0000719220srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-06-30

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,~~September 30, 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

(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 - ~~39,360,750~~39,350,383 shares as of ~~April 30,~~October 31, 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

	Consolidated Balance Sheets - ~~March 31,~~September 30, 2021 and December 31, 2020	2

	Condensed Consolidated Statements of Comprehensive Income (L oss) - Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020	3

	Consolidated Statements of Changes in Shareholders' Equity - Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020	4

	Condensed Consolidated Statements of Cash Flows - Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020	56

	Notes to Consolidated Financial Statements	67

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3738

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5355

Item 4.	Controls and Procedures	5557

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5557

Item 1A.	Risk Factors	5557

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5658

Item 3.	Defaults Upon Senior Securities	5658

Item 4.	Mine Safety Disclosures	5759

Item 5.	Other Information	5759

Item 6.	Exhibits	5759

	Signatures	5860

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
( in thousands, except share and per share data)	( in thousands, except share and per share data)	(Unaudited)			(Audited)			( in thousands, except share and per share data)	(Unaudited)			(Audited)
ASSETS	ASSETS							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
Cash and due from banks, including interest-bearing deposits of $856,105 and $158,903 at September 30, 2021 and December 31, 2020								Cash and due from banks, including interest-bearing deposits of $856,105 and $158,903 at September 30, 2021 and December 31, 2020		$	934,377		$	229,666
Securities, at fair value	Securities, at fair value		817,299			773,693		Securities, at fair value		870,121			773,693
Loans held for sale	Loans held for sale		12,794			18,528		Loans held for sale		4,303			18,528
Portfolio loans, net of unearned income	Portfolio loans, net of unearned income		7,183,168			7,225,860		Portfolio loans, net of unearned income		6,970,087			7,225,860
Allowance for credit losses on loans	Allowance for credit losses on loans		(115,101)			(117,612)		Allowance for credit losses on loans		(108,348)			(117,612)
Portfolio loans, net	Portfolio loans, net		7,068,067			7,108,248		Portfolio loans, net		6,861,739			7,108,248
Bank owned life insurance	Bank owned life insurance		82,677			82,303		Bank owned life insurance		83,259			82,303
Premises and equipment, net	Premises and equipment, net		54,720			55,614		Premises and equipment, net		52,727			55,614
Federal Home Loan Bank and other restricted stock, at cost	Federal Home Loan Bank and other restricted stock, at cost		12,199			13,030		Federal Home Loan Bank and other restricted stock, at cost		9,893			13,030
Goodwill	Goodwill		373,424			373,424		Goodwill		373,424			373,424
Other intangible assets, net	Other intangible assets, net		8,211			8,675		Other intangible assets, net		7,334			8,675
Other assets	Other assets		228,159			304,716		Other assets		238,877			304,716
Total Assets	Total Assets		$	9,328,979		$	8,967,897	Total Assets		$	9,436,054		$	8,967,897
LIABILITIES	LIABILITIES							LIABILITIES
Deposits:	Deposits:							Deposits:
Noninterest-bearing demand	Noninterest-bearing demand		$	2,539,594		$	2,261,994	Noninterest-bearing demand		$	2,652,314		$	2,261,994
Interest-bearing demand	Interest-bearing demand		976,225			864,510		Interest-bearing demand		971,321			864,510
Money market	Money market		2,002,857			1,937,063		Money market		2,045,320			1,937,063
Savings	Savings		1,036,927			969,508		Savings		1,074,896			969,508
Certificates of deposit	Certificates of deposit		1,320,425			1,387,463		Certificates of deposit		1,201,268			1,387,463

Total Deposits	Total Deposits		7,876,028			7,420,538		Total Deposits		7,945,119			7,420,538
Securities sold under repurchase agreements	Securities sold under repurchase agreements		67,417			65,163		Securities sold under repurchase agreements		72,586			65,163
Short-term borrowings	Short-term borrowings		0			75,000		Short-term borrowings		—			75,000
Long-term borrowings	Long-term borrowings		23,282			23,681		Long-term borrowings		22,693			23,681
Junior subordinated debt securities	Junior subordinated debt securities		64,097			64,083		Junior subordinated debt securities		64,128			64,083

Other liabilities	Other liabilities		129,877			164,721		Other liabilities		129,847			164,721
Total Liabilities	Total Liabilities		8,160,701			7,813,186		Total Liabilities		8,234,373			7,813,186
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY							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
Common stock ($2.50 par value) Authorized—50,000,000 shares Issued—41,449,444 shares at September 30, 2021 and December 31, 2020 Outstanding—39,367,847 shares at September 30, 2021 and 39,298,007 shares at December 31, 2020								Common stock ($2.50 par value) Authorized—50,000,000 shares Issued—41,449,444 shares at September 30, 2021 and December 31, 2020 Outstanding—39,367,847 shares at September 30, 2021 and 39,298,007 shares at December 31, 2020		103,623			103,623
Additional paid-in capital	Additional paid-in capital		401,353			400,668		Additional paid-in capital		403,028			400,668
Retained earnings	Retained earnings		731,718			710,061		Retained earnings		762,374			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)
Accumulated other comprehensive (loss) income								Accumulated other comprehensive (loss) income		(1,029)			8,971
Treasury stock — 2,081,597 shares at September 30, 2021 and 2,151,437 shares at December 31, 2020, at cost								Treasury stock — 2,081,597 shares at September 30, 2021 and 2,151,437 shares at December 31, 2020, at cost		(66,315)			(68,612)
Total Shareholders’ Equity	Total Shareholders’ Equity		1,168,278			1,154,711		Total Shareholders’ Equity		1,201,681			1,154,711
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity		$	9,328,979		$	8,967,897	Total Liabilities and Shareholders’ Equity		$	9,436,054		$	8,967,897

See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Three months ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	2021			2020				(dollars in thousands, except per share data)	2021		2020			2021		2020
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME										INTEREST AND DIVIDEND INCOME
Loans, including fees	Loans, including fees		$	70,232		$	82,051				Loans, including fees	$	66,914		$	72,263	$	204,088	$	229,812
Investment Securities:	Investment Securities:										Investment Securities:
Taxable	Taxable		3,563			4,215					Taxable	4,176			3,473		11,532		11,547
Tax-exempt	Tax-exempt		813			870					Tax-exempt	595			885		2,098		2,646
Dividends	Dividends		173			453					Dividends	84			227		409		911
Total Interest and Dividend Income	Total Interest and Dividend Income		74,781			87,589					Total Interest and Dividend Income	71,769			76,848		218,127		244,916
INTEREST EXPENSE	INTEREST EXPENSE										INTEREST EXPENSE
Deposits	Deposits		3,481			15,338					Deposits	2,439			6,626		8,572		31,191
Borrowings and junior subordinated debt securities	Borrowings and junior subordinated debt securities		641			2,215					Borrowings and junior subordinated debt securities	619			946		1,881		4,265
Total Interest Expense	Total Interest Expense		4,122			17,553					Total Interest Expense	3,058			7,572		10,453		35,456
NET INTEREST INCOME	NET INTEREST INCOME		70,659			70,036					NET INTEREST INCOME	68,711			69,276		207,674		209,460
Provision for credit losses	Provision for credit losses		3,137			20,050					Provision for credit losses	(3,388)			(17,485)		(9,087)		(124,294)
Net Interest Income After Provision for Credit Losses	Net Interest Income After Provision for Credit Losses		67,522			49,986					Net Interest Income After Provision for Credit Losses	65,323			51,791		198,587		85,166
NONINTEREST INCOME	NONINTEREST INCOME										NONINTEREST INCOME
Net gain on sale of securities	Net gain on sale of securities		0			0					Net gain on sale of securities	—			—		29		142
Mortgage banking			4,310			1,236
Debit and credit card	Debit and credit card		4,162			3,482					Debit and credit card	4,579			4,171		13,486		11,264
Service charges on deposit accounts	Service charges on deposit accounts		3,474			4,008					Service charges on deposit accounts	3,923			3,303		11,039		10,124
Wealth management	Wealth management		2,944			2,362					Wealth management	3,464			2,522		9,576		7,471
Mortgage banking											Mortgage banking	2,162			3,964		8,206		7,823
Commercial loan swap income	Commercial loan swap income		95			2,484					Commercial loan swap income	184			499		577		3,928
Other	Other		2,252			(1,169)					Other	1,534			2,024		5,595		3,358
Total Noninterest Income	Total Noninterest Income		17,236			12,403					Total Noninterest Income	15,846			16,483		48,507		44,110
NONINTEREST EXPENSE	NONINTEREST EXPENSE										NONINTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits		23,327			21,335					Salaries and employee benefits	25,228			24,571		73,070		67,326
Data processing and information technology	Data processing and information technology		4,225			3,868					Data processing and information technology	4,001			4,218		12,012		11,671
Occupancy	Occupancy		3,827			3,765					Occupancy	3,660			3,441		10,921		10,643
Furniture, equipment and software	Furniture, equipment and software		2,640			2,519					Furniture, equipment and software	2,745			2,440		7,787		7,965
Other taxes											Other taxes	1,830			1,612		5,098		4,816
Professional services and legal	Professional services and legal		1,531			1,048					Professional services and legal	1,550			1,911		4,718		4,890
Other Taxes			1,436			1,600
Marketing	Marketing		1,322			1,111					Marketing	890			1,793		3,208		3,883
FDIC Insurance			1,046			770
FDIC insurance											FDIC insurance	1,210			1,900		3,180		3,718
Merger related expenses	Merger related expenses		0			2,342					Merger related expenses	—			—		—		2,342
Other	Other		6,226			8,033					Other	6,127			6,360		18,656		20,861
Total Noninterest Expense	Total Noninterest Expense		45,580			46,391					Total Noninterest Expense	47,241			48,246		138,650		138,115
Income Before Taxes			39,178			15,998
Income tax expense			7,276			2,767
Net Income			$	31,902		$	13,231
Income (Loss) Before Taxes											Income (Loss) Before Taxes	33,928			20,028		108,444		(8,839)
Income tax expense (benefit)											Income tax expense (benefit)	6,330			3,323		20,578		(5,703)
Net Income (Loss)											Net Income (Loss)	$	27,598		$	16,705	$	87,866	$	(3,136)
Earnings per share—basic	Earnings per share—basic		$	0.81		$	0.34				Earnings per share—basic	$	0.71		$	0.43	$	2.25	$	(0.08)
Earnings per share—diluted	Earnings per share—diluted		$	0.81		$	0.34				Earnings per share—diluted	$	0.70		$	0.43	$	2.24	$	(0.08)
Dividends declared per share	Dividends declared per share		$	0.28		$	0.28				Dividends declared per share	$	0.28		$	0.28	$	0.84	$	0.84
Comprehensive Income	Comprehensive Income		$	23,992		$	30,573				Comprehensive Income	$	22,964		$	16,926	$	77,866	$	17,967

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, 2020																			For the three months ended September 30, 2020
(dollars in thousands, except share and per share data)	(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			(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, 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
Balance at June 30, 2020																				Balance at June 30, 2020		$	103,623		$	400,417		$	692,240		$	9,232		$	(69,735)		$	1,135,777
Net income for the three months ended September 30, 2020																				Net income for the three months ended September 30, 2020		—			—			16,705			—			—			16,705
Other comprehensive income, net of tax	Other comprehensive income, net of tax		—			—			—			17,342			—			17,342		Other comprehensive income, net of tax		—			—			—			221			—			221
Adoption of accounting standard - credit losses			—			—			(22,590)			—			—			(22,590)

Cash dividends declared ($0.28 per share)	Cash dividends declared ($0.28 per share)		—			—			(11,051)			—			—			(11,051)		Cash dividends declared ($0.28 per share)		—			—			(10,960)			—			—			(10,960)
Forfeitures of restricted stock, net of issuances (26,739 shares, net of issuance of 3,290 shares)			—			—			53			—			(616)			(563)
Forfeitures of restricted stock awards 11,822 shares																				Forfeitures of restricted stock awards 11,822 shares		—			—			366			—			(366)			—

Repurchase of common stock (411,430 shares)			—			—			—			—			(12,559)			(12,559)

Recognition of restricted stock compensation expense	Recognition of restricted stock compensation expense		—			443			—			—			—			443		Recognition of restricted stock compensation expense		—			372			—			—			—			372
Balance at March 31, 2020			$	103,623		$	400,387		$	740,726		$	5,672		$	(74,157)		$	1,176,251
Balance at September 30, 2020																				Balance at September 30, 2020		$	103,623		$	400,789		$	698,351		$	9,453		$	(70,101)		$	1,142,115
See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements																			See Notes to Consolidated Financial Statements
		For the three months ended March 31, 2021																			For the three months ended September 30, 2021
(dollars in thousands, except share and per share data)	(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total			(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			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
Balance at June 30, 2021																				Balance at June 30, 2021		$	103,623		$	402,053		$	746,472		$	3,605		$	(67,020)		$	1,188,733
Net income for the three months ended September 30, 2021																				Net income for the three months ended September 30, 2021		—			—			27,598			—			—			27,598
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax		—			—			—			(7,910)			—			(7,910)		Other comprehensive loss, net of tax		—			—			—			(4,634)			—			(4,634)

Cash dividends declared ($0.28 per share)	Cash dividends declared ($0.28 per share)		—			—			(10,975)			—			—			(10,975)		Cash dividends declared ($0.28 per share)		—			—			(10,991)			—			—			(10,991)
Forfeitures of restricted stock, net of issuances (30,840 shares, net of issuance of 1,192 shares)			—			—			730			—			(865)			(135)
Treasury stock issued for restricted stock awards of 25,459 shares, net of forfeitures of 3,331																				Treasury stock issued for restricted stock awards of 25,459 shares, net of forfeitures of 3,331		—			—			(705)			—			705			—

Recognition of restricted stock compensation expense	Recognition of restricted stock compensation expense		—			685			—			—			—			685		Recognition of restricted stock compensation expense		—			975			—			—			—			975
Balance at March 31, 2021			$	103,623		$	401,353		$	731,718		$	1,061		$	(69,477)		$	1,168,278
Balance at September 30, 2021																				Balance at September 30, 2021		$	103,623		$	403,028		$	762,374		$	(1,029)		$	(66,315)		$	1,201,681
See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements																			See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)


	Nine months ended September 30, 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 loss for the nine months ended September 30, 2020		—			—			(3,136)			—			—			(3,136)
Other comprehensive income, net of tax		—			—			—			21,123			—			21,123
Adoption of accounting standard - credit losses		—			—			(22,590)			—			—			(22,590)
Cash dividends declared ($0.84 per share)		—			—			(32,972)			—			—			(32,972)
Treasury stock issued for restricted stock awards (147,034 shares, net of forfeitures of 44,270 shares)		—			—			(4,034)			—			3,440			(594)

Repurchase of common stock (411,430 shares)		—			—			—			—			(12,559)			(12,559)
Recognition of restricted stock compensation expense		—			845			—			—			—			845
Balance at September 30, 2020		$	103,623		$	400,789		$	698,351		$	9,453		$	(70,101)		$	1,142,115

	Nine months ended September 30, 2021
(dollars in thousands, except share and per share data)	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			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 nine months ended September 30, 2021		—			—			87,866			—			—			87,866
Other comprehensive loss, net of tax		—			—			—			(10,000)			—			(10,000)


Cash dividends declared ($0.84 per share)		—			—			(32,954)			—			—			(32,954)
Treasury stock issued for restricted stock awards (125,170 shares, net of forfeitures of 55,330 shares)		—			—			(2,599)			—			2,297			(302)


Recognition of restricted stock compensation expense		—			2,360			—			—			—			2,360
Balance at September 30, 2021		$	103,623		$	403,028		$	762,374		$	(1,029)		$	(66,315)		$	1,201,681

See Notes to Consolidated Financial Statements

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended March 31,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)		2021		2020		(dollars in thousands)		2021		2020

Net Cash Provided by (Used in) Operating Activities	Net Cash Provided by (Used in) Operating Activities		$	90,145	$	(59,961)	Net Cash Provided by (Used in) Operating Activities		$	171,740	$	(3,002)

INVESTING ACTIVITIES	INVESTING ACTIVITIES						INVESTING ACTIVITIES
Purchases of securities	Purchases of securities		(89,038)		(30,292)		Purchases of securities		(226,971)		(90,348)
Proceeds from maturities, prepayments and calls of securities	Proceeds from maturities, prepayments and calls of securities		34,715		33,869		Proceeds from maturities, prepayments and calls of securities		109,499		176,103

Net proceeds from sales (purchases of) of Federal Home Loan Bank stock			831		(5,277)
Proceeds from sales of securities							Proceeds from sales of securities		1,917		1,349
Net proceeds from sales of Federal Home Loan Bank stock							Net proceeds from sales of Federal Home Loan Bank stock		3,137		7,200
Net decrease (increase) in loans	Net decrease (increase) in loans		33,937		(122,507)		Net decrease (increase) in loans		220,854		(350,884)
Proceeds from sale of loans not originated for resale			640		0
Proceeds from sale of portfolio loans							Proceeds from sale of portfolio loans		3,438		—
Purchases of premises and equipment	Purchases of premises and equipment		(811)		(1,429)		Purchases of premises and equipment		(2,110)		(4,356)
Proceeds from the sale of premises and equipment	Proceeds from the sale of premises and equipment		74		0		Proceeds from the sale of premises and equipment		14		15
Proceeds from life insurance settlement							Proceeds from life insurance settlement		353		—

Net Cash Used in Investing Activities			(19,652)		(125,636)
Net Cash Provided by (Used in) Investing Activities							Net Cash Provided by (Used in) Investing Activities		110,131		(260,921)
FINANCING ACTIVITIES	FINANCING ACTIVITIES						FINANCING ACTIVITIES
Net increase in core deposits	Net increase in core deposits		522,528		28,684		Net increase in core deposits		710,776		746,580
Net decrease in certificates of deposit	Net decrease in certificates of deposit		(67,003)		(7,042)		Net decrease in certificates of deposit		(186,115)		(148,573)
Net increase in securities sold under repurchase agreements	Net increase in securities sold under repurchase agreements		2,254		49,756		Net increase in securities sold under repurchase agreements		7,423		22,818
Net decrease (increase) in short-term borrowings			(75,000)		128,921
Net decrease in short-term borrowings							Net decrease in short-term borrowings		(75,000)		(198,319)

Repayments on long-term borrowings	Repayments on long-term borrowings		(399)		(688)		Repayments on long-term borrowings		(988)		(1,792)

Treasury shares issued-net	Treasury shares issued-net		(135)		(563)		Treasury shares issued-net		(302)		(594)

Cash dividends paid to common shareholders	Cash dividends paid to common shareholders		(10,975)		(11,051)		Cash dividends paid to common shareholders		(32,954)		(32,972)
Repurchase of common stock	Repurchase of common stock		0		(12,559)		Repurchase of common stock		—		(12,559)

Net Cash Provided by Financing Activities	Net Cash Provided by Financing Activities		371,270		175,458		Net Cash Provided by Financing Activities		422,840		374,589
Net increase (decrease) in cash and cash equivalents			441,763		(10,139)
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents		704,711		110,666
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period		229,666		197,823		Cash and cash equivalents at beginning of period		229,666		197,823
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period		$	671,429	$	187,684	Cash and Cash Equivalents at End of Period		$	934,377	$	308,489
Supplemental Disclosures	Supplemental Disclosures						Supplemental Disclosures
Loans transferred to held for sale	Loans transferred to held for sale		$	2,798	$	0	Loans transferred to held for sale		$	4,467	$	—

Leased right-of-use operating assets and lease liabilities			$	0	$	91

Interest paid	Interest paid		$	5,368	$	17,795	Interest paid		$	12,200	$	37,437
Income taxes paid, net of refunds	Income taxes paid, net of refunds		$	197	$	210	Income taxes paid, net of refunds		$	19,183	$	6,210

Transfers of loans to other real estate owned	Transfers of loans to other real estate owned		$	77	$	110	Transfers of loans to other real estate owned		$	12,392	$	631

See Notes to Consolidated Financial Statements

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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, 2020, filed with the Securities and Exchange Commission, or SEC, on March 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

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 simplify the accounting for income taxes by removing certain exceptions and improve the consistent application of GAAP by clarifying and amending other existing guidance. We adopted this ASU on January 1, 2021. The amendments in this ASU did not impact our ~~Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.~~consolidated financial statements.

Amendments to certain SEC paragraphs from the Codification in response to issuance of SEC Final Rules (Topics 205 and 946)

In August 2021, the FASB issued ASU No. 2021-06, which amends certain SEC paragraphs from the Codification in response to the issuance of SEC Final Rule Nos. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses, and 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. We adopted this ASU in August 2021. The amendments in this ASU did not impact our consolidated financial statements.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 1. BASIS OF PRESENTATION - continued

Accounting Standards Issued ~~But~~ Not Yet Adopted

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 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 have established a committee to guide our transition from LIBOR and have begun efforts to transition to alternative rates consistent with industry timelines. We have identified products that utilize LIBOR and are ~~evaluating~~revising fallback language to facilitate the transition to alternative reference rates. ASU 2020-04 is not expected to have a material impact ~~of this ASU and we do not expect the amendments in this ASU to materially impact~~on our ~~Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.~~consolidated financial statements.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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 and nine months ended ~~March 31,~~September 30, 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,						Three Months Ended September 30,						Nine months ended September 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2021			2020				(in thousands, except share and per share data)	2021		2020			2021		2020
Numerator for Earnings per Share—Basic:	Numerator for Earnings per Share—Basic:										Numerator for Earnings per Share—Basic:
Net income			$	31,902		$	13,231
Net income (loss)											Net income (loss)	$	27,598		$	16,705	$	87,866	$	(3,136)
Less: Income allocated to participating shares	Less: Income allocated to participating shares		141			29					Less: Income allocated to participating shares	125			52		408		—
Net Income Allocated to Shareholders	Net Income Allocated to Shareholders		$	31,761		$	13,202				Net Income Allocated to Shareholders	$	27,473		$	16,653	$	87,458	$	(3,136)

Numerator for Earnings per Share—Diluted:	Numerator for Earnings per Share—Diluted:										Numerator for Earnings per Share—Diluted:
Net income			$	31,902		$	13,231
Net income (loss)											Net income (loss)	$	27,598		$	16,705	$	87,866	$	(3,136)
Net Income Available to Shareholders	Net Income Available to Shareholders		$	31,902		$	13,231				Net Income Available to Shareholders	$	27,598		$	16,705	$	87,866	$	(3,136)

Denominators for Earnings per Share:	Denominators for Earnings per Share:										Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic	Weighted Average Shares Outstanding—Basic		39,021,208			39,271,540					Weighted Average Shares Outstanding—Basic	39,060,616			39,020,811		39,044,412		39,101,309
Add: Potentially dilutive shares	Add: Potentially dilutive shares		99,922			108,116					Add: Potentially dilutive shares	86,157			20,656		89,194		—
Denominator for Treasury Stock Method—Diluted	Denominator for Treasury Stock Method—Diluted		39,121,130			39,379,656					Denominator for Treasury Stock Method—Diluted	39,146,773			39,041,467		39,133,606		39,101,309

Weighted Average Shares Outstanding—Basic	Weighted Average Shares Outstanding—Basic		39,021,208			39,271,540					Weighted Average Shares Outstanding—Basic	39,060,616			39,020,811		39,044,412		39,101,309
Add: Average participating shares outstanding	Add: Average participating shares outstanding		0			54,398					Add: Average participating shares outstanding	1,464			—		458		—
Denominator for Two-Class Method—Diluted	Denominator for Two-Class Method—Diluted		39,021,208			39,325,938					Denominator for Two-Class Method—Diluted	39,062,080			39,020,811		39,044,870		39,101,309

Earnings per share—basic			$	0.81		$	0.34
Earnings per share—diluted			$	0.81		$	0.34
Earnings (loss) per share—basic											Earnings (loss) per share—basic	$	0.71		$	0.43	$	2.25	$	(0.08)
Earnings (loss) per share—diluted											Earnings (loss) per share—diluted	$	0.70		$	0.43	$	2.24	$	(0.08)

Restricted stock considered anti-dilutive excluded from potentially dilutive shares	Restricted stock considered anti-dilutive excluded from potentially dilutive shares		165			41					Restricted stock considered anti-dilutive excluded from potentially dilutive shares	163			19,449		615		1,137

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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, 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 fair value of U.S. treasury securities are based on quoted market prices in active markets and are classified as Level 1. The market valuation sources for other 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 3. FAIR VALUE MEASUREMENTS - continued

Securities Held in a Deferred Compensation Plan

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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss). 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 forward commitments related to 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~~interest rate swaps for commercial loans are classified as Level 2. Interest rate lock commitments and forward commitments related to mortgage loans are classified as Level 3 due to significant unobservable inputs. 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 are carried at the lower of cost or market and 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~~marked to fair value are classified as Level 3.2.

Loans Individually Evaluated

Loans that are individually evaluated to determine whether a specific allocation of ACL is needed are reported at the lower of amortized cost or 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~~individually evaluated that are marked to 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~~marked to 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 3. FAIR VALUE MEASUREMENTS - continued

Mortgage Servicing Rights

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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss).

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~~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

Collateral receivable is cash that is made available to counterparties as collateral for our interest rate swaps. 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.

Short-Term Borrowings

The carrying ~~amount~~amounts of ~~accrued interest approximates~~securities sold under repurchase agreements, or REPOs, and other short-term borrowings approximate their fair ~~value.~~values.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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~~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~~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.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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,~~September 30, 2021 and December 31, 2020.


		March 31, 2021									September 30, 2021
(dollars in thousands)	(dollars in thousands)	Level 1		Level 2		Level 3		Total		(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS	ASSETS									ASSETS
Available-for-sale debt securities:	Available-for-sale debt securities:									Available-for-sale debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	0	$	63,268	$	0	$	63,268	U.S. Treasury securities	$	85,300	$	—	$	—	$	85,300
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	0		82,028		0		82,028		Obligations of U.S. government corporations and agencies	—		71,205		—		71,205
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	0		217,916		0		217,916		Collateralized mortgage obligations of U.S. government corporations and agencies	—		208,985		—		208,985
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	0		63,911		0		63,911		Residential mortgage-backed securities of U.S. government corporations and agencies	—		60,442		—		60,442
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	0		277,253		0		277,253		Commercial mortgage-backed securities of U.S. government corporations and agencies	—		356,506		—		356,506
Corporate obligations	Corporate obligations	0		2,002		0		2,002		Corporate obligations	—		500		—		500
Obligations of states and political subdivisions	Obligations of states and political subdivisions	0		107,505		0		107,505		Obligations of states and political subdivisions	—		86,056		—		86,056
Total Available-for-sale Debt Securities	Total Available-for-sale Debt Securities	0		813,883		0		813,883		Total Available-for-sale Debt Securities	85,300		783,694		—		868,994
Marketable equity securities	Marketable equity securities	3,328		88		0		3,416		Marketable equity securities	1,051		76		—		1,127
Total Securities	Total Securities	3,328		813,971		0		817,299		Total Securities	86,351		783,770		—		870,121
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	7,178		0		0		7,178		Securities held in a deferred compensation plan	9,320		—		—		9,320
Derivative financial assets:	Derivative financial assets:									Derivative financial assets:
Interest rate swaps	Interest rate swaps	0		40,415		0		40,415		Interest rate swaps	—		42,177		—		42,177
Interest rate lock commitments	Interest rate lock commitments	0		0		1,509		1,509		Interest rate lock commitments	—		—		812		812
Forward sale contracts	Forward sale contracts	0		0		226		226		Forward sale contracts	—		—		101		101
Total Assets	Total Assets	$	10,506	$	854,386	$	1,735	$	866,627	Total Assets	$	95,671	$	825,947	$	913	$	922,531
LIABILITIES	LIABILITIES									LIABILITIES
Derivative financial liabilities:	Derivative financial liabilities:									Derivative financial liabilities:
Interest rate swaps	Interest rate swaps	$	0	$	40,818	$	—	$	40,818	Interest rate swaps	$	—	$	42,554	$	—	$	42,554

Total Liabilities	Total Liabilities	$	0	$	40,818	$	0	$	40,818	Total Liabilities	$	—	$	42,554	$	—	$	42,554


		December 31, 2020									December 31, 2020
(dollars in thousands)	(dollars in thousands)	Level 1		Level 2		Level 3		Total		(dollars in thousands)	Level 1		Level 2		Level 3		Total
ASSETS	ASSETS									ASSETS
Available-for-sale debt securities:	Available-for-sale debt securities:									Available-for-sale debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	0	$	10,282	$	0	$	10,282	U.S. Treasury securities	$	10,282	$	—	$	—	$	10,282
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	0		82,904		0		82,904		Obligations of U.S. government corporations and agencies	—		82,904		—		82,904
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	0		209,296		0		209,296		Collateralized mortgage obligations of U.S. government corporations and agencies	—		209,296		—		209,296
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	0		67,778		0		67,778		Residential mortgage-backed securities of U.S. government corporations and agencies	—		67,778		—		67,778
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	0		273,681		0		273,681		Commercial mortgage-backed securities of U.S. government corporations and agencies	—		273,681		—		273,681
Corporate obligations	Corporate obligations	0		2,025		0		2,025		Corporate obligations	—		2,025		—		2,025
Obligations of states and political subdivisions	Obligations of states and political subdivisions	0		124,427		0		124,427		Obligations of states and political subdivisions	—		124,427		—		124,427
Total Available-for-sale Debt Securities	Total Available-for-sale Debt Securities	0		770,393		0		770,393		Total Available-for-sale Debt Securities	10,282		760,111		—		770,393
Marketable equity securities	Marketable equity securities	3,228		72		0		3,300		Marketable equity securities	3,228		72		—		3,300
Total Securities	Total Securities	3,228		770,465		0		773,693		Total Securities	13,510		760,183		—		773,693
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	6,794		0		0		6,794		Securities held in a deferred compensation plan	6,794		—		—		6,794
Derivative financial assets:	Derivative financial assets:									Derivative financial assets:
Interest rate swaps	Interest rate swaps	0		78,319		0		78,319		Interest rate swaps	—		78,319		—		78,319
Interest rate lock commitments	Interest rate lock commitments	0		0		2,900		2,900		Interest rate lock commitments	—		—		2,900		2,900

Total Assets	Total Assets	$	10,022	$	848,784	$	2,900	$	861,706	Total Assets	$	20,304	$	838,502	$	2,900	$	861,706
LIABILITIES	LIABILITIES									LIABILITIES
Derivative financial liabilities:	Derivative financial liabilities:									Derivative financial liabilities:
Interest rate swaps	Interest rate swaps	$	0	$	79,033	$	0	$	79,033	Interest rate swaps	$	—	$	79,033	$	—	$	79,033
Forward sale contracts	Forward sale contracts	0		385		0		385		Forward sale contracts	—		385		—		385
Total Liabilities	Total Liabilities	$	0	$	79,418	$	0	$	79,418	Total Liabilities	$	—	$	79,418	$	—	$	79,418

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued

~~There~~Loans held for sale were ~~no transfers between Level 1,~~transferred to Level 2 ~~and~~from Level 3 ~~for~~during the ~~three~~nine months ended ~~March 31,~~September 30, 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 0no liabilities measured at fair value on a nonrecurring basis at either ~~March 31,~~September 30, 2021 or December 31, 2020.

For Level 3 assets measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021 and December 31, 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


		December 31, 2020		Valuation Technique	Significant Unobservable Inputs		Range					Weighted Average (1) (2) (3)				September 30, 2021				Valuation Technique				Significant Unobservable Inputs		Range								Weighted Average (1) (2) (3)
(dollars in thousands)	(dollars in thousands)					(dollars in thousands)
Loans individually evaluated	Loans individually evaluated	$	67,402	Collateral method		Appraisal adjustment			0%		-		47%	16.90%				Loans individually evaluated	$			41,135	Collateral method					Appraisal adjustment					—%			-	17.00%	13.68%
Other real estate owned	Other real estate owned	1,953		Collateral method	Costs to sell		4%	-		7.00%		4.92%			Other real estate owned		13,313				Collateral method				Costs to sell		4.00%			-		7.00%			6.77%
Mortgage servicing rights	Mortgage servicing rights	4,976		Discounted cash flow method	Discount rate		9.24%	-		12.55%		9.42%			Mortgage servicing rights	7,015				Discounted cash flow method				Discount rate		9.21%			-		12.54%			9.38%
					Constant prepayment rates		8.82%	-		14.58%		13.37%												Constant prepayment rates		7.93%			-		14.96%			10.69%
Loans held for sale	Loans held for sale	586		Contractual agreement	None		NA					NA			Loans held for sale	1,669				Contractual agreement				None		NA								NA
Total Assets	Total Assets	$	74,917												Total Assets	$	63,132
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.


	December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Range			Weighted Average (1) (2) (3)
(dollars in thousands)
Loans individually evaluated	$	67,402	Collateral method	Appraisal adjustment	—%	-	47.00%	16.90%
Other real estate owned	1,953		Collateral method	Costs to sell	4.00%	-	7.00%	4.92%
Mortgage servicing rights	4,976		Discounted cash flow method	Discount rate	9.24%	-	12.55%	9.42%
				Constant prepayment rates	8.82%	-	14.58%	13.37%
Loans held for sale	586		Contractual agreement	None	NA			NA
Total Assets	$	74,917
NA - not applicable
(1) Weighted averages for loans individually evaluated were weighted by loan amounts. (2) Weighted averages for other real estate owned were weighted by OREO balances. (3) Weighted averages for mortgage servicing rights discount rate and prepayment rates are based on note rate tranches and voluntary constant prepayment rates.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued

The carrying values and fair values of our financial instruments at ~~March 31,~~September 30, 2021 and December 31, 2020 are presented in the following tables:


	Carrying Value(1)		Fair Value Measurements at September 30, 2021
(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits	$	934,377	$	934,377	$	934,377	$	—	$	—
Securities	870,121		870,121		86,351		783,770		—
Loans held for sale	4,303		4,303		—		4,303		—
Portfolio loans, net	6,897,715		6,784,028		—		—		6,784,028


Collateral receivable	43,193		43,193		43,193		—		—
Securities held in a deferred compensation plan	9,320		9,320		9,320		—		—
Mortgage servicing rights	7,015		7,015		—		—		7,015
Interest rate swaps	42,177		42,177		—		42,177		—
Interest rate lock commitments	813		813		—		—		813
Forward sale contracts	101		101		—		—		101
LIABILITIES
Deposits	$	7,945,119	$	7,944,461	$	6,743,851	$	1,200,610	$	—
Securities sold under repurchase agreements	72,586		72,586		72,586		—		—
Short-term borrowings	—		—		—		—		—
Long-term borrowings	22,693		23,172		4,349		18,823		—
Junior subordinated debt securities	64,128		64,128		64,128		—		—
Interest rate swaps	42,554		42,554		—		42,554		—

(1) As reported in the Consolidated Balance Sheets

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									Carrying Value(1)		Fair Value Measurements at December 31, 2020
(dollars in thousands)	(dollars in thousands)			Total		Level 1		Level 2		Level 3		(dollars in thousands)			Total		Level 1		Level 2		Level 3
ASSETS	ASSETS											ASSETS
Cash and due from banks, including interest-bearing deposits	Cash and due from banks, including interest-bearing deposits	$	229,666	$	229,666	$	229,666	$	0	$	0	Cash and due from banks, including interest-bearing deposits	$	229,666	$	229,666	$	229,666	$	—	$	—
Securities	Securities	773,693		773,693		3,228		770,465		0		Securities	773,693		773,693		13,510		760,183		—
Loans held for sale	Loans held for sale	18,528		18,528		0		0		18,528		Loans held for sale	18,528		18,528		—		—		18,528
Portfolio loans, net	Portfolio loans, net	7,108,248		7,028,446		0		0		7,028,446		Portfolio loans, net	7,108,248		7,028,446		—		—		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	Collateral receivable	77,936		77,936		77,936		0		0		Collateral receivable	77,936		77,936		77,936		—		—
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	6,794		6,794		6,794		0		0		Securities held in a deferred compensation plan	6,794		6,794		6,794		—		—
Mortgage servicing rights	Mortgage servicing rights	4,976		4,976		0		0		4,976		Mortgage servicing rights	4,976		4,976		—		—		4,976
Interest rate swaps	Interest rate swaps	78,319		78,319		0		78,319		0		Interest rate swaps	78,319		78,319		—		78,319		—
Interest rate lock commitments	Interest rate lock commitments	2,900		2,900		0		0		2,900		Interest rate lock commitments	2,900		2,900		—		—		2,900

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

1516

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 4. SECURITIES

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


(dollars in thousands)	(dollars in thousands)	March 31, 2021			December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Available-for-sale debt securities	Available-for-sale debt securities		$	813,883		$	770,393	Available-for-sale debt securities		$	868,994		$	770,393
Marketable equity securities	Marketable equity securities		3,416			3,300		Marketable equity securities		1,127			3,300
Total Securities	Total Securities		$	817,299		$	773,693	Total Securities		$	870,121		$	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, 2021												December 31, 2020													September 30, 2021												December 31, 2020
(dollars in thousands)	(dollars in thousands)	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			(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	U.S. Treasury securities		$	63,361		$	259		$	(352)		$	63,268		$	9,980		$	302		$	0		$	10,282	U.S. Treasury securities		$	85,222		$	326		$	(248)		$	85,300		$	9,980		$	302		$	—		$	10,282
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies		78,715			3,313			0			82,028			78,755			4,149			0			82,904		Obligations of U.S. government corporations and agencies		68,635			2,570			—			71,205			78,755			4,149			—			82,904
Collateralized mortgage obligations of U.S. government corporations and agencies	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		Collateralized mortgage obligations of U.S. government corporations and agencies		206,325			3,858			(1,198)			208,985			202,975			6,410			(89)			209,296
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies		64,496			632			(1,217)			63,911			66,960			818			0			67,778		Residential mortgage-backed securities of U.S. government corporations and agencies		60,855			553			(966)			60,442			66,960			818			—			67,778
Commercial mortgage-backed securities of U.S. government corporations and agencies	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		Commercial mortgage-backed securities of U.S. government corporations and agencies		347,825			9,339			(658)			356,506			258,875			14,806			—			273,681
Corporate obligations	Corporate obligations		2,001			2			(1)			2,002			2,021			5			(1)			2,025		Corporate obligations		500			—			—			500			2,021			5			(1)			2,025
Obligations of states and political subdivisions	Obligations of states and political subdivisions		101,949			5,556			0			107,505			117,439			6,988			0			124,427		Obligations of states and political subdivisions		81,310			4,746			0			86,056			117,439			6,988			—			124,427
Total Available-for-Sale Debt Securities (1)	Total Available-for-Sale Debt Securities (1)		$	790,208		$	26,563		$	(2,888)		$	813,883		$	737,005		$	33,478		$	(90)		$	770,393	Total Available-for-Sale Debt Securities (1)		$	850,672		$	21,392		$	(3,070)		$	868,994		$	737,005		$	33,478		$	(90)		$	770,393

(1) Excludes interest receivable of $3.2 million at ~~March 31, 2021and $3.4~~September 30, 2021 and $3.1 million at December 31, 2020. Interest receivable is included in other assets in the consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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, 2021																September 30, 2021
		Less Than 12 Months					12 Months or More					Total						Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	(dollars in thousands)	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		(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	U.S. Treasury securities	5	$	53,026	$	(352)	0	$	0	$	0	5	$	53,026	$	(352)	U.S. Treasury securities	4	$	43,200	$	(248)	—	$	—	$	—	4	$	43,200	$	(248)
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	0	0		0		0	0		0		0	0		0		Obligations of U.S. government corporations and agencies	—	—		—		—	—		—		—	—		—
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	1	10,785		(124)		0	0		0		1	10,785		(124)		Collateralized mortgage obligations of U.S. government corporations and agencies	7	88,290		(1,198)		—	—		—		7	88,290		(1,198)
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	2	49,860		(1,217)		0	0		0		2	49,860		(1,217)		Residential mortgage-backed securities of U.S. government corporations and agencies	3	48,497		(966)		—	—		—		3	48,497		(966)
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	5	68,629		(1,194)		0	0		0		5	68,629		(1,194)		Commercial mortgage-backed securities of U.S. government corporations and agencies	7	101,479		(658)		—	—		—		7	101,479		(658)
Corporate bonds	Corporate bonds	1	499		(1)		0	0		0		1	499		(1)		Corporate bonds	—	—		—		—	—		—		—	—		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	0	0		0		0	0		0		0	0		0		Obligations of states and political subdivisions	1	5,000		—		—	—		—		1	5,000		—

Total	Total	14	$	182,799	$	(2,888)	0	$	0	$	0	14	$	182,799	$	(2,888)	Total	22	$	286,466	$	(3,070)	—	$	—	$	—	22	$	286,466	$	(3,070)


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

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

We evaluate securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit losses or other factors. There ~~was 14~~were 22 debt securities in an unrealized loss position at ~~March 31,~~September 30, 2021 and 3 debt securities in an unrealized loss position at December 31, 2020. We do not intend to sell and it is more likely than not that we will not be required to sell 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 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 did not record an ACL related to the securities portfolio at March 31, 2021 and December 31, 2020.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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, 2021						December 31, 2020							September 30, 2021						December 31, 2020
(dollars in thousands)	(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	Total unrealized gains/(losses) on available-for-sale debt securities	$	26,563	$	(2,888)	$	23,675	$	33,478	$	(90)	$	33,388	Total unrealized gains/(losses) on available-for-sale debt securities	$	21,392	$	(3,070)	$	18,322	$	33,478	$	(90)	$	33,388
Income tax (expense) benefit	Income tax (expense) benefit	(5,668)		615		(5,053)		(7,128)		19		(7,109)		Income tax (expense) benefit	(4,569)		657		(3,912)		(7,128)		19		(7,109)
Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss)	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	Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss)	$	16,823	$	(2,413)	$	14,410	$	26,350	$	(71)	$	26,279

The amortized cost and fair value of available-for-sale debt securities at ~~March 31,~~September 30, 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, 2021					September 30, 2021
(dollars in thousands)	(dollars in thousands)	Amortized Cost		Fair Value		(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	Obligations of the U.S. Treasury, U.S. government corporations and agencies, and obligations of states and political subdivisions					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	Due in one year or less	$	40,399	$	40,813	Due in one year or less	$	30,428	$	30,760
Due after one year through five years	Due after one year through five years	92,940		97,643		Due after one year through five years	82,551		86,321
Due after five years through ten years	Due after five years through ten years	89,580		91,236		Due after five years through ten years	101,252		102,563
Due after ten years	Due after ten years	21,106		23,109		Due after ten years	20,936		22,917
Available-for-Sale Debt Securities With Maturities		244,025		252,801

Available-for-Sale Debt Securities With Fixed Maturities						Available-for-Sale Debt Securities With Fixed Maturities	235,167		242,561
Debt Securities without a single maturity date						Debt Securities without a single maturity date
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	213,394		217,916		Collateralized mortgage obligations of U.S. government corporations and agencies	206,325		208,985
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	64,496		63,911		Residential mortgage-backed securities of U.S. government corporations and agencies	60,855		60,442
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	266,292		277,253		Commercial mortgage-backed securities of U.S. government corporations and agencies	347,825		356,506
Corporate Securities	Corporate Securities	2,001		2,002		Corporate Securities	500		500

Total Available-for-Sale Debt Securities	Total Available-for-Sale Debt Securities	$	790,208	$	813,883	Total Available-for-Sale Debt Securities	$	850,672	$	868,994

Debt securities with carrying values of ~~$320~~$435.0 million at ~~March 31,~~September 30, 2021 and ~~$308~~$308.3 million at December 31, 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,				Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021		2020			(dollars in thousands)	2021		2020		2021		2020
Marketable Equity Securities	Marketable Equity Securities						Marketable Equity Securities
Net market gains/(losses) recognized	Net market gains/(losses) recognized	$	116	$	(1,585)		Net market gains/(losses) recognized	$	31	$	585	$	175	$	(552)
Less: Net gains recognized for equity securities sold	Less: Net gains recognized for equity securities sold	0		0			Less: Net gains recognized for equity securities sold	—		—		29		142
Unrealized (Losses)/Gains on Equity Securities Still Held		$	116	$	(1,585)
Unrealized Gains/(Losses) on Equity Securities Still Held							Unrealized Gains/(Losses) on Equity Securities Still Held	$	31	$	585	$	146	$	(694)

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

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE

Loans are presented net of unearned income of ~~$14.0~~$14.5 million at ~~March 31,~~September 30, 2021 and $16.0 million at December 31, 2020 and net of a discount related to purchase accounting fair value adjustments of ~~$7.5~~$6.4 million at ~~March 31,~~September 30, 2021 and $8.6 million at December 31, 2020. The following table presents loans as of the dates presented:


(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020		(dollars in thousands)	September 30, 2021		December 31, 2020
Commercial	Commercial					Commercial
Commercial real estate	Commercial real estate	$	3,284,555	$	3,244,974	Commercial real estate	$	3,225,863	$	3,244,974
Commercial and industrial	Commercial and industrial	1,931,711		1,954,453		Commercial and industrial	1,698,784		1,954,453
Commercial construction	Commercial construction	460,417		474,280		Commercial construction	499,317		474,280
Total Commercial Loans	Total Commercial Loans	5,676,683		5,673,707		Total Commercial Loans	5,423,964		5,673,707
Consumer	Consumer					Consumer
Consumer real estate	Consumer real estate	1,425,839		1,471,238		Consumer real estate	1,448,517		1,471,238
Other consumer	Other consumer	80,646		80,915		Other consumer	97,606		80,915
Total Consumer Loans	Total Consumer Loans	1,506,485		1,552,153		Total Consumer Loans	1,546,123		1,552,153
Total Portfolio Loans	Total Portfolio Loans	7,183,168		7,225,860		Total Portfolio Loans	6,970,087		7,225,860
Loans held for sale	Loans held for sale	12,794		18,528		Loans held for sale	4,303		18,528
Total Loans (1)	Total Loans (1)	$	7,195,962	$	7,244,388	Total Loans (1)	$	6,974,390	$	7,244,388

(1) Excludes interest receivable of ~~$23.4~~$19.1 million at ~~March 31,~~September 30, 2021 and $24.7 million at December 31, 2020. Interest receivable is included in other assets in the consolidated balance sheets.

Commercial and industrial loans, or C&I, included ~~$499.1~~$181.0 million of loans originated under the Paycheck Protection Program, or PPP, at ~~March~~September 30, 2021 compared to $465.0 million at December 31, ~~2021.~~2020. 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,~~September 30, 2021, our business banking segment was $1.1 billion compared to $1.2 billion at December 31, 2020. $100.5 million of the business banking portfolio decline is due to the net change in business banking PPP loans. 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~~$523.1 million of commercial real estate loans, ~~$232.1~~$220.6 million of C&I loans ~~$11.0~~of which $78.0 million are PPP loans, $13.4 million of commercial construction loans ~~$321.8~~and $343.0 million of consumer real estate loans ~~that have a commercial purpose~~ at ~~March 31,~~September 30, 2021. At December 31, 2020 business banking consisted of $453.0 million of commercial real estate loans, $394.9 million of C&I loans of which $178.4 million are PPP 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 real estate 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 ~~79.0~~77.8 percent of total portfolio loans at ~~March 31,~~September 30, 2021 ~~and~~compared to 78.5 percent at December 31, 2020. Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or ~~66.0~~68.7 percent, of total commercial loans at ~~March 31,~~September 30, 2021 and $3.7 billion, or 65.6 percent, of total commercial loans at December 31, 2020 and ~~52.1~~53.4 percent of total portfolio loans at ~~March 31,~~September 30, 2021 and 51.5 percent at December 31, 2020.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE - continued

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 ~~5.7~~5.0 percent of the combined portfolios and ~~3.0~~2.7 percent of total portfolio loans at ~~March 31,~~September 30, 2021. This compares to 5.9 percent of the combined portfolios and 3.0 percent of total portfolio loans at December 31, 2020.

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.

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

December 31, 2020
(dollars in thousands) Performing
TDRs Nonperforming
TDRs Total
TDRs
Commercial real estate $ 14 $ 16,654 $ 16,668
Commercial and industrial 7,090 9,885 16,975
Commercial construction 3,267 0 3,267
Business banking 1,503 430 1,933
Consumer real estate 5,581 2,319 7,900
Other consumer 5 0 5
Total $ 17,460 $ 29,288 $ 46,748


	September 30, 2021						December 31, 2020
(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		Performing TDRs		Nonperforming TDRs		Total TDRs
Commercial real estate	$	4,252	$	11,093	$	15,345	$	14	$	16,654	$	16,668
Commercial and industrial	1,762		—		1,762		7,090		9,885		16,975
Commercial construction	—		—		—		3,267		—		3,267
Business banking	1,647		1,492		3,139		1,503		430		1,933
Consumer real estate	6,120		1,448		7,569		5,581		2,319		7,900
Other consumer	—		—		—		5		—		5
Total	$	13,782	$	14,033	$	27,815	$	17,460	$	29,289	$	46,748

There ~~were 0 TDR's~~was 1 TDR for $0.1 million that returned to accruing status during the three months ended ~~March 31,~~September 30, 2021 compared to 2 TDRs for a total of $0.1 million that returned to accruing status for the three months ended September 30, 2020. There were 6 TDRs for a total of $0.5 million that returned to accruing status during the nine months ended September 30, 2021 compared to 3 TDRs for a total of $22.7 million for the nine months ended September 30, 2020.

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


	Three Months Ended September 30, 2021
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	2	—		—		341		—		—		341		342
Commercial construction	—	—		—		—		—		—		—		—
Business banking	—	—		—		—		—		—		—		—
Consumer real estate	9	317		—		31		—		—		348		356
Other consumer	—	—		—		—		—		—		—		—
Total	11	$	317	$	—	$	372	$	—	$	—	$	689	$	698
(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.

2021

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 5. LOANS AND LOANS HELD FOR SALE - continued


	Three Months Ended September 30, 2020
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	2	—		—		3,735		—		287		4,022		4,021
Commercial construction	—	—		—		—		—		—		—		—
Business banking	1	—		—		171		—		—		171		333
Consumer real estate	10	334		—		30		—		—		364		334
Other consumer	1	4		—		—		—		—		4		5
Total	14	$	338	$	—	$	3,936	$	—	$	287	$	4,561	$	4,693
(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.


	Nine Months Ended September 30, 2021
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	2	—		—		772		—		5,196		5,968		6,304
Commercial construction	—	—		—		—		—		—		—		—
Business banking	7	—		80		1,420		—		—		1,500		1,551
Consumer real estate	20	866		0		31		0		147		1,045		1,064
Other consumer	—	—		—		—		—		—		—		—
Total	29	$	866	$	80	$	2,223	$	—	$	5,343	$	8,513	$	8,919
(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.


	Nine Months Ended September 30, 2020
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	1	$	—	$	—	$	2,210	$	—	$	—	$	2,210	$	2,210
Commercial industrial	3	—		—		4,997		—		287		5,284		6,489
Commercial construction	3	—		—		2,561		—		—		2,561		2,592
Business banking	3	—		—		171		—		97		268		501
Consumer real estate	23	1,052		—		206		—		—		1,258		1,237
Other consumer	1	4		—		—		—		—		4		5
Total	34	$	1,056	$	—	$	10,145	$	—	$	384	$	11,585	$	13,034
(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

~~The following tables present the restructured loans by portfolio segment and by type of concession for the periods presented:~~S&T BANCORP, INC. AND SUBSIDIARIES

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

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.

NOTE 5. LOANS AND LOANS HELD FOR SALE - continued

In response to the coronavirus, or COVID-19, pandemic and its economic impact on our customers, we implemented a short-term modification program that complies with the CARES Act to provide temporary payment relief to those borrowers directly impacted by 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. Under the applicable guidance, none of these loans were considered restructured as of ~~March 31,~~September 30, 2021. We had 4042 commercial loans that were modified totaling ~~$61.8~~$58.9 million at ~~March 31,~~September 30, 2021 compared to 52 commercial loans that were modified totaling $195.6 million at December 31, 2020.

As of ~~March 31,~~September 30, 2021, we had 2012 commitments to lend an additional ~~$0.8~~$0.3 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 0no TDRs that defaulted during the three and nine months ended September 30, 2021. There were no TDR's that defaulted during the three months ended ~~March 31, 2021. There were 11~~September 30, 2020 and 6 TDRs that defaulted during the ~~three~~nine months ended ~~March 31,~~September 30, 2020 ~~totaling $21.1~~for a total of $18.1 million that were restructured within the last 12 months prior to defaulting.

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 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.

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


	Nonperforming Assets
(dollars in thousands)	September 30, 2021			December 31, 2020
Nonperforming Assets
Nonaccrual loans		$	97,279		$	117,485
Nonaccrual TDRs		14,033			29,289
Total Nonaccrual Loans(1)		111,312			146,774
OREO		13,370			2,155
Total Nonperforming Assets		$	124,682		$	148,929
(1) Included in nonperforming commercial loans is $1.7 million of loans held for sale.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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) Commercial Real Estate, or CRE, 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/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. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

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


		March 31, 2021																			September 30, 2021
		Risk Rating																			Risk Rating
(dollars in thousands)	(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total		(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	$	96,988	$	319,206	$	444,668	$	376,347	$	258,362	$	850,342	$	44,872	0		$	2,390,785	Pass	$	255,876	$	323,514	$	443,487	$	341,387	$	224,258	$	716,460	$	42,326	—		$	2,347,308
Special mention	Special mention	0		450		35,420		8,342		22,541		113,614		0		0		180,367		Special mention	—		1,368		32,780		4,422		38,966		97,322		—		0		174,858
Substandard	Substandard	0		0		17,259		15,772		19,894		146,624		1,482		0		201,030		Substandard	—		445		16,812		19,320		18,673		123,332		1,500		0		180,082
Doubtful	Doubtful	0		0		645		0		0		7,499		0		0		8,144		Doubtful	—		—		532		—		—		—		—		—		532
Total commercial real estate	Total commercial real estate	96,988		319,656		497,992		400,461		300,796		1,118,080		46,354		0		2,780,327		Total commercial real estate	255,876		325,327		493,611		365,129		281,897		937,114		43,826		—		2,702,780

Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	252,427		478,363		168,546		110,278		55,096		179,887		361,828		0		1,606,425		Pass	401,200		156,589		145,923		98,137		43,019		133,945		428,398		—		1,407,211
Special mention	Special mention	0		3,090		28,623		3,562		180		1,289		17,718		0		54,461		Special mention	49		2,927		1,283		3,166		72		1,934		10,667		0		20,098
Substandard	Substandard	5,476		0		6,165		4,415		5,778		12,715		4,153		0		38,701		Substandard	5,196		—		19,180		1,374		5,258		5,532		5,017		0		41,557
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		9,332		—		—		—		—		—		9,332
Total commercial and industrial	Total commercial and industrial	257,902		481,453		203,334		118,255		61,054		193,891		383,699		0		1,699,588		Total commercial and industrial	406,445		159,516		175,718		102,677		48,349		141,411		444,082		0		1,478,198

Commercial construction	Commercial construction																			Commercial construction
Pass	Pass	24,730		127,643		195,245		53,248		2,059		10,856		13,232		0		427,012		Pass	100,774		134,440		172,508		33,903		996		4,298		21,714		—		468,633
Special mention	Special mention	0		3,490		2,862		0		0		8,478		0		0		14,830		Special mention	—		—		—		—		—		4,491		—		0		4,491
Substandard	Substandard	0		0		4,148		0		501		2,967		0		0		7,616		Substandard	—		2,149		7,416		—		—		3,235		—		0		12,800
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial construction	Total commercial construction	24,730		131,133		202,255		53,248		2,560		22,301		13,232		0		449,459		Total commercial construction	100,774		136,589		179,924		33,903		996		12,024		21,714		0		485,924

Business banking	Business banking																			Business banking
Pass	Pass	34,568		121,017		167,764		134,358		89,027		362,534		110,572		265		1,020,105		Pass	173,154		114,831		152,423		117,529		81,934		316,445		103,162		450		1,059,928
Special mention	Special mention	0		502		1,972		1,379		1,621		7,759		287		122		13,642		Special mention	113		153		890		1,406		935		6,265		199		121		10,082
Substandard	Substandard	0		72		1,267		3,777		2,990		25,409		1,141		674		35,330		Substandard	46		71		1,720		3,292		2,036		21,337		978		635		30,115
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	Total business banking	34,568		121,591		171,003		139,513		93,638		395,703		112,001		1,061		1,069,078		Total business banking	173,313		115,055		155,033		122,227		84,905		344,047		104,339		1,206		1,100,125

Consumer real estate	Consumer real estate																			Consumer real estate
Pass	Pass	20,000		116,640		110,942		58,166		55,435		267,411		436,449		23,550		1,088,594		Pass	89,026		107,534		94,583		58,622		42,789		242,252		435,213		23,088		1,093,107
Special mention	Special mention	0		0		0		0		0		2,246		0		0		2,246		Special mention	—		—		—		—		—		2,163		—		0		2,163
Substandard	Substandard	0		0		186		2,089		1,506		7,896		503		1,080		13,260		Substandard	—		—		208		1,765		1,368		4,868		709		1,290		10,208
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	Total consumer real estate	20,000		116,640		111,128		60,255		56,942		277,553		436,952		24,630		1,104,099		Total consumer real estate	89,026		107,534		94,791		60,387		44,157		249,283		435,922		24,378		1,105,478

Other consumer	Other consumer																			Other consumer
Pass	Pass	872		14,119		11,576		5,723		2,673		2,283		35,151		955		73,354		Pass	9,833		10,852		8,470		3,852		1,442		2,888		50,725		1,113		89,175
Special mention	Special mention	0		0		0		0		0		0		0		0		0		Special mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	0		0		109		125		104		4,968		374		1,579		7,260		Substandard	—		52		105		150		368		5,930		255		1,547		8,407
Doubtful	Doubtful	0		0		0		0		0		4		0		0		4		Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	Total other consumer	872		14,119		11,686		5,848		2,778		7,255		35,525		2,534		80,618		Total other consumer	9,833		10,904		8,575		4,002		1,810		8,818		50,980		2,660		97,582

Pass	Pass	429,585		1,176,989		1,098,741		738,120		462,653		1,673,313		1,002,104		24,770		6,606,275		Pass	1,029,863		847,760		1,017,394		653,430		394,438		1,416,288		1,081,538		24,651		6,465,362
Special mention	Special mention	0		7,532		68,876		13,283		24,342		133,387		18,005		122		265,547		Special mention	162		4,448		34,953		8,994		39,973		112,175		10,866		121		211,692
Substandard	Substandard	5,476		72		29,134		26,177		30,773		200,579		7,653		3,332		303,198		Substandard	5,242		2,717		45,441		25,901		27,703		164,234		8,459		3,472		283,169
Doubtful	Doubtful	0		0		645		0		0		7,503		0		0		8,148		Doubtful	—		—		9,864		—		—		—		—		—		9,864
Total	Total	$	435,060	$	1,184,593	$	1,197,397	$	777,580	$	517,769	$	2,014,783	$	1,027,762	$	28,225	$	7,183,168	Total	$	1,035,267	$	854,925	$	1,107,652	$	688,325	$	462,114	$	1,692,697	$	1,100,863	$	28,244	$	6,970,087

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


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

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

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

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

Business banking	Business banking																			Business banking
Pass	Pass	296,254		154,335		123,207		86,552		77,238		266,042		103,571		291		1,107,490		Pass	296,254		154,335		123,207		86,552		77,238		266,042		103,571		291		1,107,490
Special mention	Special mention	0		1,060		1,147		1,602		1,084		6,866		637		123		12,519		Special mention	—		1,060		1,147		1,602		1,084		6,866		637		123		12,519
Substandard	Substandard	103		1,078		3,896		3,209		3,880		25,871		1,341		680		40,058		Substandard	103		1,078		3,896		3,209		3,880		25,871		1,341		680		40,058
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	Total business banking	296,357		156,473		128,250		91,363		82,202		298,779		105,549		1,094		1,160,067		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	Consumer real estate																			Consumer real estate
Pass	Pass	120,736		122,171		67,700		63,653		73,805		243,939		438,888		22,667		1,153,559		Pass	120,736		122,171		67,700		63,653		73,805		243,939		438,888		22,667		1,153,559
Special mention	Special mention	0		0		1,489		0		0		150		132		0		1,771		Special mention	—		—		1,489		—		—		150		132		—		1,771
Substandard	Substandard	0		373		742		1,480		2,449		6,958		0		0		12,002		Substandard	—		373		742		1,480		2,449		6,958		—		—		12,002
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	Total consumer real estate	120,736		122,544		69,931		65,133		76,254		251,047		439,020		22,667		1,167,332		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	Other consumer																			Other consumer
Pass	Pass	18,849		13,162		6,784		3,395		2,082		687		26,647		2,767		74,373		Pass	18,849		13,162		6,784		3,395		2,082		687		26,647		2,767		74,373
Special mention	Special mention	0		0		0		0		0		0		0		0		0		Special mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	15		0		0		0		0		3,367		744		2,386		6,512		Substandard	15		—		—		—		—		3,367		744		2,386		6,512
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885		Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885

Pass	Pass	1,355,291		1,136,715		792,352		502,350		494,436		1,337,221		1,011,297		25,726		6,655,389		Pass	1,355,292		1,136,716		792,352		502,350		494,436		1,337,222		1,011,297		25,724		6,655,389
Special Mention	Special Mention	5,274		47,302		19,350		24,802		57,026		91,677		24,296		123		269,851		Special Mention	5,274		47,302		19,350		24,802		57,026		91,677		24,296		124		269,851
Substandard	Substandard	118		30,083		20,032		33,648		57,105		137,398		5,607		3,066		287,056		Substandard	118		30,083		20,032		33,648		57,105		137,398		5,606		3,066		287,056
Doubtful	Doubtful	0		645		0		4,401		1,989		6,529		0		0		13,564		Doubtful	—		645		—		4,401		1,989		6,529		—		—		13,564
Total	Total	$	1,360,684	$	1,214,746	$	831,734	$	565,201	$	610,556	$	1,572,826	$	1,041,199	$	28,914	$	7,225,860	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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued

The following tables presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of ~~March 31,~~September 30, 2021 and December 31, 2020:


		March 31, 2021																			September 30, 2021
(dollars in thousands)	(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total		(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate	Commercial real estate																			Commercial real estate
Performing	Performing	$	96,988	$	319,656	$	481,588	$	400,461	$	294,122	$	1,046,085	$	46,354	$	0	$	2,685,253	Performing	$	255,876	$	325,327	$	477,766	$	362,382	$	275,458	$	907,348	$	43,826	$	—	$	2,647,983
Nonperforming	Nonperforming	0		0		16,404		0		6,674		71,995		0		0		95,074		Nonperforming	—		—		15,845		2,747		6,439		29,766		—		—		54,797
Total commercial real estate	Total commercial real estate	96,988		319,656		497,992		400,461		300,796		1,118,080		46,354		0		2,780,327		Total commercial real estate	255,876		325,327		493,611		365,129		281,897		937,114		43,826		—		2,702,780

Commercial and industrial	Commercial and industrial																			Commercial and industrial
Performing	Performing	252,427		481,453		203,334		117,623		55,366		193,614		383,355		0		1,687,172		Performing	401,249		159,516		153,731		102,310		44,963		141,201		441,319		—		1,444,289
Nonperforming(1)		5,476		0		0		631		5,689		276		344		0		12,416
Nonperforming																				Nonperforming	5,196		0		21,987		367		3,386		210		2,763		—		33,909
Total commercial and industrial	Total commercial and industrial	257,902		481,453		203,334		118,255		61,054		193,891		383,699		0		1,699,588		Total commercial and industrial	406,445		159,516		175,718		102,677		48,349		141,411		444,082		0		1,478,198

Commercial construction	Commercial construction																			Commercial construction
Performing	Performing	24,730		131,133		202,255		53,248		2,560		21,917		13,232		0		449,074		Performing	100,774		136,589		176,567		33,903		996		11,328		21,714		—		481,871
Nonperforming	Nonperforming	0		0		0		0		0		384		0		0		384		Nonperforming	—		—		3,357		—		—		696		—		—		4,053
Total commercial construction	Total commercial construction	24,730		131,133		202,255		53,248		2,560		22,301		13,232		0		449,459		Total commercial construction	100,774		136,589		179,924		33,903		996		12,024		21,714		0		485,924

Business Banking
Business banking																				Business banking
Performing	Performing	34,568		121,591		170,640		137,748		92,837		384,332		111,932		1,004		1,054,651		Performing	173,267		115,055		154,639		120,811		84,187		336,486		104,310		1,149		1,089,904
Nonperforming	Nonperforming	0		0		362		1,765		801		11,371		69		57		14,426		Nonperforming	46		—		394		1,416		718		7,561		29		57		10,221
Total business banking	Total business banking	34,568		121,591		171,003		139,513		93,638		395,703		112,001		1,061		1,069,078		Total business banking	173,313		115,055		155,033		122,227		84,905		344,047		104,339		1,206		1,100,125

Consumer real estate	Consumer real estate																			Consumer real estate
Performing	Performing	20,000		116,640		110,249		59,931		56,397		272,547		436,628		23,759		1,096,150		Performing	89,026		107,482		94,501		60,140		43,392		244,339		434,893		23,562		1,097,335
Nonperforming	Nonperforming	0		0		880		324		545		5,006		324		871		7,949		Nonperforming	—		52		290		247		765		4,944		1,029		816		8,143
Total consumer real estate	Total consumer real estate	20,000		116,640		111,128		60,255		56,942		277,553		436,952		24,630		1,104,099		Total consumer real estate	89,026		107,534		94,791		60,387		44,157		249,283		435,922		24,378		1,105,478

Other consumer	Other consumer																			Other consumer
Performing	Performing	872		14,119		11,485		5,848		2,697		5,689		35,346		2,397		78,455		Performing	9,833		10,904		8,575		3,813		1,810		8,818		50,980		2,660		97,393
Nonperforming	Nonperforming	0		0		201		0		81		1,566		179		137		2,163		Nonperforming	—		—		—		189		—		—		—		—		189
Total other consumer	Total other consumer	872		14,119		11,686		5,848		2,778		7,255		35,525		2,534		80,618		Total other consumer	9,833		10,904		8,575		4,002		1,810		8,818		50,980		2,660		97,582

Performing	Performing	429,585		1,184,593		1,179,550		774,859		503,978		1,924,183		1,026,847		27,160		7,050,755		Performing	1,030,025		854,873		1,065,779		683,359		450,806		1,649,520		1,097,042		27,371		6,858,775
Nonperforming		5,476		0		17,847		2,720		13,790		90,599		915		1,065		132,413
Nonperforming(1)																				Nonperforming(1)	5,242		52		41,873		4,966		11,308		43,177		3,821		873		111,312
Total	Total	$	435,060	$	1,184,593	$	1,197,397	$	777,580	$	517,769	$	2,014,783	$	1,027,762	$	28,225	$	7,183,168	Total	$	1,035,267	$	854,925	$	1,107,652	$	688,325	$	462,114	$	1,692,697	$	1,100,863	$	28,244	$	6,970,087
(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) Included in nonperforming commercial loans is $1.7 million of loans held for sale with $0.3 million in 2010, $0.9 million in 2012 and $0.5 million in 2013.																				(1) Included in nonperforming commercial loans is $1.7 million of loans held for sale with $0.3 million in 2010, $0.9 million in 2012 and $0.5 million in 2013.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


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

Commercial real estate	Commercial real estate																			Commercial real estate
Performing	Performing	$	334,086	$	459,799	$	417,944	$	313,465	$	394,972	$	722,782	$	47,830	$	0	$	2,690,879	Performing	$	334,086	$	459,799	$	417,944	$	313,465	$	394,972	$	722,781	$	47,830	$	—	$	2,690,877
Nonperforming	Nonperforming	0		16,404		0		6,675		20,212		57,778		0		0		101,070		Nonperforming	—		16,404		—		6,675		20,212		57,779		—		—		101,070
Total commercial real estate	Total commercial real estate	334,086		476,203		417,944		320,140		415,184		780,560		47,830		0		2,791,947		Total commercial real estate	334,086		476,203		417,944		320,140		415,184		780,560		47,830		—		2,791,947

Commercial and industrial	Commercial and industrial																			Commercial and industrial
Performing	Performing	457,828		214,144		143,706		69,411		28,426		220,701		408,350		0		1,542,566		Performing	457,828		214,144		143,706		69,411		28,426		220,701		408,351		—		1,542,567
Nonperforming	Nonperforming	0		1,313		1,584		12,838		62		908		281		0		16,985		Nonperforming	—		1,313		1,584		12,838		62		908		280		—		16,985
Total commercial and industrial	Total commercial and industrial	457,828		215,457		145,290		82,249		28,488		221,609		408,631		0		1,559,552		Total commercial and industrial	457,828		215,457		145,290		82,249		28,488		221,609		408,631		—		1,559,552

Commercial construction	Commercial construction																			Commercial construction
Performing	Performing	132,813		230,907		63,535		2,921		6,346		16,393		12,778		0		465,692		Performing	132,813		230,907		63,535		2,921		6,346		16,393		12,778		—		465,693
Nonperforming	Nonperforming	0		0		0		0		0		384		0		0		384		Nonperforming	—		—		—		—		—		384		—		—		384
Total commercial construction	Total commercial construction	132,813		230,907		63,535		2,921		6,346		16,777		12,778		0		466,077		Total commercial construction	132,813		230,907		63,535		2,921		6,346		16,777		12,778		—		466,077

Business Banking	Business Banking																			Business Banking
Performing	Performing	296,327		156,164		126,432		90,414		80,106		286,970		105,494		1,037		1,142,944		Performing	296,327		156,164		126,432		90,414		80,106		286,970		105,494		1,037		1,142,944
Nonperforming	Nonperforming	30		309		1,818		949		2,096		11,809		55		57		17,123		Nonperforming	30		309		1,818		949		2,096		11,809		55		57		17,123
Total business banking	Total business banking	296,357		156,473		128,250		91,363		82,202		298,779		105,549		1,094		1,160,067		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	Consumer real estate																			Consumer real estate
Performing	Performing	120,736		122,315		69,225		63,647		74,690		245,331		438,702		21,572		1,156,216		Performing	120,736		122,315		69,225		63,647		74,690		245,331		438,701		21,571		1,156,216
Nonperforming	Nonperforming	0		229		706		1,486		1,564		5,716		318		1,096		11,116		Nonperforming	—		229		706		1,486		1,564		5,716		319		1,096		11,116
Total consumer real estate	Total consumer real estate	120,736		122,544		69,931		65,133		76,254		251,047		439,020		22,667		1,167,332		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	Other consumer																			Other consumer
Performing	Performing	18,864		13,162		6,784		3,395		2,082		3,958		27,391		5,153		80,789		Performing	18,864		13,162		6,784		3,395		2,082		3,958		27,391		5,153		80,789
Nonperforming	Nonperforming	0		0		0		0		0		96		0		0		96		Nonperforming	—		—		—		—		—		96		—		—		96
Total other consumer	Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885		Total other consumer	18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885

Performing	Performing	1,360,654		1,196,491		827,625		543,253		586,622		1,496,135		1,040,544		27,762		7,079,086		Performing	1,360,654		1,196,492		827,626		543,253		586,622		1,496,134		1,040,545		27,760		7,079,086
Nonperforming	Nonperforming	30		18,254		4,108		21,948		23,934		76,691		654		1,153		146,774		Nonperforming	30		18,254		4,108		21,948		23,934		76,692		654		1,154		146,774
Total	Total	$	1,360,684	$	1,214,746	$	831,734	$	565,201	$	610,556	$	1,572,826	$	1,041,199	$	28,914	$	7,225,860	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										September 30, 2021
(dollars in thousands)	(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing		Total Past Due Loans			Total Loans		(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing(2)		Total Past Due Loans		Total Loans
Commercial real estate	Commercial real estate	$	2,685,253	$	0	$	0	$	95,074	$	95,074		$	2,780,327	Commercial real estate	$	2,647,983	$	—	$	—	$	54,797	$	54,797	2,702,780
Commercial and industrial~~(1)~~	Commercial and industrial~~(1)~~	1,687,172		0		0		12,416		12,416			1,699,588		Commercial and industrial~~(1)~~	1,444,289		—		—		33,909		33,909		1,478,198
Commercial construction	Commercial construction	449,074		0		0		384		384			449,459		Commercial construction	481,871		—		—		4,053		4,053		485,924
Business banking	Business banking	1,053,430		1,191		30		14,426		15,647			1,069,078		Business banking	1,088,013		970		921		10,221		12,112		1,100,125
Consumer real estate	Consumer real estate	1,094,601		1,444		104		7,949		9,498			1,104,099		Consumer real estate	1,095,557		833		945		8,143		9,921		1,105,478
Other consumer	Other consumer	78,314		102		39		2,163		2,304			80,618		Other consumer	97,151		219		23		189		431		97,582
Total~~(2)~~(1)	Total~~(2)~~(1)	$	7,047,844	$	2,737	$	174	$	132,413	$	135,324		$	7,183,168	Total~~(2)~~(1)	$	6,854,864	$	2,022	$	1,889	$	111,312	$	115,223	$	6,970,087

(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.

~~(2)~~ We had 4042 loans that were modified totaling ~~$61.8~~$58.9 million under the CARES Act at ~~March 31,~~September 30, 2021. 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,~~modifications, this delinquency table may not accurately reflect the credit risk associated with these loans.

(2) Included in nonperforming commercial loans is $1.7 million of loans held for sale.

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															December 31, 2020
(dollars in thousands)	(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		(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90+ Days Still Accruing (2)		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	Commercial real estate	$	2,690,877	$	0	$	0	$	0	$	101,070	$	101,070	$	2,791,947	Commercial real estate	$	2,690,877	$	—	$	—	$	—	$	101,070	$	101,070	$	2,791,947
Commercial and industrial	Commercial and industrial	1,542,567		0		0		0		16,985		16,985		1,559,552		Commercial and industrial	1,542,567		—		—		—		16,985		16,985		1,559,552
Commercial construction	Commercial construction	462,094		19		3,580		0		384		3,983		466,077		Commercial construction	462,094		19		3,580		—		384		3,983		466,077
Business banking	Business banking	1,140,581		1,614		379		371		17,122		19,486		1,160,067		Business banking	1,140,581		1,614		379		371		17,122		19,486		1,160,067
Consumer real estate	Consumer real estate	1,153,028		1,087		1,968		132		11,117		14,304		1,167,332		Consumer real estate	1,153,028		1,087		1,968		132		11,117		14,304		1,167,332
Other consumer	Other consumer	80,583		168		37		0		96		302		80,885		Other consumer	80,583		168		37		—		96		302		80,885
Total(1)	Total(1)	$	7,069,730	$	2,888	$	5,965	$	503	$	146,774	$	156,130	$	7,225,860	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.	(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.															(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 by class of loan:


										March 31, 2021											September 30, 2021
		March 31, 2021								For the three months ended		September 30, 2021								For the three and nine months ended
(dollars in thousands)	(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)			(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual(2)		Nonaccrual With No Related Allowance				Interest Income Recognized on Nonaccrual(1)		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	Commercial real estate	$	101,070	$	95,074	$	52,460	$	0	$	61		Commercial real estate	$	101,070	$	54,797	$	47,730			$	493	$	556
Commercial and industrial~~(2)~~	Commercial and industrial~~(2)~~	16,985		12,416		11,425		0		43			Commercial and industrial~~(2)~~	16,985		33,909		12,566				6		88
Commercial construction	Commercial construction	384		384		0		0		0			Commercial construction	384		4,053		3,357				—		—
Business banking	Business banking	17,122		14,426		397		0		137			Business banking	17,122		10,221		1,492				57		333
Consumer real estate	Consumer real estate	11,117		7,949		345		0		110			Consumer real estate	11,117		8,143		—				86		405
Other consumer	Other consumer	96		2,163		0		0		1			Other consumer	96		189		—				—		1
Total	Total	$	146,774	$	132,413	$	64,628	$0		$	352		Total	$	146,774	$	111,312	$	65,145			$	642	$	1,383

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

(2)~~In addition to~~ Included in nonperforming commercial loans is $1.7 million of ~~$132.4 million, we have a $2.8 million commercial and industrial~~loans held for ~~sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.~~sale.

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
.


									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	$	—	$	22
Commercial and industrial	10,911		16,985		6,436		—		101
Commercial construction	737		384		285		—		—
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		—		—		4
Total	$	54,057	$	146,774	$	71,410	$	503	$	826

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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									September 30, 2021
		Type of Collateral									Type of Collateral
(dollars in thousands)	(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other		(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	Commercial real estate	$	86,683	$	0	$	5,350	$	0	Commercial real estate	$	51,006	$	—	$	—	$	—
Commercial and industrial	Commercial and industrial	335		11,968		0		0		Commercial and industrial	272		13,738		—		21,730
Commercial construction	Commercial construction	3,245		0		0		0		Commercial construction	6,057		—		—		—
Business banking	Business banking	1,856		12		0		0		Business banking	1,714		1,424		—		—
Consumer real estate	Consumer real estate	345		0		0		0		Consumer real estate	—		—		—		—

Total	Total	$	92,464	$	11,980	$	5,350	$	0	Total	$	59,049	$	15,162	$	—	$	21,730


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

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

The following tables present activity in the ACL for the periods presented:


		Three Months Ended March 31, 2021															Three Months Ended September 30, 2021
(dollars in thousands)	(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans		(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:	Allowance for credit losses on loans:															Allowance for credit losses on loans:
Balance at beginning of period	Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612	Balance at beginning of period	$	63,186	$	14,426	$	5,905	$	14,756	$	8,647	$	2,717	$	109,636
Provision for credit losses on loans(1)	Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301		Provision for credit losses on loans(1)	(7,856)		11,599		1,391		(2,689)		(80)		(63)		2,302
Charge-offs	Charge-offs	(810)		(4,302)		0		(917)		(271)		(232)		(6,532)		Charge-offs	(3,661)		(2)		(56)		(167)		(76)		(245)		(4,207)
Recoveries	Recoveries	0		137		1		166		82		334		720		Recoveries	1		216		2		241		33		123		616
Net (Charge-offs)/Recoveries	Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)		Net (Charge-offs)/Recoveries	(3,660)		214		(54)		74		(43)		(122)		(3,591)
Balance at End of Period	Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101	Balance at End of Period	$	51,670	$	26,239	$	7,242	$	12,141	$	8,524	$	2,532	$	108,348
(1) Excludes unfunded commitments	(1) Excludes unfunded commitments															(1) Excludes unfunded commitments


		Three Months Ended March 31, 2020															Three Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans		(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:	Allowance for credit losses on loans:															Allowance for credit losses on loans:
Balance at beginning of period	Balance at beginning of period	$	30,577	$	15,681	$	7,900	$	0	$	6,337	$	1,729	$	62,224	Balance at beginning of period	$	57,730	$	19,164	$	8,874	$	14,404	$	11,585	$	2,852	$	114,609
Impact of CECL adoption		4,810		7,853		(3,376)		12,898		4,525		642		27,352

Provision for credit losses on loans(1)	Provision for credit losses on loans(1)	7,639		6,196		2,309		1,194		472		620		18,430		Provision for credit losses on loans(1)	23,839		(4,155)		(1,617)		2,072		(797)		(40)		19,302
Charge-offs	Charge-offs	(442)		(9,879)		(229)		(460)		(172)		(248)		(11,430)		Charge-offs	(10,187)		(1,196)		—		(1,748)		(252)		(284)		(13,667)
Recoveries	Recoveries	27		19		2		74		38		114		274		Recoveries	172		398		1		64		41		78		754
Net (Charge-offs)/Recoveries	Net (Charge-offs)/Recoveries	(415)		(9,860)		(227)		(386)		(134)		(134)		(11,156)		Net (Charge-offs)/Recoveries	(10,015)		(798)		1		(1,684)		(211)		(206)		(12,913)
Balance at End of Period	Balance at End of Period	$	42,611	$	19,870	$	6,606	$	13,706	$	11,200	$	2,857	$	96,850	Balance at End of Period	$	71,554	$	14,211	$	7,258	$	14,792	$	10,577	$	2,606	$	120,998

(1) Excludes unfunded commitments

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued


	Nine Months Ended September 30, 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)	(2,922)		14,552		54		(2,736)		(1,335)		(1)		7,612
Charge-offs	$	(12,030)	$	(4,777)	$	(56)	$	(1,494)	$	(422)	$	(698)	$	(19,477)
Recoveries	966		364		5		454		267		545		2,601
Net (Charge-offs)/Recoveries	(11,064)		(4,413)		(51)		(1,040)		(155)		(153)		(16,876)
Balance at End of Period	$	51,670	$	26,239	$	7,242	$	12,141	$	8,524	$	2,532	$	108,348
(1) Excludes the provision for credit losses for unfunded commitments.


	Nine Months Ended September 30, 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	$	—	$	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)	52,185		62,949		2,712		4,197		32		1,489		123,564
Charge-offs	(16,229)		(72,692)		—		(2,469)		(470)		(1,556)		(93,416)
Recoveries	211		420		22		166		153		302		1,274
Net (Charge-offs)/Recoveries	(16,018)		(72,272)		22		(2,303)		(317)		(1,254)		(92,142)
Balance at End of Period	$	71,554	$	14,211	$	7,258	$	14,792	$	10,577	$	2,606	$	120,998
(1) Excludes unfunded commitments

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 Form 10-K, but before the end of the first quarter of 2020. The updated information supported a loss existed at January 1, 2020.

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. The provision for credit losses decreased ~~$16.9~~$14.1 million and $115.6 million to ~~$3.1~~$3.4 million and $8.7 million for the three and nine months ended

The significant decrease in the provision for credit losses ~~of $16.9 million was primarily due to a significant increase in provision needed~~ during the three and nine months ended ~~March 31, 2020~~September 30, 2021 was mainly due to the ~~negative impact~~customer fraud in June of ~~the COVID-19 pandemic~~2020 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~~an improved 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,~~in 2021 compared to ~~the same period in 2020 mainly due to a decrease of $3.1 million for the economic forecast.~~2020. 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,~~September 30, 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 addition of $53.6 million of hotel loans which moved to nonperforming during the fourth quarter of 2020 as a result of continued deterioration due to the pandemic.

The C&I portfolio included $499.1 million of loans originated under the PPP at March 31, 2021. The loans are 100 percent guaranteed by the SBA, therefore, we have not assigned any ACL to these loans at March 31, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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~~cash 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~~Our current ~~positions and related future~~ collateral requirements ~~relating to them, we believe any~~do not have a material effect on our cash flow or liquidity ~~position to be immaterial.~~position.

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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss).

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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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)							Derivatives (included in Other Assets)						Derivatives (included in Other Liabilities)
(dollars in thousands)	(dollars in thousands)	March 31, 2021			December 31, 2020			March 31, 2021			December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Derivatives not Designated as Hedging Instruments:	Derivatives not Designated as Hedging Instruments:													Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans	Interest Rate Swap Contracts - Commercial Loans													Interest Rate Swap Contracts - Commercial Loans
Fair value	Fair value		$	40,415		$	78,319		$	40,818		$	79,033	Fair value		$	42,177		$	78,319		$	42,554		$	79,033
Notional amount	Notional amount		983,243			983,638			983,243			983,638		Notional amount		998,385			983,638			998,385			983,638
Collateral posted	Collateral posted		0			0			43,340			77,930		Collateral posted		—			—			43,190			77,930
Interest Rate Lock Commitments - Mortgage Loans	Interest Rate Lock Commitments - Mortgage Loans													Interest Rate Lock Commitments - Mortgage Loans
Fair value	Fair value		1,509			2,900			0			0		Fair value		812			2,900			—			—
Notional amount	Notional amount		44,519			51,053			0			0		Notional amount		22,674			51,053			—			—
Forward Sale Contracts - Mortgage Loans	Forward Sale Contracts - Mortgage Loans													Forward Sale Contracts - Mortgage Loans
Fair value	Fair value		226			0			0			385		Fair value		101			—			—			385
Notional amount	Notional amount		$	36,835		$	0		$	0		$	47,062	Notional amount		$	18,915		$	—		$	—		$	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)
(dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Gross amounts recognized $ 44,022 $ 82,655 $ 43,865 $ 82,626
Gross amounts offset (3,607) (4,336) (3,047) (3,593)
Net Amounts Presented in the Consolidated Balance Sheets 40,415 78,319 40,818 79,033
Gross amounts not offset(1)
0 0 (43,340) (77,930)
Net Amount $ 40,415 $ 78,319 $ (2,522) $ 1,103


	Derivatives (included in Other Assets)						Derivatives (included in Other Liabilities)
(dollars in thousands)	September 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Derivatives not Designated as Hedging Instruments:
Gross amounts recognized		$	43,746		$	82,655		$	44,170		$	82,626
Gross amounts offset		(1,569)			(4,336)			(1,616)			(3,593)
Net Amounts Presented in the Consolidated Balance Sheets		42,177			78,319			42,554			79,033
Gross amounts not offset(1)		—			—			(43,190)			(77,930)
Net Amount		$	42,177		$	78,319		$	(636)		$	1,103

(1) Amounts represent collateral posted for the periods ~~presented.~~presented and included in other assets on our Consolidated Balance Sheets.

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


		Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020				(dollars in thousands)	2021		2020			2021		2020
Derivatives not Designated as Hedging Instruments	Derivatives not Designated as Hedging Instruments										Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans	Interest rate swap contracts—commercial loans		$	310		$	114				Interest rate swap contracts—commercial loans	$	22		$	(537)	$	337	$	(485)
Interest rate lock commitments—mortgage loans	Interest rate lock commitments—mortgage loans		(1,759)			2,606					Interest rate lock commitments—mortgage loans	192			86		712		2,877
Forward sale contracts—mortgage loans	Forward sale contracts—mortgage loans		979			(1,293)					Forward sale contracts—mortgage loans	(325)			144		(2,314)		(451)
Total Derivatives (Loss)/Gain	Total Derivatives (Loss)/Gain		$	(470)		$	1,427				Total Derivatives (Loss)/Gain	$	(111)		$	(307)	$	(1,265)	$	1,941

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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)	(dollars in thousands)	March 31, 2021			December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Commitments to extend credit	Commitments to extend credit		$	2,261,223		$	2,185,752	Commitments to extend credit		$	2,500,541		$	2,185,752
Standby letters of credit	Standby letters of credit		88,418			89,095		Standby letters of credit		90,250			89,095
Total	Total		$	2,349,641		$	2,274,847	Total		$	2,590,791		$	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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss). 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, 2021 was due to a decrease in the loss rates for the construction portfolio.~~


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020
Balance at beginning of period		$	4,858		$	7,004		$	4,467		$	3,112
Impact of adopting ASU 2016-13 at January 1, 2020		—			—			—			1,349
Balance after adoption of ASU 2016-13		4,858			7,004			4,467			4,461
Provision for credit losses		1,085			(1,816)			1,476			727
Total		$	5,943		$	5,188		$	5,943		$	5,188

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 9. 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, 2021									Three Months Ended March 31, 2020											Three Months Ended September 30, 2021									Three Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Pre-Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Pre-Tax Amount				Tax Benefit (Expense)			Net of Tax Amount			(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	Change in net unrealized gains/(losses) on debt securities available-for-sale		$	(9,712)		$	2,072		$	(7,640)		$	21,568			$	(4,592)		$	16,976	Change in net unrealized gains/(losses) on debt securities available-for-sale		$	(5,676)		$	1,211		$	(4,465)		$	(882)		$	188		$	(694)

Adjustment to funded status of employee benefit plans (1)	Adjustment to funded status of employee benefit plans (1)		(343)			73			(270)			465				(99)			366		Adjustment to funded status of employee benefit plans (1)		(215)			46			(169)			1,163			(248)			915
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.
Other Comprehensive Income																					Other Comprehensive Income		$	(5,891)		$	1,257		$	(4,634)		$	281		$	(60)		$	221
(1) Pension settlement accounting was recognized during the periods ended September 30, 2021 resulting in a charge of $0.4 million for the three months ended September 30, 2021 immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.																					(1) Pension settlement accounting was recognized during the periods ended September 30, 2021 resulting in a charge of $0.4 million for the three months ended September 30, 2021 immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.

														Nine Months Ended September 30, 2021											Nine Months Ended September 30, 2020

(dollars in thousands)																					(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																					Change in net unrealized gains/(losses) on available-for-sale debt securities		$	(15,065)		$	3,215		$	(11,850)		$	24,883		$	(5,294)		$	19,589
Reclassification adjustment for net (gains)/losses on debt securities available-for-sale included in net income (1)																					Reclassification adjustment for net (gains)/losses on debt securities available-for-sale included in net income (1)		—			—			—			(142)			30			(112)
Adjustment to funded status of employee benefit plans (1)																					Adjustment to funded status of employee benefit plans (1)		2,351			(501)			1,850			2,092			(446)			1,646
Other Comprehensive (Loss)/Income																					Other Comprehensive (Loss)/Income		$	(12,714)		$	2,714		$	(10,000)		$	26,833		$	(5,710)		$	21,123
(1) Pension settlement accounting was recognized during the periods ended September 30, 2021 resulting in a charge of $1.3 million for the nine months ended September 30, 2021 immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.																					(1) Pension settlement accounting was recognized during the periods ended September 30, 2021 resulting in a charge of $1.3 million for the nine months ended September 30, 2021 immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 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~~projected 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, 0no service costs are included in net periodic pension expense.

The investment policy for S&T's defined benefit plan is 90 percent fixed income and 10 percent equity and cash. The expected long-term rate of return on plan assets is 2.42 percent as of September 30, 2021 compared to 3.45 percent for the same period in ~~prior periods.~~2020.

We remeasured our pension obligation and recognized a pension settlement charge of ~~$0.7~~$0.4 million and $1.3 million for the three and nine months ended ~~March 31,~~September 30, 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,						Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020				(dollars in thousands)	2021		2020			2021		2020
Components of Net Periodic Pension Cost	Components of Net Periodic Pension Cost										Components of Net Periodic Pension Cost

Interest cost on projected benefit obligation	Interest cost on projected benefit obligation		$	703		$	891				Interest cost on projected benefit obligation	$	721		$	905	$	2,221	$	2,686
Expected return on plan assets	Expected return on plan assets		(716)			(972)					Expected return on plan assets	(668)			(970)		(2,029)		(2,913)
Net amortization	Net amortization		248			384					Net amortization	246			411		792		1,180
Settlement Charge	Settlement Charge		749			0					Settlement Charge	370			671		1,296		671

Net Periodic Pension Expense	Net Periodic Pension Expense		$	984		$	303				Net Periodic Pension Expense	$	669		$	1,017	$	2,280	$	1,624

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

NOTE 11. SHARE REPURCHASE PLAN

On March 15, 2021, our Board of Directors authorized an extension of its $50 million share repurchase plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase plan through March 31, 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,~~September 30, 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 and nine months ended ~~March 31,~~September 30, 2021, we had 0no 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.

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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 and nine month periods ended ~~March 31,~~September 30, 2021 and 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”, “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; 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; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party 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;~~operations, as well as compliance with any vaccine or testing mandate issued by the U.S. Department of Labor's occupational Safety and Health Administration ("OSHA") or any other government agency; 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, 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 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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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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,~~September 30, 2021 ~~have~~ remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, 2020 under Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Overview

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of ~~$9.3~~$9.4 billion at ~~March 31,~~September 30, 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 be a high performing regional community bank. We strive to do this by delivering exceptional service and 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. We acknowledge that each of our five markets are in different stages of development and that our 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.

COVID-19 Update

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. On September 9, 2021, President Biden announced that OSHA is developing a rule that will require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require unvaccinated workers to produce a negative test result on at least a weekly basis before coming to work. As an employer with more than 100 employees, S&T will be required to comply with the rule. We are currently monitoring the requirements and evaluating any potential impact of this rulemaking.

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 closely monitoring our asset quality with a focus on the loan portfolios that have been significantly impacted by the pandemic, including our hotel portfolio. We did experience some improvement in our asset quality during the three and nine months ended ~~March 31,~~September 30, 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~~Loan demand was challenging in the first half of 2021, but we have seen growth trends improving late in the second quarter and for the third quarter of 2021. Net interest income ~~is also being~~was favorably 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~~loans which contributed $4.2 million and ~~we had an average balance of PPP loans of $454.8~~$14.2 million ~~which positively impacted net~~for the three and nine months ended September 30, 2021 to interest ~~income by $5.8 million.~~income.

Earnings Summary

We recognized ~~record~~ net income of ~~$31.9~~$27.6 million, or ~~$0.81~~$0.70 per diluted share and $87.9 million, or $2.24 per diluted share for the three and nine months ended ~~March 31,~~September 30, 2021 compared to ~~$13.2~~a net income of $16.7 million, or ~~$0.34~~$0.43 per diluted share inand a net loss of $(3.1) million, or $(0.08) per diluted share for the same ~~period of~~periods in 2020. The increase in net income for the three and nine months ended ~~March 31,~~September 30, 2021 ~~of $18.7 million~~ was primarily due to a significant decrease of ~~$16.9~~$14.1 million and $115.2 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~~The significant decrease in the provision for credit losses during the three and nine months ended September 30, 2021 was mainly due to a customer fraud in 2020 that resulted in a $58.7 million charge-off in June of 2020 as well as the impact of the COVID-19 pandemic that resulted in the need for a greater provision in 2020 compared to 2021 based on the relevant economic forecast.

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

~~March 31, 2021 compared~~Net interest income decreased $0.6 million and $1.8 million to ~~March 31, 2020 due to a significant increase in deposits as a result of government stimulus programs, the PPP~~$68.7 million and ~~our customers' liquidity preferences. Average loan balances increased $58.8~~$207.7 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to $69.3 million and $209.5 million in 2020. The decrease in interest income was primarily due to lower average loan balances and the low rate interest environment compared to the same periods in 2020. Average loan balances decreased $480.7 million and $320.8 million for the three and nine months ended September 30, 2021 compared to the same period in 2020 due to PPP loans. The decrease in average interest-bearing liabilities 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 for the three months ended March 31, 2021 compared to the same periodperiods in 2020. Net interest margin, on a fully taxable-equivalent, or FTE, basis (non-GAAP), decreased 6 basis points to 3.47 percent for the three months ended March 31, 2021 compared to 3.53 percent for the same period in 2020 due to the decline in short-term interest rates during 2021. PPP loans positively impacted theOur net interest margin on an FTE basis ~~by 10 basis points~~(non-GAAP) decreased to 3.14 percent and 3.25 percent for the three and nine months ended ~~March 31, 2021.~~September 30, 2021 compared to 3.29 percent and 3.37 percent for the same periods in 2020 primarily due to lower short-term interest rates and higher interest bearing deposits with banks. 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 loans and on unfunded commitments, decreased ~~$16.9~~$14.1 million and $115.2 million to ~~$3.1~~$3.4 million and $9.1 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to ~~$20.0~~$17.5 million inand $124.3 million for the same ~~period~~periods in 2020. The significant decrease in the provision for credit losses during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was mainly due to the ~~$16.3 million increase~~customer fraud previously described above and an improved economic forecast in ~~our ACL in response to the pandemic~~2021. The decrease in the ~~prior year. For~~provision for credit losses during the three months ended ~~March 31,~~September 30, 2021 ~~we had net charge-offs of $5.8 million~~was due to an improved economic forecast in 2021 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 decreased $0.6 million and increased ~~$4.8 million to $17.2~~$4.4 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to $12.4 million for 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. ~~Also impacting~~Debit and credit card and service charges on deposit accounts increased in both the three and nine months ended September 30, 2021 as customer activity has increased in the improving economic environment. Wealth management income increased in both periods due to higher assets under management from market appreciation and an increase in customer activity. Partially offsetting these increases was ~~higher other~~a decrease in commercial loan swap income due to lower activity as a result of ~~$3.4~~the pandemic and interest rate environment.

Noninterest expense decreased $1.0 million to $47.2 million for the three months ended ~~March 31,~~September 30, 2021 ~~related~~and increased $0.5 million to ~~changes in~~$138.6 million for the ~~valuation of our deferred compensation plan and equity securities portfolio~~nine months ended September 30, 2021 compared to $48.2 million and $138.1 million for the same ~~period~~periods in 2020. ~~Offsetting this increase was a decline~~The decrease 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~~noninterest expense ~~decreased $0.8 million to $45.6 million~~ for the three months ended ~~March 31,~~September 30, 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~~lower marketing, FDIC insurance and professional services and legal services compared to the ~~three~~prior period. The higher noninterest expense for the nine months ended ~~March 31, 2020 compared~~September 30, 2021 was mainly due to ~~no merger-related expenses in 2021. This decrease was offset by increases~~an increase of ~~$2.0 million in~~ salaries and employee benefits of $5.7 million offset by lower FDIC insurance, marketing and ~~$0.5~~$2.3 million ~~in professional services and legal expenses for the three months ended March 31, 2021.~~less of merger-related expenses.

The provision for income taxes increased ~~$4.5~~$3.0 million and $26.3 million to ~~$7.3~~$6.3 million and $20.6 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The increase in income tax expense was primarily due to the ~~$23.2 million~~increase in pretax income for both periods compared to the same periods in 2020. The increase in pretax income in the nine months ended September 30, 2021 was primarily due to the loss incurred from the customer fraud in the same period in 2020 which resulted in a pretax loss and tax benefit. The increase in pretax income for the three months ended ~~March 31,~~September 30, 2021, ~~compared~~was primarily due to the ~~same period in 2020.~~reduced provision for credit losses as a result of the improved economic forecast. Our effective tax rate was ~~18.6~~18.7 percent and 19.0 percent for the three and nine months ended ~~March 31,~~September 30, 2021 compared to ~~17.3~~16.6 percent and (64.5) percent for the same period in 2020. The change in our effective tax rate for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was primarily due to the increase in pretax ~~income.~~income compared to 2020.

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, each 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 Condensed Consolidated Statements of Comprehensive Income (Loss) 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 and Nine Months Ended ~~March 31,~~September 30, 2021 Compared to Three and Nine Months Ended ~~March 31,~~September 30, 2020 - Net Interest Income" section of this MD&A.

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

RESULTS OF OPERATIONS

Three and Nine Months Ended ~~March 31,~~September 30, 2021 Compared to

Three and Nine Months Ended ~~March 31,~~September 30, 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 Condensed Consolidated Statements of Comprehensive Income (Loss) to net interest income and rates on an FTE basis for the periods presented:


		Three Months Ended March 31,								Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021				2020					(dollars in thousands)	2021		2020			2021				2020
Total interest income	Total interest income		$	74,781			$	87,589					Total interest income	$	71,769			$	76,848		$	218,127		$	244,916
Total interest expense	Total interest expense		4,122				17,553						Total interest expense	3,058				7,572			10,453			35,456
Net Interest Income per Consolidated Statements of Comprehensive Income			70,659				70,036
Net Interest Income per Condensed Consolidated Statements of Comprehensive Income (Loss)													Net Interest Income per Condensed Consolidated Statements of Comprehensive Income (Loss)	68,711				69,276			207,674			209,460
Adjustment to FTE basis	Adjustment to FTE basis		663				849						Adjustment to FTE basis	557				780			1,806			2,477
Net Interest Income on an FTE Basis (Non-GAAP)	Net Interest Income on an FTE Basis (Non-GAAP)		$	71,322			$	70,885					Net Interest Income on an FTE Basis (Non-GAAP)	$	69,268			$	70,056		$	209,480		$	211,937
Net interest margin	Net interest margin		3.44		%		3.48		%				Net interest margin	3.11		%		3.25		%	3.22		%	3.33		%
Adjustment to FTE basis	Adjustment to FTE basis		0.03		%		0.05		%				Adjustment to FTE basis	0.03		%		0.04		%	0.03		%	0.04		%
Net Interest Margin on an FTE Basis (Non-GAAP)	Net Interest Margin on an FTE Basis (Non-GAAP)		3.47		%		3.53		%				Net Interest Margin on an FTE Basis (Non-GAAP)	3.14		%		3.29		%	3.25		%	3.37		%

Income amounts are annualized for rate calculations.

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

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, 2021						Three Months Ended March 31, 2020								Three Months Ended September 30, 2021							Three Months Ended September 30, 2020
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest			Rate	Average Balance		Interest			Rate		(dollars in thousands)	Average Balance		Interest			Rate		Average Balance		Interest			Rate
ASSETS	ASSETS														ASSETS
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	302,219		$	65	0.09 %	$	99,646		$	355	1.42	%	Interest-bearing deposits with banks	$	914,370		$	374	0.16	%	$	213,051		$	61	0.11	%
Securities, at fair value(1)(2)	Securities, at fair value(1)(2)	782,118			4,566		2.34 %	786,858			4,995		2.54	%	Securities, at fair value(1)(2)	836,019			4,577		2.19	%	759,094			4,570		2.41	%
Loans held for sale	Loans held for sale	6,360			45		2.83 %	1,867			18		3.76	%	Loans held for sale	3,656			31		3.35	%	4,432			34		3.09	%
Commercial real estate	Commercial real estate	3,253,641			30,136		3.76 %	3,408,684			40,093		4.73	%	Commercial real estate	3,239,867			30,091		3.68	%	3,322,656			33,569		4.02	%
Commercial and industrial	Commercial and industrial	1,957,459			20,817		4.31 %	1,751,678			19,738		4.53	%	Commercial and industrial	1,744,684			18,329		4.17	%	2,107,750			18,300		3.45	%
Commercial construction	Commercial construction	485,269			4,034		3.37 %	386,363			4,495		4.68	%	Commercial construction	490,940			3,964		3.20	%	469,214			4,047		3.43	%
Total Commercial Loans	Total Commercial Loans	5,696,369			54,987		3.91 %	5,546,725			64,326		4.66	%	Total Commercial Loans	5,475,491			52,384		3.80	%	5,899,620			55,916		3.77	%
Residential mortgage	Residential mortgage	897,427			9,416		4.22 %	990,866			10,328		4.18	%	Residential mortgage	875,684			8,792		4.00	%	954,861			10,365		4.33	%
Home equity	Home equity	532,708			4,791		3.65 %	540,193			6,501		4.84	%	Home equity	547,984			4,612		3.34	%	536,735			5,037		3.73	%
Installment and other consumer	Installment and other consumer	79,907			1,247		6.33 %	79,680			1,388		7.01	%	Installment and other consumer	92,615			1,366		5.85	%	79,649			1,295		6.47	%
Consumer construction	Consumer construction	15,908			188		4.79 %	10,508			120		4.61	%	Consumer construction	13,626			126		3.66	%	14,475			157		4.32	%
Total Consumer Loans	Total Consumer Loans	1,525,950			15,642		4.14 %	1,621,247			18,337		4.54	%	Total Consumer Loans	1,529,909			14,896		3.87	%	1,585,720			16,854		4.24	%
Total Portfolio Loans	Total Portfolio Loans	7,222,319			70,630		3.96 %	7,167,972			82,663		4.64	%	Total Portfolio Loans	7,005,400			67,279		3.81	%	7,485,340			72,770		3.87	%
Total Loans(1)(3)	Total Loans(1)(3)	7,228,679			70,675		3.96 %	7,169,839			82,681		4.64	%	Total Loans(1)(3)	7,009,056			67,310		3.81	%	7,489,772			72,804		3.87	%
Federal Home Loan Bank and other restricted stock	Federal Home Loan Bank and other restricted stock	11,242			139		4.94 %	23,601			407		6.90	%	Federal Home Loan Bank and other restricted stock	9,981			65		2.62	%	15,157			193		5.11	%
Total Interest-earning Assets	Total Interest-earning Assets	8,324,259			75,445		3.67 %	8,079,944			88,438		4.40	%	Total Interest-earning Assets	8,769,425			72,326		3.28	%	8,477,074			77,628		3.65	%
Noninterest-earning assets	Noninterest-earning assets	756,273						687,382							Noninterest-earning assets	724,759							815,930
Total Assets	Total Assets	$	9,080,532					$	8,767,326						Total Assets	$	9,494,184						$	9,293,004
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY														LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	Interest-bearing demand	$	895,891		$	222	0.10 %	$	942,030		$	1,382	0.59	%	Interest-bearing demand	$	962,139		$	184	0.08	%	$	967,735		$	434	0.18	%
Money market	Money market	1,968,779			943		0.19 %	1,993,764			6,318		1.27	%	Money market	2,062,958			911		0.18	%	2,074,862			1,713		0.33	%
Savings	Savings	995,228			152		0.06 %	830,985			477		0.23	%	Savings	1,059,904			70		0.03	%	923,208			162		0.07	%
Certificates of deposit	Certificates of deposit	1,344,604			2,165		0.65 %	1,601,324			7,161		1.80	%	Certificates of deposit	1,240,345			1,274		0.41	%	1,486,016			4,317		1.16	%
Total Interest-bearing Deposits	Total Interest-bearing Deposits	5,204,503			3,481		0.27 %	5,368,103			15,338		1.15	%	Total Interest-bearing Deposits	5,325,346			2,439		0.18	%	5,451,821			6,626		0.48	%
Securities sold under repurchase agreements	Securities sold under repurchase agreements	64,653			25		0.15 %	30,790			42		0.56	%	Securities sold under repurchase agreements	71,054			18		0.10	%	64,000			41		0.25	%
Short-term borrowings	Short-term borrowings	25,556			12		0.19 %	286,365			1,145		1.61	%	Short-term borrowings	—			—		—	%	84,310			81		0.38	%
Long-term borrowings	Long-term borrowings	23,471			116		2.00 %	51,845			325		2.52	%	Long-term borrowings	22,841			114		1.99	%	49,269			311		2.52	%
Junior subordinated debt securities	Junior subordinated debt securities	64,088			488		3.09 %	64,195			703		4.40	%	Junior subordinated debt securities	64,118			487		3.01	%	64,057			513		3.19	%
Total Borrowings	Total Borrowings	177,768			641		1.46 %	433,195			2,215		2.06	%	Total Borrowings	158,012			619		1.56	%	261,636			946		1.44	%
Total Interest-bearing Liabilities	Total Interest-bearing Liabilities	5,382,271			4,123		0.31 %	5,801,298			17,553		1.22	%	Total Interest-bearing Liabilities	5,483,358			3,058		0.22	%	5,713,457			7,572		0.53	%
Noninterest-bearing liabilities	Noninterest-bearing liabilities	2,538,149						1,776,453							Noninterest-bearing liabilities	2,812,185							2,433,665
Shareholders’ equity		1,160,113						1,189,575
Total Liabilities and Shareholders’ Equity		$	9,080,532					$	8,767,326
Shareholders' equity															Shareholders' equity	1,198,641							1,145,882
Total Liabilities and Shareholders' Equity															Total Liabilities and Shareholders' Equity	$	9,494,184						$	9,293,004
Net Interest Income (1)(2)	Net Interest Income (1)(2)				$	71,322					$	70,885			Net Interest Income (1)(2)				$	69,268						$	70,056
Net Interest Margin (1)(2)	Net Interest Margin (1)(2)						3.47 %						3.53	%	Net Interest Margin (1)(2)						3.14	%						3.29	%

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

(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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	Nine months ended September 30, 2021							Nine months ended September 30, 2020
(dollars in thousands)	Average Balance		Interest			Rate		Average Balance		Interest			Rate
ASSETS
Interest-bearing deposits with banks	$	669,593		$	613	0.12	%	$	158,771		$	449	0.38	%
Securities, at fair value(1)(2)	815,197			13,672		2.24	%	776,995			14,590		2.50	%
Loans held for sale	4,780			108		3.02	%	5,407			129		3.17	%
Commercial real estate	3,248,417			90,158		3.71	%	3,373,466			109,278		4.33	%
Commercial and industrial	1,863,447			57,509		4.13	%	2,020,179			57,771		3.82	%
Commercial construction	479,733			11,851		3.30	%	428,977			12,562		3.91	%
Total Commercial Loans	5,591,597			159,518		3.81	%	5,822,622			179,611		4.12	%
Residential mortgage	878,709			27,204		4.13	%	974,144			30,934		4.24	%
Home equity	538,931			14,085		3.49	%	540,220			16,530		4.09	%
Installment and other consumer	85,640			3,884		6.06	%	79,757			3,942		6.60	%
Consumer construction	14,257			525		4.92	%	12,587			423		4.49	%
Total Consumer Loans	1,517,538			45,698		4.02	%	1,606,708			51,829		4.31	%
Total Portfolio Loans	7,109,135			205,216		3.86	%	7,429,330			231,440		4.16	%
Total Loans(1)(3)	7,113,915			205,324		3.86	%	7,434,737			231,569		4.16	%
Federal Home Loan Bank and other restricted stock	10,579			323		4.07	%	19,473			785		5.38	%
Total Interest-earning Assets	8,609,284			219,933		3.41	%	8,389,976			247,393		3.94	%
Noninterest-earning assets	728,314							772,404
Total Assets	$	9,337,598						$	9,162,380
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	$	952,297		$	636	0.09	%	$	981,174		$	2,425	0.33	%
Money market	2,023,583			2,748		0.18	%	2,048,466			10,610		0.69	%
Savings	1,033,581			291		0.04	%	880,673			801		0.12	%
Certificates of deposit	1,291,666			4,896		0.51	%	1,549,177			17,355		1.50	%
Total Interest-bearing Deposits	5,301,126			8,572		0.22	%	5,459,490			31,191		0.76	%
Securities sold under repurchase agreements	67,872			60		0.12	%	60,045			137		0.30	%
Short-term borrowings	8,425			12		0.19	%	182,623			1,392		1.02	%
Long-term borrowings	23,139			346		2.00	%	50,292			950		2.52	%
Junior subordinated debt securities	64,103			1,463		3.05	%	64,099			1,786		3.72	%
Total Borrowings	163,539			1,882		1.54	%	357,059			4,265		1.60	%
Total Interest-bearing Liabilities	5,464,665			10,453		0.26	%	5,816,549			35,456		0.81	%
Noninterest-bearing liabilities	2,693,530							2,170,447
Shareholders' equity	1,179,403							1,175,384
Total Liabilities and Shareholders' Equity	$	9,337,598						$	9,162,380
Net Interest Income (1) (2)				$	209,480						$	211,937
Net Interest Margin						3.25	%						3.37	%

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

(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 $0.4~~decreased $0.8 million and $2.5 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The decline was primarily due to lower average loan balances compared to the prior periods. Net interest income was favorably impacted by ~~Paycheck Protection Program, or~~ PPP loans which ~~increased interest income by $5.8~~contributed $4.2 million and $14.2 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to $3.2 million and $6.4 million for the same ~~period~~periods in 2020. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 615 and 12 basis points for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The decrease in NIM on an FTE basis is primarily due to higher average cash balances in the current periods and the low interest rate environment. PPP loans positively impacted the net interest margin on an FTE basis (non-GAAP) by 10 and 8 basis points for the three and nine months ended ~~March 31, 2021.~~September 30, 2021 compared to the negative impact of 7 and 4 basis points in the prior periods.

Interest income on an FTE basis (non-GAAP) decreased ~~$13.0~~$5.3 million ~~or 14.7 percent,~~and $27.5 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The decrease in interest income was primarily due to lower ~~short-term~~average loan balances and the low rate interest ~~rates~~environment compared to the same ~~period~~periods in 2020. Average loan balances ~~increased $58.8~~decreased $480.7 million and $320.8 million for the three and nine months ended September 30, 2021 compared to the same ~~period~~periods in 2020. Average PPP loans ~~contributed $454.8~~decreased $284.3 million and increased $58.1 million for the three and nine months ended September 30, 2021 compared to the ~~average increase~~same periods in ~~loans which was offset by lower loan activity related to the COVID-19 pandemic.~~2020. The average rate earned on loans decreased 686 and 30 basis points for the three and nine months ended September 30, 2021 compared to the same ~~period~~periods in 2020 primarily due to lower short-term interest rates. Average interest-bearing deposits with banks increased ~~$202.6~~$701.3 million and $510.8 million for the ~~average rate decreased 133 basis points~~three and nine months ended September 30, 2021 compared to the same ~~period~~periods in ~~2020. Higher average interest-bearing deposits with banks was~~2020 due to PPP forgiveness, lower loan balances and a significant increase in average deposits as a result of ~~government~~customer PPP loans and stimulus ~~programs, PPP and our~~payments along with customers' liquidity preferences. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 7337 and 53 basis points for the three and nine months ended September 30, 2021 compared to the same ~~period~~periods in 2020.

Interest expense decreased ~~$13.4~~$4.5 million and $25.0 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The ~~decrease was~~decreases were primarily due to lower short-term interest rates compared to the same ~~period~~periods in 2020. Average interest-bearing deposits decreased ~~$163.6~~$126.5 million and $158.4 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. The average rate paid on interest-bearing deposits decreased 8830 and 54 basis points compared to the same ~~period~~periods in 2020 primarily due to lower short-term interest rates. The interest-bearing ~~deposits decrease is~~deposit decreases are favorably offset by ~~a $715.6~~$425.2 million ~~increase~~and $538.4 million increases in demand ~~deposits.~~deposits for the three and nine months ended September 30, 2021. We experienced demand deposit growth due to customer PPP loans and stimulus payments along with customers' liquidity preferences. Brokered deposits decreased ~~$306.9~~$163.1 million and $267.2 million for the three and nine months ended September 30, 2021 compared to the same ~~period~~periods in 2020 due to ~~excess liquidity.~~this funding source no longer being needed. Average total borrowings decreased ~~$255.4~~$103.6 million and $193.5 million for the ~~average rate paid decreased 60 basis points~~three and nine months ended September 30, 2021 compared to the same ~~period in 2020. Borrowings decreased compared to the same period~~periods in 2020 due to ~~excess liquidity.~~this funding source no longer being needed. Overall, the cost of interest-bearing liabilities decreased 9131 and 55 basis points for the three and nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020.

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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, 2021 Compared to March 31, 2020						Three Months Ended September 30, 2021 Compared to September 30, 2020						Nine Months Ended September 30, 2021 Compared to September 30, 2020
(dollars in thousands)	(dollars in thousands)	Volume (4)		Rate (4)		Total			(dollars in thousands)	Volume (4)		Rate (4)		Total		Volume (4)		Rate (4)		Total
Interest earned on:	Interest earned on:								Interest earned on:
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	722	$	(1,012)	$	(290)		Interest-bearing deposits with banks	$	200	$	113	$	313	$	1,444	$	(1,280)	$	164
Securities, at fair value(1)(2)	Securities, at fair value(1)(2)	(30)		(400)		(430)			Securities, at fair value(1)(2)	463		(456)		7		717		(1,635)		(917)
Loans held for sale	Loans held for sale	42		(15)		27			Loans held for sale	(6)		2		(4)		(15)		(5)		(21)
Commercial real estate	Commercial real estate	(1,824)		(8,133)		(9,957)			Commercial real estate	(836)		(2,642)		(3,478)		(4,051)		(15,071)		(19,120)
Commercial and industrial	Commercial and industrial	2,319		(1,239)		1,079			Commercial and industrial	(3,152)		3,181		29		(4,482)		4,220		(262)
Commercial construction	Commercial construction	1,151		(1,612)		(461)			Commercial construction	187		(270)		(82)		1,486		(2,196)		(710)
Total Commercial Loans	Total Commercial Loans	1,646		(10,984)		(9,339)			Total Commercial Loans	(3,801)		270		(3,532)		(7,047)		(13,047)		(20,093)
Residential mortgage	Residential mortgage	(974)		62		(912)			Residential mortgage	(859)		(713)		(1,573)		(3,031)		(699)		(3,730)
Home equity	Home equity	(90)		(1,619)		(1,709)			Home equity	106		(530)		(425)		(39)		(2,405)		(2,445)
Installment and other consumer	Installment and other consumer	4		(145)		(141)			Installment and other consumer	211		(139)		71		291		(349)		(58)
Consumer construction	Consumer construction	62		6		67			Consumer construction	(9)		(22)		(31)		56		46		102
Total Consumer Loans	Total Consumer Loans	(998)		(1,697)		(2,695)			Total Consumer Loans	(552)		(1,405)		(1,958)		(2,723)		(3,408)		(6,131)
Total Portfolio Loans	Total Portfolio Loans	648		(12,681)		(12,033)			Total Portfolio Loans	(4,354)		(1,136)		(5,491)		(9,770)		(16,455)		(26,224)
Total Loans (1)(3)	Total Loans (1)(3)	690		(12,696)		(12,006)			Total Loans (1)(3)	(4,360)		(1,134)		(5,494)		(9,785)		(16,460)		(26,244)
Federal Home Loan Bank and other restricted stock	Federal Home Loan Bank and other restricted stock	(213)		(55)		(268)			Federal Home Loan Bank and other restricted stock	(66)		(62)		(128)		(359)		(104)		(462)
Change in Interest Earned on Interest-earning Assets	Change in Interest Earned on Interest-earning Assets	$	1,168	$	(14,162)	$	(12,994)		Change in Interest Earned on Interest-earning Assets	$	(3,762)	$	(1,539)	$	(5,301)	$	(7,981)	$	(19,478)	$	(27,460)
Interest paid on:	Interest paid on:								Interest paid on:
Interest-bearing demand	Interest-bearing demand	$	(68)	$	(1,092)	$	(1,160)		Interest-bearing demand	$	(3)	$	(247)	$	(250)	$	(71)	$	(1,718)	$	(1,789)
Money market	Money market	(79)		(5,296)		(5,375)			Money market	(10)		(793)		(803)		(129)		(7,733)		(7,862)
Savings	Savings	94		(419)		(325)			Savings	24		(117)		(93)		139		(649)		(510)
Certificates of deposit	Certificates of deposit	(1,148)		(3,848)		(4,996)			Certificates of deposit	(714)		(2,329)		(3,043)		(2,885)		(9,574)		(12,459)
Total Interest-bearing Deposits	Total Interest-bearing Deposits	(1,201)		(10,656)		(11,856)			Total Interest-bearing Deposits	(702)		(3,486)		(4,188)		(2,946)		(19,674)		(22,620)
Securities sold under repurchase agreements	Securities sold under repurchase agreements	47		(65)		(18)			Securities sold under repurchase agreements	4		(27)		(23)		18		(95)		(77)
Short-term borrowings	Short-term borrowings	(1,042)		(90)		(1,133)			Short-term borrowings	—		—		—		—		—		—
Long-term borrowings	Long-term borrowings	(178)		(31)		(209)			Long-term borrowings	(167)		(30)		(197)		(513)		(91)		(604)
Junior subordinated debt securities	Junior subordinated debt securities	(1)		(214)		(215)			Junior subordinated debt securities	—		(26)		(26)		—		(323)		(322)
Total Borrowings	Total Borrowings	(1,174)		(400)		(1,574)			Total Borrowings	(162)		(84)		(246)		(495)		(508)		(1,003)
Change in Interest Paid on Interest-bearing Liabilities	Change in Interest Paid on Interest-bearing Liabilities	$	(2,375)	$	(11,056)	$	(13,431)		Change in Interest Paid on Interest-bearing Liabilities	(864)		(3,569)		$	(4,433)	(3,441)		(20,182)		(23,623)
Change in Net Interest Income	Change in Net Interest Income	$	3,543	$	(3,107)	$	437		Change in Net Interest Income	$	(2,898)	$	2,030	$	(868)	$	(4,540)	$	703	$	(3,837)

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

(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. The provision for credit losses decreased ~~$16.9~~$14.1 million and $115.2 million to ~~$3.1~~$3.4 million and $9.1 million for the three and nine months ended

~~March 31,~~ September 30, 2021 compared to ~~$20.0~~$17.5 million and $124.3 million for the same ~~period~~periods in 2020. The provision for credit losses included $1.1 million and $1.5 million for the reserve for unfunded commitments for the three and nine months ended September 30, 2021 compared to $(1.8) million and $0.7 million for the same periods in 2020. The increase in the reserve for unfunded loan commitments for the three and nine months ended September 30, 2021 was due to an increase in overall unused commitments in the C&I portfolio and an increase in loss rates primarily in the construction portfolio

The significant decrease in the provision for credit losses during the nine months ended September 30, 2021 was mainly due to the customer fraud in 2020 discussed below. 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 and nine months ended ~~March 31, 2020~~September 30, 2021 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 thean improved 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,~~in 2021 compared to ~~the same period in 2020 mainly due to a decrease of $3.1 million for the economic forecast.~~2020. Our economic ~~forecast covers a period of two years and is~~

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forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at ~~March 31,~~September 30, 2021 compared to the same time in 2020.

~~Net loan~~For the three and nine months ended September 30, 2021, we had net charge-offs of $3.6 million and $16.9 million compared to $12.9 million and $92.1 million for the same periods in 2020. The most significant charge-offs for the nine months ended September 30, 2021 were ~~$5.8~~to three CRE relationships totaling $10.1 million ~~or 0.33 percent annualized as~~and a ~~percentage~~C&I relationship totaling $3.9 million.

During the three months ended June 30, 2020, we recognized a charge-off of ~~average loans at~~$58.7 million related to a customer fraud from a check kiting scheme. We continue to pursue all available resources of recovery to mitigate the loss. The customer also had a lending relationship of $15.1 million that had $8.9 million of charge-offs during 2020 and $0.5 million during the three months ended March 31, 2021. We received recoveries of $0.9 million on the lending relationship for the nine months ended September 30, 2021.

Nonperforming loans increased $27.2 million to $111.3 million at September 30, 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~~$84.1 million at ~~March 31, 2021 compared to $73.8 million at March 31,~~September 30, 2020. The ~~significant~~ increase in nonperforming loans primarily related to the addition of ~~$53.6~~$36.0 million of hotel loans which moved to nonperforming during the fourth quarter of 2020 as a result of continued deterioration due to the ~~pandemic.~~

pandemic and the addition of a $21.7 million C&I relationship which moved to nonperforming during the three months ended September 30, 2021 due to financial deterioration that led to cash flow shortfalls.
A specific reserve of $9.3 million was established based on an estimated enterprise value of the company. The increase in nonperforming loans was partially offset by two CRE hotel loans totaling $11.8 million that moved back to performing status and two CRE loans totaling $12.2 million that moved to OREO, all of which occurred during the three months ended September 30, 2021. An additional offset to the increase in nonperforming loans was a $4.9 million charge-off of a CRE relationship which occurred during the three months ended June 30, 2021.

Noninterest Income


		Three Months Ended March 31,												Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020			$ Change			% Change				(dollars in thousands)	2021	2020		$ Change			% Change			2021			2020			$ Change			% Change
Net gain on sale of securities	Net gain on sale of securities		$	—		$	—		$	—		—						Net gain on sale of securities		$	—		$	—		$	—		—			$	29		$	142	$	(113)	(79.6)
Debit and credit card																		Debit and credit card		4,579			4,171			408			9.8	%		13,486			11,264		2,222		19.7	%
Mortgage banking	Mortgage banking		4,310			1,236			3,074			248.7	%					Mortgage banking		2,162			3,964			(1,802)			(45.5)	%		8,206			7,823		383		4.9	%
Debit and credit card			4,162			3,482			680			19.5	%
Service charges on deposit accounts	Service charges on deposit accounts		3,474			4,008			(534)			(13.3)	%					Service charges on deposit accounts		3,923			3,303			620			18.8	%		11,039			10,124		915		9.0	%
Wealth management	Wealth management		2,944			2,362			582			24.6	%					Wealth management		3,464			2,522			942			37.4	%		9,576			7,471		2,105		28.2	%
Commercial loan swap income	Commercial loan swap income		95			2,484			(2,389)			(96.2)	%					Commercial loan swap income		184			499			(315)			(63.1)	%		577			3,928		(3,351)		(85.3)	%
Other	Other		2,252			(1,169)			3,421			(292.6)	%					Other		1,534			2,024			(490)			(24.2)	%		5,595			3,358		2,237		66.6	%
Total Noninterest Income	Total Noninterest Income		$	17,236		$	12,403		$	4,833		39.0	%					Total Noninterest Income		$	15,846		$	16,483		$	(637)		(3.9)	%		$	48,508		$	44,110	$	4,397	10.0	%

Noninterest income decreased $0.6 million and increased ~~$4.8 million to $17.2~~$4.4 million for the three and nine months ended ~~March 31,~~September 30, 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~~2020. Debit and credit card income increased $0.4 million and $2.2 million for the three and nine months ended September 30, 2021 due to increased activity related to the improving economic environment and increased merchant revenue. Service charges on deposit accounts increased $0.6 million and $0.9 million due to fee changes and the improving economic environment. Wealth management income increased ~~$0.6~~$0.9 million and $2.1 million due to higher assets under management from market appreciation and an increase in customer activity. ~~Debit~~Mortgage banking decreased $1.8 million for the three months ended and ~~credit card income~~ increased ~~$0.7~~$0.4 million for the nine months ended September 30, 2021.The decrease for the three months ended primarily related to a lower volume of loans sold than in the prior year same period. The increase for the nine months ended was mainly due to ~~increased activity~~changes in the valuation of the mortgage derivative and mortgage servicing rights compared to the ~~improving economic environment.~~same periods in 2020. Other income decreased $0.5 million for the three months ended September 30, 2021 and increased ~~$3.4~~$2.2 million ~~related~~for the nine months ended September 30, 2021 due 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~~periods in 2020. ~~Offsetting these increases was a $2.4 million decrease in commercial~~Commercial loan swap ~~income. Commercial loan swap~~income decreased $0.3 million and $3.4 million for the three and nine months ended September 30, 2021 as activity was significant in the first ~~quarter~~half of 2020, but activity has declined due to the ~~pandemic. Service charges on deposit accounts decreased $0.5 million also due to reduced activity related to~~pandemic and the ~~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 three months ended March 31, 2021 compared to the same period in 2020 mainly due to merger related expenses in 2020. Total merger related expenses of $2.3 million for the three months ended March 31, 2020 included $1.4 million of salaries and employee benefits, $0.4 million for data processing, $0.2interest rate environment.

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~~million~~Noninterest Expense


	Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)	2021			2020			$ Change			% Change				2021		2020			$ Change			% Change
Salaries and employee benefits(1)		$	25,228		$	24,571		$	657		2.7	%		$	73,070		$	67,326		$	5,744		8.5	%
Data processing and information technology(1)		4,001			4,218			(217)			(5.1)	%		12,012			11,671			341			2.9	%
Occupancy(1)		3,660			3,441			219			6.4	%		10,921			10,643			278			2.6	%
Furniture, equipment and software(1)		2,745			2,440			305			12.5	%		7,787			7,965			(178)			(2.2)	%
Professional services and legal(1)		1,550			1,911			(361)			(18.9)	%		4,718			4,890			(172)			(3.5)	%
FDIC insurance		1,210			1,900			(690)			(36.3)	%		3,180			3,718			(538)			(14.5)	%
Marketing(1)		890			1,793			(903)			(50.4)	%		3,208			3,883			(675)			(17.4)	%
Other taxes		1,830			1,612			218			13.5	%		5,098			4,816			282			5.9	%
Merger related expenses		—			—			—			—	%		—			2,342			(2,342)			(100.0)	%
Other(1)		6,127			6,360			(233)			(3.7)	%		18,656			20,861			(2,205)			(10.6)	%
Total Noninterest Expense		$	47,241		$	48,246		$	(1,005)		(2.1)	%		$	138,650		$	138,115		$	535		0.4	%

(1) Excludes merger related expenses for ~~professional services and $0.3 million in various other expenses. Other noninterest~~2020 amounts only

Noninterest expense decreased ~~due~~$1.0 million to ~~historic tax credits~~$47.2 million for ~~$1.1million in~~ the three months ended ~~March 31, 2020~~September 30, 2021 and ~~lower travel, lodging and training expenses resulting from~~increased $0.5 million to $138.6 million for the ~~pandemic during the three~~nine months ended ~~March 31,~~September 30, 2021 compared to the same ~~period~~periods in 2020. ~~Partially offsetting these decreases was a $2.0 million increase in salaries~~Salaries and employee benefits ~~mainly~~increased $0.7 million and $5.7 million for the three and nine months ended September 30, 2021 due to higher deferred origination costs related to PPP loans in 2020, higher payroll incentives and restricted stock expense, 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, and 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 $0.5~~decreased $0.4 million for the three months ended September 30, 2021 and decreased $0.2 million for the nine months ended September 30, 2021 mainly due to ~~higher consulting~~lower legal expense for both periods. FDIC insurance decreased $0.7 million and ~~legal expense.~~$0.5 million for the three and nine months ended September 30, 2021 due to improvements in the financial ratios used to determine the assessment. Marketing expense decreased $0.9 million and $0.7 million for the three and nine months ended due to the timing of various initiatives. Other noninterest expense decreased during the nine months ended September 30, 2021 due to lower amortization related to our qualified affordable housing projects and core deposit intangible asset compared to the same period in 2020. Total merger related expenses of $2.3 million for the nine months ended September 30, 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.

Provision for Income Taxes

The provision for income taxes increased ~~$4.5~~$3.0 million and $26.3 million to ~~$7.3~~$6.3 million and $20.6 million for the three and nine months ended ~~March 31,~~September 30, 2021 compared to ~~$2.8 million~~the same periods in 2020. The increase in income tax expense was primarily due to the increase in pretax income for both periods compared to the same periods in 2020. The increase in pretax income in the nine months ended September 30, 2021 was primarily due to the loss incurred from the customer fraud in the same period in 2020 and for the three months ended September 30, 2021, was primarily due to the reduced provision for credit losses as a result of the ~~increase in pretax income of $23.2 million.~~improved economic forecast. Our effective tax rate was ~~18.6~~18.7 percent and 19.0 percent for the three and nine months ended ~~March 31,~~September 30, 2021 compared to ~~17.3~~16.6 percent and (64.5) percent for the same period in 2020. The change in our effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2021 was primarily due to the ~~increase~~increases in pretax ~~income.~~

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

~~Total assets increased $361.1 million to $9.3 billion at March 31, 2021~~income 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, 2021 compared to December 31, 2020 due to a significant increase in deposits as a result of government stimulus programs, PPP and our customers' liquidity preferences. 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 primarily related to 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 increased $3.0 million with increases of $39.6 million in CRE offset by decreases of $22.7 million in C&I and $13.9 million in commercial construction. Excluding the PPP loans, portfolio loans decreased $76.9 million compared to December 31, 2020 due to decreased activity related to the COVID-19 pandemic.

Securities increased $43.6 million to $817.3 million at March 31, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities due to excess liquidity. The bond portfolio had a net unrealized gain of $23.7 million at March 31, 2021 compared to $33.4 million at December 31, 2020 due to rising interest rates during the first quarter of 2021.

Our deposits increased $455.5 million with total deposits of $7.9 billion at March 31, 2021 compared to $7.4 billion at December 31, 2020. Customer deposits increased $508.8 million from December 31, 2020. The increase in customer deposits is primarily related to stimulus programs, PPP and our customers' liquidity preferences. Total brokered deposits decreased $53.3 million from December 31, 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 customer deposits. The decrease in borrowings primarily related to a decline in short-term borrowings of $75.0 million compared to December 31, 2020.

Total shareholders’ equity increased by $13.6 million to $1,168.3 million at March 31, 2021 compared to $1,154.7 million at December 31, 2020. The increase was primarily due to net income of $31.9 million offset partially by dividends of

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

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Financial Condition as of September 30, 2021

Total assets increased $468.2 million to $9.4 billion at September 30, 2021 compared to $9.0 billion at December 31, 2020. Cash and due from banks increased $704.7 million to $934.4 million at September 30, 2021 compared to December 31, 2020 due to PPP forgiveness and a significant increase in deposits as a result of government stimulus programs, a second round of PPP loans and our customers' liquidity preferences. Total portfolio loans decreased $255.8 million to $7.0 billion at September 30, 2021 compared to $7.2 billion at December 31, 2020. The commercial loan portfolio decreased $249.7 million compared to December 31, 2020. C&I loans decreased $255.7 million which mainly related to a net decline in PPP loans of $284.4 million since December 31, 2020. The consumer loan portfolio decreased $6.0 million with decreases in residential mortgage of $30.5 million and consumer construction of $5.5 million offset by increases in home equity of $13.2 million and other consumer of $16.7 million. Excluding the PPP loans, portfolio loans increased $28.7 million compared to December 31, 2020.

Securities increased $96.4 million to $870.1 million at September 30, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities. The bond portfolio had a net unrealized gain of $18.3 million at September 30, 2021 compared to $33.4 million at December 31, 2020 due to rising long-term interest rates during the first nine months of 2021.

Our deposits increased $524.6 million, with total deposits of $7.9 billion at September 30, 2021 compared to $7.4 billion at December 31, 2020. Customer deposits increased $587.8 million from December 31, 2020. The increase in customer deposits primarily related to government stimulus programs, PPP loans and our customers' liquidity preferences. Total brokered deposits decreased $63.2 million from December 31, 2020 due to a reduced need for wholesale funding due to strong customer deposit growth.

Total borrowings decreased $68.5 million to $159.4 million at September 30, 2021 compared to $227.9 million at December 31, 2020 due to increased customer deposits. The decrease in borrowings is primarily related to a decline in short-term borrowings of $75.0 million compared to December 31, 2020.

Total shareholders’ equity increased by $47.0 million to $1.2 billion at both September 30, 2021 and December 31, 2020. The increase was primarily due to net income of $87.9 million offset partially by dividends of $33.0 million and a decrease in other comprehensive income of $10.0 million. The $10.0 million decrease in other comprehensive income was due to a $11.9 million decrease in unrealized gains on our available-for-sale investment securities and a $1.9 million change in the funded status of our employee benefit plans, net of taxes.

Securities Activity


(dollars in thousands)	(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change			(dollars in thousands)	September 30, 2021			December 31, 2020			$ Change
U.S. Treasury securities	U.S. Treasury securities		$	63,268		$	10,282		$	52,986	U.S. Treasury securities		$	85,300		$	10,282		$	75,018
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies		82,028			82,904			(876)		Obligations of U.S. government corporations and agencies		71,205			82,904			(11,699)
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies		217,916			209,296			8,620		Collateralized mortgage obligations of U.S. government corporations and agencies		208,985			209,296			(311)
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies		63,911			67,778			(3,867)		Residential mortgage-backed securities of U.S. government corporations and agencies		60,442			67,778			(7,336)
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies		277,253			273,681			3,572		Commercial mortgage-backed securities of U.S. government corporations and agencies		356,506			273,681			82,825
Corporate obligations	Corporate obligations		2,002			2,025			(23)		Corporate obligations		500			2,025			(1,525)
Obligations of states and political subdivisions	Obligations of states and political subdivisions		107,505			124,427			(16,922)		Obligations of states and political subdivisions		86,056			124,427			(38,371)
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities		813,883			770,393			43,490		Available-for-Sale Debt Securities		868,994			770,393			98,601
Marketable equity securities	Marketable equity securities		3,416			3,300			116		Marketable equity securities		1,127			3,300			(2,173)
Total Securities	Total Securities		$	817,299		$	773,693		$	43,606	Total Securities		$	870,121		$	773,693		$	96,428

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 ~~$43.6~~$96.4 million to ~~$817.3~~$870.1 million at ~~March 31,~~September 30, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities due to excess liquidity.

At ~~March 31,~~September 30, 2021 our bond portfolio was in a net unrealized gain position of ~~$23.7~~$18.3 million compared to a net unrealized gain position of $33.4 million at December 31, 2020. At ~~March 31,~~September 30, 2021 total gross unrealized gains in the bond portfolio were ~~$26.6~~$21.4 million offset by gross unrealized losses of ~~$2.9~~$3.1 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,~~September 30, 2021. ~~Management evaluates the securities portfolio to determine if an ACL is needed each quarter. We did not record an ACL related to the securities portfolio at March 31, 2021.~~

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

Loan Composition


	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		% of Loans		Amount		% of Loans
Commercial
Commercial real estate	$	3,225,863	46.3	%	$	3,244,974	44.9	%
Commercial and industrial	1,698,784		24.4	%	1,954,453		27.0	%
Commercial construction	499,317		7.2	%	474,280		6.6	%

Total Commercial Loans	5,423,964		77.8	%	5,673,707		78.5	%
Consumer
Consumer real estate	1,448,517		20.8	%	1,471,238		20.4	%
Other consumer	97,606		1.4	%	80,915		1.1	%
Total Consumer Loans	1,546,123		22.2	%	1,552,153		21.5	%
Total Portfolio Loans	6,970,087		100.0	%	7,225,860		100.0	%
Loans held for sale	4,303				18,528
Total Loans	$	6,974,389			$	7,244,388

March 31, 2021 December 31, 2020
(dollars in thousands) Amount % of Loans Amount % of Loans
Commercial
Commercial real estate $ 3,284,555 45.7 % $ 3,244,974 44.9 %
Commercial and industrial 1,931,711 26.9 % 1,954,453 27.0 %
Commercial construction 460,417 6.4 % 474,280 6.6 %
Total Commercial Loans 5,676,683 79.0 % 5,673,707 78.5 %
Consumer
Consumer real estate 1,425,839 19.8 % 1,471,238 20.4 %
Other consumer 80,646 1.1 % 80,915 1.1 %
Total Consumer Loans 1,506,485 21.0 % 1,552,153 21.5 %
Total Portfolio Loans 7,183,168 100.0 % 7,225,860 100.0 %
Loans held for sale 12,794 18,528
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.

~~Table~~As of ~~Contents~~

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

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

September 30, 2021, 73 percent of our total loans are variable rate loans and 27 percent are fixed rate loans. Total portfolio loans decreased ~~$42.7~~$255.8 million to ~~$7.2~~$7.0 billion at ~~March 31,~~September 30, 2021 compared to December 31, 2020. ~~The decrease in portfolio~~Portfolio loans ~~is primarily related to a decline in the consumer loan portfolio of $45.7~~excluding PPP loans increased $28.7 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 ~~79.0~~77.8 percent of total portfolio loans at ~~March 31,~~September 30, 2021 and 78.5 percent at December 31, 2020. The ~~increase of $3.0~~commercial loan portfolio decreased $249.7 million ~~in commercial loans related to $39.6 million of growth in CRE, offset by decreases of $22.7 million in C&I, and $13.9 million in commercial construction~~at September 30, 2021 compared to December 31, 2020. C&I loans decreased $255.7 million at September 30, 2021 which mainly related to a net PPP decline of $284.5 million since December 31, 2020.

As of ~~March 31,~~September 30, 2021, we had ~~$499.1~~$181.0 million of PPP loans included in C~~&I.~~&I compared to $465.5 million at December 31, 2020. 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~~1 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 processing fee ranging from 1 percent to 5 percent based on the size of the loan.

Consumer loans represent 22.2 percent of our total portfolio loans at September 30, 2021 and 21.5 percent in December 31, 2020. The consumer loan portfolio decreased $6.0 million at September 30, 2021 with decreases in residential mortgage of $30.4 million and consumer construction of $5.5 million offset by increases in home equity of $13.2 million and other consumer of $16.7 million.

Allowance for Credit Losses

~~The following are key risks within each~~ Refer to Part 1. Financial Information, Note 6. Allowance for Credit Losses for details on our 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.

~~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/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. The primary source of repayment for these loanssegments.

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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 periods presented:


		Three Months Ended March 31, 2021															Nine Months Ended September 30, 2021
(dollars in thousands)	(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans		(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:	Allowance for credit losses on loans:															Allowance for credit losses on loans:
Balance at beginning of period	Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612	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)	Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301		Provision for credit losses on loans(1)	(2,922)		14,552		54		(2,736)		(1,335)		(1)		7,612
Charge-offs	Charge-offs	(810)		(4,302)		—		(917)		(271)		(232)		(6,532)		Charge-offs	(12,030)		(4,777)		(56)		(1,494)		(422)		(698)		(19,477)
Recoveries	Recoveries	—		137		1		166		82		334		720		Recoveries	966		364		5		454		267		545		2,601
Net (Charge-offs)/Recoveries	Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)		Net (Charge-offs)/Recoveries	(11,064)		(4,413)		(51)		(1,040)		(155)		(153)		(16,876)
Balance at End of Period	Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101	Balance at End of Period	$	51,670	$	26,239	$	7,242	$	12,141	$	8,524	$	2,532	$	108,348
(1) Excludes provision on unfunded commitments
(1) Excludes the provision for credit losses for unfunded commitments.																(1) Excludes the provision for credit losses for unfunded commitments.


		March 31, 2021			December 31, 2020			September 30, 2021		December 31, 2020
Ratio of net charge-offs to average loans outstanding(1)	Ratio of net charge-offs to average loans outstanding(1)	0.33	%	*	0.61	%	Ratio of net charge-offs to average loans outstanding(1)	0.32	%	0.61	%	(2)
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 credit losses as a percentage of total portfolio loans	1.55	%	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 loan losses as a percentage of total portfolio loans - excluding PPP loans	1.60	%	1.74	%
Allowance for credit losses to nonperforming loans	Allowance for credit losses to nonperforming loans	85	%		80	%	Allowance for credit losses to nonperforming loans	97	%	80	%

*(1) Annualized

(2) Excludes $58.7 million loan charge-off related to a customer fraud in the three months ended June 30, 2020.

The ACL decreased ~~$2.5~~$9.3 million to ~~$115.1~~$108.3 million at ~~March 31,~~September 30, 2021 compared to $117.6 million at December 31, 2020. ~~The decrease in ACL was mainly~~Our total qualitative reserve decreased $8.7 million for the period ended September 30, 2021 compared to December 31, 2020 due to ~~a reduction in specific reserves on loans individually assessed and lower qualitative reserve due to an~~ improved economic trends and forecast. Specific reserves on loans individually assessed decreased ~~$5.4~~$3.6 million ~~from December 31, 2020 primarily due~~ to ~~a charge-off on a C&I relationship that was previously held in specific reserve. The qualitative reserve decreased $1.8~~$9.9 million from the prior quarter primarily due to a $2.5 million reduction in the economic forecast component which was the result of an improved national unemployment forecast. The ACL as a percentage of total portfolio loans decreased 3 basis points to 1.60 percent at ~~March 31,~~September 30, 2021 compared to ~~1.63 percent~~$13.5 million at December 31, 2020. The ~~ACL excluding PPP~~decrease in specific reserves was a result of approximately $7.5 million of loan charge-offs. Additionally, $4.1 million of specific reserves were released related to three CRE hotel loans asdue to fair value improvements during the three months ended September 30, 2021. Offsetting this decrease in specific reserves was the addition of a ~~percentage of total portfolio loans was 1.72 percent as of March 31, 2021 compared to 1.74 percent~~$21.7 million C&I loan which required a $9.3 million specific reserve at ~~December 31, 2020.~~September 30, 2021.

Net loan charge-offs were ~~$5.8~~$3.6 million, or ~~0.33~~0.21 percent ~~annualized as a percentage~~of average loans and $16.9 million, or 0.32 percent of average loans for the three and nine months ended ~~March 31,~~September 30, 2021. The most significant ~~charge-off was~~charge-offs for the nine months ending September 30, 2021 were three CRE relationships for a ~~$3.9~~total of $10.1 million and a C&I relationship ~~which was previously held in specific reserve.~~for $3.9 million. The ~~relationship was restructured during~~charge-offs were the ~~first quarter~~result of ~~2021 and charged down to the~~ fair value ~~of the collateral.~~declines.

Substandard loans ~~increased $16.1~~decreased $3.9 million to ~~$303.2~~$283.2 million at ~~March 31,~~September 30, 2021 compared to $287.1 million at December 31, ~~2020~~2020. The decrease in substandard loans was primarily due to charge-offs of $10.7 million, payoffs of three CRE relationships for a total of $14.4 million and ~~special~~two CRE loans for a total of $12.2 million that moved to OREO. The decrease in substandard loans was offset by the addition of two CRE relationships totaling $16.8 million and a C&I relationship totaling $21.7 million which were all downgraded to substandard due to financial deterioration that led to cash flow shortfalls. Special mention loans ~~decreased $4.4~~improved significantly from December 31, 2020 with a decrease of $58.2 million, or 21.6 percent, to ~~$265.5~~$211.7 million at ~~March 31,~~September 30, 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 downgrade of a $12.1 million CRE relationship from special mention~~various payoffs and upgrades to substandard due to declining revenue that led to cash flow shortfalls. The relationship matured during the first quarter and received a short term COVID deferral as the borrower and bank work towards a long term solution.pass ratings.

Troubled debt restructurings, or TDRs, ~~increased $1.2~~decreased $18.9 million to ~~$47.9~~$27.8 million at ~~March 31,~~September 30, 2021 compared to $46.7 million at December 31, 2020. The decrease in TDRs was primarily due to payoffs of $4.8 million and $3.7 million on two CRE relationships and a $6.1 million CRE loan moved to OREO at September 30, 2021. Total TDRs of ~~$47.9~~$27.8 million ~~at March 31, 2021~~ included ~~$17.9~~$13.8 million, or ~~37.4~~49.6 percent, that were ~~accruing~~performing and ~~$30.0~~$14.0 million, or ~~62.6~~50.4 percent, that were ~~not accruing.~~nonperforming at September 30, 2021.

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 Condensed Consolidated Statements of Comprehensive ~~Income.~~Income (Loss). The allowance for unfunded loan commitments ~~was $4.3~~increased $1.4 million to $5.9 million at ~~March 31,~~September 30, 2021 compared to $4.5 million at December 31, 2020. This change was due to an increase in the overall unused commitments in the C&I portfolio and higher loss rates, primarily in the construction portfolio. 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)	(dollars in thousands)	March 31, 2021				December 31, 2020				$ Change			(dollars in thousands)	September 30, 2021				December 31, 2020				$ Change
Nonperforming Loans	Nonperforming Loans												Nonperforming Loans
Commercial real estate	Commercial real estate		$	79,321			$	84,416			$	(5,095)	Commercial real estate		$	43,704			$	84,416			$	(40,712)
Commercial and industrial(1)			991				7,100				(6,109)
Commercial and industrial													Commercial and industrial		33,909				7,100				26,809
Commercial construction	Commercial construction		384				384				—		Commercial construction		4,053				384				3,669
Business banking	Business banking		14,029				16,692				(2,663)		Business banking		8,729				16,692				(7,963)
Consumer real estate	Consumer real estate		5,542				8,798				(3,256)		Consumer real estate		6,695				8,798				(2,103)
Other Consumer	Other Consumer		2,163				96				2,067		Other Consumer		189				96				93
Total Nonperforming Loans	Total Nonperforming Loans		102,430				117,486				(15,056)		Total Nonperforming Loans		97,279				117,486				(20,207)
Nonperforming Troubled Debt Restructurings	Nonperforming Troubled Debt Restructurings												Nonperforming Troubled Debt Restructurings
Commercial real estate	Commercial real estate		15,754				16,654				(900)		Commercial real estate		11,093				16,654				(5,561)
Commercial and industrial	Commercial and industrial		11,425				9,885				1,540		Commercial and industrial		—				9,885				(9,885)
Commercial construction	Commercial construction		—				—				—		Commercial construction		—				—				—
Business banking	Business banking		397				430				(33)		Business banking		1,492				430				1,062
Consumer real estate	Consumer real estate		2,407				2,319				88		Consumer real estate		1,448				2,319				(871)
Other Consumer	Other Consumer		—				—				—		Other Consumer		—				—				—
Total Nonperforming Troubled Debt Restructurings	Total Nonperforming Troubled Debt Restructurings		29,983				29,288				695		Total Nonperforming Troubled Debt Restructurings		14,033				29,288				(15,255)
Total Nonperforming Loans(1)	Total Nonperforming Loans(1)		132,413				146,774				(14,361)		Total Nonperforming Loans(1)		111,312				146,774				(35,462)
OREO	OREO		1,620				2,155				(535)		OREO		13,370				2,155				11,215
Total Nonperforming Assets	Total Nonperforming Assets		$	134,033			$	148,929			$	(14,896)	Total Nonperforming Assets		$	124,682			$	148,929			$	(24,247)
Asset Quality Ratios:	Asset Quality Ratios:												Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans	Nonperforming loans as a percent of total portfolio loans		1.88		%		2.03		%				Nonperforming loans as a percent of total portfolio loans		1.60		%		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		%				Nonperforming assets as a percent of total portfolio loans plus OREO		1.78		%		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) Included in nonperforming commercial loans is $1.7 million of loans held for sale													(1) Included in nonperforming commercial loans is $1.7 million of loans held for sale

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 the contractual due date. Nonperforming loans decreased ~~$11.6~~$35.5 million to ~~$135.2~~$111.3 million at ~~March 31,~~September 30, 2021 compared to $146.8 million at December 31, 2020. The significant decrease in nonperforming loans primarily related to the payoff of three CRE relationships for a ~~$4.6~~total of $14.4 million, charge-offs of four commercial relationships for a total of $14.3 million, two loans moving to OREO for a total of $12.2 million and two CRE ~~relationship and charge-off~~hotel loans returning to performing status for a total of $11.8 million. Offsetting the decrease in nonperforming loans was the addition of a ~~$3.9~~$21.7 million C&I ~~relationship which were previously held in specific reserve.~~

loans during the three months ended September 30, 2021.

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Deposits


(dollars in thousands)	(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change			(dollars in thousands)	September 30, 2021			December 31, 2020			$ Change
Customer Deposits	Customer Deposits										Customer Deposits
Noninterest-bearing demand	Noninterest-bearing demand		$	2,539,594		$	2,261,994		$	277,600	Noninterest-bearing demand		$	2,652,314		$	2,261,994		$	390,320
Interest-bearing demand	Interest-bearing demand		976,225			864,510			111,715		Interest-bearing demand		971,321			864,510			106,811
Money market	Money market		1,997,856			1,887,051			110,805		Money market		2,045,320			1,887,051			158,269
Savings	Savings		1,036,927			969,508			67,419		Savings		1,074,896			969,508			105,388
Certificates of deposit	Certificates of deposit		1,310,473			1,369,239			(58,766)		Certificates of deposit		1,196,268			1,369,239			(172,971)
Total Customer Deposits	Total Customer Deposits		7,861,075			7,352,302			508,773		Total Customer Deposits		7,940,119			7,352,302			587,817
Brokered Deposits	Brokered Deposits										Brokered Deposits
Interest-bearing demand			—			—			—

Money market	Money market		5,001			50,012			(45,011)		Money market		—			50,012			(50,012)
Certificates of deposit	Certificates of deposit		9,952			18,224			(8,272)		Certificates of deposit		5,000			18,224			(13,224)
Total Brokered Deposits	Total Brokered Deposits		14,953			68,236			(53,283)		Total Brokered Deposits		5,000			68,236			(63,236)

Total Deposits	Total Deposits		$	7,876,028		$	7,420,538		$	455,490	Total Deposits		$	7,945,119		$	7,420,538		$	524,581

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, 2021~~ increased ~~$455.5~~$524.6 million, or ~~6.1~~7.1 percent, ~~from~~at September 30, 2021 compared to December 31, 2020. Total customer deposits increased ~~$508.8~~$587.8 million from December 31, 2020. The increase in customer deposits is primarily related to government stimulus programs, PPP loans and our ~~customer’s~~customers’ liquidity preferences. Total brokered deposits decreased ~~$53.3~~$63.2 million from December 31, 2020 due to a reduced need for this funding given the 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.

Borrowings


(dollars in thousands)	(dollars in thousands)	March 31, 2021			December 31, 2020			$ Change			(dollars in thousands)	September 30, 2021			December 31, 2020			$ Change
Securities sold under repurchase agreements	Securities sold under repurchase agreements		$	67,417		$	65,163		$	2,254	Securities sold under repurchase agreements		$	72,586		$	65,163		$	7,423
Short-term borrowings	Short-term borrowings		—			75,000			(75,000)		Short-term borrowings		—			75,000			(75,000)
Long-term borrowings	Long-term borrowings		23,282			23,681			(399)		Long-term borrowings		22,693			23,681			(988)
Junior subordinated debt securities	Junior subordinated debt securities		64,097			64,083			14		Junior subordinated debt securities		64,128			64,083			45
Total Borrowings	Total Borrowings		$	154,796		$	227,927		$	(73,131)	Total Borrowings		$	159,407		$	227,927		$	(68,520)

Borrowings are an additional source of funding for us. Total borrowings decreased ~~$73.1~~$68.5 million ~~or 32.1 percent,~~ compared to December 31, 2020 due to increased customer deposits. Total short-term borrowings decreased $75.0 million, compared to December 31, 2020. We prepaid a $9.8 million junior subordinated debt security with a rate of 4.25% on October 1, 2021.

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Information pertaining to short-term borrowings is summarized in the tables below for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and for the twelve months ended December 31, 2020.


		Securities Sold Under Repurchase Agreements						Securities Sold Under Repurchase Agreements
(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance at the period end	Balance at the period end	$	67,417	$	65,163		Balance at the period end	$	72,586		$	65,163
Average balance during the period	Average balance during the period	$	64,653	$	57,673		Average balance during the period	$	67,872		$	57,673
Average interest rate during the period	Average interest rate during the period	0.15 %		0.29		%	Average interest rate during the period	0.12		%	0.29		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	67,417	$	92,159		Maximum month-end balance during the period	$	73,591		$	92,159
Average interest rate at the period end	Average interest rate at the period end	0.10 %		0.25		%	Average interest rate at the period end	0.10		%	0.25		%

		Short-Term Borrowings						Short-Term Borrowings
(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance at the period end	Balance at the period end	$	—	$	75,000		Balance at the period end	$	—		$	75,000
Average balance during the period	Average balance during the period	$	25,556	$	155,753		Average balance during the period	$	8,425		$	155,753
Average interest rate during the period	Average interest rate during the period	0.19 %		0.92		%	Average interest rate during the period	0.19		%	0.92		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	25,000	$	410,240		Maximum month-end balance during the period	$	25,000		$	410,240
Average interest rate at the period end	Average interest rate at the period end	- %		0.19		%	Average interest rate at the period end	—		%	0.19		%

Information pertaining to long-term borrowings is summarized in the tables below for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and for the twelve months ended December 31, 2020.


		Long-Term Borrowings						Long-Term Borrowings
(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance at the period end	Balance at the period end	$	23,282	$	23,681		Balance at the period end	$	22,693		$	23,681
Average balance during the period	Average balance during the period	$	23,471	$	47,953		Average balance during the period	$	23,139		$	47,953
Average interest rate during the period	Average interest rate during the period	2.00 %		—		%	Average interest rate during the period	2.00		%	2.50		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	23,549	$	50,635		Maximum month-end balance during the period	$	23,549		$	50,635
Average interest rate at the period end	Average interest rate at the period end	2.00 %		2.03		%	Average interest rate at the period end	1.96		%	2.03		%

		Junior Subordinated Debt Securities						Junior Subordinated Debt Securities
(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance at the period end	Balance at the period end	$	64,097	$	64,083		Balance at the period end	$	64,128		$	64,083
Average balance during the period	Average balance during the period	$	64,088	$	64,092		Average balance during the period	$	64,103		$	64,092
Average interest rate during the period	Average interest rate during the period	3.09 %		3.57		%	Average interest rate during the period	3.05		%	3.57		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	64,097	$	64,848		Maximum month-end balance during the period	$	64,128		$	64,848
Average interest rate at the period end	Average interest rate at the period end	2.97 %		3.01		%	Average interest rate at the period end	2.87		%	3.01		%

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

Liquidity and Capital Resources

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,~~September 30, 2021, we had ~~$1.1~~$1.3 billion in highly liquid assets, which consisted of ~~$601.0~~$855.6 million in interest-bearing deposits with banks, ~~$494.1~~$434.0 million in unpledged securities and ~~$12.8~~$4.3 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of ~~11.9~~13.7 percent at ~~March 31,~~September 30, 2021. Also, at ~~March 31,~~September 30, 2021, we had remaining borrowing availability of $2.5 billion with the FHLB of Pittsburgh. ~~Refer~~For more information regarding our outstanding borrowings refer to 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:


(dollars in thousands)	(dollars in thousands)	Adequately Capitalized		Well- Capitalized		March 31, 2021			December 31, 2020			(dollars in thousands)	Adequately Capitalized		Well- Capitalized		September 30, 2021				December 31, 2020
						Amount		Ratio	Amount		Ratio						Amount		Ratio		Amount		Ratio
S&T Bancorp, Inc.	S&T Bancorp, Inc.											S&T Bancorp, Inc.
Tier 1 leverage	Tier 1 leverage	4.00	%	5.00	%	$	846,536	9.71 %	$	825,515	9.43 %	Tier 1 leverage	4.00	%	5.00	%	$	881,306	9.65	%	$	825,515	9.43 %
Common equity tier 1 to risk-weighted assets	Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	817,536		11.84 %	796,515		11.33 %	Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	852,306		12.07	%	796,515		11.33 %
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	846,536		12.26 %	825,515		11.74 %	Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	881,306		12.48	%	825,515		11.74 %
Total capital to risk-weighted assets	Total capital to risk-weighted assets	8.00	%	10.00	%	961,751		13.93 %	944,686		13.44 %	Total capital to risk-weighted assets	8.00	%	10.00	%	992,685		14.06	%	944,686		13.44 %
S&T Bank	S&T Bank											S&T Bank
Tier 1 leverage	Tier 1 leverage	4.00	%	5.00	%	$	830,633	9.54 %	$	810,636	9.27 %	Tier 1 leverage	4.00	%	5.00	%	$	856,926	9.39	%	$	810,636	9.27 %
Common equity tier 1 to risk-weighted assets	Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	830,633		12.04 %	810,636		11.55 %	Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	856,926		12.15	%	810,636		11.55 %
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	830,633		12.04 %	810,636		11.55 %	Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	856,926		12.15	%	810,636		11.55 %
Total capital to risk-weighted assets	Total capital to risk-weighted assets	8.00	%	10.00	%	939,998		13.63 %	922,007		13.14 %	Total capital to risk-weighted assets	8.00	%	10.00	%	962,456		13.64	%	922,007		13.14 %

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~~five-year transition”). We adopted CECL effective January 1, 2020 and elected to implement the ~~five year~~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,~~September 30, 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 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.~~

management.

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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 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 and 13-24 month periods of pretax net interest income and EVE.


		March 31, 2021							December 31, 2020										September 30, 2021										December 31, 2020
		1 - 12 Months		13 - 24 Months		% Change in EVE			1 - 12 Months			13 - 24 Months				% Change in EVE			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 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			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	400	24.1 %		33.6 %				18.2 %			15.8 %			28.5 %					28.5 %		400	29.5			37.3			20.3			15.8			28.5			28.5
300	300	17.9 %		25.1 %		19.8 %			11.7 %			21.3 %				29.0 %		300	21.9				27.8				21.4			11.7			21.3			29.0
200	200	11.9 %		17.1 %		18.5 %			7.7 %			14.3 %				25.6 %		200	14.5				18.8			19.6			7.7			14.3			25.6
100	100	5.4 %		8.2 %		11.6 %			4.4 %			8.0 %				17.7 %		100	6.8				9.2			12.5			4.4			8.0			17.7
(100)		(3.7)	%	(7.6)	%	(23.9)	%		(2.8)	%		(5.7)	%			(28.2)	%
-100																		-100	(4.5)				(8.3)			(27.0)			(2.8)			(5.7)			(28.2)

The results from the rate shock analyses on 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.

Our rate shock analyses show an improvement in the percentage change in pretax net interest income in the rates up scenarios and a decline in the rates down scenarios when comparing ~~March 31,~~September 30, 2021 to December 31, 2020. We have become more asset sensitive due to our increased balances at the Federal Reserve. Our EVE analyses show a decline in the percentage change in EVE in the rates up scenarios and an improvement in the rates down scenario when comparing ~~March 31,~~September 30, 2021 to December 31, 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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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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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,~~September 30, 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,~~September 30, 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.

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, 2020, as filed with the SEC on March 1, ~~2021.~~2021 other than the risks described below.

Risks Related to Our Business Strategy

Our future performance will depend, in part, on the successful transition of our new CEO.

Christopher J. McComish was appointed Chief Executive Officer (CEO) of S&T and S&T Bank, effective August 23, 2021 (the “Effective Date”) and was appointed to the Boards of Directors of S&T and S&T Bank on the Effective Date. David G. Antolik, who served as Interim Chief Executive Officer since April 2021 through the Effective Date, continues to serve as President of S&T and S&T Bank and as a member of the Boards of Directors of S&T and S&T Bank. Our future performance will depend, in part, on the successful transition of our new CEO. This transition may be disruptive to our business, and if we are unable to execute an orderly transition and successfully integrate our new CEO into our management team, our revenue, results of operations, and financial condition may be adversely affected. Further, if our new CEO formulates different or changed views, the future strategy and plans of S&T may differ materially from those of the past.

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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~~third quarter of 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
				$37,441,683
~~01/~~07/01/2021 - ~~01/~~07/31/2021	—	$—	—	37,441,683

~~02/~~08/01/2021 - ~~02/28/~~08/31/2021	—	—	—	37,441,683

~~03/~~09/01/2021 - ~~03/31/~~09/30/2021	—	—	—	37,441,683
Total	—	$—	—	$37,441,683

(1) On March 15, 2021, our Board of Directors authorized an extension of the $50 million share repurchase plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase plan through March 31, 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,~~September 30, 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~~Share repurchases will not occur unless permissible under applicable laws.

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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.
~~10.1~~3.1	~~Confidentiality, Trade Secrets, Non-Solicitation~~Amended and ~~Severance Agreement, October 21, 2020, by and between George Basara and~~Restated Articles of Incorporation of S&T Bancorp, Inc.*	Filed ~~herewith~~
~~10.2~~	~~Severance Agreement dated April 20, 2015 by and between George Basara and~~as Exhibit 3.1 to S&T Bancorp, Inc.* Quarterly Report on Form 10-Q filed for the quarter ended June 30, 2021 filed on August 4, 2021, and incorporated herein by reference.	~~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 as Inline XBRL and contained in Exhibits 101)

* Management Contract or Compensatory Plan or Arrangement

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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,~~November 3, 2021			/s Mark Kochvar
			Mark Kochvar Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)

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	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