivatives (included in Other Assets)						Derivatives (included in Other Liabilities)
(dollars in thousands)	March 31, 2021			December 31, 2020			March 31, 2021			December 31, 2020
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value		$	40,415		$	78,319		$	40,818		$	79,033
Notional amount		983,243			983,638			983,243			983,638
Collateral posted		0			0			43,340			77,930
Interest Rate Lock Commitments - Mortgage Loans
Fair value		1,509			2,900			0			0
Notional amount		44,519			51,053			0			0
Forward Sale Contracts - Mortgage Loans
Fair value		226			0			0			385
Notional amount		$	36,835		$	0		$	0		$	47,062

Presenting offsetting derivatives that are subject to legally enforceable netting arrangements with the same party is permitted. For example, we may have a derivative asset and a derivative liability with the same counterparty to a swap transaction and we are permitted to offset the asset position and the liability position resulting in a net presentation.

The following table indicates the gross amounts of commercial loan swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets as of the dates presented:


	Derivatives (included in Other Assets)								Derivatives (included in Other Liabilities)									Derivatives (included in Other Assets)						Derivatives (included in Other Liabilities)
(dollars in thousands)	March 31, 2020				December 31, 2019				March 31, 2020				December 31, 2019				(dollars in thousands)	March 31, 2021			December 31, 2020			March 31, 2021			December 31, 2020
Derivatives not Designated as Hedging Instruments:																	Derivatives not Designated as Hedging Instruments:
Gross amounts recognized		$	90,723			$	26,146			$	90,577			$	26,114		Gross amounts recognized		$	44,022		$	82,655		$	43,865		$	82,626
Gross amounts offset		(2,588		)		(499		)		(2,588		)		(499		)	Gross amounts offset		(3,607)			(4,336)			(3,047)			(3,593)
Net Amounts Presented in the Consolidated Balance Sheets		88,135				25,647				87,989				25,615			Net Amounts Presented in the Consolidated Balance Sheets		40,415			78,319			40,818			79,033
Gross amounts not offset⁽¹⁾		—				—				(86,720		)		(26,127		)	Gross amounts not offset(1)		0			0			(43,340)			(77,930)
Net Amount		$	88,135			$	25,647			$	1,269			$	(512	)	Net Amount		$	40,415		$	78,319		$	(2,522)		$	1,103

⁽¹⁾ Amounts represent collateral posted for the periods presented.

The following table indicates the gain or loss recognized in income on derivatives for the periods presented:

Three Months Ended March 31,
(dollars in thousands) 2020 2019
Derivatives not Designated as Hedging Instruments

Interest rate swap contracts—commercial loans $ 114
$ (122 )
Interest rate lock commitments—mortgage loans 2,606
88
Forward sale contracts—mortgage loans (1,293 ) 33
Total Derivatives Gain/(Loss) $ 1,427
$ (1 )


	Three Months Ended March 31,
(dollars in thousands)	2021			2020
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans		$	310		$	114
Interest rate lock commitments—mortgage loans		(1,759)			2,606
Forward sale contracts—mortgage loans		979			(1,293)
Total Derivatives (Loss)/Gain		$	(470)		$	1,427

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

~~NOTE 9. BORROWINGS~~

Short-term borrowings are for terms under or equal to one year and are comprised of securities sold under repurchase agreements, or REPOs and FHLB advances. All REPOs are overnight short-term investments and are not insured by the Federal Deposit Insurance Corporation, or FDIC. Securities pledged as collateral under these REPO financing arrangements cannot be sold or repledged by the secured party and, therefore, the REPOs are accounted for as secured borrowings. Mortgage-backed securities with amortized cost of $66.4 million and carrying value of $70.0 million at March 31, 2020 and amortized cost of $22.7 million and carrying value of $23.0 million at December 31, 2019, were pledged as collateral for these secured transactions. The pledged securities are held in safekeeping at the Federal Reserve. Due to the overnight short-term nature of REPOs, potential risk due to a decline in the value of the pledged collateral is low. Collateral pledging requirements with REPOs are monitored daily. FHLB advances are for various terms and are secured by a blanket lien on residential mortgages and other real estate secured loans.

Long-term borrowings are for original terms greater than one year and are comprised of FHLB advances, finance leases and junior subordinated debt securities. Long-term FHLB advances are secured by the same loans as short-term FHLB advances. We had total long-term borrowings outstanding of $45.6 million at a fixed rate and $67.1 million at a variable rate at March 31, 2020, excluding our finance leases.

~~Information pertaining to borrowings is summarized in the table below as of the dates presented:~~

March 31, 2020 December 31, 2019
(dollars in thousands) Balance Weighted
Average Rate Balance Weighted
Average Rate
Short-term Borrowings
Securities sold under repurchase agreements $ 69,644
0.25 % $ 19,888
0.74 %
Short-term borrowings 410,240
0.44 % 281,319
1.84 %
Total Short-term Borrowings 479,884
0.41 % 301,207
1.76 %
Long-term Borrowings
Long-term borrowings 50,180
2.59 % 50,868
2.60 %
Junior subordinated debt securities 64,038
3.63 % 64,277
3.59 %
Total Long-term Borrowings 114,218
3.17 % 115,145
3.15 %
Total Borrowings $ 594,102
0.94 % $ 416,352
2.14 %

We had total borrowings at the FHLB of Pittsburgh of $458.9 million at March 31, 2020 and $532.9 million at December 31, 2019. The $458.9 million at March 31, 2020 consisted of $410.2 million in short-term borrowings and $50.2 million in long-term borrowings. Our maximum borrowing capacity with the FHLB of Pittsburgh was $3.1 billion at March 31, 2020. We utilized $698.1 million of our borrowing capacity at March 31, 2020 consisting of $458.9 million for borrowings and $239.2 million for letters of credit to collateralize public funds. Our remaining borrowing availability at March 31, 2020 is $2.4 billion.

We have completed three private placements of trust preferred securities to financial institutions. As a result, we own 100 percent of the common equity of STBA Capital Trust I, DNB Capital Trust I and DNB Capital Trust II, collectively the Trusts. The Trusts were formed to issue mandatorily redeemable capital securities to third-party investors. The proceeds from the sale of the securities and the issuance of the common equity by the Trusts were invested in junior subordinated debt securities issued by us. The Trusts are variable interest entities, and the third-party investors are the primary beneficiaries; therefore, the trusts are not consolidated into our financial statements. The Trusts pays dividends on the securities at the same rate as the interest paid by us on the junior subordinated debt held by the Trusts. DNB Capital Trust I and DNB Capital Trust II were acquired with the DNB merger.

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

NOTE ~~10.~~8. COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. Our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers. Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

The following table sets forth our commitments and letters of credit as of the dates presented:

(dollars in thousands) March 31, 2020 December 31, 2019
Commitments to extend credit $ 1,967,190
$ 1,910,805
Standby letters of credit 85,021
80,040
Total $ 2,052,211
$ 1,990,845


(dollars in thousands)	March 31, 2021			December 31, 2020
Commitments to extend credit		$	2,261,223		$	2,185,752
Standby letters of credit		88,418			89,095
Total		$	2,349,641		$	2,274,847

Allowance for Credit Losses on Unfunded Loan Commitments

We maintain an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Consolidated Statements of Comprehensive Income. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

The following table presents activity in the allowance for credit losses on unfunded loan commitments as of the dates presented:


(dollars in thousands)	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Balance at beginning of period		$	4,467		$	3,112
Impact of adopting ASU 2016-13 at January 1, 2020		0			1,349
Balance after adoption of ASU 2016-13		4,467			4,461
(Recovery) provision for credit losses		(164)			1,616
Total		$	4,303		$	6,077

The decrease in allowance for credit losses on unfunded loan commitments for the three months ended March 31, ~~2020~~2021 was ~~as follows:~~

(dollars in thousands) Total
Three months ended March 31, 2020
Allowance for credit losses on unfunded loan commitments:
Balance at beginning of period $ 3,112
Impact of adopting ASU 2016-13 1,349
January 1, 2020 4,461
Provision for credit losses 1,616
March 31, 2020 $ 6,077

due to a decrease in the loss rates for the construction portfolio.

Litigation

In the normal course of business, we are subject to various legal and administrative proceedings and claims. While any type of litigation contains a level of uncertainty, we believe that the outcome of such proceedings or claims pending will not have a material adverse effect on our consolidated financial position or results of operations.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE ~~11. REVENUE FROM CONTRACTS WITH CUSTOMERS~~

We earn revenue from contracts with our customers when we have completed our performance obligations and recognize that revenue when services are provided to our customers. Our contracts with customers are primarily in the form of account agreements. Generally, our services are transferred at a point in time in response to transactions initiated and controlled by our customers under service agreements with an expected duration of one year or less. Our customers have the right to terminate their service agreements at any time.

We do not defer incremental direct costs to obtain contracts with customers that would be amortized in one year or less. These costs are primarily salaries and employee benefits recognized as expense in the period incurred.

~~Service charges on deposit accounts~~ - We recognize monthly service charges for both commercial and personal banking customers based on account fee schedules. Our performance obligation is generally satisfied and the related revenue recognized at a point in time or over time when the services are provided. Other fees are earned based on specific transactions or customer activity within the customers' deposit accounts. These are earned at the time the transaction or customer activity occurs.

~~Debit and credit card services~~ - Interchange fees are earned whenever debit and credit cards are processed through third-party card payment networks. ATM fees are based on transactions by our customers' and other customers' use of our ATMs or other ATMs. Debit and credit card revenue is recognized at a point in time when the transaction is settled. Our performance obligation to our customers is generally satisfied and the related revenue is recognized at a point in time when the service is provided. Third-party service contracts include annual volume and marketing incentives which are recognized over a period of twelve months when we meet thresholds as stated in the service contract.

~~Wealth management services~~ - Wealth management services are primarily comprised of fees earned from the management and administration of trusts, assets under administration and other financial advisory services. Generally, wealth management fees are earned over a period of time between monthly and annually, per the related fee schedules. Our performance obligations with our customers are generally satisfied when we provide the services as stated in the customers' agreements. The fees are based on a fixed amount or a scale based on the level of services provided or amount of assets under management.

~~Other fee revenue~~ - Other fee revenue includes a variety of other traditional banking services such as, electronic banking fees, letters of credit origination fees, wire transfer fees, money orders, treasury checks, checksale fees and transfer fees. Our performance obligations are generally satisfied at a point in time, while fee revenue is recognized when the services are provided or the transaction is settled.9. OTHER COMPREHENSIVE INCOME (LOSS)

The ~~information presented in the~~ following table presents the ~~point~~change in components of ~~revenue recognition~~other comprehensive income (loss) for ~~revenue from contracts with customers. Other revenue streams such as: interest income,~~the periods presented, net ~~securities gains and losses, insurance, mortgage banking and other revenues that are accounted for under other generally accepted accounting principles are excluded.~~of tax effects.


	Three Months Ended March 31, 2021									Three Months Ended March 31, 2020
(dollars in thousands)	Pre-Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Pre-Tax Amount			Tax Benefit (Expense)			Net of Tax Amount
Change in net unrealized gains/(losses) on debt securities available-for-sale		$	(9,712)		$	2,072		$	(7,640)		$	21,568		$	(4,592)		$	16,976

Adjustment to funded status of employee benefit plans (1)		(343)			73			(270)			465			(99)			366
Other Comprehensive (Loss) Income		$	(10,055)		$	2,145		$	(7,910)		$	22,033		$	(4,691)		$	17,342
(1) Pension settlement accounting was triggered during the three months ended March 31, 2021 resulting in a charge of $0.7 million immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.

(dollars in thousands) Three Months Ended March 31,
Revenue Streams Point of Revenue Recognition 2020
2019
Service charges on deposit accounts Over a period of time $ 484
$ 457
At a point in time 3,074
2,696
$ 3,558
$ 3,153

Debit and credit card Over a period of time $ 194
$ 185
At a point in time 3,287
2,789
$ 3,482
$ 2,974

Wealth management Over a period of time $ 345
$ 413
At a point in time 2,018
1,635
$ 2,362
$ 2,048

Other fee revenue At a point in time $ 919
$ 919

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

~~NOTE 12. OTHER COMPREHENSIVE INCOME/(LOSS)~~

~~The following table presents the change in components of other comprehensive income/(loss) for the periods presented, net of tax effects.~~

Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
(dollars in thousands)
Pre-Tax
Amount

Tax
(Expense)
Benefit

Net of Tax
Amount

Pre-Tax
Amount

Tax
(Expense)
Benefit

Net of Tax
Amount

Change in net unrealized gains/(losses) on available-for-sale debt securities ⁽¹⁾
$ 21,568
$ (4,592 ) $ 16,976
$ 7,398
$ (1,578 ) $ 5,820
Adjustment to funded status of employee benefit plans 465
(99 ) 366
453
(97 ) 356
Other Comprehensive Income/(Loss) $ 22,033
$ (4,691 ) $ 17,342
$ 7,851
$ (1,675 ) $ 6,176
⁽¹⁾ Reclassification adjustments are comprised of realized security gains or losses. The realized gains or losses have been reclassified out of accumulated other comprehensive income/(loss) and have affected certain lines in the Consolidated Statements of Comprehensive Income as follows: the pre-tax amount is included in net gain on sale of securities, the tax expense amount is included in the provision for income taxes and the net of tax amount is included in net income. There were no reclassification adjustments for the three months ended March 31, 2020 or 2019.

NOTE ~~13.~~10. EMPLOYEE BENEFITS

Our qualified and nonqualified defined benefit plans were amended to freeze benefit accruals for all persons entitled to benefits under the plans in 2016. We will continue recording pension expense related to these plans, primarily representing interest costs on the accumulated benefit obligation and amortization of actuarial losses accumulated in the plans, as well as income from expected investment returns on pension assets. Since the plans have been frozen, 0 service costs are included in net periodic pension expense.

The defined benefit plan of DNB was merged into S&T's defined benefit plan at November 30, 2019 and the components of net periodic pension cost at March 31, 2020 include the impact of the addition of the DNB defined benefit plan.

~~The~~ investment policy for S&T's defined benefit plan is ~~85 percent to 95~~90 percent fixed income and ~~5 percent to 15~~10 percent equity and cash. The expected long-term rate of return on plan assets is ~~3.50~~2.42 percent compared to ~~4.80~~3.45 percent in prior periods.

We remeasured our pension obligation and recognized a pension settlement charge of $0.7 million for the three months ended March 31, 2021. A settlement charge is incurred when the aggregate amount of lump-sum distributions during the year is greater than the sum of the interest cost component of the annual net periodic pension cost.

The following table summarizes the components of net periodic pension cost for the periods presented:

Three Months Ended March 31,
(dollars in thousands) 2020 2019
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation $ 891
$ 989
Expected return on plan assets (972 ) (1,180 )
Net amortization 384
394
Net Periodic Pension Expense $ 303
$ 203


	Three Months Ended March 31,
(dollars in thousands)	2021			2020
Components of Net Periodic Pension Cost

Interest cost on projected benefit obligation		$	703		$	891
Expected return on plan assets		(716)			(972)
Net amortization		248			384
Settlement Charge		749			0

Net Periodic Pension Expense		$	984		$	303

The components of net periodic pension expense are included in salaries and employee benefits on the Consolidated Statements of Comprehensive Income.

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 14. QUALIFIED AFFORDABLE HOUSING~~

As part of our responsibilities under the Community Reinvestment Act and due to their favorable federal income tax benefits, we invest in Low Income Housing projects. As a limited partner in these operating partnerships, we receive tax credits and tax deductions for losses incurred by the underlying properties. We use the cost method to account for these partnerships.

Our total investment in qualified affordable housing projects was $6.4 million at March 31, 2020 and $4.8 million at December 31, 2019. Amortization expense, included in other noninterest expense in the Consolidated Statements of Comprehensive Income, was $0.6 million for the three months ended March 31, 2020 and $0.7 million for the three months ended March 31, 2019. The amortization expense was offset by tax credits of $0.6 million for the three months ended March 31, 2020 and $0.7 million for the three months ended March 31, 2019 as a reduction to our federal tax provision.

On September 11, 2019, we entered into a new qualified affordable housing project and committed to an investment of $10.2 million. As of March 31, 2020, we have invested $3.6 million in this new project. NaN amortization expense or tax credits will be recognized for this new project until complete, which we expect to be later in 2020.

NOTE ~~15.~~11. SHARE REPURCHASE PLAN

On ~~September 16, 2019,~~March 15, 2021, our Board of Directors authorized aan extension of its $50 million share repurchase ~~plan.~~plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase ~~authorization, which is effective~~plan through March 31, ~~2021,~~2022. The plan permits S&T to repurchase from time to time up to the previously authorized $50 million in aggregate value of shares of S&T's common stock, with $37.4 million of capacity remaining at March 31, 2021, through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions, the trading price of common stock, legal and contractual requirements, applicable securities laws and S&T's financial performance. The repurchase plan does not obligate us to repurchase any particular number of shares. We expect to fund any repurchases from cash on hand and internally generated funds. Any share repurchases will not begin until permissible under applicable laws. During the three months ended March 31, 2021, we had 0 repurchases. Repurchase activity was suspended in March of 2020 due to the impact of the COVID-19 pandemic. During the year ended December 31, 2020, we repurchased 411,430 common shares at a total cost of $12.6 million, or an average of $30.52 per share. ~~Repurchase activity was suspended in March as the impact of the COVID-19 pandemic spread.~~

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 16. SUBSEQUENT EVENTS~~

~~Paycheck Protection Program~~

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law. It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act includes the Paycheck Protection Program, or PPP, a $349 billion program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks. The Paycheck Protection Program and Health Care Enhancement Act, or PPP/HCEA Act, was signed into law on April 24, 2020. Among other provisions, the PPP/HCEA Act authorized an additional $310 billion of funding under the CARES Act for PPP loans. These loans are intended to cover eight weeks of payroll and other costs to help those businesses remain viable. As of May 5, 2020, we had obtained approvals for 2,959 loans totaling $548.0 million.

PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00 percent and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first six months of the loan. The loans are 100 percent guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1 percent to 5 percent based on the size of the loan.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of our consolidated results of operations and financial condition and highlights material changes in our financial condition and results of operations at and for the three month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020. Our MD&A should be read in conjunction with our Consolidated Financial Statements and Notes. The results of operations reported in the accompanying Consolidated Financial Statements are not necessarily indicative of results to be expected in future periods.

Important Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains or incorporates statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting S&T and its future business and operations. Forward-looking statements are typically identified by words or phrases such as “will likely result”, “expect”, “anticipate”, “estimate”, “forecast”, “project”, “intend”, “ believe”, “assume”, “strategy”, “trend”, “plan”, “outlook”, “outcome”, “continue”, “remain”, “potential”, “opportunity”~~, “believe”~~, “comfortable”, “current”, “position”, “maintain”, “sustain”, “seek”, “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses; cyber-security concerns; rapid technological developments and changes; operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our reputational risks; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; the transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those ~~requirements~~;requirements; unanticipated changes in our liquidity position; changes in accounting policies, practices, or guidance, for example, our adoption of CECL; legislation affecting the financial services industry as a whole, and S&T, in particular; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions,including DNB, cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated;

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containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party ~~provider~~;provider; our ability to attract and retain talented executives and employees; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; the duration and severity of the coronavirus (“COVID-19”) pandemic, both in our principal area of operations and nationally, including the ultimate impact of the pandemic on the economy generally and on our operations; our participation in the Paycheck Protection Program; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, including Part I, Item 1A-"Risk Factors" and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

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Critical Accounting Policies and Estimates

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, ~~2020~~2021 have remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 under Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” except for we have updated our allowance for credit losses policy in response to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

~~Allowance for Credit Losses~~

The ACL for homogeneous loans is calculated using a life-time loss rate methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. The ACL model is comprised of six distinct portfolio segments: 1) Construction, 2) Commercial Real Estate, or CRE, 3) Commercial and Industrial, or C&I, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer. Each segment has a distinct set of risk characteristics monitored by management. We further evaluate the ACL at a disaggregated level which includes type of collateral and our internal risk rating system for the commercial segments and type of collateral, lien position, and FICO score, for the consumer segments. Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on the unemployment forecast and management judgment. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate. The qualitative adjustments for current conditions are based upon changes in lending policies and practices, experience and ability of lending staff, quality of the bank’s loan review system, value of underlying collateral for collateral dependent loans, the existence of and changes in concentrations and other external factors. These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve. A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit, and any needed reserve is recorded in other liabilities.

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans greater than $0.5 million that meet the following criteria: 1) when it is determined that foreclosure is probable, 2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, 3) any commercial troubled debt restructuring (TDR), or any loan reasonably expected to become a TDR whether on accrual or nonaccrual status and 4) when it is determined by management that a loan does not share similar risk characteristics with other loans. Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. Our individual loan evaluations consist primarily of the fair value of collateral method because most of our loans are collateral dependent. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the recorded investment in the loan balance.

Overview

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of ~~$9.0~~$9.3 billion at March 31, ~~2020.~~2021. We operate in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio and Upstate New York.

We provide a full range of financial services with retail and commercial banking products, cash management services, trust and brokerage services. Our common stock trades on the NASDAQ Global Select Market under the symbol “STBA”.

We earn revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers. We incur expenses for the cost of deposits and other funding sources, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, occupancy and tax expense.

Our mission is to become the financial services provider of choice within the markets that we serve which will enable us to ~~continue to~~ be a high performing regional community bank. We strive to do this by delivering exceptional service and ~~value, one customer at a time.~~value. Our strategic plan follows a disciplined approach focused on organic growth, which includes both growth within our current footprint and through market expansion. We employ a geographic market-based growth platform in order to drive organic growth. ~~Each of our five markets is led by a Market President who is responsible for developing strategic initiatives specific to each market.~~ We acknowledge that each of our five markets are in different stages of development and that our ~~market based~~market-based strategy will allow us to customize our approach to each market given its developmental stage and unique characteristics. We also actively evaluate acquisition opportunities that align with our strategic objectives as another source of growth. Our strategic plan includes a collaborative model that combines expertise from all areas of our business and focuses on satisfying each customer’s individual financial objectives. We continuously work to maintain and improve the efficiency of our different lines of business.

We merged with DNB Financial Corporation (DNB) on November 30, 2019. The merger expanded S&T’s footprint in Eastern Pennsylvania gaining a new presence in the counties of Chester, Delaware and Philadelphia. The merger was valued at $201.0 million, or $37.72 per share, and added approximately $899.3 million of portfolio loans and $990.6 million of deposits at December 31, 2019.

Our focus continues to be on organic loan and deposit growth and implementing opportunities to increase fee income while closely monitoring our operating expenses and asset quality. We are focused on executing our strategy to successfully build our brand and grow our business in all of our markets.

COVID-19 Update

~~S&T is monitoring and will continue to monitor the impact of the novel coronavirus (“COVID-19”) pandemic and has~~

~~taken and will continue to take steps to mitigate the potential risks and impact on S&T and to promote the health and safety of~~

~~our employees, and the customers and communities we serve. In response to the COVID-19 pandemic, preventive health~~

~~measures including social distancing, wearing masks, remote work where feasible, extra cleaning and branch access restrictions~~

~~have been implemented. Our Business Continuity teams were activated and have guided our efforts to respond to the~~

rapidly developing situation. Furthermore, as described in Note 16 of Notes to Consolidated Financial Statements, we are participating in the PPP, designed to aid small and medium sized businesses to address the impact of the COVID-19 pandemic.

The extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which remain highly uncertain and unpredictable. The pandemic has had, and we expect that it will continue to have, negative impacts on S&T’s commercial and consumer loan customers and the economy as a whole. The severity and length of the pandemic’s impact on S&T and the U.S. and global economies continue to be unknown.

As we navigate through the uncertainty resulting from the pandemic, our first priority remains the safety of both our employees and customers. Our financial performance continues to be negatively impacted in many ways due to the pandemic. We are ~~highly~~closely monitoring our asset quality with a focus on the portfolios that have been significantly impacted by the pandemic, including our hotel portfolio. We did experience improvement in our asset quality during the three months ended March 31, 2021, but remain cautious given the current environment. Our balance sheet is asset sensitive resulting in our net interest income and net interest margin, or NIM, being negatively impacted in this low interest rate environment. Our net interest income is also being impacted by declining loan balances as new loan originations have decreased in the current environment. Partially offsetting this impact was the Paycheck Protection Program, or PPP. During the first quarter of 2021, PPP forgiveness was $156.5 million and we had an average balance of PPP loans of $454.8 million which positively impacted net interest income by $5.8 million.

Earnings Summary

We recognized record net income of $31.9 million, or $0.81 per diluted share for the three months ended March 31, 2021 compared to $13.2 million, or $0.34 per diluted share in the same period of 2020. The increase in net income for the three months ended March 31, 2021 of $18.7 million was primarily due to a decrease of $16.9 million in our provision for credit losses primarily related to the $16.3 million increase in our ACL in response to the COVID-19 pandemic in the prior year. Also impacting the increase was a $4.8 million increase in noninterest income and a decrease in noninterest expense of $0.8 million offset by an increase in income tax expense of $4.5 million.

Net interest income increased $0.7 million to $70.7 million for the three months ended March 31, 2021 compared to $70.0 million for the same period in 2020. Average interest-earning assets increased $244.3 million to $8.3 billion and average interest-bearing liabilities decreased $419.0 million to $5.4 billion during the three months ended March 31, 2021 compared to the same periods in 2020. Average interest-bearing deposits with banks increased $202.6 million for the three months ended

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~~uncertain and unpredictable. The COVID-19 pandemic has had, and we expect that it will continue~~March 31, 2021 compared to ~~have, negative impacts~~

~~on S&T’s commercial and consumer loan customers and the economy as a whole. The severity and length of the~~

COVID-19 pandemic’s impact on S&T and the U.S. and global economies are unknown. In order to assist our customers through this difficult period we have provided the following assistance, which may have an adverse impact on our results in the short term, but which we believe will provide better outcomes in the long term for our customers and for S&T:

~~We have provided needs-based payment deferrals and modifications to interest only periods to commercial loan~~

~~customers.~~

~~We have provided mortgage and consumer loan payment deferrals with no negative credit bureau reporting to~~

~~consumer customers.~~

~~We have paused foreclosures/repossessions for mortgages and consumer loans.~~

~~Earnings Summary~~

~~Net income decreased $9.7 million, or 42.3 percent, to $13.2 million, or $0.34 per diluted share, for the three months ended~~ March 31, 2020 ~~compared to $22.9 million, or $0.66 per diluted share, in 2019. The decrease in net income was primarily~~ due to ~~the potential impact of COVID-19 on our expected credit losses which contributed to an increased provision for credit losses of $14.4 million, an~~a significant increase in other noninterest expenses of $7.5 million, which included $2.3 million, or $0.05 per diluted share, of merger related expenses. These increases were offset by an increase of $9.7 million in net interest income which was primarilydeposits as a result of government stimulus programs, the ~~merger.~~

~~Net interest income~~PPP and our customers' liquidity preferences. Average loan balances increased ~~$9.7 million, or 16.0 percent, to $70.0 million compared to $60.3~~$58.8 million for the three months ended March 31, ~~2019. The increase was primarily~~2021 compared to the same period in 2020 due to ~~higher~~PPP loans. The decrease in average interest-earning assets of $1.4 billion. The majority of the increase came from higher average loans of $1.2 billion from organic loan growth combined with $900 million of loans from the DNB Merger. Average interest-bearing liabilities ~~increased $1.0 billion, primarily from increases~~compared to the same period in 2020 was due to decreases in average borrowings of $255.4 million and $163.6 million in average interest-bearing deposits ~~from~~for the ~~DNB merger.~~three months ended March 31, 2021 compared to the same period in 2020. Net interest margin, on a fully taxable-equivalent, or FTE, basis (non-GAAP), ~~declined 18~~decreased 6 basis points to 3.47 percent for the three months ended March 31, 2021 compared to 3.53 percent ~~compared to 3.71 percent from~~for the ~~year ago~~same period in 2020 due to the ~~declining~~decline in short-term interest ~~rate environment.~~rates during 2021. PPP loans positively impacted the net interest margin on an FTE basis by 10 basis points for the three months ended March 31, 2021. Net interest margin is reconciled to net interest income adjusted to an FTE basis below in the "Net Interest Income" section of this MD&A.

The provision for credit losses, which includes a provision for losses on unfunded commitments, ~~increased $14.4~~decreased $16.9 million to ~~$20.1~~$3.1 million for the three months ended March 31, ~~2020~~2021 compared to ~~$5.7~~$20.0 million in the same period ~~of 2019.~~in 2020. The significant ~~increase~~decrease in the provision for credit losses during the three months ended March 31, 2021 was mainly due to athe $16.3 million increase in our ACL in response to the ~~COVID-19 pandemic. Net~~pandemic in the prior year. For the three months ended March 31, 2021, we had net charge-offs of $5.8 million compared to net charge-offs of $11.2 million for the same period in 2020. Annualized net loan charge-offs to average loans was 0.33 percent for the three months ended March 31, 2021compared to 0.63 percent for the same period in 2020.

Noninterest income increased ~~$6.0~~$4.8 million to ~~$11.2~~$17.2 million ~~or 0.63 percent~~for the three months ended March 31, 2021 compared to $12.4 million for the same period in 2020. The increase in noninterest income primarily related to an increase of ~~average~~$3.1 million in mortgage banking fees due to higher gains on loans sold and an increase in the mortgage servicing rights valuation compared to the same periods in 2020. Also impacting the increase was higher other income of $3.4 million for the three months ended March 31, 2021 related to changes in the valuation of our deferred compensation plan and equity securities portfolio compared to the same period in 2020. Offsetting this increase was a decline in commercial loan swap income of $2.4 million due to the change in the rate environment impacting customer activity compared to the same period in 2020.

Noninterest expense decreased $0.8 million to $45.6 million for the three months ended March 31, 2021 compared to $46.4 million for the same period in 2020. The decrease was mainly due to $2.3 million of merger-related expenses recognized in the three months ended March 31, 2020 compared to ~~$5.2~~no merger-related expenses in 2021. This decrease was offset by increases of $2.0 million ~~or 0.36 percent of average loans,~~ in salaries and employee benefits and $0.5 million in professional services and legal expenses for the ~~same period in 2019.~~three months ended March 31, 2021.

~~Total noninterest~~The provision for income taxes increased ~~$1.0~~$4.5 million to ~~$12.4~~$7.3 million for the three months ended March 31, ~~2020~~2021 compared to $11.4 million in the same period of 2019. Total noninterest income includes the impact of the DNB merger in the three months ended March 31, 2020 since the merger closed on November 30, 2019. The increase in noninterest income primarily related to higher commercial loan swap income of $1.9 million as we continue to see a high demand for this product in the current rate environment. Also impacting the increase was $0.7 million in mortgage banking fees, $0.5 million in debit and credit card fees and $0.4 million in service charges on deposit accounts. Offsetting these increases was a $2.8 million decrease in other income primarily attributable to the decline in stock market performance during the first quarter of 2020 resulting in a change in the valuation related to a deferred compensation plan of $1.8 million, which has a corresponding offset in salaries and benefit expense resulting in no impact to net income and a decrease in the equity securities portfolio of $1.3 million compared to the prior period.

~~Noninterest expense increased $7.5 million to $46.4 million in three months ended March 31, 2020 compared to $38.9 million in~~ the same period in ~~2019. Total noninterest~~2020. The increase in income tax expense includes the impact of the DNB merger in the three months ended March 31, 2020 since the merger closed on November 30, 2019. We incurred $2.3 million of merger related expenses in the three months ended March 31, 2020 and higher operating expenses after the merger with DNB. Other noninterest expense increased $2.6 million mainlywas primarily due to ~~$1.1~~the $23.2 million increase ~~related to historic tax credits and $0.5 million of additional amortization related to the DNB merger.~~

~~The provision for~~in pretax income ~~taxes decreased $1.5 million to $2.7 million~~ for the three months ended March 31, ~~2020~~2021 compared to ~~$4.2 million in~~ the same period in ~~2019 as a result of the decrease in pretax income of $11.2 million.~~2020. Our effective tax rate ~~increased to 17.3~~was 18.6 percent for the three months ended March 31, ~~2020~~2021 compared to ~~15.6~~17.3 percent for the same period in ~~2019.~~2020. The ~~increase~~change in ~~the~~our effective tax rate isfor the three months ended March 31, 2021 was primarily due to ~~a $1.7 million decrease~~the increase in ~~benefits from tax credits in the first quarter of 2020 compared to the same period of 2019.~~

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pretax income.

Explanation of Use of Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles, or GAAP, in the United States, management uses, and this quarterly report references, net interest income and net interest margin on a fully taxable equivalent, or FTE, basis, which are non-GAAP financial measures. Management believes net interest income and net interest margin on an FTE basis provide information useful to investors in understanding our underlying business, operational performance and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although management believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies.

We believe the presentation of net interest income and net interest margin on an FTE basis ensures the comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (GAAP) per the Consolidated Statements of Comprehensive Income is reconciled to net interest income adjusted on an FTE basis and net interest margin adjusted on an FTE basis in the "Results of Operations - Three Months Ended March 31, ~~2020~~2021 Compared to Three Months Ended March 31, ~~2019~~2020 - Net Interest Income" section of this MD&A.

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RESULTS OF OPERATIONS

Three Months Ended March 31, ~~2020~~2021 Compared to

Three Months Ended March 31, ~~2019~~2020

Net Interest Income

Our principal source of revenue is net interest income. Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and spreads. The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee, or ALCO, in order to mitigate interest rate and liquidity risks of the balance sheet. A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what we believe is an acceptable level of net interest income.

The interest income on interest-earning assets and the net interest margin are presented on an FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory tax rate of 21 percent for each period and the dividend-received deduction for equity securities. We believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between taxable and non-taxable sources of interest income.

The following table reconciles interest income per the Consolidated Statements of Comprehensive Income to net interest income and rates on an FTE basis for the periods presented:


	Three Months Ended March 31,
(dollars in thousands)	2021				2020
Total interest income		$	74,781			$	87,589
Total interest expense		4,122				17,553
Net Interest Income per Consolidated Statements of Comprehensive Income		70,659				70,036
Adjustment to FTE basis		663				849
Net Interest Income on an FTE Basis (Non-GAAP)		$	71,322			$	70,885
Net interest margin		3.44		%		3.48		%
Adjustment to FTE basis		0.03		%		0.05		%
Net Interest Margin on an FTE Basis (Non-GAAP)		3.47		%		3.53		%

Three Months Ended March 31,
(dollars in thousands) 2020 2019
Total interest income $ 87,589
$ 78,590
Total interest expense 17,553
18,234
Net Interest Income per Consolidated Statements of Comprehensive Income 70,036
60,356
Adjustment to FTE basis 849
961
Net Interest Income on an FTE Basis (Non-GAAP) $ 70,885
$ 61,317
Net interest margin 3.48 % 3.65 %
Adjustment to FTE basis 0.05 % 0.06 %
Net Interest Margin on an FTE Basis (Non-GAAP) 3.53 % 3.71 %

Income amounts are annualized for rate calculations.

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Average Balance Sheet and Net Interest Income Analysis (FTE)

The following tables provide information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the periods presented:


	Three Months Ended March 31, 2020							Three Months Ended March 31, 2019								Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
(dollars in thousands)	Average Balance		Interest			Rate		Average Balance		Interest			Rate		(dollars in thousands)	Average Balance		Interest			Rate	Average Balance		Interest			Rate
ASSETS															ASSETS
Interest-bearing deposits with banks	$	99,646		$	355	1.42	%	$	53,588		$	352	2.63	%	Interest-bearing deposits with banks	$	302,219		$	65	0.09 %	$	99,646		$	355	1.42	%
Securities, at fair value⁽²⁾⁽³⁾	786,858			4,995		2.54	%	680,517			4,558		2.68	%
Securities, at fair value(1)(2)															Securities, at fair value(1)(2)	782,118			4,566		2.34 %	786,858			4,995		2.54	%
Loans held for sale	1,867			18		3.76	%	894			9		4.07	%	Loans held for sale	6,360			45		2.83 %	1,867			18		3.76	%
Commercial real estate	3,408,684			40,093		4.73	%	2,905,272			35,964		5.02	%	Commercial real estate	3,253,641			30,136		3.76 %	3,408,684			40,093		4.73	%
Commercial and industrial	1,751,678			19,738		4.53	%	1,508,658			19,333		5.20	%	Commercial and industrial	1,957,459			20,817		4.31 %	1,751,678			19,738		4.53	%
Commercial construction	386,363			4,495		4.68	%	249,997			3,312		5.37	%	Commercial construction	485,269			4,034		3.37 %	386,363			4,495		4.68	%
Total Commercial Loans	5,546,725			64,326		4.66	%	4,663,927			58,609		5.10	%	Total Commercial Loans	5,696,369			54,987		3.91 %	5,546,725			64,326		4.66	%
Residential mortgage	990,866			10,328		4.18	%	722,554			7,869		4.38	%	Residential mortgage	897,427			9,416		4.22 %	990,866			10,328		4.18	%
Home equity	540,193			6,501		4.84	%	467,739			6,269		5.44	%	Home equity	532,708			4,791		3.65 %	540,193			6,501		4.84	%
Installment and other consumer	79,680			1,388		7.01	%	69,099			1,222		7.17	%	Installment and other consumer	79,907			1,247		6.33 %	79,680			1,388		7.01	%
Consumer construction	10,508			120		4.61	%	9,466			144		6.19	%	Consumer construction	15,908			188		4.79 %	10,508			120		4.61	%
Total Consumer Loans	1,621,247			18,337		4.54	%	1,268,858			15,504		4.93	%	Total Consumer Loans	1,525,950			15,642		4.14 %	1,621,247			18,337		4.54	%
Total Portfolio Loans	7,167,972			82,663		4.64	%	5,932,785			74,113		5.06	%	Total Portfolio Loans	7,222,319			70,630		3.96 %	7,167,972			82,663		4.64	%
Total Loans⁽¹⁾⁽²⁾	7,169,839			82,681		4.64	%	5,933,679			74,122		5.06	%
Total Loans(1)(3)															Total Loans(1)(3)	7,228,679			70,675		3.96 %	7,169,839			82,681		4.64	%
Federal Home Loan Bank and other restricted stock	23,601			407		6.90	%	24,471			519		8.90	%	Federal Home Loan Bank and other restricted stock	11,242			139		4.94 %	23,601			407		6.90	%
Total Interest-earning Assets	8,079,944			88,438		4.40	%	6,692,255			79,551		4.81	%	Total Interest-earning Assets	8,324,259			75,445		3.67 %	8,079,944			88,438		4.40	%
Noninterest-earning assets	687,382							518,500							Noninterest-earning assets	756,273						687,382
Total Assets	$	8,767,326						$	7,210,755						Total Assets	$	9,080,532					$	8,767,326
LIABILITIES AND SHAREHOLDERS’ EQUITY															LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	$	942,030		$	1,382	0.59	%	$	54,695		$	553	0.41	%	Interest-bearing demand	$	895,891		$	222	0.10 %	$	942,030		$	1,382	0.59	%
Money market	1,993,764			6,318		1.27	%	1,568,417			7,292		1.89	%	Money market	1,968,779			943		0.19 %	1,993,764			6,318		1.27	%
Savings	830,985			477		0.23	%	770,587			472		0.25	%	Savings	995,228			152		0.06 %	830,985			477		0.23	%
Certificates of deposit	1,601,324			7,161		1.80	%	1,434,511			6,664		1.88	%	Certificates of deposit	1,344,604			2,165		0.65 %	1,601,324			7,161		1.80	%
Total Interest-bearing Deposits	5,368,103			15,338		1.15	%	4,319,210			14,981		1.41	%	Total Interest-bearing Deposits	5,204,503			3,481		0.27 %	5,368,103			15,338		1.15	%
Securities sold under repurchase agreements	30,790			42		0.56	%	23,170			29		0.52	%	Securities sold under repurchase agreements	64,653			25		0.15 %	30,790			42		0.56	%
Short-term borrowings	286,365			1,145		1.61	%	319,389			2,145		2.72	%	Short-term borrowings	25,556			12		0.19 %	286,365			1,145		1.61	%
Long-term borrowings	51,845			325		2.52	%	70,196			493		2.84	%	Long-term borrowings	23,471			116		2.00 %	51,845			325		2.52	%
Junior subordinated debt securities	64,195			703		4.40	%	45,619			586		5.21	%	Junior subordinated debt securities	64,088			488		3.09 %	64,195			703		4.40	%
Total Borrowings	433,195			2,215		2.06	%	458,374			3,253		2.88	%	Total Borrowings	177,768			641		1.46 %	433,195			2,215		2.06	%
Total Interest-bearing Liabilities	5,801,298			17,553		1.22	%	4,777,584			18,234		1.55	%	Total Interest-bearing Liabilities	5,382,271			4,123		0.31 %	5,801,298			17,553		1.22	%
Noninterest-bearing liabilities	1,776,453							1,448,057							Noninterest-bearing liabilities	2,538,149						1,776,453
Shareholders’ equity	1,189,575							945,114							Shareholders’ equity	1,160,113						1,189,575
Total Liabilities and Shareholders’ Equity	$	8,767,326						$	7,210,755						Total Liabilities and Shareholders’ Equity	$	9,080,532					$	8,767,326
Net Interest Income ⁽²⁾⁽³⁾				$	70,885						$	61,317
Net Interest Margin ⁽²⁾⁽³⁾						3.53	%						3.71	%
Net Interest Income (1)(2)															Net Interest Income (1)(2)				$	71,322					$	70,885
Net Interest Margin (1)(2)															Net Interest Margin (1)(2)						3.47 %						3.53	%

⁽¹⁾ ~~Nonaccruing loans are included in the daily average loan amounts outstanding.~~

⁽²⁾ Tax-exempt income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent for ~~2020~~2021 and ~~2019.~~2020.

⁽³⁾(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

(3) Nonaccruing loans are included in the daily average loan amounts outstanding.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net interest income on an FTE basis (non-GAAP) increased ~~$9.6~~$0.4 million ~~or 15.6 percent,~~ for the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. Net interest income was favorably impacted by Paycheck Protection Program, or PPP loans which increased interest income by $5.8 million for the three months ended March 31, 2021 compared to the same period in 2020. The net interest margin on an FTE basis (non-GAAP) decreased 186 basis points for the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. PPP loans positively impacted the net interest margin on an FTE basis by 10 basis points for the three months ended March 31, 2021.

Interest income on an FTE basis (non-GAAP) ~~increased $8.9~~decreased $13.0 million, or ~~11.2~~14.7 percent, for the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The ~~increase~~decrease in interest income was primarily due to ~~increases in average interest-earning assets of $1.4 billion for the three months ended March 31, 2020 offset by~~ lower short-term interest rates compared to the same period in ~~2019.~~2020. Average loan balances increased ~~$1.2 billion~~$58.8 million compared to the same period in ~~2019 due~~2020. PPP loans contributed $454.8 million to the ~~DNB merger and organic~~average increase in loans which was offset by lower loan ~~growth.~~activity related to the COVID-19 pandemic. The average rate earned on loans decreased 4268 basis points compared to the same period in ~~2019~~2020 primarily due to lower short-term interest rates. Average ~~investment securities~~interest-bearing deposits with banks increased ~~$106.3~~$202.6 million and the average rate ~~earned~~ decreased 14133 basis points compared to the same period in ~~2019.~~2020. Higher average interest-bearing deposits with banks was due to a significant increase in deposits as a result of government stimulus programs, PPP and our customers' liquidity preferences. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 4173 basis points ~~for the three months ended March 31, 2020~~ compared to the same period in ~~2019.~~2020.

Interest expense decreased ~~$0.7~~$13.4 million for the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019.~~2020. The decrease was primarily due to lower short-term interest rates compared to the same period in ~~2019.~~2020. Average interest-bearing deposits ~~increased $1.0 billion~~decreased $163.6 million for the three months ended March 31, 2021 compared to the same period in ~~2019 due to the DNB merger and organic deposit growth.~~2020. The average rate paid decreased 2688 basis points compared to the same period in ~~2019~~2020 primarily due to lower short-term interest rates. The interest-bearing deposits decrease is favorably offset by a $715.6 million increase in demand deposits. We experienced demand deposit growth due to customer PPP loans and stimulus payments along with customers' liquidity preferences. Brokered deposits decreased $306.9 million compared to the same period in 2020 due to excess liquidity. Average total borrowings decreased ~~$25.2~~$255.4 million and the average rate paid decreased 8260 basis points compared to the same period in ~~2019.~~2020. Borrowings decreased compared to the same period in 2020 due to excess liquidity. Overall, the cost of interest-bearing liabilities decreased 3391 basis points for the three months ended March 31, ~~2020,~~2021 compared to the same period in ~~2019.~~2020.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates:


	Three Months Ended March 31, 2020 Compared to March 31, 2019										Three Months Ended March 31, 2021 Compared to March 31, 2020
(dollars in thousands)	Volume ⁽⁴⁾			Rate ⁽⁴⁾			Total			(dollars in thousands)	Volume (4)		Rate (4)		Total
Interest earned on:										Interest earned on:
Interest-bearing deposits with banks	$	302		$	(299	)	$	3		Interest-bearing deposits with banks	$	722	$	(1,012)	$	(290)
Securities, at fair value⁽²⁾⁽³⁾	712			(274		)	438
Securities, at fair value(1)(2)										Securities, at fair value(1)(2)	(30)		(400)		(430)
Loans held for sale	10			(1		)	9			Loans held for sale	42		(15)		27
Commercial real estate	6,232			(2,103		)	4,129			Commercial real estate	(1,824)		(8,133)		(9,957)
Commercial and industrial	3,114			(2,709		)	405			Commercial and industrial	2,319		(1,239)		1,079
Commercial construction	1,807			(623		)	1,184			Commercial construction	1,151		(1,612)		(461)
Total Commercial Loans	11,153			(5,435		)	5,718			Total Commercial Loans	1,646		(10,984)		(9,339)
Residential mortgage	2,922			(463		)	2,459			Residential mortgage	(974)		62		(912)
Home equity	971			(739		)	232			Home equity	(90)		(1,619)		(1,709)
Installment and other consumer	187			(21		)	166			Installment and other consumer	4		(145)		(141)
Consumer construction	16			(40		)	(24		)	Consumer construction	62		6		67
Total Consumer Loans	4,096			(1,263		)	2,833			Total Consumer Loans	(998)		(1,697)		(2,695)
Total Portfolio Loans	15,249			(6,698		)	8,551			Total Portfolio Loans	648		(12,681)		(12,033)
Total Loans⁽¹⁾⁽²⁾	15,259			(6,699		)	8,560
Total Loans (1)(3)										Total Loans (1)(3)	690		(12,696)		(12,006)
Federal Home Loan Bank and other restricted stock	(18		)	(94		)	(112		)	Federal Home Loan Bank and other restricted stock	(213)		(55)		(268)
Change in Interest Earned on Interest-earning Assets	16,255			(7,366		)	8,889			Change in Interest Earned on Interest-earning Assets	$	1,168	$	(14,162)	$	(12,994)
Interest paid on:										Interest paid on:
Interest-bearing demand		$401			$428			$829		Interest-bearing demand	$	(68)	$	(1,092)	$	(1,160)
Money market	1,977			(2,951		)	(974		)	Money market	(79)		(5,296)		(5,375)
Savings	37			(33		)	4			Savings	94		(419)		(325)
Certificates of deposit	775			(278		)	497			Certificates of deposit	(1,148)		(3,848)		(4,996)
Total Interest-bearing Deposits	3,190			(2,834		)	356			Total Interest-bearing Deposits	(1,201)		(10,656)		(11,856)
Securities sold under repurchase agreements	10			4			14			Securities sold under repurchase agreements	47		(65)		(18)
Short-term borrowings	(222		)	(779		)	(1,001		)	Short-term borrowings	(1,042)		(90)		(1,133)
Long-term borrowings	(129		)	(39		)	(168		)	Long-term borrowings	(178)		(31)		(209)
Junior subordinated debt securities	239			(121		)	118			Junior subordinated debt securities	(1)		(214)		(215)
Total Borrowings	(102		)	(935		)	(1,037		)	Total Borrowings	(1,174)		(400)		(1,574)
Change in Interest Paid on Interest-bearing Liabilities	3,088			(3,769		)	(681		)	Change in Interest Paid on Interest-bearing Liabilities	$	(2,375)	$	(11,056)	$	(13,431)
Change in Net Interest Income	$	13,167		$	(3,597	)	$	9,570		Change in Net Interest Income	$	3,543	$	(3,107)	$	437

⁽¹⁾ ~~Nonaccruing loans are included in the daily average loan amounts outstanding.~~

⁽²⁾ Tax-exempt income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent for ~~2020~~2021 and ~~2019.~~2020.

⁽³⁾(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

⁽³⁾ Nonaccruing loans are included in the daily average loan amounts outstanding.

(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Provision for Credit Losses

The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date. ~~At January 1, 2020, we increased the ACL by $27.3 million for the day one CECL adjustment.~~ The provision for credit losses ~~increased $14.4~~decreased $16.9 million to ~~$20.1~~$3.1 million for the three months ended

March 31, 2021 compared to $20.0 million for the same period in 2020.

The decrease in the provision for credit losses of $16.9 million was primarily due to a significant increase in provision needed during the three months ended March 31, 2020 due to the negative impact of the COVID-19 pandemic and our adoption of CECL on January 1, 2020. The provision for credit losses for the three months ended March 31, 2020 included $14.3 million related to the economic forecast and other qualitative reserves established for the uncertainty of the pandemic. Our total qualitative reserve decreased $2.7 million for the three months ended March 31, ~~2020~~2021 compared to ~~$5.7 million for~~ the same period in ~~2019. The provision for credit losses includes $1.6~~2020 mainly due to a decrease of $3.1 million for the ~~reserve for unfunded commitments for the three months ended March 31, 2020.~~

The significant increase in the provision for credit losses during the three months ended March 31, 2020 was mainly due to the COVID-19 pandemic. We added approximately $14.9 million to the ACL in the first quarter of 2020 related to qualitative factors. This included $11.2 million for a revisedeconomic forecast. Our economic forecast covers a period of two years and ~~the impact of that forecast on certain loan portfolios due to the COVID-19 pandemic. Changes in current conditions resulted in an additional $3.7 million increase in the ACL.~~

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

driven primarily by national unemployment data. The forecasted national unemployment rate improved at March 31, 2021 compared to the same time in 2020.

Net loan charge-offs ~~increased $6.0~~were $5.8 million, or 0.33 percent annualized as a percentage of average loans at March 31, 2021 compared to $11.2 million, or 0.63 percent of average loans ~~for the first quarter of 2020 compared to $5.2 million, or 0.36 percent of average loans, for~~during the same period in 2019. The most significant charge-off for the first quarter related to a $9.9 million C&I relationship that was charged off due to potential irregularities of the borrower that are still under review. We obtained information on the relationship subsequent to filing our Annual Report on Form 10-K for the year ended December 31, 2019, but before the end of the first quarter of 2020; therefore, we recorded a $9.9 million specific reserve in the day one CECL adjustment. The updated information supported a loss existed at January 1, 2020. Nonperforming loans increased ~~$25.8~~$61.4 million to $135.2 million at March 31, 2021 compared to $73.8 million at March 31, ~~2020 compared to $48.0 million at March 31, 2019.~~2020. The significant increase in nonperforming loans primarily related to the addition of ~~a $20.9~~$53.6 million ~~CRE relationship and a $5.9 million C&I relationship,~~of hotel loans which ~~was partially offset by the $9.9 million C&I relationship that was charged off during the quarter. The $20.9 million CRE relationship became a performing TDR in the third quarter of 2019 and then~~ moved to nonperforming during the fourth quarter of 2020 as a result of continued deterioration due to the pandemic.

Noninterest Income


	Three Months Ended March 31,
(dollars in thousands)	2021			2020			$ Change			% Change
Net gain on sale of securities		$	—		$	—		$	—		—
Mortgage banking		4,310			1,236			3,074			248.7	%
Debit and credit card		4,162			3,482			680			19.5	%
Service charges on deposit accounts		3,474			4,008			(534)			(13.3)	%
Wealth management		2,944			2,362			582			24.6	%
Commercial loan swap income		95			2,484			(2,389)			(96.2)	%
Other		2,252			(1,169)			3,421			(292.6)	%
Total Noninterest Income		$	17,236		$	12,403		$	4,833		39.0	%

Noninterest income increased $4.8 million to $17.2 million for the three months ended March 31, 2021 compared to the same period in 2020. The increase in noninterest income primarily related to an increase of $3.1 million in mortgage banking fees due to higher gains on loans sold and an increase in the mortgage servicing rights valuation compared to the same periods in 2020.Wealth management income increased $0.6 million due to higher assets under management from market appreciation and an increase in customer activity. Debit and credit card income increased $0.7 million due to increased activity and the improving economic environment. Other income increased $3.4 million related to changes in the valuation of our deferred compensation plan, which has a corresponding offset in salaries and employee benefits expense resulting in no impact to net income, and the change in value in the equity securities portfolio compared to the same period in 2020. Offsetting these increases was a $2.4 million decrease in commercial loan swap income. Commercial loan swap activity was significant in first quarter of 2020, ~~when the borrower experienced financial deterioration that lead to cash flow issues. The relationship was individually assessed at March 31, 2020 resulting in no ACL~~but activity has declined due to the ~~borrower being current~~pandemic. Service charges on ~~their payments under~~deposit accounts decreased $0.5 million also due to reduced activity related to the ~~modified terms and~~pandemic.

Noninterest Expense


	Three Months Ended March 31,
(dollars in thousands)	2021			2020			$ Change			% Change
Salaries and employee benefits (1)		$	23,327		$	21,335		$	1,992		9.3	%
Data processing and information technology (1)		4,225			3,868			357			9.2	%
Occupancy (1)		3,827			3,765			62			1.6	%
Furniture, equipment and software (1)		2,640			2,519			121			4.8	%
Professional services and legal (1)		1,531			1,048			483			46.1	%
Other taxes		1,436			1,600			(164)			(10.3)	%
Marketing (1)		1,322			1,111			211			19.0	%
FDIC insurance		1,046			770			276			35.8	%
Merger related expenses		—			2,342			(2,342)			(100.0)	%
Other (1)		6,226			8,033			(1,807)			(22.5)	%
Total Noninterest Expense		$	45,580		$	46,391		$	(810)		(1.7)	%

(1)Excludes Merger related expenses for 2020 amounts only.

Noninterest expense decreased $0.8 million to $45.6 million for the ~~relationship being fully collateralized as of~~three months ended March 31, 2021 compared to the same period in 2020 ~~or as~~mainly due to merger related expenses in 2020. Total merger related expenses of ~~the filing date of this Form 10-Q.~~

~~Noninterest Income~~

Three Months Ended March 31,
(dollars in thousands) 2020 2019 $ Change % Change
Net gain on sale of securities $ —
$ —
$ —
—
Service charges on deposit accounts 3,558
3,153
405
12.8 %
Debit and credit card 3,482
2,974
508
17.1 %
Commercial loan swap income 2,484
581
1,903
327.5 %
Wealth management 2,362
2,048
314
15.3 %
Mortgage banking 1,236
494
742
150.2 %
Other (719 ) 2,112
(2,831 ) (134.0 )%
Total Noninterest Income $ 12,403
$ 11,362
$ 1,041
9.2 %

~~NM - not meaningful~~

~~Noninterest income increased $1.0 million to $12.4~~$2.3 million for the three months ended March 31, 2020 ~~compared to the same period in 2019. Total noninterest income includes the impact~~included $1.4 million of the DNB merger in the three months ended March 31, 2020 which closed on November 30, 2019. The increase was also related to higher commercial loan swap income of $1.9 million due to an increase in customer demand for this product in the current interest rate environment. Mortgage banking fees increased $0.7 million due to an increase in the volume of loans originated for sale in the secondary market due to a decline in mortgage rates from the comparable period. Debit and credit card fees also increased $0.5 million compared to 2019 due to increased debit card usage, the DNB merger and the timing of referral merchant revenue. Offsetting these increases was a $2.8 million decrease in other income primarily attributable to the decline in stock market performance during the first quarter of 2020 resulting in a change in the valuation related to a deferred compensation plan of $1.8 million, which has a corresponding

~~offset in~~ salaries and ~~benefit expense resulting in no impact to net income and a decrease in the equity securities portfolio of $1.3~~employee benefits, $0.4 million ~~compared to the prior period.~~

for data processing, $0.2

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Noninterest Expense~~

Three Months Ended March 31,
(dollars in thousands) 2020 2019 $ Change % Change
Salaries and employee benefits⁽¹⁾
$ 21,335
$ 20,910
$ 425
2.0 %
Data processing and information technology⁽¹⁾
3,868
3,233
635
19.6 %
Net occupancy⁽¹⁾
3,765
3,036
729
24.0 %
Furniture, equipment and software⁽¹⁾
2,519
2,230
289
13.0 %
Merger related expenses 2,342
—
2,342
NM
Other taxes 1,600
1,185
415
35.0 %
Marketing⁽¹⁾
1,111
1,141
(30 ) (2.6 )%
Professional services and legal⁽¹⁾
1,048
1,184
(136 ) (11.5 )%
FDIC insurance 770
516
254
49.2 %
Other⁽¹⁾
8,033
5,449
2,584
47.4 %
Total Noninterest Expense $ 46,391
$ 38,884
$ 7,507
19.3 %

⁽¹⁾~~Excludes Merger related expenses for 2020 amounts only.~~

~~NM - not meaningful~~

Noninterest expense increased $7.5 million, or 19.3 percent, to $46.4 million in 2020 compared to 2019. Total noninterest expense includes the impact of the DNB merger in the three months ended March 31, 2020 which closed on November 30, 2019. Total merger related expenses of $2.3 million incurred in the three months ended March 31, 2020 included $1.4 million of salaries and employee benefits, $0.4 million for data processing, $0.2 million for professional services and $0.3 million in various other expenses. Other noninterest expense decreased due to historic tax credits for $1.1million in the three months ended March 31, 2020 and lower travel, lodging and training expenses resulting from the pandemic during the three months ended March 31, 2021 compared to the same period in 2020. Partially offsetting these decreases was a $2.0 million increase in salaries and employee benefits mainly due to a change in the valuation related to a deferred compensation plan of $1.6 million, which has a corresponding offset in other noninterest income resulting in no impact to net income, higher pension expense due to an increase in retirees electing lump-sum distributions causing settlement accounting and higher medical expenses. Professional services and legal expenses increased ~~$2.6~~$0.5 million mainly due to ~~$1.1 million increase related to historic tax credits~~higher consulting and $0.5 million additional amortization related to the DNB merger. Net occupancy expenses increased $0.7 million due to additional locations acquired as part of the DNB merger. Salaries and employee benefits increased $0.4 million primarily due to additional employees. Data processing and information technology increased $0.6 million due to the outsourcing agreement for certain components of our information technology function, the annual increase with our third-party data processor and the merger. Other taxes increased $0.4 million due to the merger and growth resulting in an increase in our shares tax.legal expense.

Provision for Income Taxes

The provision for income taxes ~~decreased $1.5~~increased $4.5 million to ~~$2.7~~$7.3 million for the three months ended March 31, ~~2020~~2021 compared to ~~$4.2~~$2.8 million in the same period in ~~2019~~2020 as a result of the ~~decrease~~increase in pretax income of ~~$11.2~~$23.2 million. Our effective tax rate ~~increased to 17.3~~was 18.6 percent for the three months ended March 31, ~~2020~~2021 compared to ~~15.6~~17.3 percent for the same period in ~~2019.~~2020. The ~~increase~~change in ~~the~~our effective tax rate isfor the three months ended March 31, 2021 was primarily due to ~~a $1.7 million decrease~~the increase in ~~tax benefits from tax credits compared to 2019.~~pretax income.

Financial Condition as of March 31, ~~2020~~2021

Total assets increased ~~$0.2~~$361.1 million to $9.3 billion at March 31, 2021 compared to $9.0 billion at December 31, 2020. Cash and due from banks increased $441.8 million to $671.4 million at March 31, ~~2020~~2021 compared ~~$8.8 billion at~~to December 31, ~~2019.~~2020 due to a significant increase in deposits as a result of government stimulus programs, PPP and our customers' liquidity preferences. Total portfolio loans ~~increased $109.6~~decreased $42.7 million to $7.2 billion at March 31, ~~2020~~2021 compared to ~~$7.1 billion at~~ December 31, ~~2019.~~2020. The ~~increase~~decrease in portfolio loans primarily related to ~~growth~~a decrease in the consumer loan portfolio of $45.7 million, with decreases in residential mortgage of $37.2 million, home equity of $4.8 million, consumer construction of $3.4 million and other consumer of $0.3 million. The commercial loan portfolio ~~of $107.6~~increased $3.0 million with increases of ~~$60.5~~$39.6 million in CRE offset by decreases of $22.7 million in C&I ~~$26.0 million in CRE~~ and ~~$21.1~~$13.9 million in commercial ~~construction compared to December 31, 2019. Consumer~~construction. Excluding the PPP loans, ~~increased $2.0~~portfolio loans decreased $76.9 million compared to December 31, 2019 with increases in all categories except residential mortgages. Home equity increased $6.1 million, consumer construction loans increased $4.8 million, installment and other consumer increased $0.9 million offset by a decrease of $9.8 million in residential mortgages.2020 due to decreased activity related to the COVID-19 pandemic.

Securities increased ~~$15.2~~$43.6 million to ~~$799.5~~$817.3 million at March 31, ~~2020~~2021 from ~~$784.3~~$773.7 million at December 31, ~~2019.~~2020. The increase in securities is primarily due to ~~increases~~an increase in ~~the unrealized gains of $21.6 million during the three months ended March 31, 2020 partially offset by pay downs on mortgage-backed securities.~~overall investing activities due to excess liquidity. The bond portfolio had ana net unrealized gain of ~~$32.3~~$23.7 million at March 31, ~~2020~~2021 compared to ~~$10.7~~$33.4 million at December 31, ~~2019~~2020 due to ~~a decrease in~~rising interest ~~rates.~~rates during the first quarter of 2021.

Our deposits increased ~~$21.3~~$455.5 million with total deposits of ~~$7.1~~$7.9 billion at March 31, ~~2020~~2021 compared to ~~$7.0~~$7.4 billion at December 31, ~~2019.~~2020. Customer deposits increased ~~$37.3~~$508.8 million from December 31, ~~2019. Money market~~2020. The increase in customer deposits ~~increased $17.9 million, certificates of deposit increased $8.5 million, savings increased $5.3 million, noninterest-bearing demand deposits increased $4.9 million,~~is primarily related to stimulus programs, PPP and ~~interest-bearing demand increased $0.7 million.~~our customers' liquidity preferences. Total brokered deposits decreased ~~$16.0~~$53.3 million from December 31, ~~2019.~~2020 due to a reduced need for wholesale funding due to strong customer deposit growth. Brokered deposits are an additional source of funds utilized by ALCO as a way to diversify funding sources, as well as manage our funding costs and structure.

Total borrowings decreased $73.1 million to $154.8 million at March 31, 2021 compared to $227.9 million at December 31, 2020 due to increased ~~$177.8~~customer deposits. The decrease in borrowings primarily related to a decline in short-term borrowings of $75.0 million ~~or 42.7 percent,~~ compared to December 31, ~~2019 to fund asset growth.~~ 2020.

Total ~~short-term borrowings~~shareholders’ equity increased by ~~$128.9 million, or 45.8 percent compared to December 31, 2019. Securities sold under repurchase agreements increased $49.8~~$13.6 million to ~~$69.6~~$1,168.3 million at March 31, ~~2020~~2021 compared to ~~December 31, 2019 due to repositioning by our REPO customers,~~

~~Total shareholders’ equity decreased by $15.8~~$1,154.7 million ~~and remains at $1.2 billion at March 31, 2020 compared to $1.2 billion~~ at December 31, ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~the $22.6 million cumulative-effect adjustment related to the adoption of ASU 2016-13, share repurchases of $12.6 million and $11.1 million of dividends partially offset by~~ net income of ~~$13.2~~$31.9 million offset partially by dividends of

$11.0 million and ~~$17.3 million increase~~a decrease in other comprehensive ~~income.~~income of $7.9 million. The ~~increase~~$7.9 million decrease in other comprehensive income was due to a ~~$17.0~~$7.6 million ~~increase~~decrease in unrealized gains on our available-for-sale investment securities ~~net of tax,~~ and a $0.3 million change in the funded status of our employee benefit ~~plans.~~plans, net of taxes.

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Securities Activity


(dollars in thousands)	March 31, 2020			December 31, 2019			$ Change				(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change
U.S. treasury securities		$	10,372		$	10,040		$	332
U.S. Treasury securities											U.S. Treasury securities		$	63,268		$	10,282		$	52,986
Obligations of U.S. government corporations and agencies		137,982			157,697			(19,715		)	Obligations of U.S. government corporations and agencies		82,028			82,904			(876)
Collateralized mortgage obligations of U.S. government corporations and agencies		189,472			189,348			124			Collateralized mortgage obligations of U.S. government corporations and agencies		217,916			209,296			8,620
Residential mortgage-backed securities of U.S. government corporations and agencies		21,193			22,418			(1,225		)	Residential mortgage-backed securities of U.S. government corporations and agencies		63,911			67,778			(3,867)
Commercial mortgage-backed securities of U.S. government corporations and agencies		284,679			275,870			8,809			Commercial mortgage-backed securities of U.S. government corporations and agencies		277,253			273,681			3,572
Corporate obligations		7,551			7,627			(76		)	Corporate obligations		2,002			2,025			(23)
Obligations of states and political subdivisions		144,717			116,133			28,584			Obligations of states and political subdivisions		107,505			124,427			(16,922)
Available-for-Sale Debt Securities		795,966			779,133			16,833			Available-for-Sale Debt Securities		813,883			770,393			43,490
Marketable equity securities		3,566			5,150			(1,584		)	Marketable equity securities		3,416			3,300			116
Total Securities		$	799,532		$	784,283		$	15,249		Total Securities		$	817,299		$	773,693		$	43,606

We invest in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of ALCO to reposition the balance sheet for interest rate risk purposes. Securities are subject to market risks that could negatively affect the level of liquidity available to us. Security purchases are subject to an investment policy approved annually by our Board of Directors and administered through ALCO and our treasury function. Securities increased ~~$15.2~~$43.6 million to ~~$799.5~~$817.3 million at March 31, ~~2020~~2021 from ~~$784.3~~$773.7 million at December 31, ~~2019.~~2020. The increase in securities is primarily due to an increase in ~~market value compared~~overall investing activities due to ~~December 31, 2019.~~excess liquidity.

At March 31, ~~2020~~2021 our bond portfolio was in a net unrealized gain position of ~~$32.3~~$23.7 million compared to a net unrealized gain position of ~~$10.7~~$33.4 million at December 31, ~~2019.~~2020. At March 31, ~~2020~~2021 total gross unrealized gains in the bond portfolio were ~~$32.3 million compared to December 31, 2019, when total gross unrealized gains were $11.7~~$26.6 million offset by gross unrealized losses of ~~$1.0~~$2.9 million compared to December 31, 2020, when total gross unrealized gains were $33.5 million offset by gross unrealized losses of $0.1 million. The decrease in the net unrealized gain position was primarily due to an increase in interest rates from December 31, 2020 to March 31, 2021. Management evaluates the securities portfolio to determine if an ACL is needed each quarter. ~~During the three months ended March 31, 2020 we~~We did not record an ACL related to the securities ~~portfolio.~~portfolio at March 31, 2021.

Loan Composition


	March 31, 2020				December 31, 2019					March 31, 2021				December 31, 2020
(dollars in thousands)	Amount		% of Loans		Amount		% of Loans		(dollars in thousands)	Amount		% of Loans		Amount		% of Loans
Commercial									Commercial
Commercial real estate	$	3,442,495	47.50	%	$	3,416,518	47.87	%	Commercial real estate	$	3,284,555	45.7	%	$	3,244,974	44.9	%
Commercial and industrial	1,781,402		24.58		1,720,833		24.11		Commercial and industrial	1,931,711		26.9	%	1,954,453		27.0	%
Construction	396,518		5.47		375,445		5.26
Commercial construction									Commercial construction	460,417		6.4	%	474,280		6.6	%

Total Commercial Loans	5,620,415		77.56	%	5,512,796		77.24	%	Total Commercial Loans	5,676,683		79.0	%	5,673,707		78.5	%
Consumer									Consumer
Residential mortgage	988,816		13.64	%	998,585		13.99	%
Home equity	544,405		7.51		538,348		7.54
Installment and other consumer	79,887		1.10		79,033		1.10
Construction	13,222		0.18		8,390		0.12
Consumer real estate									Consumer real estate	1,425,839		19.8	%	1,471,238		20.4	%
Other consumer									Other consumer	80,646		1.1	%	80,915		1.1	%
Total Consumer Loans	1,626,329		22.44	%	1,624,356		22.76	%	Total Consumer Loans	1,506,485		21.0	%	1,552,153		21.5	%
Total Portfolio Loans	7,246,745		100.00	%	7,137,152		100.00	%	Total Portfolio Loans	7,183,168		100.0	%	7,225,860		100.0	%
Loans held for sale	7,309				5,256				Loans held for sale	12,794				18,528
Total Loans	$	7,254,054			$	7,142,408			Total Loans	$	7,195,962			$	7,244,388

The loan portfolio represents the most significant source of interest income for us. The risk that borrowers will be unable to pay such obligations is inherent in the loan portfolio. Other conditions such as downturns in the borrower’s industry or the overall economic climate can significantly impact the borrower’s ability to pay.

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Total portfolio loans decreased $42.7 million to $7.2 billion at March 31, 2021 compared to December 31, 2020. The decrease in portfolio loans is primarily related to a decline in the consumer loan portfolio of $45.7 million compared to December 31, 2020 with decreases of $45.4 million in consumer real estate and $0.3 million in other consumer. Consumer loans represent 21.0 percent of our total portfolio loans at March 31, 2021 and 21.5 percent at December 31, 2020.

Commercial loans, including CRE, C&I and commercial construction, comprised ~~77.6~~79.0 percent of total portfolio loans at March 31, ~~2020~~2021 and ~~77.2~~78.5 percent at December 31, ~~2019. Total portfolio loans increased $109.6 million to $7.2 billion at March 31, 2020 compared to $7.1 billion at December 31, 2019.~~2020. The increase of ~~$107.6~~$3.0 million in ~~the~~ commercial loans related to ~~$60.5~~$39.6 million of growth in CRE, offset by decreases of $22.7 million in C&I, ~~$26.0 million in CRE~~ and ~~$21.1~~$13.9 million in commercial construction ~~loans~~ compared to December 31, ~~2019.~~2020.

~~Consumer loans represent 22.4 percent~~As of ~~our total portfolio loans at~~ March 31, ~~2020 and 22.8 percent at December 31, 2019. Consumer~~2021, we had $499.1 million of PPP loans ~~increased $2.0 million compared to December 31, 2019 with increases~~included in ~~all categories except residential mortgages. Home equity increased $6.1 million, consumer construction~~C&I. PPP loans ~~increased $4.8 million, installment~~are forgivable, in whole or in part, if the proceeds are used for payroll and other ~~consumer increased $0.9 million offset~~permitted expenses in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA on or after June 5, 2020. Payments are deferred for the first six months of the loan. The loans are 100 percent guaranteed by the SBA. The SBA pays us a ~~decrease~~processing fee ranging from 1 percent to 5 percent based on the size of ~~$9.8 million in residential mortgages.~~the loan.

Allowance for Credit Losses

We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of ~~a loan~~an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) ~~Construction,~~Commercial Real Estate, or CRE, 2) ~~CRE,~~Commercial and Industrial, or C&I, 3) ~~C&I,~~Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.

The following are key risks within each portfolio segment:

CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and healthcare. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.

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is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

The following table presents activity in the ACL for the ~~three months ended March 31, 2020:~~periods presented:


	Three Months Ended March 31, 2021
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612
Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301
Charge-offs	(810)		(4,302)		—		(917)		(271)		(232)		(6,532)
Recoveries	—		137		1		166		82		334		720
Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)
Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101
(1) Excludes provision on unfunded commitments

Three Months Ended March 31, 2020
(dollars in thousands)
Commercial
Real Estate

Commercial and
Industrial

Commercial
Construction

Business Banking⁽¹⁾

Consumer
Real Estate

Other
Consumer

Total
Loans
Three months ended March 31, 2020
Allowance for credit losses on loans:
Balance at beginning of period $ 30,577
$ 15,681
$ 7,900
$ —
$ 6,337
$ 1,729
$ 62,224
Impact of CECL adoption 4,810
7,853
(3,376 ) 12,898
4,525
642
27,352
Provision for credit losses on loans 7,639
6,196
2,309
1,194
472
620
18,430
Charge-offs (442 ) (9,879 ) (229 ) (460 ) (172 ) (248 ) (11,430 )
Recoveries 27
19
2
74
38
114
274
Net (Charge-offs)/Recoveries (415 ) (9,860 ) (227 ) (386 ) (134 ) (134 ) (11,156 )
Balance at End of Period $ 42,611
$ 19,870
$ 6,606
$ 13,706
$ 11,200
$ 2,857
$ 96,850


	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Ratio of net charge-offs to average loans outstanding	0.63	%	*	0.22	%	Ratio of net charge-offs to average loans outstanding	0.33	%	*	0.61	%
Allowance for credit losses as a percentage of total loans	1.34	%		0.87	%
Allowance for credit losses as a percentage of total portfolio loans						Allowance for credit losses as a percentage of total portfolio loans	1.60	%		1.63	%
Allowance for loan losses as a percentage of total portfolio loans - excluding PPP loans						Allowance for loan losses as a percentage of total portfolio loans - excluding PPP loans	1.72	%		1.74	%
Allowance for credit losses to nonperforming loans	131	%		115	%	Allowance for credit losses to nonperforming loans	85	%		80	%

^* Annualized

The ~~adoption of ASU 2016-13 resulted in an increase~~ACL decreased $2.5 million to ~~our ACL of $27.4~~$115.1 million ~~on January 1,~~at March 31, 2021 compared to $117.6 million at December 31, 2020. The ~~increase included $8.2~~decrease in ACL was mainly due to a reduction in specific reserves on loans individually assessed and lower qualitative reserve due to an improved economic forecast. Specific reserves on loans individually assessed decreased $5.4 million ~~for S&T legacy loans and $9.3 million for acquired loans~~ from ~~the DNB merger. We also recorded~~December 31, 2020 primarily due to a ~~day one adjustment of $9.9 million primarily related to~~charge-off on a C&I relationship that was ~~charged off~~previously held in specific reserve. The qualitative reserve decreased $1.8 million from the prior quarter primarily due to a $2.5 million reduction in the ~~first quarter~~economic forecast component which was the result of ~~2020. We obtained information on the relationship subsequent~~an improved national unemployment forecast. The ACL as a percentage of total portfolio loans decreased 3 basis points to ~~filing our Annual Report on Form 10-K for the year ended~~1.60 percent at March 31, 2021 compared to 1.63 percent at December 31, ~~2019, but before the end of the first quarter of~~ 2020. The ~~updated information supported that~~ACL excluding PPP loans as a ~~loss existed at January 1, 2020.~~

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~The significant increase in the provision for credit losses~~total portfolio loans was 1.72 percent as of ~~$18.4 million during the three months ended~~ March 31, ~~2020 was mainly due~~2021 compared to ~~the COVID-19 pandemic.~~ 1.74 percent at December 31, 2020.

Net loan charge-offs were ~~$11.2~~$5.8 million, or ~~0.63~~0.33 percent annualized as a percentage of average loans for the three months ended March 31, ~~2020.~~2021. The most significant charge-off ~~for the first quarter related to~~was a $9.9 million C&I relationship that was charged off due to potential irregularities of the borrower that are still under review. We obtained information on the relationship subsequent to filing our December 31, 2019 10-K, but before the end of the first quarter of 2020; therefore, we recorded a day one CECL adjustment through a $9.9 million specific reserve. The updated information supported a loss existed at January 1, 2020.

Commercial substandard loans increased $15.8 million to $168.5 million at March 31, 2020 compared to $152.7 million at December 31, 2019 and special mention loans increased $20.8 million to $124.7 million at March 31, 2020 compared to $103.9 million at December 31, 2019 due to downgrades as a result of updated financial information.

~~Nonperforming loans increased $19.7 million to $73.8 million at March 31, 2020 compared to $54.1 million at~~

~~December 31, 2019. The significant increase in nonperforming loans primarily related to the addition of a $20.9 million CRE relationship and a $5.9~~$3.9 million C&I relationship which was ~~partially offset by the $9.9 million C&I~~previously held in specific reserve. The relationship ~~that~~ was ~~charged off~~restructured during ~~the quarter. The $20.9 million CRE relationship became a performing TDR in the third quarter of 2019 and then moved to nonperforming in~~ the first quarter of 2021 and charged down to the fair value of the collateral.

Substandard loans increased $16.1 million to $303.2 million at March 31, 2021 compared to $287.1 million at December 31, 2020 ~~when~~and special mention loans decreased $4.4 million to $265.5 million at March 31, 2021 compared to $269.9 million at December 31, 2020. The increase in commercial substandard and corresponding decrease in special mention loans was primarily due to the ~~borrower experienced financial deterioration~~downgrade of a $12.1 million CRE relationship from special mention to substandard due to declining revenue that led to cash flow ~~issues.~~shortfalls. The relationship ~~was individually assessed at March 31, 2020 resulting in no ACL due to~~matured during the first quarter and received a short term COVID deferral as the borrower ~~being current on their payments under the modified terms~~ and ~~the relationship is fully collateralized as of March 31, 2020.~~ bank work towards a long term solution.

The adoption of the CECL accounting standard as of January 1, 2020 and the uncertainty around the COVID-19 pandemic both contributed to the higher ACL of 1.34 percent of total portfolio loans as of March 31, 2020 compared to 0.87 percent at December 31, 2019.

Troubled debt restructurings, or TDRs increased ~~$5.4~~$1.2 million to ~~$51.3~~$47.9 million at March 31, ~~2020~~2021 compared to ~~$45.9~~$46.7 million at December 31, ~~2019.~~2020. Total TDRs of ~~$51.3~~$47.9 million at March 31, ~~2020~~2021 included ~~$15.2~~$17.9 million, or ~~29.6~~37.4 percent, that were accruing and ~~$36.1~~$30.0 million, or ~~70.4~~62.6 percent, that were not accruing.

Our allowance for credit losses on unfunded commercial lending commitments and letters of credit provide for the risk of expected loss in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our ~~consolidated statement~~Consolidated Statements of ~~comprehensive income.~~Comprehensive Income. The allowance for unfunded loan commitments was ~~$6.1~~$4.3 million at March 31, ~~2020~~2021 compared to ~~$3.1~~$4.5 million at December 31, ~~2019. The adoption of ASU 2016-13 resulted in an increase to our allowance for unfunded commitments of $1.4 million on January 1,~~ 2020. ~~We increased the allowance for unfunded loan commitments $1.6 million during the three months ended March 31, 2020 mainly in response to COVID-19 pandemic.~~ The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

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Nonperforming assets consist of nonaccrual loans, nonaccrual TDRs and OREO. The following table summarizes nonperforming assets for the dates presented:


(dollars in thousands)	March 31, 2020				December 31, 2019				$ Change				(dollars in thousands)	March 31, 2021				December 31, 2020				$ Change
Nonperforming Loans													Nonperforming Loans
Commercial real estate		$	21,267			$	22,427			$	(1,160	)	Commercial real estate		$	79,321			$	84,416			$	(5,095)
Commercial and industrial		4,348				13,287				(8,939		)
Commercial and industrial(1)													Commercial and industrial(1)		991				7,100				(6,109)
Commercial construction		571				737				(166		)	Commercial construction		384				384				—
Residential mortgage		9,271				6,697				2,574
Home equity		2,029				1,961				68
Installment and other consumer		258				36				222
Business banking													Business banking		14,029				16,692				(2,663)
Consumer real estate													Consumer real estate		5,542				8,798				(3,256)
Other Consumer													Other Consumer		2,163				96				2,067
Total Nonperforming Loans		37,744				45,145				(7,400		)	Total Nonperforming Loans		102,430				117,486				(15,056)
Nonperforming Troubled Debt Restructurings													Nonperforming Troubled Debt Restructurings
Commercial real estate		29,242				6,713				22,529			Commercial real estate		15,754				16,654				(900)
Commercial and industrial		4,734				695				4,039			Commercial and industrial		11,425				9,885				1,540
Commercial construction		—				—				—			Commercial construction		—				—				—
Residential mortgage		1,311				822				489
Home equity		768				678				90
Installment and other consumer		—				4				(4		)
Business banking													Business banking		397				430				(33)
Consumer real estate													Consumer real estate		2,407				2,319				88
Other Consumer													Other Consumer		—				—				—
Total Nonperforming Troubled Debt Restructurings		36,055				8,912				27,142			Total Nonperforming Troubled Debt Restructurings		29,983				29,288				695
Total Nonperforming Loans		73,799				54,057				19,742			Total Nonperforming Loans		132,413				146,774				(14,361)
OREO		3,389				3,525				(136		)	OREO		1,620				2,155				(535)
Total Nonperforming Assets		$	77,188			$	57,582			$	19,606		Total Nonperforming Assets		$	134,033			$	148,929			$	(14,896)

Asset Quality Ratios:													Asset Quality Ratios:
Nonperforming loans as a percent of total loans		1.02		%		0.76		%
Nonperforming assets as a percent of total loans plus OREO		1.06		%		0.81		%
Nonperforming loans as a percent of total portfolio loans													Nonperforming loans as a percent of total portfolio loans		1.88		%		2.03		%
Nonperforming assets as a percent of total portfolio loans plus OREO													Nonperforming assets as a percent of total portfolio loans plus OREO		1.90		%		2.06		%
(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.													(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or generally when interest or principal payments are 90 days or more past ~~due.~~

the contractual due date. Nonperforming loans ~~increased $19.7~~decreased $11.6 million to ~~$73.8~~$135.2 million at March 31, ~~2020~~2021 compared to ~~$54.1~~$146.8 million at

December 31, ~~2019 mainly due~~2020. The significant decrease in nonperforming loans primarily related to the ~~$20.9~~payoff of a $4.6 million CRE relationship ~~discussed above.~~and charge-off of a $3.9 million C&I relationship which were previously held in specific reserve.

~~Deposits~~

(dollars in thousands) March 31, 2020 December 31, 2019 $ Change
Customer Deposits
Noninterest-bearing demand $ 1,702,960
$ 1,698,082
$ 4,878
Interest-bearing demand 762,783
762,111
672
Money market 1,867,602
1,849,684
17,918
Savings 836,237
830,919
5,318
Certificates of deposit 1,543,790
1,535,305
8,485
Total Customer Deposits 6,713,371
6,676,101
37,271
Brokered Deposits
Interest-bearing demand 200,154
200,220
(66 )
Money market 100,090
100,127
(37 )
Certificates of deposit 44,263
60,128
(15,865 )
Total Brokered Deposits 344,507
360,475
(15,969 )
Total Deposits $ 7,057,879
$ 7,036,576
$ 21,303

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Deposits


(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change
Customer Deposits
Noninterest-bearing demand		$	2,539,594		$	2,261,994		$	277,600
Interest-bearing demand		976,225			864,510			111,715
Money market		1,997,856			1,887,051			110,805
Savings		1,036,927			969,508			67,419
Certificates of deposit		1,310,473			1,369,239			(58,766)
Total Customer Deposits		7,861,075			7,352,302			508,773
Brokered Deposits
Interest-bearing demand		—			—			—
Money market		5,001			50,012			(45,011)
Certificates of deposit		9,952			18,224			(8,272)
Total Brokered Deposits		14,953			68,236			(53,283)

Total Deposits		$	7,876,028		$	7,420,538		$	455,490

Deposits are our primary source of funds. We believe that our deposit base is stable and that we have the ability to attract new deposits. Total deposits at March 31, ~~2020~~2021 increased ~~$21.3~~$455.5 million, or 6.1 percent, from December 31, 2020. Total customer deposits increased $508.8 million from December 31, ~~2019. Total~~2020. The increase in customer deposits ~~increased $37.3~~is primarily related to government stimulus programs, PPP and our customer’s liquidity preferences. Total brokered deposits decreased $53.3 million from December 31, ~~2019. Money market deposits increased $17.9 million, certificates of~~2020 due to a reduced need for this funding given the customer deposit increased $8.5 million, savings increased $5.3 million, noninterest-bearing demand deposits increased $4.9 million, and interest-bearing demand increased $0.7 million. Total brokered deposits decreased $16.0 million from December 31, 2019.growth. Brokered deposits are an additional source of funds utilized by ALCO as a way to diversify funding sources, as well as manage our funding costs and structure.

Borrowings


(dollars in thousands)	March 31, 2020			December 31, 2019			$ Change				(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change
Securities sold under repurchase agreements		$	69,644		$	19,888		$	49,756		Securities sold under repurchase agreements		$	67,417		$	65,163		$	2,254
Short-term borrowings		410,240			281,319			128,921			Short-term borrowings		—			75,000			(75,000)
Long-term borrowings		50,180			50,868			(688		)	Long-term borrowings		23,282			23,681			(399)
Junior subordinated debt securities		64,038			64,277			(239		)	Junior subordinated debt securities		64,097			64,083			14
Total Borrowings		$	594,102		$	416,352		$	177,750		Total Borrowings		$	154,796		$	227,927		$	(73,131)

Borrowings are an additional source of funding for us. ~~At March 31, 2020 total~~Total borrowings ~~increased $177.8~~decreased $73.1 million, or ~~42.7~~32.1 percent, compared to December 31, ~~2019~~2020 due to ~~fund asset growth.~~increased customer deposits. Total short-term borrowings ~~increased by $128.9~~decreased $75.0 million, ~~or 45.8 percent,~~ compared to December 31, ~~2019. Securities sold under repurchase agreements increased $49.8 million to $69.6 million during the three month period compared to December 31, 2019 due to repositioning by our REPO customers.~~

~~Information pertaining to short-term borrowings is summarized in the tables below for the three months ended March 31, 2020 and for the twelve months ended December 31, 2019.~~2020.

Securities Sold Under Repurchase Agreements
(dollars in thousands) March 31, 2020 December 31, 2019
Balance at the period end $ 69,644
$ 19,888
Average balance during the period $ 30,790
$ 16,863
Average interest rate during the period 0.56 % 0.65 %
Maximum month-end balance during the period $ 69,644
$ 23,427
Average interest rate at the period end 0.25 % 0.74 %

Short-Term Borrowings
(dollars in thousands) March 31, 2020 December 31, 2019
Balance at the period end $ 410,240
$ 281,319
Average balance during the period $ 286,365
$ 255,264
Average interest rate during the period 1.61 % 2.51 %
Maximum month-end balance during the period $ 410,240
$ 425,000
Average interest rate at the period end 0.44 % 1.84 %

~~Information pertaining to long-term borrowings is summarized in the tables below for the three months ended March 31, 2020 and for the twelve months ended December 31, 2019.~~

Long-Term Borrowings
(dollars in thousands) March 31, 2020 December 31, 2019
Balance at the period end $ 50,180
$ 50,868
Average balance during the period $ 51,845
$ 66,392
Average interest rate during the period 2.52 % 2.76 %
Maximum month-end balance during the period $ 50,635
$ 70,418
Average interest rate at the period end 2.59 % 2.61 %

Junior Subordinated Debt Securities
(dollars in thousands) March 31, 2020 December 31, 2019
Balance at the period end $ 64,038
$ 64,277
Average balance during the period $ 64,195
$ 47,934
Average interest rate during the period 4.40 % 4.82 %
Maximum month-end balance during the period $ 64,648
$ 64,277
Average interest rate at the period end 3.63 % 4.42 %

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information pertaining to short-term borrowings is summarized in the tables below for the three months ended March 31, 2021 and for the twelve months ended December 31, 2020.


	Securities Sold Under Repurchase Agreements
(dollars in thousands)	March 31, 2021		December 31, 2020
Balance at the period end	$	67,417	$	65,163
Average balance during the period	$	64,653	$	57,673
Average interest rate during the period	0.15 %		0.29		%
Maximum month-end balance during the period	$	67,417	$	92,159
Average interest rate at the period end	0.10 %		0.25		%

	Short-Term Borrowings
(dollars in thousands)	March 31, 2021		December 31, 2020
Balance at the period end	$	—	$	75,000
Average balance during the period	$	25,556	$	155,753
Average interest rate during the period	0.19 %		0.92		%
Maximum month-end balance during the period	$	25,000	$	410,240
Average interest rate at the period end	- %		0.19		%

Information pertaining to long-term borrowings is summarized in the tables below for the three months ended March 31, 2021 and for the twelve months ended December 31, 2020.


	Long-Term Borrowings
(dollars in thousands)	March 31, 2021		December 31, 2020
Balance at the period end	$	23,282	$	23,681
Average balance during the period	$	23,471	$	47,953
Average interest rate during the period	2.00 %		—		%
Maximum month-end balance during the period	$	23,549	$	50,635
Average interest rate at the period end	2.00 %		2.03		%

	Junior Subordinated Debt Securities
(dollars in thousands)	March 31, 2021		December 31, 2020
Balance at the period end	$	64,097	$	64,083
Average balance during the period	$	64,088	$	64,092
Average interest rate during the period	3.09 %		3.57		%
Maximum month-end balance during the period	$	64,097	$	64,848
Average interest rate at the period end	2.97 %		3.01		%

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

L~~iquidity~~Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. This includes the ability to satisfy the financial needs of depositors who want to withdraw funds or of borrowers needing to access funds to meet their credit needs. In order to manage liquidity risk, our Board of Directors has delegated authority to ALCO for the formulation, implementation, and oversight of liquidity risk management for S&T. The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events. The ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and having a detailed contingency funding plan. The ALCO policy guidelines define graduated risk tolerance levels. If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position.

Our primary funding and liquidity source is a stable customer deposit base. We believe S&T has the ability to retain existing and attract new deposits, mitigating any funding dependency on other more volatile sources. Refer to the "Financial Condition-Deposits" section of this MD&A, for additional discussion on deposits. Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified. Additional funding sources accessible to S&T include borrowing availability at the Federal Home Loan Bank, or FHLB, of Pittsburgh, federal funds lines with other financial institutions, the brokered deposit market and borrowing availability through the Federal Reserve Borrower-In-Custody program.

An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets. Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate, and high. At March 31, ~~2020,~~2021, we had ~~$618.0 million~~$1.1 billion in highly liquid assets, which consisted of ~~$113.2~~$601.0 million in interest-bearing deposits with banks, ~~$497.5~~$494.1 million in unpledged securities and ~~$7.3~~$12.8 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of ~~6.9~~11.9 percent at March 31, ~~2020.~~2021. Also, at March 31, ~~2020,~~2021, we had a remaining borrowing availability of ~~$2.4~~$2.5 billion with the FHLB of Pittsburgh. Refer to ~~Note 9:, Borrowings in the Notes to Consolidated Financial Statements and~~ the "Financial Condition- Borrowings" section of this MD&A for more details.

The following table summarizes capital amounts and ratios for S&T and S&T Bank for the dates ~~presented:~~presented:


(dollars in thousands)	Adequately Capitalized		Well- Capitalized		March 31, 2021			December 31, 2020
					Amount		Ratio	Amount		Ratio
S&T Bancorp, Inc.
Tier 1 leverage	4.00	%	5.00	%	$	846,536	9.71 %	$	825,515	9.43 %
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	817,536		11.84 %	796,515		11.33 %
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	846,536		12.26 %	825,515		11.74 %
Total capital to risk-weighted assets	8.00	%	10.00	%	961,751		13.93 %	944,686		13.44 %
S&T Bank
Tier 1 leverage	4.00	%	5.00	%	$	830,633	9.54 %	$	810,636	9.27 %
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	830,633		12.04 %	810,636		11.55 %
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	830,633		12.04 %	810,636		11.55 %
Total capital to risk-weighted assets	8.00	%	10.00	%	939,998		13.63 %	922,007		13.14 %

(dollars in thousands)
Adequately
Capitalized
Well-
Capitalized
March 31, 2020 December 31, 2019
Amount Ratio Amount Ratio
S&T Bancorp, Inc.
Tier 1 leverage 4.00 % 5.00 % $ 843,703
10.03 % $ 854,146
10.29 %
Common equity tier 1 to risk-weighted assets 4.50 % 6.50 % 814,703
10.93 % 825,146
11.43 %
Tier 1 capital to risk-weighted assets 6.00 % 8.00 % 843,703
11.32 % 854,146
11.84 %
Total capital to risk-weighted assets 8.00 % 10.00 % 948,509
12.73 % 954,094
13.22 %
S&T Bank
Tier 1 leverage 4.00 % 5.00 % $ 821,488
9.79 % $ 832,113
10.04 %
Common equity tier 1 to risk-weighted assets 4.50 % 6.50 % 821,488
11.04 % 832,113
11.56 %
Tier 1 capital to risk-weighted assets 6.00 % 8.00 % 821,488
11.04 % 832,113
11.56 %
Total capital to risk-weighted assets 8.00 % 10.00 % 918,495
12.35 % 922,310
12.81 %

On March 27, 2020, the regulators issued interim final rule, or IFR, “Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity due to the COVID-19 pandemic. The IFR provides financial institutions that adopted CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five year transition”). We adopted CECL effective January 1, 2020 and elected to implement the five year transition.

We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended, with the SEC, which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and warrants. We may use the proceeds from the sale of securities for general corporate purposes, which could include investments at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases. As of March 31, ~~2020,~~2021, we had not issued any securities pursuant to this shelf registration statement.

S&T is monitoring and will continue to monitor the impact of the ~~COVID-19~~ pandemic and has taken and will continue to take steps to mitigate the potential risks and impact on our liquidity and capital resources. Due to the economic uncertainty, we are taking a prudent approach to capital management and have established access to the Federal Reserve’s PPP Lending Facility.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is defined as the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity prices can adversely affect a financial institution’s earnings or capital. For most financial institutions, including S&T, market risk primarily reflects exposures to changes in interest rates. Interest rate fluctuations affect earnings by changing net interest income and other interest-sensitive income and expense levels. Interest rate changes also affect capital by changing the net present value of a bank’s future cash flows, and the cash flows themselves, as rates change. Accepting this risk is a normal part of banking and can be an important source of profitability and enhancing shareholder value. However, excessive interest rate risk can threaten a bank’s earnings, capital, liquidity and solvency. Our sensitivity to changes in interest rate movements is continually monitored by the Asset and Liability Committee, or ALCO. The ALCO monitors and manages market risk through rate shock analyses, economic value of equity, or EVE, analyses and by performing stress tests and simulations ~~in order~~ to mitigate earnings and market value fluctuations due to changes in interest rates.

Rate shock analyses results are compared to a base case to provide an estimate of the impact that market rate changes may have on 12 and 24 months of pretax net interest income. The base case and rate shock analyses are performed on a static balance sheet. A static balance sheet is a no growth balance sheet in which all maturing and/or repricing cash flows are reinvested in the same product at the existing product spread. Rate shock analyses assume an immediate parallel shift in market interest rates and also include management assumptions regarding the impact of interest rate changes on non-maturity deposit products (noninterest-bearing demand, interest-bearing demand, money market and savings) and changes in the prepayment behavior of loans and securities with optionality. S&T policy guidelines limit the change in pretax net interest income over 12 and 24 month horizons using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in pretax net interest income by graduated risk tolerance levels of minimal, moderate and high. We have temporarily suspended the analyses on downward rate shocks of 200 basis points or more because they do not provide meaningful insight into our interest rate risk position.

In order to monitor interest rate risk beyond the 24 month time horizon of rate shocks on pretax net interest income, we also perform EVE analyses. EVE represents the present value of all asset cash flows minus the present value of all liability cash flows. EVE change results are compared to a base case to determine the impact that market rate changes may have on our EVE. As with rate shock analyses on pretax net interest income, EVE analyses incorporate management assumptions regarding prepayment behavior of fixed rate loans and securities with optionality and the behavior and value of non-maturity deposit products. S&T policy guidelines limit the change in EVE using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in EVE by graduated risk tolerance levels of minimal, moderate and high. We have also temporarily suspended the downward rate shocks of 200 basis points or more for EVE.

The table below reflects the rate shock analyses results for the ~~1 - 12~~1-12 and ~~13 - 24~~13-24 month periods of pretax net interest income and EVE. ~~All results are in the minimal risk tolerance level.~~

March 31, 2020 December 31, 2019
1 - 12 Months
13 - 24 Months
% Change in EVE
1 - 12 Months
13 - 24 Months
% Change in EVE
Change in Interest Rate (basis points)
% Change in Pretax Net Interest Income
% Change in Pretax Net Interest Income
% Change in Pretax Net Interest Income
% Change in Pretax Net Interest Income

400 10.3 % 13.5 % 0.3 % 9.6 % 14.4 % (1.8 )%
300 7.6
10.1
4.6
7.2
10.8
2.8
200 5.7
7.6
7.6
5.0
7.6
5.5
100 3.5
4.6
6.9
2.7
4.2
5.1
(100) (8.4 ) (10.5 ) (18.5 ) (4.3 ) (6.4 ) (10.8 )
(200) NM
NM
NM
—
—
—

~~NM - not meaningful~~


	March 31, 2021						December 31, 2020
	1 - 12 Months		13 - 24 Months		% Change in EVE		1 - 12 Months		13 - 24 Months		% Change in EVE
Change in Interest Rate (basis points)	% Change in Pretax Net Interest Income		% Change in Pretax Net Interest Income				% Change in Pretax Net Interest Income		% Change in Pretax Net Interest Income
400	24.1 %		33.6 %		18.2 %		15.8 %		28.5 %		28.5 %
300	17.9 %		25.1 %		19.8 %		11.7 %		21.3 %		29.0 %
200	11.9 %		17.1 %		18.5 %		7.7 %		14.3 %		25.6 %
100	5.4 %		8.2 %		11.6 %		4.4 %		8.0 %		17.7 %
(100)	(3.7)	%	(7.6)	%	(23.9)	%	(2.8)	%	(5.7)	%	(28.2)	%

The results from the rate shock analyses on ~~pretax~~ net interest income are consistent with having an asset sensitive balance sheet. Having an asset sensitive balance sheet means more assets than liabilities will reprice during the measured time frames. The implications of an asset sensitive balance sheet will differ depending upon the change in market interest rates. For example, with an asset sensitive balance sheet in a declining interest rate environment, more assets than liabilities will decrease in rate. This situation could result in a decrease in net interest income and operating income. Conversely, with an asset sensitive balance sheet in a rising interest rate environment, more assets than liabilities will increase in rate. This situation could result in an increase in net interest income and operating income.

~~Table of Contents~~

~~Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Our rate shock analyses show an improvement in the percentage change in pretax net interest income in the ~~1-12 month rates up scenarios, a decline in the 13-24 month~~ rates up scenarios and a decline in the rates down scenarios ~~in months 1 - 12 and 13 - 24~~ when comparing March 31, ~~2020~~2021 to December 31, ~~2019.~~2020. We have become more asset sensitive due to our increased balances at the Federal Reserve. Our EVE analyses show ~~an improvement~~a decline in the percentage change in EVE in the rates up scenarios and ~~a decline~~an improvement in the rates down scenario when comparing March 31, ~~2020~~2021 to December 31, ~~2019.~~2020. The EVE decline is due to the impact of a steepened yield curve on the value of non-maturity deposits.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to rate shocks and EVE analyses, we perform a market risk stress test at least annually. The market risk stress test includes sensitivity analyses and simulations. Sensitivity analyses are performed to help us identify which model assumptions cause the greatest impact on pretax net interest income. Sensitivity analyses may include changing prepayment behavior of loans and securities with optionality and the impact of interest rate changes on non-maturity deposit products. Simulation analyses may include the potential impact of rate changes other than the policy guidelines, yield curve shape changes, significant balance mix changes and various growth scenarios.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of S&T’s Interim Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO (its principal executive officer and principal financial officer, respectively), management has evaluated the effectiveness of the design and operation of S&T’s disclosure controls and procedures as of March 31, ~~2020.~~2021. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission, or the SEC, and that such information is accumulated and communicated to S&T’s management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Based on and as of the date of such evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were effective in all material respects, as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, ~~2020,~~2021, there were no changes made to S&T’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, S&T’s internal control over financial reporting.

~~Table of Contents~~

~~S&T BANCORP, INC. AND SUBSIDIARIES~~

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There have been no material changes to the risk factors that we have previously disclosed in Part I, Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC on March ~~2, 2020 other than the risks described below related to COVID-19.~~

The duration and severity of the COVID-19 pandemic, in our principal area of operations, nationally and globally, could adversely impact S&T’s business, results of operations and financial condition. While it is difficult to predict the impact of the COVID-19 pandemic (or any other outbreak) on the economy and S&T, the future impacts may include, but are not limited to, the following:


•	~~Our results of operations may be negatively impacted by~~ ~~general economic or business conditions and uncertainty, including the strength of economic conditions in our~~ ~~principal area of operations~~ ~~impacting the demand for our products and services~~.

~~The low interest rate environment resulting from the Federal Reserve decreasing the Federal Funds target rates will negatively impact our net interest income and net interest margin.~~

~~Credit losses may be higher and our provision for credit losses may increase, due to deterioration in the financial condition of S&T’s commercial and consumer loan customers.~~

~~Declining asset and collateral values may necessitate increases in our provision for credit losses and net charge-offs.~~

Expense management will be impacted by the uncertainty of the effects of the pandemic and S&T’s continued efforts to promote the health and safety of our employees, and the customers and communities we serve.


•	~~S&T’s liquidity and regulatory capital could be adversely impacted.~~


•	~~We may have an interruption or cessation of an important service provided by a third-party provider~~.

~~Any new or revised regulations regarding capital and liquidity adopted in response to the COVID-19 pandemic may require us to maintain materially more capital or liquidity.~~

Investors may have less confidence in the equity markets in general and in financial services industry in particular, which could have a negative impact on S&T’s stock price and resulting market valuation.

To the extent the COVID-19 pandemic continues to adversely affect the global economy it may also increase the likelihood and/or magnitude of other risks described in the Part I, Item IA. “Risk Factors” in S&T’s Annual Report on Form 10-K for the year ended December 31, 2019.

~~The impact that the COVID-19 pandemic will have on S&T’s credit losses is uncertain, and continued economic uncertainty and deterioration since January~~ 1, ~~2020 in the forward looking economic forecasts used to estimate credit losses may adversely affect our ACL.~~

2021.

~~S&T calculates the ACL, using to the CECL accounting standard adopted January 1, 2020. The CECL methodology reflects expected credit losses and~~ ~~requires consideration of a broad range of reasonable and supportable information to form credit loss estimates. The CECL accounting standard~~ ~~bases the measurement of expected credit losses on historical loss experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount~~. S&T’s ability to assess expected credit losses may be impaired if the models and approaches we use become less predictive of future behaviors. In particular, the reliance on supportable economic forecasts in light of the COVID-19 pandemic has had and is expected to have an impact on the estimates of our ACL. These forecasts have deteriorated since January 1, 2020 and continued adverse economic forecasts and economic uncertainty could adversely affect our ACL.

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities

The following table is a summary of our purchases of common stock during the first quarter of ~~2020:~~2021:

Period Total number of shares purchased
Average price paid per share

Total number of shares purchased as part of publicly announced plan⁽¹⁾⁾

Approximate dollar value of shares that may yet be purchased under the plan

$50,000,000
01/01/2020 - 01/31/2020 —
—
—
50,000,000

02/01/2020 - 02/29/2020 96,699
34.97
96,699
46,618,003

03/01/2020 - 03/31/2020 314,731
29.16
314,731
37,441,683
Total 411,430

$30.52
411,430

$37,441,683


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plan(1)	Approximate dollar value of shares that may yet be purchased under the plan
				$37,441,683
01/01/2021 - 01/31/2021	—	$—	—	37,441,683

02/01/2021 - 02/28/2021	—	—	—	37,441,683

03/01/2021 - 03/31/2021	—	—	—	37,441,683
Total	—	$—	—	$37,441,683

⁽¹⁾On ~~September 16, 2019,~~March 15, 2021, our Board of Directors authorized aan extension of the $50 million share repurchase ~~plan.~~plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase ~~authorization, which is effective~~plan through March 31, ~~2021,~~2022. The plan permits S&T to repurchase from time to time up to the previously authorized $50 million in aggregate value of shares of S&T's common stock, with $37.4 million of capacity remaining at March 31, 2021, through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions, the trading price of common stock, legal and contractual requirements, applicable securities laws and S&T's financial performance. The repurchase plan does not obligate us to repurchase any particular number of shares. We expect to fund any repurchases from cash on hand and internally generated funds. ~~Repurchase activity was suspended in March 2020 as the impact~~Any share repurchases will not occur unless permissible under applicable laws.

Table of ~~the COVID-19 pandemic spread.~~Contents

S&T BANCORP, INC. AND SUBSIDIARIES

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

Item 6. Exhibits



2.1	Agreement and Plan of Merger, dated June 5, 2019, by and between DNB Financial Corporation and S&T Bancorp, Inc. Filed as Exhibit 2.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 5, 2019, and incorporated herein by reference.
~~31.1~~10.1	Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, October 21, 2020, by and between George Basara and S&T Bancorp, Inc.*	Filed herewith
10.2	Severance Agreement dated April 20, 2015 by and between George Basara and S&T Bancorp, Inc.*	Filed herewith
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.	Filed herewith
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.	Filed herewith
32	Rule 13a-14(b) Certification of the Chief Executive Officer and Chief Financial Officer.	Filed herewith
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File ~~((formatted~~(formatted as Inline XBRL and contained in Exhibits 101))

* Management Contract or Compensatory Plan or Arrangement

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		S&T Bancorp, Inc. (Registrant)

May 5, 2021		~~S&T Bancorp, Inc.~~ ~~(Registrant)~~

~~May 8, 2020~~	/s Mark Kochvar
		Mark Kochvar Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)

6358



	January 1, 2020
(dollars in thousands)	As Reported Under ASU 2016-13				Pre-ASU 2016-13				Impact of ASU 2016-13 Adoption
Assets:
Loans held for investment (outstanding balance)
Commercial real estate		$	2,946,319			$	3,416,518			$	(470,199	)
Commercial and industrial		1,458,541				1,720,833				(262,292		)
Commercial construction		345,263				375,445				(30,182		)
Business banking		1,092,908				—				1,092,908
Consumer real estate		1,235,352				1,545,323				(309,971		)
Other consumer		58,769				79,033				(20,264		)
Allowance for credit losses on loans		(89,577		)		(62,224		)		(27,353		)
Total loans held for investment, net		$	7,047,575			$	7,074,928			$	(27,353	)
Net deferred tax asset		$	19,317			$	13,206			$	6,111
Liabilities:
Allowance for credit losses on unfunded loan commitments		$	4,462			$	3,113			$	1,349
Equity:
Retained earnings		$	738,493			$	761,083			$	(22,590	)



	November 30, 2019									March 31, 2020
	As Recorded by DNB			Preliminary Fair Value Adjustments⁽¹⁾			As Recorded by S&T			Measurement Period Adjustments			As Recorded by S&T
Fair Value of Assets Acquired
Cash and cash equivalents	$	64,119		$	—		$	64,119		$	—		$	64,119
Securities and other investments	108,715			183			108,898			—			108,898
Loans	917,127			(8,143		)	908,984			(2,496		)	906,488
Allowance for credit losses	(6,487		)	6,487			—			—			—
Goodwill	15,525			(15,525		)	—			—			—
Premises and equipment	6,782			8,090			14,872			—			14,872
Accrued interest receivable	4,138			—			4,138			—			4,138
Deferred income taxes	2,017			(3,298		)	(1,281		)	311			(970		)
Core deposits and other intangible assets	269			(269		)	—			—			—
Other assets	24,883			(4,278		)	20,605			40			20,645
Total Assets Acquired	1,137,088			(16,753		)	1,120,335			(2,145		)	1,118,190
Fair Value of Liabilities Assumed
Deposits	966,263			1,002			967,265			(12		)	967,253
Borrowings	37,617			(276		)	37,341			(257		)	37,084
Accrued interest payable and other liabilities	11,157			(3,184		)	7,973			(68		)	7,905
Total Liabilities Assumed	1,015,037			(2,458		)	1,012,579			(337		)	1,012,242
Total Net Assets Acquired	$	122,051		$	(14,295	)	$	107,756		$	(1,808	)	$	105,948
Core Deposit Intangible Asset							$	7,288		$	—		$	7,288
Wealth Management Intangible Asset							1,772			—			1,772
Total Fair Value of Net Assets Acquired and Identified							$	116,816		$	(1,808	)	$	115,008
Consideration Paid
Cash							$	360		$	—		$	360
Common stock							200,631			—			200,631
Fair Value of Total Consideration							$	200,991		$	—		$	200,991
Goodwill							$	84,175		$	1,808		$	85,983



	Carrying Value⁽¹⁾		Fair Value Measurements at March 31, 2020
(dollars in thousands)	Carrying Value⁽¹⁾		Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	187,684	$	187,684	$	187,684	$	—	$	—
Securities	799,532		799,532		3,504		796,028		—
Loans held for sale	7,309		7,309		—		—		7,309
Portfolio loans, net	7,149,895		7,090,570		—		—		7,090,570
Bank owned life insurance	80,978		80,798		—		80,798		—
FHLB and other restricted stock	28,253		28,253		—		—		28,253
Securities held in a deferred compensation plan	4,782		4,782		4,782		—		—
Mortgage servicing rights	3,979		3,982		—		—		3,982
Interest rate swaps	88,135		88,135		—		88,135		—
Interest rate lock commitments	2,927		2,927		—		2,927		—
LIABILITIES
Deposits	$	7,057,879	$	7,065,896	$	5,469,826	$	1,596,070	$	—
Securities sold under repurchase agreements	69,644		69,644		69,644		—		—
Short-term borrowings	410,240		410,240		410,240		—		—
Long-term borrowings	50,180		51,675		4,630		47,045		—
Junior subordinated debt securities	64,038		64,038		64,038		—		—
Interest rate swaps	87,989		87,989		—		87,989		—
Forward sales contracts	1,292		1,292		—		1,292		—
⁽¹⁾ As reported in the Consolidated Balance Sheets



	Three Months Ended March 31,
(dollars in thousands)	2020			2019
Marketable Equity Securities
Net gains and losses recognized during the period on equity securities	$	(1,585	)	$	(318	)
Less: Net gains and losses recognized during the period on equity securities sold during the period	—			—
Unrealized Losses/Gains Recognized During the Reporting Period on Equity Securities Still Held at the Reporting Date	$	(1,585	)	$	(318	)



	Three Months Ended March 31, 2020
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽¹⁾		Total Difference in Recorded Investment
Totals by Loan Segment
Commercial Real Estate
Principal deferral and maturity date extension	1	$	2,210	$	2,210	$	—
Total Commercial Real Estate	1	2,210		2,210		—
Commercial and Industrial
Principal deferral and maturity date extension	5	3,780		3,780		—
Total Commercial and Industrial	5	3,780		3,780		—
Commercial Construction		—
Maturity date extension	1	1,891		1,891		—
Total Commercial Construction	1	1,891		1,891		—
Consumer Real Estate
Consumer bankruptcy⁽²⁾	6	388		388		—
Maturity date extension and reduction in payment	1	27		27		—
Total Consumer Real Estate	7	415		415		—
Totals by Concession Type
Principal deferral and maturity date extension	6	5,991		5,991		—
Maturity date extension	1	1,891		1,891		—
Consumer bankruptcy⁽²⁾	6	388		388		—
Maturity date extension and payment reduction	1	27		27		—
Total⁽³⁾	14	$	8,297	$	8,297	$	—
⁽¹⁾ Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end. ⁽²⁾ Consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed. ⁽³⁾Refer to Note 1, Basis of Presentation for details of reclassification of our portfolio segments related to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.



	December 31, 2019
(dollars in thousands)	Residential Mortgage		% of Total		Home Equity		% of Total		Installment and Other Consumer		% of Total		Consumer Construction		% of Total		Total		% of Total
Performing	$	991,066	99.2	%	$	535,709	99.5	%	$	78,993	99.9	%	$	8,390	100.0	%	$	1,614,158	99.4	%
Nonperforming	7,519		0.8	%	2,639		0.5	%	40		0.1	%	—		—	%	10,198		0.6	%
Total	$	998,585	100.0	%	$	538,348	100.0	%	$	79,033	100.0	%	$	8,390	100.0	%	$	1,624,356	100.0	%



	December 31, 2019
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With a related allowance recorded:
Commercial real estate	$	13,011	$	14,322	$	2,023
Commercial and industrial	10,001		10,001		55
Commercial construction	489		489		113
Consumer real estate	—		—		—
Other consumer	9		9		9
Total with a Related Allowance Recorded	23,510		24,821		2,200
Without a related allowance recorded:
Commercial real estate	34,909		40,201		—
Commercial and industrial	7,605		10,358		—
Commercial construction	1,425		2,935		—
Consumer real estate	7,884		8,445		—
Other consumer	4		11		—
Total without a Related Allowance Recorded	51,827		61,950		—
Total:
Commercial real estate	47,920		54,523		2,023
Commercial and industrial	17,606		20,359		55
Commercial construction	1,914		3,424		113
Consumer real estate	7,884		8,445		—
Other consumer	13		20		9
Total	$	75,337	$	86,771	$	2,200



	Three months ended
	March 31, 2019
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Commercial real estate	$	15,107	$	144
Commercial and industrial	12,780		209
Commercial construction	2,319		140
Consumer real estate	8,846		417
Other consumer	4		—
Total with a Related Allowance Recorded	39,056		910
Without a related allowance recorded:
Commercial real estate	12,983		400
Commercial and industrial	980		35
Commercial construction	489		—
Consumer real estate	14		1
Other consumer	10		1
Total without a Related Allowance Recorded	14,476		437
Total:
Commercial real estate	28,090		544
Commercial and industrial	13,760		244
Commercial construction	2,808		140
Consumer real estate	8,860		418
Other consumer	14		1
Total	$	53,532	$	1,347



	December 31, 2019
	Allowance for Loan Losses						Portfolio Loans
(dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total
Commercial real estate	$	2,023	$	28,554	$	30,577	$	47,920	$	3,368,598	$	3,416,518
Commercial and industrial	55		15,626		15,681		17,606		1,703,227		1,720,833
Commercial construction	113		7,787		7,900		1,914		373,531		375,445
Consumer real estate	—		6,337		6,337		7,884		1,537,439		1,545,323
Other consumer	9		1,720		1,729		13		79,020		79,033
Total	$	2,200	$	60,024	$	62,224	$	75,337	$	7,061,815	$	7,137,152



(dollars in thousands)		Three Months Ended March 31,
Revenue Streams	Point of Revenue Recognition	2020		2019
Service charges on deposit accounts	Over a period of time	$	484	$	457
	At a point in time	3,074		2,696
		$	3,558	$	3,153

Debit and credit card	Over a period of time	$	194	$	185
	At a point in time	3,287		2,789
		$	3,482	$	2,974

Wealth management	Over a period of time	$	345	$	413
	At a point in time	2,018		1,635
		$	2,362	$	2,048

Other fee revenue	At a point in time	$	919	$	919