~~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 September 30, ~~2021~~2022


☐			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 - ~~39,350,383~~39,003,545 shares as of October 31, ~~2021~~2022

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 - ~~September~~ ~~30, 2021 and December 31, 2020~~	2

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

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

	Condensed Consolidated Statements of Cash Flows ~~- Three and~~ ~~Nine~~ ~~Months Ended~~ ~~September~~ ~~30, 2021 and 2020~~	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3831

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5548

Item 4.	Controls and Procedures	5749

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	5749

Item 1A.	Risk Factors	5749

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5850

Item 3.	Defaults Upon Senior Securities	5850

Item 4.	Mine Safety Disclosures	5950

Item 5.	Other Information	5950

Item 6.	Exhibits	5951

	Signatures	6052

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30, 2021 December 31, 2020
( in thousands, except share and per share data) (Unaudited) (Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $856,105 and $158,903 at September 30, 2021 and December 31, 2020 $ 934,377 $ 229,666
Securities, at fair value 870,121 773,693
Loans held for sale 4,303 18,528
Portfolio loans, net of unearned income 6,970,087 7,225,860
Allowance for credit losses on loans (108,348) (117,612)
Portfolio loans, net 6,861,739 7,108,248
Bank owned life insurance 83,259 82,303
Premises and equipment, net 52,727 55,614
Federal Home Loan Bank and other restricted stock, at cost 9,893 13,030
Goodwill 373,424 373,424
Other intangible assets, net 7,334 8,675
Other assets 238,877 304,716
Total Assets $ 9,436,054 $ 8,967,897
LIABILITIES
Deposits:
Noninterest-bearing demand $ 2,652,314 $ 2,261,994
Interest-bearing demand 971,321 864,510
Money market 2,045,320 1,937,063
Savings 1,074,896 969,508
Certificates of deposit 1,201,268 1,387,463
Total Deposits 7,945,119 7,420,538
Securities sold under repurchase agreements 72,586 65,163
Short-term borrowings — 75,000
Long-term borrowings 22,693 23,681
Junior subordinated debt securities 64,128 64,083
Other liabilities 129,847 164,721
Total Liabilities 8,234,373 7,813,186
SHAREHOLDERS’ EQUITY
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 403,028 400,668
Retained earnings 762,374 710,061
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 (66,315) (68,612)
Total Shareholders’ Equity 1,201,681 1,154,711
Total Liabilities and Shareholders’ Equity $ 9,436,054 $ 8,967,897


	September 30, 2022			December 31, 2021
(in thousands, except share and per share data)	(Unaudited)			(Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $61,186 and $857,192 at September 30, 2022 and December 31, 2021		$	134,903		$	922,215
Securities, at fair value		997,428			910,793
Loans held for sale		1,039			1,522
Portfolio loans, net of unearned income		7,096,916			6,999,990
Allowance for credit losses		(99,694)			(98,576)
Portfolio loans, net		6,997,222			6,901,414
Bank owned life insurance		84,778			83,685
Premises and equipment, net		49,802			52,632
Federal Home Loan Bank and other restricted stock, at cost		10,900			9,519
Goodwill		373,424			373,424
Other intangible assets, net		5,743			6,895
Other assets		280,730			226,430
Total Assets		$	8,935,969		$	9,488,529
LIABILITIES
Deposits:
Noninterest-bearing demand		$	2,663,176		$	2,748,586
Interest-bearing demand		847,825			979,133
Money market		1,818,642			2,070,579
Savings		1,128,169			1,110,155
Certificates of deposit		952,785			1,088,071

Total Deposits		7,410,597			7,996,524
Securities sold under repurchase agreements		—			84,491
Short-term borrowings		35,000			—
Long-term borrowings		14,853			22,430
Junior subordinated debt securities		54,438			54,393

Other liabilities		267,900			124,237
Total Liabilities		7,782,788			8,282,075
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value) Authorized—50,000,000 shares Issued—41,449,444 shares at September 30, 2022 and December 31, 2021 Outstanding—39,012,773 shares at September 30, 2022 and 39,351,194 shares at December 31, 2021		103,623			103,623
Additional paid-in capital		405,506			403,095
Retained earnings		835,684			773,659
Accumulated other comprehensive loss		(114,967)			(7,090)
Treasury stock — 2,436,671 shares at September 30, 2022 and 2,098,250 shares at December 31, 2021, at cost		(76,665)			(66,833)
Total Shareholders’ Equity		1,153,181			1,206,454
Total Liabilities and Shareholders’ Equity		$	8,935,969		$	9,488,529

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 September 30,						Nine Months Ended September 30,							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			2021			2020			(dollars in thousands, except per share data)	2022			2021			2022			2021
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME													INTEREST AND DIVIDEND INCOME
Loans, including fees	Loans, including fees		$	66,914		$	72,263		$	204,088		$	229,812	Loans, including fees		$	83,035		$	66,914		$	218,646		$	204,088
Investment Securities:	Investment Securities:													Investment Securities:
Taxable	Taxable		4,176			3,473			11,532			11,547		Taxable		6,305			4,176			17,236			11,532
Tax-exempt	Tax-exempt		595			885			2,098			2,646		Tax-exempt		380			595			1,346			2,098
Dividends	Dividends		84			227			409			911		Dividends		115			84			315			409
Total Interest and Dividend Income	Total Interest and Dividend Income		71,769			76,848			218,127			244,916		Total Interest and Dividend Income		89,835			71,769			237,543			218,127
INTEREST EXPENSE	INTEREST EXPENSE													INTEREST EXPENSE
Deposits	Deposits		2,439			6,626			8,572			31,191		Deposits		5,197			2,439			8,840			8,572
Borrowings and junior subordinated debt securities	Borrowings and junior subordinated debt securities		619			946			1,881			4,265		Borrowings and junior subordinated debt securities		840			619			1,978			1,881
Total Interest Expense	Total Interest Expense		3,058			7,572			10,453			35,456		Total Interest Expense		6,037			3,058			10,818			10,453
NET INTEREST INCOME	NET INTEREST INCOME		68,711			69,276			207,674			209,460		NET INTEREST INCOME		83,798			68,711			226,725			207,674
Provision for credit losses	Provision for credit losses		(3,388)			(17,485)			(9,087)			(124,294)		Provision for credit losses		2,498			3,388			5,190			9,087
Net Interest Income After Provision for Credit Losses	Net Interest Income After Provision for Credit Losses		65,323			51,791			198,587			85,166		Net Interest Income After Provision for Credit Losses		81,300			65,323			221,535			198,587
NONINTEREST INCOME	NONINTEREST INCOME													NONINTEREST INCOME
Net gain on sale of securities	Net gain on sale of securities		—			—			29			142		Net gain on sale of securities		198			—			198			29
Debit and credit card	Debit and credit card		4,579			4,171			13,486			11,264		Debit and credit card		4,768			4,579			14,587			13,486
Service charges on deposit accounts	Service charges on deposit accounts		3,923			3,303			11,039			10,124		Service charges on deposit accounts		4,333			3,923			12,488			11,039
Wealth management	Wealth management		3,464			2,522			9,576			7,471		Wealth management		3,212			3,464			9,701			9,576
Mortgage banking	Mortgage banking		2,162			3,964			8,206			7,823		Mortgage banking		425			2,162			1,906			8,206
Commercial loan swap income			184			499			577			3,928

Other	Other		1,534			2,024			5,595			3,358		Other		1,824			1,718			3,736			6,257
Total Noninterest Income	Total Noninterest Income		15,846			16,483			48,507			44,110		Total Noninterest Income		14,760			15,846			42,616			48,593
NONINTEREST EXPENSE	NONINTEREST EXPENSE													NONINTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits		25,228			24,571			73,070			67,326		Salaries and employee benefits		26,700			25,228			75,223			73,070
Data processing and information technology	Data processing and information technology		4,001			4,218			12,012			11,671		Data processing and information technology		4,220			4,001			12,759			12,012
Occupancy	Occupancy		3,660			3,441			10,921			10,643		Occupancy		3,490			3,660			11,006			10,921
Furniture, equipment and software	Furniture, equipment and software		2,745			2,440			7,787			7,965		Furniture, equipment and software		2,915			2,745			8,631			7,787
Professional services and legal														Professional services and legal		1,851			1,550			6,180			4,718
Other taxes	Other taxes		1,830			1,612			5,098			4,816		Other taxes		1,559			1,830			4,778			5,098
Professional services and legal			1,550			1,911			4,718			4,890
Marketing	Marketing		890			1,793			3,208			3,883		Marketing		1,367			890			4,252			3,208
FDIC insurance	FDIC insurance		1,210			1,900			3,180			3,718		FDIC insurance		598			1,210			2,417			3,180
Merger related expenses			—			—			—			2,342

Other	Other		6,127			6,360			18,656			20,861		Other		6,933			6,127			20,225			18,742
Total Noninterest Expense	Total Noninterest Expense		47,241			48,246			138,650			138,115		Total Noninterest Expense		49,633			47,241			145,471			138,736
Income (Loss) Before Taxes			33,928			20,028			108,444			(8,839)
Income tax expense (benefit)			6,330			3,323			20,578			(5,703)
Net Income (Loss)			$	27,598		$	16,705		$	87,866		$	(3,136)
Income Before Taxes														Income Before Taxes		46,427			33,928			118,680			108,444
Income tax expense														Income tax expense		9,178			6,330			23,430			20,578
Net Income														Net Income		$	37,249		$	27,598		$	95,250		$	87,866
Earnings per share—basic	Earnings per share—basic		$	0.71		$	0.43		$	2.25		$	(0.08)	Earnings per share—basic		$	0.95		$	0.71		$	2.43		$	2.25
Earnings per share—diluted	Earnings per share—diluted		$	0.70		$	0.43		$	2.24		$	(0.08)	Earnings per share—diluted		$	0.95		$	0.70		$	2.43		$	2.24
Dividends declared per share	Dividends declared per share		$	0.28		$	0.28		$	0.84		$	0.84	Dividends declared per share		$	0.30		$	0.28		$	0.89		$	0.84
Comprehensive Income			$	22,964		$	16,926		$	77,866		$	17,967
Comprehensive (Loss) Income														Comprehensive (Loss) Income		$	(10,547)		$	22,964		$	(12,627)		$	77,866

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 September 30, 2020
(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 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			—			—			16,705			—			—			16,705
Other comprehensive income, net of tax			—			—			—			221			—			221

Cash dividends declared ($0.28 per share)			—			—			(10,960)			—			—			(10,960)
Forfeitures of restricted stock awards 11,822 shares			—			—			366			—			(366)			—

Recognition of restricted stock compensation expense			—			372			—			—			—			372
Balance at September 30, 2020			$	103,623		$	400,789		$	698,351		$	9,453		$	(70,101)		$	1,142,115
See Notes to Consolidated Financial Statements
		For the three months ended September 30, 2021																			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 (Loss)			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 June 30, 2021	Balance at June 30, 2021		$	103,623		$	402,053		$	746,472		$	3,605		$	(67,020)		$	1,188,733	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		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		—			—			—			(4,634)			—			(4,634)		Other comprehensive loss, net of tax		—			—			—			(4,634)			—			(4,634)

Cash dividends declared ($0.28 per share)	Cash dividends declared ($0.28 per share)		—			—			(10,991)			—			—			(10,991)		Cash dividends declared ($0.28 per share)		—			—			(10,991)			—			—			(10,991)
Treasury stock issued for restricted stock awards of 25,459 shares, net of forfeitures of 3,331			—			—			(705)			—			705			—
Treasury stock issued for restricted stock awards (25,459 shares)																				Treasury stock issued for restricted stock awards (25,459 shares)		—			—			(811)			—			811			—
Forfeitures of restricted stock awards (3,331 shares)																				Forfeitures of restricted stock awards (3,331 shares)		—			—			106			—			(106)			—

Recognition of restricted stock compensation expense	Recognition of restricted stock compensation expense		—			975			—			—			—			975		Recognition of restricted stock compensation expense		—			975			—			—			—			975
Balance at September 30, 2021	Balance at September 30, 2021		$	103,623		$	403,028		$	762,374		$	(1,029)		$	(66,315)		$	1,201,681	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

																					Three months ended September 30, 2022
(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			Treasury Stock			Total
Balance at June 30, 2022																				Balance at June 30, 2022		$	103,623		$	404,841		$	809,644		$	(67,171)		$	(72,579)		$	1,178,358
Net income for the three months ended September 30, 2022																				Net income for the three months ended September 30, 2022		—			—			37,249			—			—			37,249
Other comprehensive loss, net of tax																				Other comprehensive loss, net of tax		—			—			—			(47,796)			—			(47,796)

Cash dividends declared ($0.30 per share)																				Cash dividends declared ($0.30 per share)		—			—			(11,747)			—			—			(11,747)

Forfeitures of restricted stock awards (18,943 shares)																				Forfeitures of restricted stock awards (18,943 shares)		—			—			538			—			(602)			(64)

Repurchase of S&T stock (117,283 shares)																				Repurchase of S&T stock (117,283 shares)		—			—			—			—			(3,484)			(3,484)
Recognition of restricted stock compensation expense																				Recognition of restricted stock compensation expense		—			665			—			—			—			665
Balance at September 30, 2022																				Balance at September 30, 2022		$	103,623		$	405,506		$	835,684		$	(114,967)		$	(76,665)		$	1,153,181
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																			Nine 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 (Loss)			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	Balance at January 1, 2021		$	103,623		$	400,668		$	710,061		$	8,971		$	(68,612)		$	1,154,711	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	Net income for the nine months ended September 30, 2021		—			—			87,866			—			—			87,866		Net income for the nine months ended September 30, 2021		—			—			87,866			—			—			87,866
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax		—			—			—			(10,000)			—			(10,000)		Other comprehensive loss, net of tax		—			—			—			(10,000)			—			(10,000)

Cash dividends declared ($0.84 per share)	Cash dividends declared ($0.84 per share)		—			—			(32,954)			—			—			(32,954)		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)
Treasury stock issued for restricted stock awards (125,170 shares)																				Treasury stock issued for restricted stock awards (125,170 shares)		—			—			(3,988)			—			3,988			—
Forfeitures of restricted stock awards (55,330 shares)																				Forfeitures of restricted stock awards (55,330 shares)		—			—			1,389			—			(1,691)			(302)

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

																					Nine months ended September 30, 2022
(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			Treasury Stock			Total
Balance at January 1, 2022																				Balance at January 1, 2022		$	103,623		$	403,095		$	773,659		$	(7,090)		$	(66,833)		$	1,206,454
Net income for the nine months ended September 30, 2022																				Net income for the nine months ended September 30, 2022		—			—			95,250			—			—			95,250
Other comprehensive loss, net of tax																				Other comprehensive loss, net of tax		—			—			—			(107,877)			—			(107,877)

Cash dividends declared ($0.89 per share)																				Cash dividends declared ($0.89 per share)		—			—			(34,922)			—			—			(34,922)
Treasury stock issued for restricted stock awards (4,250 shares)																				Treasury stock issued for restricted stock awards (4,250 shares)		—			—			(135)			—			135			—
Forfeitures of restricted stock awards (74,168 shares)																				Forfeitures of restricted stock awards (74,168 shares)		—			—			1,832			—			(2,330)			(498)

Repurchase of S&T Stock (268,503 shares)																				Repurchase of S&T Stock (268,503 shares)		—			—			—			—			(7,637)			(7,637)
Recognition of restricted stock compensation expense																				Recognition of restricted stock compensation expense		—			2,411			—			—			—			2,411
Balance at September 30, 2022																				Balance at September 30, 2022		$	103,623		$	405,506		$	835,684		$	(114,967)		$	(76,665)		$	1,153,181

See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,						Nine months ended September 30,
(dollars in thousands)	(dollars in thousands)		2021		2020		(dollars in thousands)		2022		2021
OPERATING ACTIVITIES							OPERATING ACTIVITIES

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

Net Cash Provided by Operating Activities							Net Cash Provided by Operating Activities		$	205,236	$	171,740
INVESTING ACTIVITIES	INVESTING ACTIVITIES						INVESTING ACTIVITIES
Purchases of securities	Purchases of securities		(226,971)		(90,348)		Purchases of securities		(353,088)		(226,971)
Proceeds from maturities, prepayments and calls of securities	Proceeds from maturities, prepayments and calls of securities		109,499		176,103		Proceeds from maturities, prepayments and calls of securities		117,377		109,499
Proceeds from sales of securities	Proceeds from sales of securities		1,917		1,349		Proceeds from sales of securities		30,490		1,917
Net proceeds from sales of Federal Home Loan Bank stock			3,137		7,200
Net decrease (increase) in loans			220,854		(350,884)
Proceeds from redemption of Federal Home Loan Bank stock							Proceeds from redemption of Federal Home Loan Bank stock		18,186		19,694
Purchases of Federal Home Loan Bank stock							Purchases of Federal Home Loan Bank stock		(19,567)		(16,557)
Net (increase) decrease in loans							Net (increase) decrease in loans		(101,919)		220,854
Proceeds from sale of portfolio loans	Proceeds from sale of portfolio loans		3,438		—		Proceeds from sale of portfolio loans		4,326		3,438

Purchases of premises and equipment	Purchases of premises and equipment		(2,110)		(4,356)		Purchases of premises and equipment		(2,877)		(2,110)
Proceeds from the sale of premises and equipment	Proceeds from the sale of premises and equipment		14		15		Proceeds from the sale of premises and equipment		251		14
Proceeds from life insurance settlement	Proceeds from life insurance settlement		353		—		Proceeds from life insurance settlement		214		353

Net Cash Provided by (Used in) Investing Activities			110,131		(260,921)
Net Cash (Used in) Provided by Investing Activities							Net Cash (Used in) Provided by Investing Activities		(306,607)		110,131
FINANCING ACTIVITIES	FINANCING ACTIVITIES						FINANCING ACTIVITIES
Net increase in core deposits			710,776		746,580
Net decrease in certificates of deposit			(186,115)		(148,573)
Net increase in securities sold under repurchase agreements			7,423		22,818
Net decrease in short-term borrowings			(75,000)		(198,319)
Net (decrease) increase in core deposits							Net (decrease) increase in core deposits		(450,642)		710,776
Net (decrease) in certificates of deposit							Net (decrease) in certificates of deposit		(135,227)		(186,115)
Net (decrease) increase in securities sold under repurchase agreements							Net (decrease) increase in securities sold under repurchase agreements		(84,491)		7,423
Net increase (decrease) in short-term borrowings							Net increase (decrease) in short-term borrowings		35,000		(75,000)

Repayments on long-term borrowings	Repayments on long-term borrowings		(988)		(1,792)		Repayments on long-term borrowings		(7,577)		(988)

Treasury shares issued-net			(302)		(594)
Repurchase of shares for taxes on restricted stock							Repurchase of shares for taxes on restricted stock		(498)		(302)

Cash dividends paid to common shareholders	Cash dividends paid to common shareholders		(32,954)		(32,972)		Cash dividends paid to common shareholders		(34,869)		(32,954)
Repurchase of common stock	Repurchase of common stock		—		(12,559)		Repurchase of common stock		(7,637)		—

Net Cash Provided by Financing Activities			422,840		374,589
Net increase in cash and cash equivalents			704,711		110,666
Net Cash (Used in) Provided by Financing Activities							Net Cash (Used in) Provided by Financing Activities		(685,941)		422,840
Net (decrease) increase in cash and cash equivalents							Net (decrease) increase in cash and cash equivalents		(787,312)		704,711
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		922,215		229,666
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period		$	934,377	$	308,489	Cash and Cash Equivalents at End of Period		$	134,903	$	934,377

Supplemental Disclosures	Supplemental Disclosures						Supplemental Disclosures
Loans transferred to held for sale	Loans transferred to held for sale		$	4,467	$	—	Loans transferred to held for sale		$	—	$	4,467

Interest paid			$	12,200	$	37,437
Income taxes paid, net of refunds			$	19,183	$	6,210
Cash paid for interest							Cash paid for interest		$	10,152	$	12,200
Cash paid for income taxes, net of refunds							Cash paid for income taxes, net of refunds		$	19,725	$	19,183

Transfers of loans to other real estate owned	Transfers of loans to other real estate owned		$	12,392	$	631	Transfers of loans to other real estate owned		$	23	$	12,392

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,~~2021, filed with the Securities and Exchange Commission, or SEC, on ~~March 1, 2021.~~February 28, 2022 (2021 Form 10-K). 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,~~Policy for Derivative Instruments and Hedging Activities

During the nine months ended September 30, 2022, we entered into interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing variable rate assets. We have updated our accounting policy for derivative instruments and hedging activities to include hedge accounting.

All derivatives are evaluated at inception to determine whether it is a hedging 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.~~non-hedging activity. The ~~amendments in this ASU simplify the~~ accounting for ~~income taxes by removing certain exceptions~~changes in the fair value of derivatives depends on whether we have elected to designate a derivative in a hedging relationship and ~~improve~~apply hedge accounting and whether the ~~consistent application~~hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of ~~GAAP by clarifying and amending~~the exposure to variability in expected future cash flows, or other ~~existing guidance. We adopted this ASU~~types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on ~~January 1, 2021. The amendments~~the hedging instrument with the recognition of the changes in ~~this ASU did not impact our consolidated financial statements.~~

~~Amendments to certain SEC paragraphs from~~ the ~~Codification in response to issuance~~fair value 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~~hedged asset or liability that are attributable to the ~~issuance~~hedged risk in a fair value hedge or the earnings effect of ~~SEC Final Rule Nos. 33-10786, Amendments~~the hedged forecasted transactions in a cash flow hedge. As long as the cash flow hedge continues to ~~Financial Disclosures About Acquired~~qualify for hedge accounting, the entire change in the fair value of the hedging instrument is recorded in Accumulated Other Comprehensive Income (Loss), or AOCI, and ~~Disposed Businesses,~~recognized in earnings as the hedged transaction affects earnings.

We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. We elect, however, to account for all derivatives with counterparty institutions on a gross basis.

Refer to our 2021 Form 10-K for a discussion of our complete Accounting Policy for Derivative Instruments 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.

Hedging Activities.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~– continued~~

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

Recently Adopted Accounting Standards ~~Issued Not Yet Adopted~~Updates, or ASU or Updated

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. In January 2021, the FASB issued ASU 2021-01, Reference Rate Addendum (Topic 848) which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The guidance is effective for all entities 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 revising fallback language to facilitate the transition to alternative reference rates.adopted ASU 2020-04 and ASU 2021-01 on January 1, 2022. We are utilizing the LIBOR transition relief as contract modifications are made during the course of the reference rate reform transition period. ASU 2020-04 and ASU 2021-01 did not have a material impact on our consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Financial Instruments Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures. The guidance eliminates the “once a TDR, always a TDR” requirement for loan disclosures and requires disclosures about the performance of modified loans to borrowers experiencing financial difficulty in the 12 months following the modification.

The amendments eliminate the recognition and measurement guidance related to TDRs for creditors that have adopted ASC 326 Financial Instruments - Credit Losses. We adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020. Once applying ASC 326, the required accounting and disclosures for a loan modified in a TDR no longer provide decision-useful information. ASC 326 requires the recognition of lifetime expected credit losses when a loan is originated or acquired, so the effect of credit losses that occur in loans modified in TDRs is already included in the allowance for credit losses.

ASU 2022-02 requires a creditor to apply the loan refinancing and restructuring guidance in ASC 310-205 (consistent with the accounting for other loan modifications) to determine whether a modification results in a new loan or a continuation of an existing loan. It also requires enhanced disclosures for modifications in the form of interest rate reductions, principal forgiveness, other-than-insignificant payment delays or term extensions (or combinations thereof) of loans made to borrowers experiencing financial difficulty. Disclosures are required regardless of whether a modification of a loan to a borrower experiencing financial difficulty results in a new loan. The objective of the disclosures is to provide information about the type and magnitude of modifications and the degree of their success in mitigating potential credit losses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption is permitted, however, we have not ~~expected~~elected to do so. We are currently in the process of developing new reporting and processes in order adhere to the new disclosure requirements. We anticipate using a modified retrospective transition approach, which would result in a cumulative effect adjustment being record to retained earnings related to the elimination of TDRs. While we are currently evaluating the impact of this ASU, we do not expect it to have a material impact on our 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 two-class method was used to determine earnings per share for the three and nine months ended September 30, ~~2021~~2022 and ~~2020, diluted EPS was reported using the two-class method.~~2021. The following table reconciles the numerators and denominators of basic and diluted earnings per share calculations for the periods ~~presented.~~

Three Months Ended September 30, Nine months ended September 30,
(in thousands, except share and per share data) 2021 2020 2021 2020
Numerator for Earnings per Share—Basic:
Net income (loss) $ 27,598 $ 16,705 $ 87,866 $ (3,136)
Less: Income allocated to participating shares 125 52 408 —
Net Income Allocated to Shareholders $ 27,473 $ 16,653 $ 87,458 $ (3,136)
Numerator for Earnings per Share—Diluted:
Net income (loss) $ 27,598 $ 16,705 $ 87,866 $ (3,136)
Net Income Available to Shareholders $ 27,598 $ 16,705 $ 87,866 $ (3,136)
Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic 39,060,616 39,020,811 39,044,412 39,101,309
Add: Potentially dilutive shares 86,157 20,656 89,194 —
Denominator for Treasury Stock Method—Diluted 39,146,773 39,041,467 39,133,606 39,101,309
Weighted Average Shares Outstanding—Basic 39,060,616 39,020,811 39,044,412 39,101,309
Add: Average participating shares outstanding 1,464 — 458 —
Denominator for Two-Class Method—Diluted 39,062,080 39,020,811 39,044,870 39,101,309
Earnings (loss) per share—basic $ 0.71 $ 0.43 $ 2.25 $ (0.08)
Earnings (loss) per share—diluted $ 0.70 $ 0.43 $ 2.24 $ (0.08)
Restricted stock considered anti-dilutive excluded from potentially dilutive shares 163 19,449 615 1,137

presented:


	Three months ended September 30,						Nine months ended September 30,
(in thousands, except share and per share data)	2022			2021			2022			2021
Numerator for Earnings per Share—Basic and Diluted:
Net income		$	37,249		$	27,598		$	95,250		$	87,866
Less: Income allocated to participating shares		98			125			223			408
Net Income Allocated to Shareholders		$	37,151		$	27,473		$	95,027		$	87,458
Denominator for Earnings per Share - Basic and Diluted:
Weighted Average Shares Outstanding—Basic		38,937,771			39,060,616			39,030,325			39,044,412
Add: Average participating shares outstanding		37,374			1,464			18,826			458
Denominator for Two-Class Method—Diluted		38,975,145			39,062,080			39,049,151			39,044,870

Earnings per share—basic		$	0.95		$	0.71		$	2.43		$	2.25
Earnings per share—diluted		$	0.95		$	0.70		$	2.43		$	2.24


Restricted stock considered anti-dilutive excluded from potentially dilutive shares		655			163			1,027			615

~~Table of Contents~~

~~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~~financial instruments 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~~

There have been no changes in our valuation methodologies during the three and nine months ended September 30, 2022. Refer to ~~recognize transfers between any~~Note 1 of the ~~fair value hierarchy levels at the end of the reporting period~~Notes to Consolidated Financial Statements in ~~which the transfer occurred.~~

~~The following are descriptions of~~our 2021 Form 10-K for more information on 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 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.

109

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S&T BANCORP, INC. AND SUBSIDIARIES

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 (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, 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 marked to fair value are classified as Level 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 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 marked to fair value are classified as Level 3. OREO and other repossessed assets are reported in other assets in the Consolidated Balance Sheets.

~~Table of Contents~~

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

~~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 (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 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.

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

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~NOTE 3. FAIR VALUE MEASUREMENTS - continued~~

~~Long-Term Borrowings~~

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

~~Junior Subordinated Debt Securities~~

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

~~Table of Contents~~

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

~~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 ~~September 30, 2021 and December 31, 2020.~~the dates presented:


		September 30, 2021									September 30, 2022
(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	$	85,300	$	—	$	—	$	85,300	U.S. Treasury securities	$	120,825	$	—	$	—	$	120,825
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—		71,205		—		71,205		Obligations of U.S. government corporations and agencies	—		51,784		—		51,784
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	—		208,985		—		208,985		Collateralized mortgage obligations of U.S. government corporations and agencies	—		419,719		—		419,719
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	—		60,442		—		60,442		Residential mortgage-backed securities of U.S. government corporations and agencies	—		41,984		—		41,984
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	—		356,506		—		356,506		Commercial mortgage-backed securities of U.S. government corporations and agencies	—		323,469		—		323,469
Corporate obligations	Corporate obligations	—		500		—		500		Corporate obligations	—		500		—		500
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		86,056		—		86,056		Obligations of states and political subdivisions	—		38,122		—		38,122
Total Available-for-sale Debt Securities	Total Available-for-sale Debt Securities	85,300		783,694		—		868,994		Total Available-for-sale Debt Securities	120,825		875,578		—		996,403
Marketable equity securities	Marketable equity securities	1,051		76		—		1,127		Marketable equity securities	963		62		—		1,025
Total Securities	Total Securities	86,351		783,770		—		870,121		Total Securities	121,788		875,640		—		997,428
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	9,320		—		—		9,320		Securities held in a deferred compensation plan	7,354		—		—		7,354
Derivative financial assets:	Derivative financial assets:									Derivative financial assets:
Interest rate swaps		—		42,177		—		42,177
Interest rate lock commitments		—		—		812		812
Forward sale contracts		—		—		101		101
Interest rate swaps - commercial loans										Interest rate swaps - commercial loans	—		88,888		—		88,888

Forward sale contracts - mortgage loans										Forward sale contracts - mortgage loans	—		—		8		8

Total Assets	Total Assets	$	95,671	$	825,947	$	913	$	922,531	Total Assets	$	129,142	$	964,528	$	8	$	1,093,678
LIABILITIES	LIABILITIES									LIABILITIES
Derivative financial liabilities:	Derivative financial liabilities:									Derivative financial liabilities:
Interest rate swaps		$	—	$	42,554	$	—	$	42,554
Interest rate swaps - commercial loans										Interest rate swaps - commercial loans	$	—	$	88,920	$	—	$	88,920

Interest rate lock commitments										Interest rate lock commitments	—		—		3		3
Interest rate swaps - cash flow hedge										Interest rate swaps - cash flow hedge	—		22,724		—		22,724
Total Liabilities	Total Liabilities	$	—	$	42,554	$	—	$	42,554	Total Liabilities	$	—	$	111,644	$	3	$	111,647


		December 31, 2020									December 31, 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	$	10,282	$	—	$	—	$	10,282	U.S. Treasury securities	$	95,327	$	—	$	—	$	95,327
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—		82,904		—		82,904		Obligations of U.S. government corporations and agencies	—		70,348		—		70,348
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	—		209,296		—		209,296		Collateralized mortgage obligations of U.S. government corporations and agencies	—		270,294		—		270,294
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	—		67,778		—		67,778		Residential mortgage-backed securities of U.S. government corporations and agencies	—		56,793		—		56,793
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	—		273,681		—		273,681		Commercial mortgage-backed securities of U.S. government corporations and agencies	—		341,300		—		341,300
Corporate obligations	Corporate obligations	—		2,025		—		2,025		Corporate obligations	—		500		—		500
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		124,427		—		124,427		Obligations of states and political subdivisions	—		75,089		—		75,089
Total Available-for-sale Debt Securities	Total Available-for-sale Debt Securities	10,282		760,111		—		770,393		Total Available-for-sale Debt Securities	95,327		814,324		—		909,651
Marketable equity securities	Marketable equity securities	3,228		72		—		3,300		Marketable equity securities	1,061		81		—		1,142
Total Securities	Total Securities	13,510		760,183		—		773,693		Total Securities	96,388		814,405		—		910,793
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	6,794		—		—		6,794		Securities held in a deferred compensation plan	10,230		—		—		10,230
Derivative financial assets:	Derivative financial assets:									Derivative financial assets:
Interest rate swaps		—		78,319		—		78,319
Interest rate swaps - commercial loans										Interest rate swaps - commercial loans	—		33,528		—		33,528
Interest rate lock commitments	Interest rate lock commitments	—		—		2,900		2,900		Interest rate lock commitments	—		—		401		401
Forward sale contracts - mortgage loans										Forward sale contracts - mortgage loans	—		—		4		4

Total Assets	Total Assets	$	20,304	$	838,502	$	2,900	$	861,706	Total Assets	$	106,618	$	847,933	$	405	$	954,956
LIABILITIES	LIABILITIES									LIABILITIES
Derivative financial liabilities:	Derivative financial liabilities:									Derivative financial liabilities:
Interest rate swaps		$	—	$	79,033	$	—	$	79,033
Forward sale contracts		—		385		—		385
Interest rate swaps - commercial loans										Interest rate swaps - commercial loans	$	—	$	33,631	$	—	$	33,631

Total Liabilities	Total Liabilities	$	—	$	79,418	$	—	$	79,418	Total Liabilities	$	—	$	33,631	$	—	$	33,631

1410

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~– continued~~

~~NOTE 3. FAIR VALUE MEASUREMENTS - continued~~

Loans held for sale were transferred to Level 2 from Level 3 during the nine months ended 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 consolidated financial statements. There were no liabilities measured at fair value on a nonrecurring basis at either September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

~~For~~There were no Level 3 assets measured at fair value on a nonrecurring basis as of September 30, ~~2021~~2022. Level 3 assets measured at fair value on a nonrecurring basis and ~~December 31, 2020,~~ the significant unobservable inputs used in the fair value measurements as of December 31, 2021 were as follows:

September 30, 2021 Valuation Technique Significant Unobservable Inputs Range
Weighted Average
(1) (2) (3)
(dollars in thousands)
Loans individually evaluated $ 41,135 Collateral method Appraisal adjustment —% - 17.00% 13.68%
Other real estate owned 13,313 Collateral method Costs to sell 4.00% - 7.00% 6.77%
Mortgage servicing rights 7,015 Discounted cash flow method Discount rate 9.21% - 12.54% 9.38%
Constant prepayment rates 7.93% - 14.96% 10.69%
Loans held for sale 1,669 Contractual agreement None NA NA
Total Assets $ 63,132

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.


	December 31, 2021		Valuation Technique	Significant Unobservable Inputs	Range			Weighted Average (1) (2)
(dollars in thousands)
Loans individually evaluated	$	7,268	Collateral method	Appraisal adjustment	0%	-	20%	4.48%
Other real estate owned	1,011		Collateral method	Appraisal adjustment	2.53%			2.53%



Total Assets	$	8,279
(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.

1511

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~– continued~~

~~NOTE 3. FAIR VALUE MEASUREMENTS - continued~~

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


		Carrying Value(1)		Fair Value Measurements at September 30, 2021									Carrying Value(1)		Fair Value Measurements at September 30, 2022
(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	$	934,377	$	934,377	$	934,377	$	—	$	—	Cash and due from banks, including interest-bearing deposits	$	134,903	$	134,903	$	134,903	$	—	$	—
Securities	Securities	870,121		870,121		86,351		783,770		—		Securities	997,428		997,428		121,788		875,640		—
Loans held for sale	Loans held for sale	4,303		4,303		—		4,303		—		Loans held for sale	1,039		1,039		—		—		1,039
Portfolio loans, net	Portfolio loans, net	6,897,715		6,784,028		—		—		6,784,028		Portfolio loans, net	6,997,222		6,729,260		—		—		6,729,260

Collateral receivable	Collateral receivable	43,193		43,193		43,193		—		—		Collateral receivable	5,529		5,529		5,529		—		—
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	9,320		9,320		9,320		—		—		Securities held in a deferred compensation plan	7,354		7,354		7,354		—		—
Mortgage servicing rights	Mortgage servicing rights	7,015		7,015		—		—		7,015		Mortgage servicing rights	7,374		7,374		—		—		7,374
Interest rate swaps		42,177		42,177		—		42,177		—
Interest rate lock commitments		813		813		—		—		813
Interest rate swaps - commercial loans												Interest rate swaps - commercial loans	88,888		88,888		—		88,888		—

Forward sale contracts	Forward sale contracts	101		101		—		—		101		Forward sale contracts	8		8		—		—		8
LIABILITIES	LIABILITIES											LIABILITIES
Deposits	Deposits	$	7,945,119	$	7,944,461	$	6,743,851	$	1,200,610	$	—	Deposits	$	7,410,597	$	7,382,732	$	6,457,813	$	924,919	$	—
Securities sold under repurchase agreements		72,586		72,586		72,586		—		—
Collateral payable												Collateral payable	69,183		69,183		69,183		—		—

Short-term borrowings	Short-term borrowings	—		—		—		—		—		Short-term borrowings	35,000		35,000		35,000		—		—
Long-term borrowings	Long-term borrowings	22,693		23,172		4,349		18,823		—		Long-term borrowings	14,853		14,257		4,156		10,101		—
Junior subordinated debt securities	Junior subordinated debt securities	64,128		64,128		64,128		—		—		Junior subordinated debt securities	54,438		54,438		54,438		—		—
Interest rate swaps		42,554		42,554		—		42,554		—
Interest rate swaps - commercial loans												Interest rate swaps - commercial loans	88,920		88,920		—		88,920		—
Interest rate swaps - cash flow hedge												Interest rate swaps - cash flow hedge	22,724		22,724		—		22,724		—
Interest rate lock commitments												Interest rate lock commitments	3		3		—		—		3

(1) As reported in the Consolidated Balance Sheets	(1) As reported in the Consolidated Balance Sheets											(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, 2021
(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	$	—	$	—	Cash and due from banks, including interest-bearing deposits	$	922,215	$	922,215	$	922,215	$	—	$	—
Securities	Securities	773,693		773,693		13,510		760,183		—		Securities	910,793		910,793		96,388		814,405		—
Loans held for sale	Loans held for sale	18,528		18,528		—		—		18,528		Loans held for sale	1,522		1,522		—		—		1,522
Portfolio loans, net	Portfolio loans, net	7,108,248		7,028,446		—		—		7,028,446		Portfolio loans, net	6,901,414		6,815,468		—		—		6,815,468

Collateral receivable	Collateral receivable	77,936		77,936		77,936		—		—		Collateral receivable	37,363		37,363		37,363		—		—
Securities held in a deferred compensation plan	Securities held in a deferred compensation plan	6,794		6,794		6,794		—		—		Securities held in a deferred compensation plan	10,230		10,230		10,230		—		—
Mortgage servicing rights	Mortgage servicing rights	4,976		4,976		—		—		4,976		Mortgage servicing rights	7,677		7,677		—		—		7,677
Interest rate swaps	Interest rate swaps	78,319		78,319		—		78,319		—		Interest rate swaps	33,528		33,528		—		33,528		—
Interest rate lock commitments	Interest rate lock commitments	2,900		2,900		—		—		2,900		Interest rate lock commitments	401		401		—		—		401

Forward sale contracts												Forward sale contracts	4		4		—		—		4
LIABILITIES	LIABILITIES											LIABILITIES
Deposits	Deposits	$	7,420,538	$	7,422,894	$	6,033,075	$	1,389,819	$	—	Deposits	$	7,996,524	$	7,992,942	$	6,908,453	$	1,084,489	$	—

Securities sold under repurchase agreements	Securities sold under repurchase agreements	65,163		65,163		65,163		—		—		Securities sold under repurchase agreements	84,491		84,491		84,491		—		—
Short-term borrowings	Short-term borrowings	75,000		75,000		75,000		—		—		Short-term borrowings	—		—		—		—		—
Long-term borrowings	Long-term borrowings	23,681		24,545		4,494		20,051		—		Long-term borrowings	22,430		22,678		4,300		18,378		—
Junior subordinated debt securities	Junior subordinated debt securities	64,083		64,083		64,083		—		—		Junior subordinated debt securities	54,393		54,393		54,393		—		—
Interest rate swaps		79,033		79,033		—		79,033		—
Forward sale contracts		385		385		—		385		—
Interest rate swaps - commercial loans												Interest rate swaps - commercial loans	33,631		33,631		—		33,631		—

(1) As reported in the Consolidated Balance Sheets	(1) As reported in the Consolidated Balance Sheets											(1) As reported in the Consolidated Balance Sheets

1612

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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)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Available-for-sale debt securities	Available-for-sale debt securities		$	868,994		$	770,393	Available-for-sale debt securities		$	996,403		$	909,651
Marketable equity securities	Marketable equity securities		1,127			3,300		Marketable equity securities		1,025			1,142
Total Securities	Total Securities		$	870,121		$	773,693	Total Securities		$	997,428		$	910,793

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:


		September 30, 2021												December 31, 2020													September 30, 2022												December 31, 2021
(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		$	85,222		$	326		$	(248)		$	85,300		$	9,980		$	302		$	—		$	10,282	U.S. Treasury securities		$	135,554		$	—		$	(14,729)		$	120,825		$	95,954		$	115		$	(742)		$	95,327
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies		68,635			2,570			—			71,205			78,755			4,149			—			82,904		Obligations of U.S. government corporations and agencies		53,515			—			(1,731)			51,784			68,599			1,749			—			70,348
Collateralized mortgage obligations of U.S. government corporations and agencies	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		Collateralized mortgage obligations of U.S. government corporations and agencies		470,935			—			(51,216)			419,719			270,696			2,408			(2,810)			270,294
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies		60,855			553			(966)			60,442			66,960			818			—			67,778		Residential mortgage-backed securities of U.S. government corporations and agencies		50,625			3			(8,644)			41,984			57,029			392			(628)			56,793
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies		347,825			9,339			(658)			356,506			258,875			14,806			—			273,681		Commercial mortgage-backed securities of U.S. government corporations and agencies		350,550			—			(27,081)			323,469			336,918			5,969			(1,587)			341,300
Corporate obligations	Corporate obligations		500			—			—			500			2,021			5			(1)			2,025		Corporate obligations		500			—			—			500			500			—			—			500
Obligations of states and political subdivisions	Obligations of states and political subdivisions		81,310			4,746			0			86,056			117,439			6,988			—			124,427		Obligations of states and political subdivisions		39,320			14			(1,212)			38,122			70,539			4,550			—			75,089
Total Available-for-Sale Debt Securities (1)	Total Available-for-Sale Debt Securities (1)		$	850,672		$	21,392		$	(3,070)		$	868,994		$	737,005		$	33,478		$	(90)		$	770,393	Total Available-for-Sale Debt Securities (1)		$	1,100,999		$	17		$	(104,613)		$	996,403		$	900,235		$	15,183		$	(5,767)		$	909,651

(1) Excludes interest receivable of ~~$3.2~~$3.4 million at September 30, ~~2021~~2022 and ~~$3.1~~$3.3 million at December 31, ~~2020.~~2021. Interest receivable is included in other assets in the ~~consolidated balance sheets.~~

Consolidated Balance Sheets.

1713

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S&T BANCORP, INC. AND SUBSIDIARIES

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:


		September 30, 2021																September 30, 2022
		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	4	$	43,200	$	(248)	—	$	—	$	—	4	$	43,200	$	(248)	U.S. Treasury securities	9	$	83,694	$	(8,943)	4	$	37,130	$	(5,786)	13	$	120,824	$	(14,729)
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—	—		—		—	—		—		—	—		—		Obligations of U.S. government corporations and agencies	7	46,784		(1,731)		—	—		—		7	46,784		(1,731)
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies	7	88,290		(1,198)		—	—		—		7	88,290		(1,198)		Collateralized mortgage obligations of U.S. government corporations and agencies	52	353,504		(35,910)		7	66,215		(15,306)		59	419,719		(51,216)
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	3	48,497		(966)		—	—		—		3	48,497		(966)		Residential mortgage-backed securities of U.S. government corporations and agencies	26	7,459		(686)		3	34,337		(7,958)		29	41,796		(8,644)
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	7	101,479		(658)		—	—		—		7	101,479		(658)		Commercial mortgage-backed securities of U.S. government corporations and agencies	30	237,751		(12,757)		7	85,718		(14,324)		37	323,469		(27,081)
Corporate bonds		—	—		—		—	—		—		—	—		—
Corporate obligations																	Corporate obligations	1	500		—		—	—		—		1	500		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	1	5,000		—		—	—		—		1	5,000		—		Obligations of states and political subdivisions	5	33,009		(1,212)		—	—		—		5	33,009		(1,212)

Total	Total	22	$	286,466	$	(3,070)	—	$	—	$	—	22	$	286,466	$	(3,070)	Total	130	$	762,701	$	(61,239)	21	$	223,400	$	(43,374)	151	$	986,101	$	(104,613)


		December 31, 2020																December 31, 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	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	U.S. Treasury securities	8	$	85,221	$	(742)	—	$	—	$	—	8	$	85,221	$	(742)
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies	—	—		—		—	—		—		—	—		—		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)		—	—		—		2	35,697		(89)		Collateralized mortgage obligations of U.S. government corporations and agencies	12	141,204		(2,436)		1	8,933		(374)		13	150,137		(2,810)
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	—	—		—		—	—		—		—	—		—		Residential mortgage-backed securities of U.S. government corporations and agencies	3	46,042		(628)		—	—		—		3	46,042		(628)
Commercial 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	7	100,032		(1,587)		—	—		—		7	100,032		(1,587)
Corporate bonds		1	499		(1)		—	—		—		1	499		(1)
Corporate obligations																	Corporate obligations	—	—		—		—	—		—		—	—		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—	—		—		—	—		—		—	—		—		Obligations of states and political subdivisions	—	—		—		—	—		—		—	—		—

Total	Total	3	$	36,196	$	(90)	—	$	—	$	—	3	$	36,196	$	(90)	Total	30	$	372,499	$	(5,393)	1	$	8,933	$	(374)	31	$	381,432	$	(5,767)

We evaluate securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit losses or other factors. There were 22151 debt securities in an unrealized loss position at September 30, ~~2021~~2022 and 331 debt securities in an unrealized loss position at December 31, ~~2020.~~2021. 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.

1814

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S&T BANCORP, INC. AND SUBSIDIARIES

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/~~income (loss), for the periods presented:


		September 30, 2021						December 31, 2020							September 30, 2022						December 31, 2021
(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 Losses		Gross Unrealized Gains		Gross Unrealized Losses		Net Unrealized Gains
Total unrealized gains/(losses) on available-for-sale debt securities		$	21,392	$	(3,070)	$	18,322	$	33,478	$	(90)	$	33,388
Total unrealized gains (losses) on available-for-sale debt securities														Total unrealized gains (losses) on available-for-sale debt securities	$	17	$	(104,613)	$	(104,596)	$	15,183	$	(5,767)	$	9,416
Income tax (expense) benefit	Income tax (expense) benefit	(4,569)		657		(3,912)		(7,128)		19		(7,109)		Income tax (expense) benefit	(4)		22,340		22,336		(3,215)		1,221		(1,994)
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
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)	$	13	$	(82,273)	$	(82,260)	$	11,968	$	(4,546)	$	7,422

The amortized cost and fair value of available-for-sale debt securities at September 30, ~~2021~~2022 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.


		September 30, 2021					September 30, 2022
(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	$	30,428	$	30,760	Due in one year or less	$	18,402	$	18,381
Due after one year through five years	Due after one year through five years	82,551		86,321		Due after one year through five years	128,117		118,811
Due after five years through ten years	Due after five years through ten years	101,252		102,563		Due after five years through ten years	70,299		62,733
Due after ten years	Due after ten years	20,936		22,917		Due after ten years	11,571		10,806
Available-for-Sale Debt Securities With Fixed Maturities	Available-for-Sale Debt Securities With Fixed Maturities	235,167		242,561		Available-for-Sale Debt Securities With Fixed Maturities	228,389		210,731
Debt Securities without a single maturity date	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	206,325		208,985		Collateralized mortgage obligations of U.S. government corporations and agencies	470,935		419,719
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies	60,855		60,442		Residential mortgage-backed securities of U.S. government corporations and agencies	50,625		41,984
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies	347,825		356,506		Commercial mortgage-backed securities of U.S. government corporations and agencies	350,550		323,469
Corporate Securities		500		500
Corporate obligations						Corporate obligations	500		500

Total Available-for-Sale Debt Securities	Total Available-for-Sale Debt Securities	$	850,672	$	868,994	Total Available-for-Sale Debt Securities	$	1,100,999	$	996,403

Debt securities ~~with~~are pledged in order to meet various regulatory and legal requirements. Restricted pledged securities had a carrying ~~values~~value of ~~$435.0~~$17.9 million at September 30, ~~2021~~2022 and ~~$308.3~~$23.9 million at December 31, ~~2020 were~~2021. Unrestricted pledged ~~for various regulatory~~securities had a carrying value of $272.3 million at September 30, 2022 and ~~legal requirements.~~$443.0 million at December 31, 2021.

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 September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021		2020		2021		2020		(dollars in thousands)	2022		2021		2022		2021
Marketable Equity Securities	Marketable Equity Securities									Marketable Equity Securities
Net market gains/(losses) recognized		$	31	$	585	$	175	$	(552)
Net market gains (losses) recognized										Net market gains (losses) recognized	$	(60)	$	31	$	(117)	$	175
Less: Net gains recognized for equity securities sold	Less: Net gains recognized for equity securities sold	—		—		29		142		Less: Net gains recognized for equity securities sold	—		—		—		29
Unrealized Gains/(Losses) on Equity Securities Still Held		$	31	$	585	$	146	$	(694)
Unrealized Gains (Losses) on Equity Securities Still Held										Unrealized Gains (Losses) on Equity Securities Still Held	$	(60)	$	31	$	(117)	$	146

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 (Loss).

1915

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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. Unearned income consists of ~~$14.5~~net deferred loan fees and costs of $7.9 million at September 30, ~~2021~~2022 and ~~$16.0~~$14.1 million at December 31, ~~2020~~2021 and ~~net of~~ a discount related to purchase accounting fair value adjustments of ~~$6.4~~$5.0 million at September 30, ~~2021~~2022 and ~~$8.6~~$6.7 million at December 31, ~~2020.~~2021. The following table ~~presents~~summarizes the composition of originated and acquired loans as of the dates presented:


(dollars in thousands)	(dollars in thousands)	September 30, 2021		December 31, 2020		(dollars in thousands)	September 30, 2022		December 31, 2021
Commercial	Commercial					Commercial
Commercial real estate	Commercial real estate	$	3,225,863	$	3,244,974	Commercial real estate	$	3,134,841	$	3,236,653
Commercial and industrial	Commercial and industrial	1,698,784		1,954,453		Commercial and industrial	1,714,714		1,728,969
Commercial construction	Commercial construction	499,317		474,280		Commercial construction	390,093		440,962
Total Commercial Loans	Total Commercial Loans	5,423,964		5,673,707		Total Commercial Loans	5,239,648		5,406,584
Consumer	Consumer					Consumer
Consumer real estate	Consumer real estate	1,448,517		1,471,238		Consumer real estate	1,730,639		1,485,478
Other consumer	Other consumer	97,606		80,915		Other consumer	126,629		107,928
Total Consumer Loans	Total Consumer Loans	1,546,123		1,552,153		Total Consumer Loans	1,857,268		1,593,406
Total Portfolio Loans	Total Portfolio Loans	6,970,087		7,225,860		Total Portfolio Loans	7,096,916		6,999,990
Loans held for sale	Loans held for sale	4,303		18,528		Loans held for sale	1,039		1,522
Total Loans (1)	Total Loans (1)	$	6,974,390	$	7,244,388	Total Loans (1)	$	7,097,955	$	7,001,512

(1) Excludes interest receivable of ~~$19.1~~$23.2 million at September 30, ~~2021 and $24.7~~2022 compared to $18.7 million at December 31, ~~2020.~~2021. Interest receivable is included in other assets in the ~~consolidated balance sheets.~~

Consolidated Balance Sheets.

Commercial and industrial loans, or C&I, included ~~$181.0~~$4.7 million of loans originated under the Paycheck Protection Program, or PPP, at September 30, ~~2021~~2022 compared to ~~$465.0~~$88.3 million at December 31, ~~2020.~~2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law. The CARES Act included the PPP, a program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. The loans are 100 percent guaranteed by the Small Business Administration, or SBA. These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA, on or after June 5, 2020. Payments are deferred for at least six months of the loan. The SBA pays us a processing fee ranging from 1 percent to 5 percent based on the size of the loan. Interest is accrued as earned and loan origination fees and direct costs are deferred and accreted or amortized into interest income over the life of the loan using the level yield method. When a PPP loan is paid off or forgiven by the SBA, the remaining unaccreted or unamortized net origination fees or costs will be immediately recognized into income.

~~At September 30, 2021, our~~Our business banking segment was ~~$1.1~~$1.2 billion at September 30, 2022 compared to ~~$1.2~~$1.1 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.~~2021. Business banking consists of 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. Business banking consisted of ~~$523.1~~$572.3 million of commercial real estate loans, ~~$220.6~~$213.8 million of C&I loans of which ~~$78.0~~$1.0 million are PPP loans, ~~$13.4~~$14.8 million of commercial construction loans and ~~$343.0~~$377.7 million of loans secured by consumer real estate ~~loans~~ at September 30, ~~2021.~~2022. At December 31, ~~2020~~2021 business banking consisted of ~~$453.0~~$546.1 million of commercial real estate loans, ~~$394.9~~$215.4 million of C&I loans of which ~~$178.4~~$39.7 million are PPP loans, ~~$8.2~~$16.2 million of commercial construction loans and ~~$303.9~~$357.9 million of loans secured by 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.estate.

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.~~segments to determine if additional ACL is needed. Total commercial loans represented ~~77.8~~73.8 percent of total portfolio loans at September 30, ~~2021~~2022 compared to ~~78.5~~77.2 percent at December 31, ~~2020.~~2021. Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised ~~$3.7~~$3.5 billion, or ~~68.7~~67.3 percent, of total commercial loans ~~at September 30, 2021~~ and ~~$3.7 billion, or 65.6 percent, of total commercial loans at December 31, 2020 and 53.4~~49.7 percent of total portfolio loans at September 30, ~~2021~~2022 and ~~51.5~~$3.7 billion, or 68.0 percent, of total commercial loans and 52.5 percent of total portfolio loans at December 31, ~~2020.~~2021.

~~Table of Contents~~

~~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 ~~5.0~~6.3 percent of the combined portfolios and ~~2.7~~3.1 percent of total portfolio loans at September 30, ~~2021.~~2022. This compares to ~~5.9~~5.7 percent of the combined portfolios and 3.0 percent of total portfolio loans at December 31, ~~2020.~~2021.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We ~~individually~~ evaluate all substandard commercial and ~~nonaccrual commercial~~consumer loans that have experienced a forbearance or ~~change in~~modification of existing 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~~TDRs as of the dates presented:


		September 30, 2021						December 31, 2020							September 30, 2022						December 31, 2021
(dollars in thousands)	(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		Performing TDRs		Nonperforming TDRs		Total TDRs		(dollars in thousands)	Accruing TDRs		Nonaccruing TDRs		Total TDRs		Accruing TDRs		Nonaccruing TDRs		Total TDRs
Commercial real estate	Commercial real estate	$	4,252	$	11,093	$	15,345	$	14	$	16,654	$	16,668	Commercial real estate	$	—	$	480	$	480	$	—	$	1,697	$	1,697
Commercial and industrial	Commercial and industrial	1,762		—		1,762		7,090		9,885		16,975		Commercial and industrial	658		—		658		748		14,889		15,637
Commercial construction	Commercial construction	—		—		—		3,267		—		3,267		Commercial construction	1,674		—		1,674		2,190		2,087		4,277
Business banking	Business banking	1,647		1,492		3,139		1,503		430		1,933		Business banking	607		1,092		1,699		858		1,696		2,554
Consumer real estate	Consumer real estate	6,120		1,448		7,569		5,581		2,319		7,900		Consumer real estate	5,981		2,279		8,260		6,122		1,405		7,527
Other consumer	Other consumer	—		—		—		5		—		5		Other consumer	5		9		14		3		—		3
Total	Total	$	13,782	$	14,033	$	27,815	$	17,460	$	29,289	$	46,748	Total	$	8,925	$	3,860	$	12,785	$	9,921	$	21,774	$	31,695

There ~~was 1 TDR for $0.1~~were two TDRs totaling $0.2 million that returned to accruing status during the three and nine months ended September 30, ~~2021~~2022, compared to ~~2 TDRs for a total of~~one TDR totaling $0.1 million ~~that returned to accruing status for the three months ended September 30, 2020. There were 6~~and six TDRs ~~for a total of~~totaling $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.~~same periods in 2021.

The following tables present the ~~restructured loans~~TDRs by portfolio segment and by type of concession for the periods presented:


	Three Months Ended September 30, 2022
	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	—	—		—		—		—		—		—		—
Commercial construction	—	—		—		—		—		—		—		—
Business banking	—	—		—		—		—		—		—		—
Consumer real estate	6	172		—		—		—		—		172		173
Other consumer	1	9		—		—		—		—		9		12
Total	7	$	181	$	—	$	—	$	—	$	—	$	181	$	185
(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.


	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.

2117

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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																Nine Months Ended September 30, 2022
		Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)			Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2)		Total Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)	(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments						(dollars in thousands)		Bankruptcy(1)		Other		Extend Maturity		Modify Rate		Modify Payments
Commercial real estate	Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Commercial real estate	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial industrial	Commercial industrial	2	—		—		3,735		—		287		4,022		4,021		Commercial industrial	—	—		—		—		—		—		—		—
Commercial construction	Commercial construction	—	—		—		—		—		—		—		—		Commercial construction	—	—		—		—		—		—		—		—
Business banking	Business banking	1	—		—		171		—		—		171		333		Business banking	—	—		—		—		—		—		—		—
Consumer real estate	Consumer real estate	10	334		—		30		—		—		364		334		Consumer real estate	21	1,204		—		862		—		—		2,066		2,530
Other consumer	Other consumer	1	4		—		—		—		—		4		5		Other consumer	2	11		—		—		—		—		11		15
Total	Total	14	$	338	$	—	$	3,936	$	—	$	287	$	4,561	$	4,693	Total	23	$	1,215	$	—	$	862	$	—	$	—	$	2,077	$	2,545
(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.	(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.																(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~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

~~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 September 30, 2021. We had 42 commercial loans that were modified totaling $58.9 million at September 30, 2021 compared to 52 commercial loans that were modified totaling $195.6 million at December 31, 2020.


	Nine Months Ended September 30, 2021
	Number of Contracts	Type of Modification										Total Post-Modification Outstanding Recorded Investment(2,3)		Total Pre-Modification Outstanding Recorded Investment(2,3)
(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		—		31		—		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. (3) Excludes 42 loans totaling $58.9 million that were modified under the CARES Act.

As of September 30, ~~2021,~~2022, we had 16 commitments to lend an additional $0.4 million on TDRs compared to 12 commitments to lend an additional $0.3 million ~~on TDRs.~~as of September 30, 2021. Defaulted TDRs are defined as loans having a payment default of 90 days or more after the restructuring takes ~~place.~~place that were restructured within the last 12 months prior to defaulting. There was one TDR that defaulted, totaling $0.1 million, during the three months ended September 30, 2022 and two TDRs that defaulted totaling $0.2 million during the nine months ended September 30, 2022. There were no 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 September 30, 2020 and 6 TDRs that defaulted during the nine months ended September 30, 2020 for a total of $18.1 million that were restructured within the last 12 months prior to defaulting.

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

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.


	Nonperforming Assets
(dollars in thousands)	September 30, 2022			December 31, 2021
Nonperforming Assets
Nonaccrual loans		$	18,917		$	44,517
Nonaccrual TDRs		3,860			21,774
Total Nonaccrual Loans		22,777			66,291
OREO		6,022			13,313
Total Nonperforming Assets		$	28,799		$	79,604

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

NOTE 6. ALLOWANCE FOR CREDIT LOSSES

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and unsecured loans and ~~lines.~~lines of credit. 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.

~~Table of Contents~~

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

~~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.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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


	September 30, 2022
	Risk Rating
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial Real Estate
Pass	$	228,599	$	363,347	$	278,153	$	432,862	$	238,351	$	760,947	$	21,051	$	—	$	2,323,310
Special mention	—		—		—		9,407		20,189		118,852		—		—		148,448
Substandard	—		3,226		1,319		12,652		14,937		58,690		—		—		90,824
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate	228,599		366,573		279,472		454,921		273,477		938,489		21,051		—		2,562,582

Commercial and Industrial
Pass	185,389		293,593		97,811		72,039		66,958		137,693		574,820		—		1,428,303
Special mention	—		14,849		—		4,213		2,091		7,193		13,466		—		41,812
Substandard	—		—		—		13,018		1,219		1,979		15,548		—		31,764
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial and Industrial	185,389		308,442		97,811		89,270		70,268		146,865		603,834		—		1,501,879

Commercial Construction
Pass	83,458		171,331		43,840		32,949		4,331		3,150		28,758		—		367,817
Special mention	—		—		—		5,565		—		—		—		—		5,565
Substandard	—		—		—		—		—		1,897		—		—		1,897
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Construction	83,458		171,331		43,840		38,514		4,331		5,047		28,758		—		375,279

Business Banking
Pass	213,494		240,694		91,018		116,429		86,469		287,074		107,849		679		1,143,706
Special mention	—		85		189		851		3,076		4,796		121		95		9,213
Substandard	—		—		3,082		2,114		2,983		15,760		171		574		24,684
Doubtful	—		—		—		—		—		—		—		—		—
Total Business Banking	213,494		240,779		94,289		119,394		92,528		307,630		108,141		1,348		1,177,603

Consumer Real Estate
Pass	224,054		150,932		93,003		76,097		31,556		198,505		541,548		21,267		1,336,962
Special mention	—		—		—		—		—		895		—		—		895
Substandard	38		89		137		292		1,220		9,797		636		2,899		15,108
Doubtful	—		—		—		—		—		—		—		—		—
Total Consumer Real Estate	224,092		151,021		93,140		76,389		32,776		209,197		542,184		24,166		1,352,965

Other Consumer
Pass	17,127		12,046		6,385		4,028		1,399		848		83,463		1,278		126,574
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		4		30		—		—		—		—		34
Doubtful	—		—		—		—		—		—		—		—		—
Total Other Consumer	17,127		12,046		6,389		4,058		1,399		848		83,463		1,278		126,608

Pass	952,121		1,231,943		610,210		734,404		429,064		1,388,217		1,357,489		23,224		6,726,672
Special mention	—		14,934		189		20,036		25,356		131,736		13,587		95		205,933
Substandard	38		3,315		4,542		28,106		20,359		88,123		16,355		3,473		164,311
Doubtful	—		—		—		—		—		—		—		—		—
Total Loan Balance	$	952,159	$	1,250,192	$	614,941	$	782,546	$	474,779	$	1,608,076	$	1,387,431	$	26,792	$	7,096,916

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

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:~~

September 30, 2021
Risk Rating
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Pass $ 255,876 $ 323,514 $ 443,487 $ 341,387 $ 224,258 $ 716,460 $ 42,326 — $ 2,347,308
Special mention — 1,368 32,780 4,422 38,966 97,322 — 0 174,858
Substandard — 445 16,812 19,320 18,673 123,332 1,500 0 180,082
Doubtful — — 532 — — — — — 532
Total commercial real estate 255,876 325,327 493,611 365,129 281,897 937,114 43,826 — 2,702,780
Commercial and industrial
Pass 401,200 156,589 145,923 98,137 43,019 133,945 428,398 — 1,407,211
Special mention 49 2,927 1,283 3,166 72 1,934 10,667 0 20,098
Substandard 5,196 — 19,180 1,374 5,258 5,532 5,017 0 41,557
Doubtful — — 9,332 — — — — — 9,332
Total commercial and industrial 406,445 159,516 175,718 102,677 48,349 141,411 444,082 0 1,478,198
Commercial construction
Pass 100,774 134,440 172,508 33,903 996 4,298 21,714 — 468,633
Special mention — — — — — 4,491 — 0 4,491
Substandard — 2,149 7,416 — — 3,235 — 0 12,800
Doubtful — — — — — — — — —
Total commercial construction 100,774 136,589 179,924 33,903 996 12,024 21,714 0 485,924
Business banking
Pass 173,154 114,831 152,423 117,529 81,934 316,445 103,162 450 1,059,928
Special mention 113 153 890 1,406 935 6,265 199 121 10,082
Substandard 46 71 1,720 3,292 2,036 21,337 978 635 30,115
Doubtful — — — — — — — — —
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
Pass 89,026 107,534 94,583 58,622 42,789 242,252 435,213 23,088 1,093,107
Special mention — — — — — 2,163 — 0 2,163
Substandard — — 208 1,765 1,368 4,868 709 1,290 10,208
Doubtful — — — — — — — — —
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
Pass 9,833 10,852 8,470 3,852 1,442 2,888 50,725 1,113 89,175
Special mention — — — — — — — — —
Substandard — 52 105 150 368 5,930 255 1,547 8,407
Doubtful — — — — — — — — —
Total other consumer 9,833 10,904 8,575 4,002 1,810 8,818 50,980 2,660 97,582
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 162 4,448 34,953 8,994 39,973 112,175 10,866 121 211,692
Substandard 5,242 2,717 45,441 25,901 27,703 164,234 8,459 3,472 283,169
Doubtful — — 9,864 — — — — — 9,864
Total $ 1,035,267 $ 854,925 $ 1,107,652 $ 688,325 $ 462,114 $ 1,692,697 $ 1,100,863 $ 28,244 $ 6,970,087


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

Commercial Real Estate
Pass	$	385,347	$	316,003	$	412,191	$	314,303	$	213,019	$	698,992	$	35,448	$	—	$	2,375,303
Special mention	—		—		37,786		6,401		40,445		75,938		—		—		160,570
Substandard	—		1,356		18,743		14,039		12,555		106,461		1,500		—		154,654
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Real Estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and Industrial
Pass	437,483		126,371		115,359		83,030		37,176		132,182		536,554		—		1,468,155
Special mention	46		—		3,060		2,546		72		832		8,887		—		15,443
Substandard	—		—		14,221		1,336		4,174		3,456		4,961		—		28,148
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total Commercial and Industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial Construction
Pass	142,321		108,405		111,512		16,838		989		3,539		30,036		—		413,640
Special mention	—		—		—		—		—		4,458		—		—		4,458
Substandard	—		2,157		2,020		—		—		2,480		—		—		6,657
Doubtful	—		—		—		—		—		—		—		—		—
Total Commercial Construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

Business Banking
Pass	257,264		107,791		141,411		110,586		79,187		293,215		107,093		443		1,096,990
Special mention	104		151		1,986		1,365		1,057		5,929		160		111		10,863
Substandard	41		106		1,579		3,277		1,645		19,591		977		625		27,841
Doubtful	—		—		—		—		—		—		—		—		—
Total Business Banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer Real Estate
Pass	137,465		100,995		91,981		48,531		39,029		231,861		442,530		23,391		1,115,783
Special mention	—		—		—		—		—		937		—		—		937
Substandard	—		—		184		1,625		1,355		5,664		876		1,161		10,865
Doubtful	—		—		—		—		—		—		—		—		—
Total Consumer Real Estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

Other Consumer
Pass	19,976		9,396		7,120		2,878		613		2,037		57,702		1,130		100,852
Special mention	—		—		—		—		—		—		—		—		—
Substandard	83		52		141		215		408		4,407		201		1,547		7,054
Doubtful	—		—		—		—		—		—		—		—		—
Total Other Consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906


Pass	1,379,856		768,961		879,574		576,166		370,013		1,361,826		1,209,363		24,964		6,570,723
Special Mention	150		151		42,832		10,312		41,574		88,094		9,047		111		192,271
Substandard	124		3,671		36,888		20,492		20,137		142,059		8,515		3,333		235,219
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total Loan Balance	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

2621

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~– continued~~

~~NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued~~

December 31, 2020
Risk Rating
(dollars in thousands) 2020 2019 2018 2017 2016 2015 and Prior Revolving Revolving-Term Total
Commercial real estate
Pass $ 334,086 $ 422,800 $ 394,963 $ 277,724 $ 307,321 $ 615,217 $ 46,330 $ — $ 2,398,441
Special mention — 35,499 10,200 22,502 55,174 75,022 — — 198,397
Substandard — 17,259 12,781 19,914 50,700 83,792 1,500 — 185,946
Doubtful — 645 — — 1,989 6,529 — — 9,163
Total commercial real estate 334,086 476,203 417,944 320,140 415,184 780,560 47,830 — 2,791,947
Commercial and industrial
Pass 454,131 199,453 140,049 68,607 27,645 206,782 383,082 — 1,479,749
Special mention 3,697 8,211 2,628 697 768 1,046 23,527 — 40,574
Substandard — 7,793 2,613 8,544 75 13,781 2,022 — 34,828
Doubtful — — — 4,401 — — — — 4,401
Total commercial and industrial 457,828 215,457 145,290 82,249 28,488 221,609 408,631 — 1,559,552
Commercial construction
Pass 131,235 224,794 59,649 2,420 6,346 4,555 12,778 — 441,777
Special mention 1,578 2,533 3,886 — — 8,593 — — 16,590
Substandard — 3,580 — 501 — 3,629 — — 7,710
Doubtful — — — — — — — — —
Total commercial construction 132,813 230,907 63,535 2,921 6,346 16,777 12,778 — 466,077
Business banking
Pass 296,254 154,335 123,207 86,552 77,238 266,042 103,571 291 1,107,490
Special mention — 1,060 1,147 1,602 1,084 6,866 637 123 12,519
Substandard 103 1,078 3,896 3,209 3,880 25,871 1,341 680 40,058
Doubtful — — — — — — — — —
Total business banking 296,357 156,473 128,250 91,363 82,202 298,779 105,549 1,094 1,160,067
Consumer real estate
Pass 120,736 122,171 67,700 63,653 73,805 243,939 438,888 22,667 1,153,559
Special mention — — 1,489 — — 150 132 — 1,771
Substandard — 373 742 1,480 2,449 6,958 — — 12,002
Doubtful — — — — — — — — —
Total consumer real estate 120,736 122,544 69,931 65,133 76,254 251,047 439,020 22,667 1,167,332
Other consumer
Pass 18,849 13,162 6,784 3,395 2,082 687 26,647 2,767 74,373
Special mention — — — — — — — — —
Substandard 15 — — — — 3,367 744 2,386 6,512
Doubtful — — — — — — — — —
Total other consumer 18,864 13,162 6,784 3,395 2,082 4,054 27,391 5,153 80,885
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 5,274 47,302 19,350 24,802 57,026 91,677 24,296 124 269,851
Substandard 118 30,083 20,032 33,648 57,105 137,398 5,606 3,066 287,056
Doubtful — 645 — 4,401 1,989 6,529 — — 13,564
Total $ 1,360,684 $ 1,214,746 $ 831,734 $ 565,201 $ 610,556 $ 1,572,826 $ 1,041,199 $ 28,914 $ 7,225,860

We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered nonperforming and placed on nonaccrual 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.

The following tables present loan balances by year of origination and performing and nonperforming status for our portfolio segments as of the dates presented:


	September 30, 2022
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial Real Estate
Performing	$	228,599	$	366,573	$	279,472	$	454,441	$	273,477	$	931,136	$	21,051	$	—	$	2,554,749
Nonperforming	—		—		—		480		—		7,353		—		—		7,833
Total Commercial Real Estate	228,599		366,573		279,472		454,921		273,477		938,489		21,051		—		2,562,582

Commercial and Industrial
Performing	185,389		308,442		97,811		89,270		70,214		146,814		603,604		—		1,501,544
Nonperforming	—		—		—		—		54		51		230		—		335
Total Commercial and Industrial	185,389		308,442		97,811		89,270		70,268		146,865		603,834		—		1,501,879

Commercial Construction
Performing	83,458		171,331		43,840		38,514		4,331		4,663		28,758		—		374,895
Nonperforming	—		—		—		—		—		384		—		—		384
Total Commercial Construction	83,458		171,331		43,840		38,514		4,331		5,047		28,758		—		375,279

Business Banking
Performing	213,494		240,779		94,289		119,050		90,907		303,348		108,039		1,252		1,171,158
Nonperforming	—		—		—		344		1,621		4,282		102		96		6,445
Total Business Banking	213,494		240,779		94,289		119,394		92,528		307,630		108,141		1,348		1,177,603

Consumer Real Estate
Performing	224,092		150,885		92,672		75,953		32,401		204,232		542,005		23,352		1,345,592
Nonperforming	—		136		468		436		375		4,965		179		814		7,373
Total Consumer Real Estate	224,092		151,021		93,140		76,389		32,776		209,197		542,184		24,166		1,352,965

Other Consumer
Performing	17,127		12,046		6,116		4,058		1,399		717		83,463		1,275		126,201
Nonperforming	—		—		273		—		—		131		—		3		407
Total Other Consumer	17,127		12,046		6,389		4,058		1,399		848		83,463		1,278		126,608

Performing	952,159		1,250,056		614,200		781,286		472,729		1,590,910		1,386,920		25,879		7,074,139
Nonperforming	—		136		741		1,260		2,050		17,166		511		913		22,777
Total Loan Balance	$	952,159	$	1,250,192	$	614,941	$	782,546	$	474,779	$	1,608,076	$	1,387,431	$	26,792	$	7,096,916

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

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 September 30, 2021 and December 31, 2020:~~

September 30, 2021
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Performing $ 255,876 $ 325,327 $ 477,766 $ 362,382 $ 275,458 $ 907,348 $ 43,826 $ — $ 2,647,983
Nonperforming — — 15,845 2,747 6,439 29,766 — — 54,797
Total commercial real estate 255,876 325,327 493,611 365,129 281,897 937,114 43,826 — 2,702,780
Commercial and industrial
Performing 401,249 159,516 153,731 102,310 44,963 141,201 441,319 — 1,444,289
Nonperforming 5,196 0 21,987 367 3,386 210 2,763 — 33,909
Total commercial and industrial 406,445 159,516 175,718 102,677 48,349 141,411 444,082 0 1,478,198
Commercial construction
Performing 100,774 136,589 176,567 33,903 996 11,328 21,714 — 481,871
Nonperforming — — 3,357 — — 696 — — 4,053
Total commercial construction 100,774 136,589 179,924 33,903 996 12,024 21,714 0 485,924
Business banking
Performing 173,267 115,055 154,639 120,811 84,187 336,486 104,310 1,149 1,089,904
Nonperforming 46 — 394 1,416 718 7,561 29 57 10,221
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
Performing 89,026 107,482 94,501 60,140 43,392 244,339 434,893 23,562 1,097,335
Nonperforming — 52 290 247 765 4,944 1,029 816 8,143
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
Performing 9,833 10,904 8,575 3,813 1,810 8,818 50,980 2,660 97,393
Nonperforming — — — 189 — — — — 189
Total other consumer 9,833 10,904 8,575 4,002 1,810 8,818 50,980 2,660 97,582
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(1)
5,242 52 41,873 4,966 11,308 43,177 3,821 873 111,312
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) 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.

~~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, 2021
(dollars in thousands)	(dollars in thousands)	2020		2019		2018		2017		2016		2015 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	$	334,086	$	459,799	$	417,944	$	313,465	$	394,972	$	722,781	$	47,830	$	—	$	2,690,877	Performing	$	385,347	$	317,359	$	461,613	$	332,482	$	259,723	$	865,567	$	36,948	$	—	$	2,659,039
Nonperforming	Nonperforming	—		16,404		—		6,675		20,212		57,779		—		—		101,070		Nonperforming	—				7,107		2,261		6,296		15,824		—		—		31,488
Total commercial real estate		334,086		476,203		417,944		320,140		415,184		780,560		47,830		—		2,791,947
Total Commercial Real Estate																				Total Commercial Real Estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and industrial
Commercial and Industrial																				Commercial and Industrial
Performing	Performing	457,828		214,144		143,706		69,411		28,426		220,701		408,351		—		1,542,567		Performing	437,529		126,371		123,944		86,852		38,540		136,427		548,622		—		1,498,285
Nonperforming	Nonperforming	—		1,313		1,584		12,838		62		908		280		—		16,985		Nonperforming	—		—		10,473		60		2,882		43		1,780		—		15,239
Total commercial and industrial		457,828		215,457		145,290		82,249		28,488		221,609		408,631		—		1,559,552
Total Commercial and Industrial																				Total Commercial and Industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial construction
Commercial Construction																				Commercial Construction
Performing	Performing	132,813		230,907		63,535		2,921		6,346		16,393		12,778		—		465,693		Performing	142,321		110,562		111,445		16,838		989		10,093		30,036		—		422,284
Nonperforming	Nonperforming	—		—		—		—		—		384		—		—		384		Nonperforming	—		—		2,087		—		—		384		—		—		2,471
Total commercial construction		132,813		230,907		63,535		2,921		6,346		16,777		12,778		—		466,077
Total Commercial Construction																				Total Commercial Construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

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	257,368		107,984		144,689		113,820		81,195		311,673		108,202		1,122		1,126,052
Nonperforming	Nonperforming	30		309		1,818		949		2,096		11,809		55		57		17,123		Nonperforming	41		64		287		1,408		694		7,062		28		57		9,641
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																				Total Business Banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer real estate
Consumer Real Estate																				Consumer Real Estate
Performing	Performing	120,736		122,315		69,225		63,647		74,690		245,331		438,701		21,571		1,156,216		Performing	137,465		100,253		91,689		49,853		39,657		234,297		443,238		23,839		1,120,291
Nonperforming	Nonperforming	—		229		706		1,486		1,564		5,716		319		1,096		11,116		Nonperforming	—		742		476		303		727		4,165		168		713		7,294
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																				Total Consumer Real Estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

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	20,059		9,290		7,261		3,093		1,021		6,444		57,903		2,677		107,748
Nonperforming	Nonperforming	—		—		—		—		—		96		—		—		96		Nonperforming	—		158		—		—		—		—		—		—		158
Total other consumer		18,864		13,162		6,784		3,395		2,082		4,054		27,391		5,153		80,885
Total Other Consumer																				Total Other Consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906

Performing	Performing	1,360,654		1,196,492		827,626		543,253		586,622		1,496,134		1,040,545		27,760		7,079,086		Performing	1,380,089		771,819		940,641		602,938		421,125		1,564,501		1,224,949		27,638		6,933,699
Nonperforming	Nonperforming	30		18,254		4,108		21,948		23,934		76,692		654		1,154		146,774		Nonperforming	41		964		20,430		4,032		10,599		27,478		1,976		770		66,291
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 Loan Balance																				Total Loan Balance	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

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


		September 30, 2021										September 30, 2022
(dollars in thousands)	(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing(2)		Total Past Due Loans			Total Loans		(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	Commercial real estate	$	2,647,983	$	—	$	—	$	54,797	$	54,797		2,702,780		Commercial real estate	$	2,554,749	$	—	$	—	$	7,833	$	7,833	$	2,562,582
Commercial and industrial	Commercial and industrial	1,444,289		—		—		33,909		33,909			1,478,198		Commercial and industrial	1,501,512		29		3		335		367		1,501,879
Commercial construction	Commercial construction	481,871		—		—		4,053		4,053			485,924		Commercial construction	374,895		—		—		384		384		375,279
Business banking	Business banking	1,088,013		970		921		10,221		12,112			1,100,125		Business banking	1,168,727		574		1,857		6,445		8,876		1,177,603
Consumer real estate	Consumer real estate	1,095,557		833		945		8,143		9,921			1,105,478		Consumer real estate	1,341,890		2,188		1,514		7,373		11,075		1,352,965
Other consumer	Other consumer	97,151		219		23		189		431			97,582		Other consumer	126,027		119		55		407		581		126,608
Total~~(1)~~	Total~~(1)~~	$	6,854,864	$	2,022	$	1,889	$	111,312	$	115,223		$	6,970,087	Total~~(1)~~	$	7,067,800	$	2,910	$	3,429	$	22,777	$	29,116	$	7,096,916

~~(1)~~ We had 42 loans that were modified totaling $58.9 million under the CARES Act at 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 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.~~

2923

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, 2021
(dollars in thousands)	(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		(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	Commercial real estate	$	2,690,877	$	—	$	—	$	—	$	101,070	$	101,070	$	2,791,947	Commercial real estate	$	2,659,040	$	—	$	—	$	31,488	$	31,488	$	2,690,528
Commercial and industrial	Commercial and industrial	1,542,567		—		—		—		16,985		16,985		1,559,552		Commercial and industrial	1,497,755		529		—		15,239		15,768		1,513,523
Commercial construction	Commercial construction	462,094		19		3,580		—		384		3,983		466,077		Commercial construction	421,834		450		—		2,471		2,921		424,755
Business banking	Business banking	1,140,581		1,614		379		371		17,122		19,486		1,160,067		Business banking	1,124,748		813		491		9,641		10,945		1,135,693
Consumer real estate	Consumer real estate	1,153,028		1,087		1,968		132		11,117		14,304		1,167,332		Consumer real estate	1,117,074		1,087		2,130		7,294		10,511		1,127,585
Other consumer	Other consumer	80,583		168		37		—		96		302		80,885		Other consumer	107,492		206		50		158		414		107,906
Total(1)	Total(1)	$	7,069,730	$	2,888	$	5,965	$	503	$	146,774	$	156,130	$	7,225,860	Total(1)	$	6,927,943	$	3,085	$	2,671	$	66,291	$	72,047	$	6,999,990
(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 eight loans that were modified totaling $28.8 million under the CARES Act at December 31, 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, this delinquency table may not accurately reflect the credit risk associated with these loans.																(1) We had eight loans that were modified totaling $28.8 million under the CARES Act at December 31, 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, this delinquency table may not accurately reflect the credit risk associated with these loans.

The following ~~table presents~~tables present loans on nonaccrual status by class of ~~loan:~~loan for the year-to-date periods presented:


									September 30, 2021
		September 30, 2021						For the three and nine months ended					September 30, 2022
(dollars in thousands)	(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)			(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	Commercial real estate	$	101,070	$	54,797	$	47,730		$	493	$	556		Commercial real estate	$	31,488	$	7,833	$	6,317	$	625
Commercial and industrial	Commercial and industrial	16,985		33,909		12,566			6		88			Commercial and industrial	15,239		335		—		86
Commercial construction	Commercial construction	384		4,053		3,357			—		—			Commercial construction	2,471		384		—		—
Business banking	Business banking	17,122		10,221		1,492			57		333			Business banking	9,641		6,445		1,092		242
Consumer real estate	Consumer real estate	11,117		8,143		—			86		405			Consumer real estate	7,294		7,373		—		178
Other consumer	Other consumer	96		189		—			—		1			Other consumer	158		407		—		1
Total	Total	$	146,774	$	111,312	$	65,145		$	642	$	1,383		Total	$	66,291	$	22,777	$	7,409	$	1,132

(1) Represents only cash payments received and applied to interest on nonaccrual ~~loans.~~loans for the nine months ended September 30, 2022.

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


										December 31, 2020
		December 31, 2020								For the twelve months ended			December 31, 2021
(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		Nonaccrual With No Related Allowance		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	Commercial real estate	$	25,356	$	101,070	$	60,401	$	—	$	22	Commercial real estate	$	101,070	$	31,488	$	28,046	$	158
Commercial and industrial	Commercial and industrial	10,911		16,985		6,436		—		101		Commercial and industrial	16,985		15,239		5,707		74
Commercial construction	Commercial construction	737		384		285		—		—		Commercial construction	384		2,471		2,020		(28)
Business banking	Business banking	9,863		17,122		3,890		371		275		Business banking	17,122		9,641		1,696		427
Consumer real estate	Consumer real estate	6,063		11,117		398		132		423		Consumer real estate	11,117		7,294		—		496
Other consumer	Other consumer	1,127		96		—		—		4		Other consumer	96		158		—		1
Total	Total	$	54,057	$	146,774	$	71,410	$	503	$	826	Total	$	146,774	$	66,291	$	37,469	$	1,128

(1) Represents only cash payments received and applied to interest on nonaccrual ~~loans.~~loans for the twelve months ended December 31, 2021.

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S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~– continued~~

~~NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued~~

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


	September 30, 2022
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	5,837	$	—	$	480	$	—
Commercial and industrial	—		658		—		—
Commercial construction	1,674		—		—		—
Business banking	524		1,175		—		—
Consumer real estate	576		—		—		—

Total	$	8,611	$	1,833	$	480	$	—


		September 30, 2021									December 31, 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	$	51,006	$	—	$	—	$	—	Commercial real estate	$	28,046	$	—	$	—	$	—
Commercial and industrial	Commercial and industrial	272		13,738		—		21,730		Commercial and industrial	259		4,905		—		10,473
Commercial construction	Commercial construction	6,057		—		—		—		Commercial construction	4,210		—		—		—
Business banking	Business banking	1,714		1,424		—		—		Business banking	910		1,636		—		—
Consumer real estate	Consumer real estate	—		—		—		—		Consumer real estate	1,031		—		—		—

Total	Total	$	59,049	$	15,162	$	—	$	21,730	Total	$	34,456	$	6,541	$	—	$	10,473

December 31, 2020
Type of Collateral
(dollars in thousands) Real Estate Business
Assets Investment/Cash Other
Commercial real estate $ 100,450 $ — $ — $ —
Commercial and industrial 1,040 15,080 — —
Commercial construction 3,552 — — —
Business banking 3,085 1,619 — 689
Consumer real estate 398 — — —
Total $ 108,525 $ 16,699 $ — $ 689

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

Three 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 $ 63,186 $ 14,426 $ 5,905 $ 14,756 $ 8,647 $ 2,717 $ 109,636
Provision for credit losses on loans(1)
(7,856) 11,599 1,391 (2,689) (80) (63) 2,302
Charge-offs (3,661) (2) (56) (167) (76) (245) (4,207)
Recoveries 1 216 2 241 33 123 616
Net (Charge-offs)/Recoveries (3,660) 214 (54) 74 (43) (122) (3,591)
Balance at End of Period $ 51,670 $ 26,239 $ 7,242 $ 12,141 $ 8,524 $ 2,532 $ 108,348
(1) Excludes unfunded commitments

Three 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 $ 57,730 $ 19,164 $ 8,874 $ 14,404 $ 11,585 $ 2,852 $ 114,609
Provision for credit losses on loans(1)
23,839 (4,155) (1,617) 2,072 (797) (40) 19,302
Charge-offs (10,187) (1,196) — (1,748) (252) (284) (13,667)
Recoveries 172 398 1 64 41 78 754
Net (Charge-offs)/Recoveries (10,015) (798) 1 (1,684) (211) (206) (12,913)
Balance at End of Period $ 71,554 $ 14,211 $ 7,258 $ 14,792 $ 10,577 $ 2,606 $ 120,998


	Three Months Ended September 30, 2022
(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	$	45,314	$	21,526	$	6,583	$	12,157	$	9,673	$	2,842	$	98,095
Provision for credit losses on loans(1)	(2,997)		3,806		(1,159)		950		1,075		634		2,309
Charge-offs	(628)		—		—		(178)		(161)		(272)		(1,239)
Recoveries	145		6		—		242		39		97		529
Net (Charge-offs)/ Recoveries	(483)		6		—		64		(122)		(175)		(710)
Balance at End of Period	$	41,834	$	25,338	$	5,424	$	13,171	$	10,626	$	3,301	$	99,694
(1) Excludes the provision for credits losses for unfunded commitments.


	Three 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	$	63,186	$	14,426	$	5,905	$	14,756	$	8,647	$	2,717	$	109,637

Provision for credit losses on loans(1)	(7,856)		11,599		1,391		(2,689)		(80)		(63)		2,302
Charge-offs	(3,661)		(2)		(56)		(167)		(76)		(245)		(4,207)
Recoveries	1		216		2		241		33		123		616
Net (Charge-offs)/Recoveries	(3,660)		214		(54)		74		(43)		(122)		(3,591)
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~~commitments.

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S&T BANCORP, INC. AND SUBSIDIARIES

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


	Nine Months Ended September 30, 2022
(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	$	50,700	$	19,727	$	5,355	$	11,338	$	8,733	$	2,723	$	98,576
Provision for credit losses on loans(1)	(8,471)		4,573		68		3,158		2,083		1,393		2,804
Charge-offs	(827)		(5,797)		—		(1,924)		(299)		(1,052)		(9,899)
Recoveries	432		6,835		1		599		109		237		8,213
Net (Charge-offs)/Recoveries	(395)		1,038		1		(1,325)		(190)		(815)		(1,686)
Balance at End of Period	$	41,834	$	25,338	$	5,424	$	13,171	$	10,626	$	3,301	$	99,694
(1) Excludes the provision for credits losses for unfunded commitments.


	Nine Months Ended September 30, 2021
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking(1)		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	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 credits losses for unfunded commitments.

The ~~adoption~~C&I portfolio included $4.7 million 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~~originated under 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 existedPPP program 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 $14.1 million and $115.6 million to $3.4 million and $8.7 million for the three and nine months ended September 30, ~~2021~~2022 compared to ~~$17.5~~$181.0 million ~~and $124.3 million for the same 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~~at September 30, 2021.

The ~~significant decrease in~~PPP loans do not have an ACL since the ~~provision for credit losses during~~loans are 100 percent guaranteed by the three and nine months ended September 30, 2021 was mainly due to the customer fraud in June of 2020 and an improved economic forecast in 2021 compared to 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 September 30, 2021 compared to the same time in 2020.

SBA.

~~Table of Contents~~

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued~~

NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivatives Designated as Hedging Instruments

Cash Flow Hedges of Interest Rate ~~Swaps~~Risk

~~In accordance with applicable accounting guidance for derivatives~~As part of our interest rate risk management strategy, we use interest rate swaps to add stability to interest income and ~~hedging, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value.~~to manage exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for making variable rate payments over the life of the agreements without exchange of the underlying notional amount.

For designated derivatives that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received on variable rate assets. During the next twelve months, we estimate that an additional $8.4 million will be reclassified as a decrease to interest income.

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivatives Not Designated as Hedging Instruments

Interest Rate Contracts with Customers

Interest rate swaps with customers are contracts in which a series of 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~~Interest rate swaps 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~~customers and the ~~form of cash or securities may be made available to counterparties of~~corresponding offsetting interest rate swap ~~transactions. Our current collateral requirements do not have a material effect on our cash flow or liquidity position.~~

~~Derivatives contain an element of credit risk, the possibility that we will incur a loss because a counterparty, which may be~~with 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 (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 (Loss).

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


	Derivative Assets (Included in Other Assets)								Derivative Liabilities (Included in Other Liabilities)
	September 30, 2022				December 31, 2021				September 30, 2022				December 31, 2021
(dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives Designated as Hedging Instruments
Interest rate swap contracts - cash flow hedge	$	—	$	—	$	—	$	—	$	500,000	$	22,724	$	—	$	—
Total Derivatives Designated as Hedging Instruments	$	—	$	—	$	—	$	—	$	500,000	$	22,724	$	—	$	—

Derivatives Not Designated as Hedging Instruments
Interest rate swap contracts - commercial loans	$	996,542	$	88,888	$	1,017,178	$	33,528	$	996,542	$	88,920	$	1,017,178	$	33,361
Interest rate lock commitments - mortgage loans	—		—		12,148		401		216		3		—		—
Forward sales contracts - mortgage loans	325		8		8,436		4		—		—		—		—
Total Derivatives Not Designated as Hedging Instruments	$	996,867	$	88,896	$	1,037,762	$	33,933	$	996,758	$	88,923	$	1,017,178	$	33,361

Total Derivatives	$	996,867	$	88,896	$	1,037,762	$	33,933	$	1,496,758	$	111,647	$	1,017,178	$	33,631

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

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)
(dollars in thousands) September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value $ 42,177 $ 78,319 $ 42,554 $ 79,033
Notional amount 998,385 983,638 998,385 983,638
Collateral posted — — 43,190 77,930
Interest Rate Lock Commitments - Mortgage Loans
Fair value 812 2,900 — —
Notional amount 22,674 51,053 — —
Forward Sale Contracts - Mortgage Loans
Fair value 101 — — 385
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~~interest rate swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets asat the dates presented:


	Derivatives (included in Other Assets)				Derivatives (included in Other Liabilities)
(dollars in thousands)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Gross amounts recognized	$	88,918	$	37,289	$	111,644	$	37,392
Gross amounts offset	(30)		(3,761)		—		(3,761)
Net amounts presented in the Consolidated Balance Sheets	88,888		33,528		111,644		33,631
Netting adjustments (1)	(16,048)		—		(16,048)		—
Cash collateral (2)	(69,183)		—		(5,529)		(33,631)
Net Amount	$	3,657	$	33,528	$	90,067	$	—
(1) Netting adjustments represents the amounts recorded to convert derivatives assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance..
(2) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above.

The following table presents the effect of the ~~dates presented:~~
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~~cash flow hedges on OCI and on the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three month periods ~~presented~~presented:


	Amount of Loss Recognized in Other Comprehensive Income						Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Income
(dollars in thousands)	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge		$	(13,256)		$	—		$	222		$	—

Total		$	(13,256)		$	—		$	222		$	—

The following table presents the effect of the cash flow hedges on OCI and ~~included in other assets~~ on ~~our~~the Condensed Consolidated ~~Balance Sheets.~~Statements of Comprehensive Income (Loss) for the nine month periods presented:


	Amount of Loss Recognized in Other Comprehensive Income						Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Income
(dollars in thousands)	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Derivatives in Cash Flow Hedging Relationships:
Interest rate swap contracts - cash flow hedge		$	(17,875)		$	—		$	947		$	—

Total		$	(17,875)		$	—		$	947		$	—

The following table indicates the gain or loss recognized in income on derivatives not designated as hedging instruments for the periods presented:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020			2021			2020			(dollars in thousands)	2022			2021			2022			2021
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		$	22		$	(537)		$	337		$	(485)	Interest rate swap contracts—commercial loans		$	64		$	22		$	71		$	337
Interest rate lock commitments—mortgage loans	Interest rate lock commitments—mortgage loans		192			86			712			2,877		Interest rate lock commitments—mortgage loans		(58)			192			(404)			712
Forward sale contracts—mortgage loans	Forward sale contracts—mortgage loans		(325)			144			(2,314)			(451)		Forward sale contracts—mortgage loans		9			(325)			4			(2,314)
Total Derivatives (Loss)/Gain			$	(111)		$	(307)		$	(1,265)		$	1,941
Total Derivatives Gain (Loss)														Total Derivatives Gain (Loss)		$	15		$	(111)		$	(329)		$	(1,265)

The gain or loss recognized on commercial loan swap contracts is included in other income and the gain or loss on mortgage loan interest rate lock commitments and forward sales contracts is included in mortgage banking on the Condensed Consolidated Statements of Comprehensive Income (Loss).

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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 consolidated 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)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Commitments to extend credit	Commitments to extend credit		$	2,500,541		$	2,185,752	Commitments to extend credit		$	2,689,993		$	2,583,957
Standby letters of credit	Standby letters of credit		90,250			89,095		Standby letters of credit		70,402			87,335
Total	Total		$	2,590,791		$	2,274,847	Total		$	2,760,395		$	2,671,292

Allowance for Credit Losses on Unfunded Loan Commitments

We maintain an allowance for credit losses on unfunded commercial and consumer 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 (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~~for the ~~dates~~periods presented:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	(dollars in thousands)	2021			2020			2021			2020			(dollars in thousands)	2022			2021			2022			2021
Balance at beginning of period	Balance at beginning of period		$	4,858		$	7,004		$	4,467		$	3,112	Balance at beginning of period		$	7,387		$	4,858		$	5,189		$	4,467
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	Provision for credit losses		1,085			(1,816)			1,476			727		Provision for credit losses		189			1,085			2,387			1,476
Total	Total		$	5,943		$	5,188		$	5,943		$	5,188	Total		$	7,576		$	5,943		$	7,576		$	5,943

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)~~LOSS

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

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
(dollars in thousands) Pre-Tax
Amount Tax
(Expense)
Benefit Net of Tax
Amount Pre-Tax
Amount Tax Benefit (Expense) Net of Tax
Amount
Change in net unrealized gains/(losses) on debt securities available-for-sale $ (5,676) $ 1,211 $ (4,465) $ (882) $ 188 $ (694)
Adjustment to funded status of employee benefit plans (1)
(215) 46 (169) 1,163 (248) 915
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.
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
(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 $ (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)
— — — (142) 30 (112)
Adjustment to funded status of employee benefit plans (1)
2,351 (501) 1,850 2,092 (446) 1,646
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.

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

~~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 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, no 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 2020.

We remeasured our pension obligation and recognized a pension settlement charge of $0.4 million and $1.3 million for the three and nine months ended 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 September 30, Nine Months Ended September 30,
(dollars in thousands) 2021 2020 2021 2020
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation $ 721 $ 905 $ 2,221 $ 2,686
Expected return on plan assets (668) (970) (2,029) (2,913)
Net amortization 246 411 792 1,180
Settlement Charge 370 671 1,296 671
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 (Loss).~~


	Three Months Ended September 30, 2022									Three Months Ended September 30, 2021
(dollars in thousands)	Pre-Tax Amount			Tax Benefit			Net of Tax Amount			Pre-Tax Amount			Tax Benefit			Net of Tax Amount
Change in net unrealized losses on available-for-sale debt securities		$	(42,741)		$	9,121		$	(33,620)		$	(5,676)		$	1,211		$	(4,465)
Change in interest rate swap		(16,852)			3,596			(13,256)			—			—			—
Adjustment to funded status of employee benefit plans (1)		(1,170)			250			(920)			(215)			46			(169)
Other Comprehensive Loss		$	(60,763)		$	12,967		$	(47,796)		$	(5,891)		$	1,257		$	(4,634)

	Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2021
(dollars in thousands)	Pre-Tax Amount			Tax Benefit			Net of Tax Amount			Pre-Tax Amount			Tax Benefit (Expense)			Net of Tax Amount
Change in net unrealized losses on available-for-sale debt securities		$	(114,011)		$	24,325		$	(89,686)		$	(15,065)		$	3,215		$	(11,850)
Change in interest rate swap		(22,724)			4,849			(17,875)			—			—			—
Adjustment to funded status of employee benefit plans (1)		(416)			100			(316)			2,351			(501)			1,850
Other Comprehensive Loss		$	(137,151)		$	29,274		$	(107,877)		$	(12,714)		$	2,714		$	(10,000)

NOTE ~~11.~~10. SHARE REPURCHASE PLAN

On March ~~15, 2021,~~21, 2022, our Board of Directors authorized an extension of its $50 million share repurchase plan, which was set to expire March 31, ~~2021.~~2022. This authorization extended the expiration date of the repurchase plan through March 31, ~~2022.~~2023. The plan permits S&T to repurchase ~~from time to time~~shares 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 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 following table presents repurchase activity for the three and nine months ended September 30, 2021, we had no 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.periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share data)	2022			2021			2022			2021
Value of shares authorized to repurchase		$	50,000		$	50,000		$	50,000		$	50,000
Remaining plan capacity at the beginning of the period		$	33,289		$	37,442		$	37,442		$	37,442
Total shares repurchased		117,283			—			268,503			—
Average share price for the period		$	29.71		$	—		$	28.44		$	—
Total cost of repurchases		$	3,484		$	—		$	7,637		$	—
Remaining plan capacity at the end of the period		$	29,805		$	37,442		$	29,805		$	37,442

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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~~months ended September 30, ~~2021~~2022 and ~~2020.~~2021. 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~~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”,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~~losses, or ACL; 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;~~guidance; legislation affecting the financial services industry as a whole, and S&T, in particular; climate change and related legislative and regulatory initiatives; 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;~~employees, particularly in light of the strong competition in the marketplace; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; macroeconomic conditions including inflation and economic uncertainty; the duration and severity of the coronavirus, ~~(“COVID-19”)~~or 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, 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;~~operations; our participation in the Paycheck Protection Program; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described elsewhere in this report, and in our ~~Annual Report on~~2021 Form 10-K, ~~for the year ended December 31, 2020,~~ including Part I,II, Item ~~1A-"~~1A, Risk ~~Factors"~~Factors and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

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

Critical Accounting Policies and Estimates

We view critical accounting policies to be those which are highly dependent on subjective or complex estimates, assumptions and judgments and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements. Further, we view critical accounting estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our critical accounting policies ~~involving significant judgments~~ and ~~assumptions used in the preparation of the Consolidated Financial Statements~~estimates as of September 30, ~~2021~~2022 remained unchanged from the disclosures presented in our ~~Annual Report on~~2021 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”.~~Operations.”

Overview

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of ~~$9.4~~$8.9 billion at September 30, ~~2021.~~2022. 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~~On August 23, 2021, Christopher McComish joined S&T as our new chief executive officer. He brings over 34 years of proven banking leadership with a track record of growth and transformation of commercial, consumer and wealth businesses. Additionally, we have elevated proven internal leaders and attracted external talent from larger banking institutions to ~~become the financial services provider of choice within the markets that we serve which will enable~~position 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 offor future growth. Our priorities for 2022 and beyond include pursuing high impact growth initiatives, ensuring rigorous credit risk and enterprise governance practices, advancing strategic ~~plan includes~~infrastructure and platform investments, including enhancing our digital platform, investing in organization talent and performance and promoting stakeholder engagement.

Earnings Summary

The following table presents a ~~collaborative model that combines expertise from all areas~~summary of ~~our business and focuses on satisfying each customer’s individual financial objectives. We continuously work to maintain and improve~~key profitability metrics for the ~~efficiency of our different lines of business.~~periods presented:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Net income		$	37,249			$	27,598			$	95,250			$	87,866
Earnings per share - diluted		$	0.95			$	0.70			$	2.43			$	2.24
Return on average assets		1.64		%		1.15		%		1.38		%		1.26		%
Return on average shareholders' equity		12.47		%		9.13		%		10.73		%		9.96		%
Return on average tangible shareholders' equity (non-GAAP)		18.46		%		13.53		%		15.91		%		14.87		%

~~COVID-19 Update~~

~~The extent~~Net income increased $9.7 million for the three months ended September 30, 2022 compared 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,same period in 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 waysprimarily due to ~~the pandemic. We are closely monitoring our asset quality with a focus on the loan portfolios that have been significantly impacted~~an increase in net interest income of $15.1 million partially offset by ~~the pandemic, including our hotel portfolio. We did experience some improvement~~an increase in ~~our asset quality during~~noninterest expense and income tax expense of $2.4 million and $2.8 million. Net income increased $7.4 million for the ~~three and~~ nine months ended September 30, 2022 compared to the same period in 2021 ~~but remain cautious given the current environment. Our balance sheet is asset sensitive resulting~~primarily due to an increase in ~~our~~ net interest income of $19.1 million offset by an increase of $6.7 million in noninterest expense and ~~net interest margin, or NIM, being negatively impacted~~a decrease of $6.0 million in ~~this low interest rate environment. 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.~~ noninterest income.

Net interest income ~~was favorably impacted by PPP loans which contributed $4.2~~increased $15.1 million and ~~$14.2~~$19.1 million for the three and nine months ended September 30, ~~2021~~2022 compared to ~~interest income.~~

~~Earnings Summary~~

~~We recognized net~~the same periods in 2021. Interest and dividend income ~~of $27.6~~increased $18.1 million ~~or $0.70 per diluted share~~ and ~~$87.9~~$19.4 million ~~or $2.24 per diluted share~~ for the three and nine months ended September 30, ~~2021 compared to a net income of $16.7~~2022. Interest expense increased $3.0 million ~~or $0.43 per diluted share~~ and ~~a net loss of $(3.1)~~$0.4 million ~~or $(0.08) per diluted share for the same periods in 2020. The increase in net income~~ for the three and nine months ended September 30, ~~2021 was primarily due to a significant decrease of $14.1 million~~2022. The net interest margin, or NIM, on an FTE basis (non-GAAP) increased 90 and ~~$115.2 million in our provision~~33 basis points for ~~credit losses compared to the same periods in 2020. The significant decrease in the provision for credit losses during~~ the three and nine months ended September 30, ~~2021 was mainly~~2022 compared to the same periods in 2021. The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily 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.higher interest rates during 2022.

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

~~Net interest income~~The provision for credit losses decreased ~~$0.6~~$0.9 million and ~~$1.8~~$3.9 million to ~~$68.7~~$2.5 million and ~~$207.7~~$5.2 million for the three and nine months ended September 30, ~~2021~~2022 compared to ~~$69.3~~$3.4 million and ~~$209.5~~$9.1 million for the same periods in ~~2020.~~2021. The decrease in ~~interest income~~the provision for credit losses was ~~primarily~~ due to a reduction in net charge-offs, lower ~~average loan balances~~specific reserves and a decrease in the ~~low rate interest environment~~quantitative reserve mainly due to improvement in our hotel portfolio.

Noninterest income decreased $1.1 million to $14.8 million for the three months ended September 30, 2022 and decreased $6.0 million to $42.6 million for the nine months ended September 30, 2022 compared to the same periods in ~~2020. Average loan balances~~2021. Mortgage banking income decreased ~~$480.7 million and $320.8~~$1.7 million for the three months ended September 30, 2022 and decreased $6.3 million for the nine months ended September 30, ~~2021~~2022. Higher interest rates have resulted in a lower volume of mortgage loans sold in the secondary market during 2022 compared to the prior year.

Noninterest expense increased $2.4 million to $49.6 million for the three months ended September 30, 2022 and increased $6.7 million to $145.5 million for the nine months ended September 30, 2022 compared to the same periods in ~~2020.~~2021. Salaries and employee benefits increased $1.5 million for the three months ended September 30, 2022 due to base rate increases and higher medical costs, and increased $2.2 million for the nine months ended September 30, 2022 due to base rate and incentive increases partially offset by lower pension expense and a decline in fair value of the liability in a nonqualified benefit plan. Professional services and legal increased by $0.3 million for the three months ended September 30, 2022 and $1.5 million for the nine months ended September 30, 2022 due to increased consulting engagements compared to the same periods in 2021. Other noninterest expense increased $0.8 million for the three months ended September 30, 2022 mainly due to a lease impairment. Other noninterest expense increased $1.5 million for the nine months ended September 30, 2022 primarily due to to the lease impairment and higher OREO expenses.

The provision for income taxes increased $2.8 million to $9.2 million for the three months ended September 30, 2022 and increased $2.9 million to $23.4 million for the nine months ended September 30, 2022 compared to $6.3 million and $20.6 million for the same periods in 2021. Our ~~net interest margin on an FTE basis (non-GAAP) decreased to 3.14~~effective tax rate was 19.8 percent and ~~3.25~~19.7 percent for the three and nine months ended September 30, ~~2021~~2022 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 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 $14.1 million and $115.2 million to $3.4 million and $9.1 million for the three and nine months ended September 30, 2021 compared to $17.5 million and $124.3 million for the same periods in 2020. The significant decrease in the provision for credit losses during the nine months ended September 30, 2021 was mainly due to the customer fraud previously described above and an improved economic forecast in 2021. The decrease in the provision for credit losses during the three months ended September 30, 2021 was due to an improved economic forecast in 2021 compared to 2020.

Noninterest income decreased $0.6 million and increased $4.4 million for the three and nine months ended September 30, 2021 compared to the same periods in 2020. 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 a decrease in commercial loan swap income due to lower activity as a result of the pandemic and interest rate environment.

Noninterest expense decreased $1.0 million to $47.2 million for the three months ended September 30, 2021 and increased $0.5 million to $138.6 million for the nine months ended September 30, 2021 compared to $48.2 million and $138.1 million for the same periods in 2020. The decrease in noninterest expense for the three months ended September 30, 2021 was mainly due to lower marketing, FDIC insurance and professional services and legal services compared to the prior period. The higher noninterest expense for the nine months ended September 30, 2021 was mainly due to an increase of salaries and employee benefits of $5.7 million offset by lower FDIC insurance, marketing and $2.3 million less of merger-related expenses.

The provision for income taxes increased $3.0 million and $26.3 million to $6.3 million and $20.6 million for the three and nine months ended September 30, 2021 compared to 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 which resulted in a pretax loss and tax benefit. The increase in pretax income for the three months ended September 30, 2021, was primarily due to the reduced provision for credit losses as a result of the improved economic forecast. Our effective tax rate was 18.7 percent and 19.0 percent for the three and nine months ended September 30, ~~2021 compared to 16.6 percent and (64.5) percent for the same period in 2020.~~2021. The ~~change~~increases in our effective tax ~~rate~~rates for the three and nine ~~months~~month periods ended September 30, ~~2021 was~~2022 were primarily due to ~~the increase~~increases in pretax income compared to ~~2020.~~the same periods in 2021.

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, interest income, net interest income and net interest margin, each on a fully taxable equivalent, or FTE, ~~basis, which~~basis. Management also uses return on average tangible shareholders' equity, or ROTE, to evaluate and measure performance. These metrics are non-GAAP financial measures. Management believes ~~net interest income and net interest margin on an FTE basis~~these performance metrics 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 interest income, 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 September 30, ~~2021~~2022 Compared to Three and Nine Months Ended September 30, ~~2020~~2021 - Net Interest Income" section of this MD&A.

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Return on average tangible shareholders' equity is a key profitability metric used by management to measure financial performance. The following table provides a reconciliation of return on average tangible shareholders' equity (non-GAAP) by reconciling net income (GAAP) per the Condensed Consolidated Statements of Comprehensive Income (Loss) to net income before amortization and intangibles and average shareholder's equity to average tangible shareholders' equity for the periods presented:


	Three Months Ended September 30,								Nine Months Ended September 30,
(dollars in thousands)	2022				2021				2022				2021
Net income (annualized)		$	147,781			$	109,492			$	127,350			$	117,477
Plus: amortization of intangibles (annualized), net of tax		1,181				1,369				1,217				1,409
Net income before amortization of intangibles (annualized)		$	148,962			$	110,861			$	128,567			$	118,886

Average shareholders' equity		$	1,185,162			$	1,198,641			$	1,186,427			$	1,179,403
Less: average goodwill and other intangible assets, net of deferred tax liability		(378,154)				(379,443)				(378,454)				(379,788)
Average tangible shareholders' equity		$	807,008			$	819,198			$	807,973			$	799,615
Return on average tangible shareholders' equity (non-GAAP)		18.46		%		13.53		%		15.91		%		14.87		%

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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 September 30, ~~2021~~2022 Compared to

Three and Nine Months Ended September 30, ~~2020~~2021

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 and the dividend-received deduction for equity securities using the federal statutory tax rate of 21 percent for each ~~period and the dividend-received deduction for equity securities.~~period. 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 and dividend income and net interest income per the Condensed Consolidated Statements of Comprehensive Income (Loss) to interest income, net interest income and ~~rates~~net interest margin on an FTE basis for the periods presented:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021				2020				2021				2020				(dollars in thousands)	2022				2021				2022				2021
Total interest income			$	71,769			$	76,848			$	218,127			$	244,916
Total interest and dividend income per Condensed Consolidated Statements of Comprehensive Income (Loss)																		Total interest and dividend income per Condensed Consolidated Statements of Comprehensive Income (Loss)		$	89,835			$	71,769			$	237,543			$	218,127
Adjustment to FTE basis																		Adjustment to FTE basis		521				557				1,520				1,806
Interest Income on an FTE Basis (Non-GAAP)																		Interest Income on an FTE Basis (Non-GAAP)		$	90,356			$	72,326			$	239,063			$	219,933

Total interest and dividend income																		Total interest and dividend income		$	89,835			$	71,769			$	237,543			$	218,127
Total interest expense	Total interest expense		3,058				7,572				10,453				35,456			Total interest expense		6,037				3,058				10,818				10,453
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			Net Interest Income per Condensed Consolidated Statements of Comprehensive Income (Loss)		83,798				68,711				226,725				207,674
Adjustment to FTE basis	Adjustment to FTE basis		557				780				1,806				2,477			Adjustment to FTE basis		521				557				1,520				1,806
Net Interest Income on an FTE Basis (Non-GAAP)	Net Interest Income on an FTE Basis (Non-GAAP)		$	69,268			$	70,056			$	209,480			$	211,937		Net Interest Income on an FTE Basis (Non-GAAP)		$	84,319			$	69,268			$	228,245			$	209,480

Net interest margin	Net interest margin		3.11		%		3.25		%		3.22		%		3.33		%	Net interest margin		4.02		%		3.11		%		3.56		%		3.22		%
Adjustment to FTE basis	Adjustment to FTE basis		0.03		%		0.04		%		0.03		%		0.04		%	Adjustment to FTE basis		0.02		%		0.03		%		0.02		%		0.03		%
Net Interest Margin on an FTE Basis (Non-GAAP)	Net Interest Margin on an FTE Basis (Non-GAAP)		3.14		%		3.29		%		3.25		%		3.37		%	Net Interest Margin on an FTE Basis (Non-GAAP)		4.04		%		3.14		%		3.58		%		3.25		%

Income amounts are annualized for rate calculations.

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Average Balance Sheet and Net Interest Income Analysis (FTE)

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


		Three Months Ended September 30, 2021							Three Months Ended September 30, 2020								Three Months Ended September 30, 2022							Three Months Ended September 30, 2021
(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	$	914,370		$	374	0.16	%	$	213,051		$	61	0.11	%	Interest-bearing deposits with banks	$	158,700		$	813	2.05	%	$	914,370		$	374	0.16	%
Securities, at fair value(1)(2)	Securities, at fair value(1)(2)	836,019			4,577		2.19	%	759,094			4,570		2.41	%	Securities, at fair value(1)(2)	1,051,534			5,994		2.28	%	836,019			4,577		2.19	%
Loans held for sale	Loans held for sale	3,656			31		3.35	%	4,432			34		3.09	%	Loans held for sale	1,032			14		5.36	%	3,656			31		3.35	%
Commercial real estate	Commercial real estate	3,239,867			30,091		3.68	%	3,322,656			33,569		4.02	%	Commercial real estate	3,159,543			36,865		4.63	%	3,239,867			30,091		3.68	%
Commercial and industrial	Commercial and industrial	1,744,684			18,329		4.17	%	2,107,750			18,300		3.45	%	Commercial and industrial	1,704,271			21,896		5.10	%	1,744,684			18,329		4.17	%
Commercial construction	Commercial construction	490,940			3,964		3.20	%	469,214			4,047		3.43	%	Commercial construction	405,460			5,163		5.05	%	490,940			3,964		3.20	%
Total Commercial Loans	Total Commercial Loans	5,475,491			52,384		3.80	%	5,899,620			55,916		3.77	%	Total Commercial Loans	5,269,274			63,924		4.81	%	5,475,491			52,384		3.80	%
Residential mortgage	Residential mortgage	875,684			8,792		4.00	%	954,861			10,365		4.33	%	Residential mortgage	1,005,139			10,376		4.12	%	875,684			8,792		4.00	%
Home equity	Home equity	547,984			4,612		3.34	%	536,735			5,037		3.73	%	Home equity	629,827			6,891		4.34	%	547,984			4,612		3.34	%
Installment and other consumer	Installment and other consumer	92,615			1,366		5.85	%	79,649			1,295		6.47	%	Installment and other consumer	123,010			1,890		6.10	%	92,615			1,366		5.85	%
Consumer construction	Consumer construction	13,626			126		3.66	%	14,475			157		4.32	%	Consumer construction	40,975			358		3.47	%	13,626			126		3.66	%
Total Consumer Loans	Total Consumer Loans	1,529,909			14,896		3.87	%	1,585,720			16,854		4.24	%	Total Consumer Loans	1,798,951			19,515		4.31	%	1,529,909			14,896		3.87	%
Total Portfolio Loans	Total Portfolio Loans	7,005,400			67,279		3.81	%	7,485,340			72,770		3.87	%	Total Portfolio Loans	7,068,225			83,439		4.69	%	7,005,400			67,279		3.81	%
Total Loans(1)(3)	Total Loans(1)(3)	7,009,056			67,310		3.81	%	7,489,772			72,804		3.87	%	Total Loans(1)(3)	7,069,257			83,453		4.69	%	7,009,056			67,310		3.81	%
Federal Home Loan Bank and other restricted stock	Federal Home Loan Bank and other restricted stock	9,981			65		2.62	%	15,157			193		5.11	%	Federal Home Loan Bank and other restricted stock	8,398			96		4.55	%	9,981			65		2.62	%
Total Interest-earning Assets	Total Interest-earning Assets	8,769,425			72,326		3.28	%	8,477,074			77,628		3.65	%	Total Interest-earning Assets	8,287,889			90,356		4.33	%	8,769,425			72,326		3.28	%
Noninterest-earning assets	Noninterest-earning assets	724,759							815,930							Noninterest-earning assets	721,480							724,759
Total Assets	Total Assets	$	9,494,184						$	9,293,004						Total Assets	$	9,009,369						$	9,494,184
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY															LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	Interest-bearing demand	$	962,139		$	184	0.08	%	$	967,735		$	434	0.18	%	Interest-bearing demand	$	872,302		$	165	0.07	%	$	962,139		$	184	0.08	%
Money market	Money market	2,062,958			911		0.18	%	2,074,862			1,713		0.33	%	Money market	1,861,389			3,258		0.69	%	2,062,958			911		0.18	%
Savings	Savings	1,059,904			70		0.03	%	923,208			162		0.07	%	Savings	1,131,575			290		0.10	%	1,059,904			70		0.03	%
Certificates of deposit	Certificates of deposit	1,240,345			1,274		0.41	%	1,486,016			4,317		1.16	%	Certificates of deposit	962,898			1,484		0.61	%	1,240,345			1,274		0.41	%
Total Interest-bearing Deposits	Total Interest-bearing Deposits	5,325,346			2,439		0.18	%	5,451,821			6,626		0.48	%	Total Interest-bearing Deposits	4,828,164			5,197		0.43	%	5,325,346			2,439		0.18	%
Securities sold under repurchase agreements	Securities sold under repurchase agreements	71,054			18		0.10	%	64,000			41		0.25	%	Securities sold under repurchase agreements	12,668			3		0.10	%	71,054			18		0.10	%
Short-term borrowings	Short-term borrowings	—			—		—	%	84,310			81		0.38	%	Short-term borrowings	10,379			83		3.16	%	—			—		—	%
Long-term borrowings	Long-term borrowings	22,841			114		1.99	%	49,269			311		2.52	%	Long-term borrowings	17,278			98		2.25	%	22,841			114		1.99	%
Junior subordinated debt securities	Junior subordinated debt securities	64,118			487		3.01	%	64,057			513		3.19	%	Junior subordinated debt securities	54,428			656		4.78	%	64,118			487		3.01	%
Total Borrowings	Total Borrowings	158,012			619		1.56	%	261,636			946		1.44	%	Total Borrowings	94,753			840		3.52	%	158,012			619		1.56	%
Total Interest-bearing Liabilities	Total Interest-bearing Liabilities	5,483,358			3,058		0.22	%	5,713,457			7,572		0.53	%	Total Interest-bearing Liabilities	4,922,917			6,037		0.49	%	5,483,358			3,058		0.22	%
Noninterest-bearing liabilities	Noninterest-bearing liabilities	2,812,185							2,433,665							Noninterest-bearing liabilities	2,901,290							2,812,185
Shareholders' equity	Shareholders' equity	1,198,641							1,145,882							Shareholders' equity	1,185,162							1,198,641
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	9,494,184						$	9,293,004						Total Liabilities and Shareholders' Equity	$	9,009,369						$	9,494,184
Net Interest Income (1)(2)	Net Interest Income (1)(2)				$	69,268						$	70,056			Net Interest Income (1)(2)				$	84,319						$	69,268
Net Interest Margin (1)(2)	Net Interest Margin (1)(2)						3.14	%						3.29	%	Net Interest Margin (1)(2)						4.04	%						3.14	%

(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.~~percent.

(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


		Nine months ended September 30, 2021							Nine months ended September 30, 2020								Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2021
(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	$	669,593		$	613	0.12	%	$	158,771		$	449	0.38	%	Interest-bearing deposits with banks	$	478,896		$	2,146	0.60	%	$	669,593		$	613	0.12	%
Securities, at fair value(1)(2)	Securities, at fair value(1)(2)	815,197			13,672		2.24	%	776,995			14,590		2.50	%	Securities, at fair value(1)(2)	1,026,131			16,860		2.19	%	815,197			13,672		2.24	%
Loans held for sale	Loans held for sale	4,780			108		3.02	%	5,407			129		3.17	%	Loans held for sale	1,326			42		4.15	%	4,780			108		3.02	%
Commercial real estate	Commercial real estate	3,248,417			90,158		3.71	%	3,373,466			109,278		4.33	%	Commercial real estate	3,204,371			99,187		4.14	%	3,248,417			90,158		3.71	%
Commercial and industrial	Commercial and industrial	1,863,447			57,509		4.13	%	2,020,179			57,771		3.82	%	Commercial and industrial	1,700,923			56,843		4.47	%	1,863,447			57,509		4.13	%
Commercial construction	Commercial construction	479,733			11,851		3.30	%	428,977			12,562		3.91	%	Commercial construction	406,513			12,304		4.05	%	479,733			11,851		3.30	%
Total Commercial Loans	Total Commercial Loans	5,591,597			159,518		3.81	%	5,822,622			179,611		4.12	%	Total Commercial Loans	5,311,807			168,334		4.24	%	5,591,597			159,518		3.81	%
Residential mortgage	Residential mortgage	878,709			27,204		4.13	%	974,144			30,934		4.24	%	Residential mortgage	947,454			28,674		4.04	%	878,709			27,204		4.13	%
Home equity	Home equity	538,931			14,085		3.49	%	540,220			16,530		4.09	%	Home equity	598,595			16,995		3.80	%	538,931			14,085		3.49	%
Installment and other consumer	Installment and other consumer	85,640			3,884		6.06	%	79,757			3,942		6.60	%	Installment and other consumer	117,388			4,955		5.64	%	85,640			3,884		6.06	%
Consumer construction	Consumer construction	14,257			525		4.92	%	12,587			423		4.49	%	Consumer construction	31,407			801		3.41	%	14,257			525		4.92	%
Total Consumer Loans	Total Consumer Loans	1,517,538			45,698		4.02	%	1,606,708			51,829		4.31	%	Total Consumer Loans	1,694,844			51,425		4.05	%	1,517,538			45,698		4.02	%
Total Portfolio Loans	Total Portfolio Loans	7,109,135			205,216		3.86	%	7,429,330			231,440		4.16	%	Total Portfolio Loans	7,006,651			219,759		4.19	%	7,109,135			205,216		3.86	%
Total Loans(1)(3)	Total Loans(1)(3)	7,113,915			205,324		3.86	%	7,434,737			231,569		4.16	%	Total Loans(1)(3)	7,007,977			219,801		4.19	%	7,113,915			205,324		3.86	%
Federal Home Loan Bank and other restricted stock	Federal Home Loan Bank and other restricted stock	10,579			323		4.07	%	19,473			785		5.38	%	Federal Home Loan Bank and other restricted stock	8,869			256		3.86	%	10,579			323		4.07	%
Total Interest-earning Assets	Total Interest-earning Assets	8,609,284			219,933		3.41	%	8,389,976			247,393		3.94	%	Total Interest-earning Assets	8,521,873			239,063		3.75	%	8,609,284			219,933		3.41	%
Noninterest-earning assets	Noninterest-earning assets	728,314							772,404							Noninterest-earning assets	706,640							728,314
Total Assets	Total Assets	$	9,337,598						$	9,162,380						Total Assets	$	9,228,513						$	9,337,598
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY															LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand	Interest-bearing demand	$	952,297		$	636	0.09	%	$	981,174		$	2,425	0.33	%	Interest-bearing demand	$	945,733		$	526	0.07	%	$	952,297		$	636	0.09	%
Money market	Money market	2,023,583			2,748		0.18	%	2,048,466			10,610		0.69	%	Money market	1,948,653			4,714		0.32	%	2,023,583			2,748		0.18	%
Savings	Savings	1,033,581			291		0.04	%	880,673			801		0.12	%	Savings	1,119,739			496		0.06	%	1,033,581			291		0.04	%
Certificates of deposit	Certificates of deposit	1,291,666			4,896		0.51	%	1,549,177			17,355		1.50	%	Certificates of deposit	1,011,228			3,105		0.41	%	1,291,666			4,896		0.51	%
Total Interest-bearing Deposits	Total Interest-bearing Deposits	5,301,126			8,572		0.22	%	5,459,490			31,191		0.76	%	Total Interest-bearing Deposits	5,025,353			8,841		0.24	%	5,301,126			8,572		0.22	%
Securities sold under repurchase agreements	Securities sold under repurchase agreements	67,872			60		0.12	%	60,045			137		0.30	%	Securities sold under repurchase agreements	47,912			36		0.10	%	67,872			60		0.12	%
Short-term borrowings	Short-term borrowings	8,425			12		0.19	%	182,623			1,392		1.02	%	Short-term borrowings	3,498			83		3.16	%	8,425			12		0.19	%
Long-term borrowings	Long-term borrowings	23,139			346		2.00	%	50,292			950		2.52	%	Long-term borrowings	20,535			316		2.06	%	23,139			346		2.00	%
Junior subordinated debt securities	Junior subordinated debt securities	64,103			1,463		3.05	%	64,099			1,786		3.72	%	Junior subordinated debt securities	54,413			1,542		3.79	%	64,103			1,463		3.05	%
Total Borrowings	Total Borrowings	163,539			1,882		1.54	%	357,059			4,265		1.60	%	Total Borrowings	126,358			1,977		2.09	%	163,539			1,882		1.54	%
Total Interest-bearing Liabilities	Total Interest-bearing Liabilities	5,464,665			10,453		0.26	%	5,816,549			35,456		0.81	%	Total Interest-bearing Liabilities	5,151,711			10,818		0.28	%	5,464,665			10,453		0.26	%
Noninterest-bearing liabilities	Noninterest-bearing liabilities	2,693,530							2,170,447							Noninterest-bearing liabilities	2,890,375							2,693,530
Shareholders' equity	Shareholders' equity	1,179,403							1,175,384							Shareholders' equity	1,186,427							1,179,403
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	9,337,598						$	9,162,380						Total Liabilities and Shareholders' Equity	$	9,228,513						$	9,337,598
Net Interest Income (1) (2)					$	209,480						$	211,937
Net Interest Income (1)(2)																Net Interest Income (1)(2)				$	228,245						$	209,480
Net Interest Margin(2)	Net Interest Margin(2)						3.25	%						3.37	%	Net Interest Margin(2)						3.58	%						3.25	%

(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.~~percent.

(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.

Net interest income on an FTE basis (non-GAAP) increased $15.1 million and $18.8 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021. The net interest margin, or NIM, on an FTE basis (non-GAAP) increased 90 and 33 basis points for the three and nine months ended September 30, 2022 compared to the same periods in 2021. The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates during 2022. NIM on an FTE basis (non-GAAP) was also positively impacted by lower average cash balances. Average interest-bearing deposits with banks decreased $755.7 million and $190.7 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021.

Interest income on an FTE basis (non-GAAP) increased $18.0 million and $19.1 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021. The increases in interest income on an FTE basis (non-GAAP) were primarily due to higher interest rates partially offset by lower Paycheck Protection Program, or PPP, income.

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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)~~Average PPP loans decreased ~~$0.8~~$256.3 million and ~~$2.5~~$360.2 million compared to the three and nine months ended September 30, 2021. Average loan balances, excluding PPP loans, increased $316.5 million and $254.3 million for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020.~~2021. The ~~decline was primarily due to lower~~ average ~~loan balances compared to the prior periods. Net interest income was favorably impacted by PPP~~yield on loans ~~which contributed $4.2 million~~increased 88 basis points and $14.2 million for the three and nine months ended September 30, 2021 compared to $3.2 million and $6.4 million for the same periods in 2020. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 15 and 1233 basis points for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020. The decrease in NIM on an FTE basis is primarily~~2021 due to increased interest rates. Average securities increased $215.5 million and $210.9 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Securities increased due to interest-bearing deposits with banks being redeployed to higher ~~average cash~~yielding assets. Average interest-bearing deposits with banks decreased $755.7 million and $190.7 million for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to decreased deposit balances inand increased loans and securities. Overall, the ~~current periods~~FTE rate (non-GAAP) on interest-earning assets increased 105 and ~~the low interest rate environment. PPP loans positively impacted the net interest margin on an FTE basis (non-GAAP) by 10 and 8~~34 basis points for the three and nine months ended September 30, ~~2021~~2022 compared to the ~~negative impact of 7 and 4 basis points~~same periods in ~~the prior periods.~~2021.

Interest ~~income on an FTE basis (non-GAAP) decreased $5.3~~expense increased $3.0 million and ~~$27.5~~$0.4 million for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020.~~2021. The ~~decrease~~increases in interest ~~income was~~expense were primarily due to ~~lower average loan balances and the low rate~~higher interest ~~environment compared to the same periods in 2020.~~rates. Average ~~loan balances~~interest-bearing deposits decreased ~~$480.7~~$497.2 million and ~~$320.8~~$275.8 million for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020. Average PPP loans decreased $284.3 million and increased $58.1 million for the three and nine months ended September 30, 2021 compared~~2021. The decreases were due to the ~~same periods in 2020.~~competitive market driven by rising interest rates. The average rate ~~earned~~paid on ~~loans decreased 6~~interest-bearing deposits increased 25 and 302 basis points for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020 primarily~~2021 due to ~~lower short-term~~increased interest rates. Average ~~interest-bearing~~demand deposits ~~with banks~~ increased ~~$701.3~~$38.4 million and ~~$510.8~~$181.5 million for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in 2020 due to PPP forgiveness, lower loan balances and a significant increase in average deposits as a result of customer PPP loans and stimulus payments along with customers' liquidity preferences. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 37 and 53 basis points for the three and nine months ended September 30, 2021 compared to the same periods in 2020.

Interest expense decreased $4.5 million and $25.0 million for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The decreases were primarily due to lower short-term interest rates compared to the same periods in 2020. Average interest-bearing deposits decreased $126.5 million and $158.4 million for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The average rate paid on interest-bearing deposits decreased 30 and 54 basis points compared to the same periods in 2020 primarily due to lower short-term interest rates. The interest-bearing deposit decreases are favorably offset by $425.2 million and $538.4 million increases in demand deposits for the three and nine months ended September 30, 2021. We experienced demand deposit growth throughout 2021 due to customer PPP loans and stimulus payments along with customers' liquidity preferences. ~~Brokered deposits~~Average borrowings decreased ~~$163.1~~$63.3 million and ~~$267.2~~$37.2 million for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020~~2021 primarily due to ~~this funding source no longer being needed. Average total borrowings decreased $103.6 million~~the discontinuation of the customer repurchase agreement product and ~~$193.5 million for~~ the ~~three and nine months ended September 30, 2021 compared to the same periods in 2020 due to this funding source no longer being needed.~~payoff of a subordinated debt. Overall, the cost of interest-bearing liabilities ~~decreased 31~~increased 27 and 552 basis points for the three and nine months ended September 30, ~~2021~~2022 compared to the same periods in ~~2020.~~

2021.

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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 September 30, 2021 Compared to September 30, 2020 Nine Months Ended September 30, 2021 Compared to September 30, 2020
(dollars in thousands)
Volume (4)
Rate (4)
Total
Volume (4)
Rate (4)
Total
Interest earned on:
Interest-bearing deposits with banks $ 200 $ 113 $ 313 $ 1,444 $ (1,280) $ 164
Securities, at fair value(1)(2)
463 (456) 7 717 (1,635) (917)
Loans held for sale (6) 2 (4) (15) (5) (21)
Commercial real estate (836) (2,642) (3,478) (4,051) (15,071) (19,120)
Commercial and industrial (3,152) 3,181 29 (4,482) 4,220 (262)
Commercial construction 187 (270) (82) 1,486 (2,196) (710)
Total Commercial Loans (3,801) 270 (3,532) (7,047) (13,047) (20,093)
Residential mortgage (859) (713) (1,573) (3,031) (699) (3,730)
Home equity 106 (530) (425) (39) (2,405) (2,445)
Installment and other consumer 211 (139) 71 291 (349) (58)
Consumer construction (9) (22) (31) 56 46 102
Total Consumer Loans (552) (1,405) (1,958) (2,723) (3,408) (6,131)
Total Portfolio Loans (4,354) (1,136) (5,491) (9,770) (16,455) (26,224)
Total Loans (1)(3)
(4,360) (1,134) (5,494) (9,785) (16,460) (26,244)
Federal Home Loan Bank and other restricted stock (66) (62) (128) (359) (104) (462)
Change in Interest Earned on Interest-earning Assets $ (3,762) $ (1,539) $ (5,301) $ (7,981) $ (19,478) $ (27,460)
Interest paid on:
Interest-bearing demand $ (3) $ (247) $ (250) $ (71) $ (1,718) $ (1,789)
Money market (10) (793) (803) (129) (7,733) (7,862)
Savings 24 (117) (93) 139 (649) (510)
Certificates of deposit (714) (2,329) (3,043) (2,885) (9,574) (12,459)
Total Interest-bearing Deposits (702) (3,486) (4,188) (2,946) (19,674) (22,620)
Securities sold under repurchase agreements 4 (27) (23) 18 (95) (77)
Short-term borrowings — — — — — —
Long-term borrowings (167) (30) (197) (513) (91) (604)
Junior subordinated debt securities — (26) (26) — (323) (322)
Total Borrowings (162) (84) (246) (495) (508) (1,003)
Change in Interest Paid on Interest-bearing Liabilities (864) (3,569) $ (4,433) (3,441) (20,182) (23,623)
Change in Net Interest Income $ (2,898) $ 2,030 $ (868) $ (4,540) $ 703 $ (3,837)


	Three Months Ended September 30, 2022 Compared to September 30, 2021						Nine Months Ended September 30, 2022 Compared to September 30, 2021
(dollars in thousands)	Volume (4)		Rate (4)		Total		Volume (4)		Rate (4)		Total
Interest earned on:
Interest-bearing deposits with banks	$	(309)	$	749	$	440	$	(175)	$	1,707	$	1,532
Securities, at fair value(1)(2)	1,180		237		1,417		3,538		(350)		3,188
Loans held for sale	(22)		5		(17)		(78)		11		(67)
Commercial real estate	(746)		7,519		6,773		(1,222)		10,252		9,030
Commercial and industrial	(425)		3,993		3,568		(5,016)		4,350		(666)
Commercial construction	(690)		1,889		1,199		(1,809)		2,262		453
Total Commercial Loans	(1,861)		13,401		11,540		(8,047)		16,863		8,816
Residential mortgage	1,300		283		1,583		2,128		(658)		1,470
Home equity	689		1,590		2,279		1,559		1,351		2,910
Installment and other consumer	448		76		524		1,440		(369)		1,071
Consumer construction	252		(19)		233		631		(356)		276
Total Consumer Loans	2,689		1,930		4,619		5,759		(32)		5,727
Total Portfolio Loans	828		15,331		16,159		(2,288)		16,832		14,543
Total Loans (1)(3)	806		15,336		16,142		(2,366)		16,843		14,476
Federal Home Loan Bank and other restricted stock	(10)		41		31		(52)		(14)		(66)
Change in Interest Earned on Interest-earning Assets	$	1,667	$	16,363	$	18,030	$	945	$	18,186	$	19,131
Interest paid on:
Interest-bearing demand	$	(17)	$	(2)	$	(19)	$	(4)	$	(106)	$	(110)
Money market	(89)		2,437		2,348		(102)		2,068		1,966
Savings	5		215		220		24		180		205
Certificates of deposit	(285)		495		210		(1,063)		(729)		(1,792)
Total Interest-bearing Deposits	(386)		3,145		2,759		(1,145)		1,414		269
Securities sold under repurchase agreements	(15)		—		(15)		(18)		(6)		(24)
Short-term borrowings	83		—		83		(7)		78		71
Long-term borrowings	(28)		12		(16)		(39)		9		(30)
Junior subordinated debt securities	(74)		242		168		(221)		300		79
Total Borrowings	(34)		254		220		(285)		381		96
Change in Interest Paid on Interest-bearing Liabilities	(420)		3,399		2,979		(1,430)		1,795		365
Change in Net Interest Income	$	2,087	$	12,964	$	15,051	$	2,374	$	16,391	$	18,766

(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.~~percent.

(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 credit losses in the ~~loan~~ portfolio at the balance sheet date. The provision for credit losses decreased ~~$14.1~~$0.9 million and ~~$115.2~~$3.9 million to ~~$3.4~~$2.5 million and ~~$9.1~~$5.2 million for the three and nine months ended September 30, ~~2021~~2022 compared to ~~$17.5~~$3.4 million and ~~$124.3~~$9.1 million for the same periods in ~~2020.~~2021. The provision for credit losses included ~~$1.1~~$0.2 million and ~~$1.5~~$2.4 million for the reserve for unfunded commitments for the three and nine months ended September 30, ~~2021~~2022 compared to ~~$(1.8)~~$1.1 million and ~~$0.7~~$1.5 million for the same periods in ~~2020.~~ 2021.

The ~~increase~~decrease in the ~~reserve~~provision for ~~unfunded loan commitments~~credit losses for the three and nine months ended September 30, 2022 compared to the same periods in 2021 was due to ~~an increase~~a reduction in ~~overall unused commitments in the C&I portfolio~~net charge-offs, lower specific reserves and ~~an increase in loss rates primarily in the construction portfolio~~

~~The significant~~a decrease in the ~~provision~~quantitative reserve mainly due to improvement in our hotel portfolio.

For the three and nine months ended September 30, 2022, we had net loan charge-offs of $0.7 million and $1.7 million compared to $3.6 million and $16.9 million for ~~credit losses~~the same periods in 2021. During the nine months ended September 30, 2022, we had two C&I loan recoveries totaling $6.6 million. The most significant charge-offs 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 during the three~~were two CRE relationships totaling $9.2 million and ~~nine months ended September 30, 2021 was due to an improved economic forecast in 2021 compared to 2020. Our economic~~a C&I relationship totaling $3.9 million.

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

~~forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at September 30, 2021 compared~~Refer to the ~~same time in 2020.~~"Allowance for Credit Losses" section of this MD&A for further details.

~~For~~

Noninterest Income


	Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)	2022			2021			$ Change			% Change			2022			2021			$ Change			% Change
Net gain on sale of securities		$	198		$	—		$	198		NM			$	198		$	29		$	169		NM
Debit and credit card		4,768			4,579			189			4.1	%		14,587			13,486			1,101			8.2	%
Service charges on deposit accounts		4,333			3,923			410			10.5	%		12,488			11,039			1,449			13.1	%
Wealth management		3,212			3,464			(252)			(7.3)	%		9,701			9,576			125			1.3	%
Mortgage banking		425			2,162			(1,737)			(80.3)	%		1,906			8,206			(6,300)			(76.8)	%

Other		1,824			1,718			106			6.2	%		3,736			6,257			(2,521)			(40.3)	%
Total Noninterest Income		$	14,760		$	15,846		$	(1,086)		(6.9)	%		$	42,616		$	48,593		$	(5,977)		(12.3)	%
NM - not meaningful

Noninterest income decreased $1.1 million to $14.8 million for the three ~~and nine~~ months ended September 30, ~~2021, we had net charge-offs of $3.6~~2022 and decreased $6.0 million ~~and $16.9~~to $42.6 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~~2022 compared to ~~three CRE relationships totaling $10.1~~the same periods in 2021. Mortgage banking decreased $1.7 million ~~and a C&I relationship totaling $3.9 million.~~

~~During~~for the three months ended ~~June~~September 30, ~~2020, we recognized a charge-off of $58.7~~2022 and decreased $6.3 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~~2022. Higher interest rates have resulted in a lower volume of mortgage loans ~~increased $27.2 million to $111.3 million at September 30, 2021~~sold in the secondary market during 2022 compared to ~~$84.1~~the prior year. Other noninterest income decreased $2.5 million ~~at September 30, 2020. The increase in nonperforming loans primarily related to~~for the addition of $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 and the addition of a $21.7 million C&I relationship which moved to nonperforming during the threenine months ended September 30, ~~2021~~2022 primarily due to ~~financial deterioration that led to cash flow shortfalls.A specific reserve of $9.3 million was established based on an estimated enterprise~~the decline in the fair value of the ~~company. The increase~~assets in ~~nonperforming loans was partially~~a nonqualified benefit plan which has a corresponding offset ~~by two CRE hotel loans totaling $11.8 million that moved back~~in salaries and benefits resulting in no impact to ~~performing status~~net income. Service charges on deposit accounts 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 September 30, Nine Months Ended September 30,
(dollars in thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net gain on sale of securities $ — $ — $ — — $ 29 $ 142 $ (113) (79.6)
Debit and credit card 4,579 4,171 408 9.8 % 13,486 11,264 2,222 19.7 %
Mortgage banking 2,162 3,964 (1,802) (45.5) % 8,206 7,823 383 4.9 %
Service charges on deposit accounts 3,923 3,303 620 18.8 % 11,039 10,124 915 9.0 %
Wealth management 3,464 2,522 942 37.4 % 9,576 7,471 2,105 28.2 %
Commercial loan swap income 184 499 (315) (63.1) % 577 3,928 (3,351) (85.3) %
Other 1,534 2,024 (490) (24.2) % 5,595 3,358 2,237 66.6 %
Total Noninterest Income $ 15,846 $ 16,483 $ (637) (3.9) % $ 48,508 $ 44,110 $ 4,397 10.0 %

~~Noninterest income decreased $0.6 million~~debit and credit card fees increased ~~$4.4 million~~ for the three and nine months ended September 30, 2021 compared to the same periods in 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 $0.9 million and $2.1 million2022 due to higher ~~assets under management from market appreciation and an increase in~~ customer activity. ~~Mortgage banking decreased $1.8~~

Noninterest Expense


	Three Months Ended September 30,												Nine Months Ended September 30,
(dollars in thousands)	2022			2021			$ Change			% Change			2022		2021			$ Change			% Change
Salaries and employee benefits		$	26,700		$	25,228		$	1,472		5.8	%	$	75,223		$	73,070		$	2,153		2.9	%
Data processing and information technology		4,220			4,001			219			5.5	%	12,759			12,012			747			6.2	%
Occupancy		3,490			3,660			(170)			(4.6)	%	11,006			10,921			85			0.8	%
Furniture, equipment and software		2,915			2,745			170			6.2	%	8,631			7,787			844			10.8	%
Professional services and legal		1,851			1,550			301			19.4	%	6,180			4,718			1,462			31.0	%
Other taxes		1,559			1,830			(271)			(14.8)	%	4,778			5,098			(320)			(6.3)	%
Marketing		1,367			890			477			53.6	%	4,252			3,208			1,044			32.5	%
FDIC insurance		598			1,210			(612)			(50.6)	%	2,417			3,180			(763)			(24.0)	%

Other		6,933			6,127			806			13.2	%	20,225			18,742			1,483			7.9	%
Total Noninterest Expense		$	49,633		$	47,241		$	2,392		5.1	%	$	145,471		$	138,736		$	6,735		4.9	%

Noninterest expense increased $2.4 million to $49.6 million for the three months ended September 30, 2022 and increased ~~$0.4~~$6.7 million to $145.5 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 changes in the valuation of the mortgage derivative and mortgage servicing rights2022 compared to the same periods in ~~2020. Other income decreased $0.5~~2021. Salaries and employee benefits increased $1.5 million for the three months ended September 30, ~~2021~~2022 due to base rate increases and higher medical costs, and increased $2.2 million for the nine months ended September 30, ~~2021~~2022 due to ~~changes~~base rate and incentive increases partially offset by lower pension expense and a decline in fair value of the liability in a nonqualified benefit plan. The decrease in pension expense related to retirees electing lump-sum distributions causing settlement accounting in the ~~valuation of~~same period in 2021. Data processing and information technology costs increased by $0.2 million for the three months ended September 30, 2022, and increased $0.7 million for the nine months ended September 30, 2022 due to additional services provided through our ~~deferred compensation plan, which has a corresponding offset in salaries~~third party processor and ~~employee benefits expense resulting in no impact~~increased information technology outsourcing costs. Furniture, equipment and software increased $0.2 million for the three months ended September 30, 2022 and increased $0.8 million for the nine month ended September 30, 2022 due to ~~net income,~~new software implementation costs. Professional services and legal increased by $0.3 million for the ~~change in value in~~three months ended September 30, 2022 and $1.5 million for the ~~equity securities portfolio~~nine months ended September 30, 2022 due to increased consulting engagements compared to the same periods in ~~2020. Commercial loan swap income decreased $0.3 million and $3.4~~2021. Marketing costs increased $0.5 million for the three months ended September 30, 2022 and increased $1.0 million for the nine months ended September 30, ~~2021 as activity was significant~~2022 due to increased marketing efforts and timing of various promotions. FDIC Insurance expense decreased $0.6 million and $0.8 million for the the three and nine month periods due to a lower assessment base and improvements in the ~~first half of 2020, but activity has declined~~components used to determine the assessment. Other noninterest expense increased $0.8 million for the three months ended September 30, 2022 mainly due to ~~the pandemic and the interest rate environment.~~a

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

~~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 2020 amounts only~~

~~Noninterest expense decreased $1.0 million to $47.2 million for the three months ended September 30, 2021~~lease impairment and increased ~~$0.5 million to $138.6~~$1.5 million for the nine months ended September 30, 2021 compared to the same periods in 2020. Salaries and employee benefits 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, 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 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 lower legal expense for both periods. FDIC insurance decreased $0.7 million and $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 ended2022 also due to the ~~timing of various initiatives. Other noninterest expense decreased during the nine months ended September 30, 2021 due to lower~~lease impairment, higher OREO expenses and increased 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.projects.

Provision for Income Taxes

The provision for income taxes increased ~~$3.0~~$2.8 million to $9.2 million for the three months ended September 30, 2022 and ~~$26.3~~increased $2.9 million to $23.4 million for the nine months ended September 30, 2022 compared to $6.3 million and $20.6 million for the same periods in 2021. Our effective tax rate was 19.8 percent and 19.7 percent for the three and nine months ended September 30, ~~2021~~2022 compared to 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 improved economic forecast. Our effective tax rate was 18.7 percent and 19.0 percent for the three and nine months ended September 30, ~~2021 compared to 16.6 percent and (64.5) percent for the same period in 2020.~~2021. The ~~change~~increases in our effective tax ~~rate~~rates for the three and nine ~~months~~month periods ended September 30, ~~2021 was~~2022 were primarily due to ~~the~~ increases in pretax income compared to ~~2020.~~the same periods in 2021.

Financial Condition as of September 30, 2022

Total assets decreased $552.6 million to $8.9 billion at September 30, 2022 compared to $9.5 billion at December 31, 2021. Cash and due from banks decreased $787.3 million to $134.9 million at September 30, 2022 compared to $922.2 million at December 31, 2021 primarily due to a decrease in deposits of $585.9 million. Total portfolio loans increased $96.9 million to $7.1 billion at September 30, 2022 compared to $7.0 billion at December 31, 2021. The commercial loan portfolio decreased $166.9 million compared to December 31, 2021. C&I loans decreased $14.3 million which mainly related to a decline in PPP loans of $83.7 million since December 31, 2021. The consumer loan portfolio increased $263.9 million with increases in consumer real estate of $245.2 million and other consumer of $18.7 million compared to December 31, 2021. Excluding the PPP loans, portfolio loans increased $180.6 million compared to December 31, 2021.

Securities increased $86.6 million to $1.0 billion at September 30, 2022 from $910.8 million at December 31, 2021. The increase in securities is primarily due to interest-bearing deposits with banks being redeployed to higher yielding assets. The bond portfolio was in a net unrealized loss position of $104.6 million at September 30, 2022 compared to a net unrealized gain position of $9.4 million at December 31, 2021 due to higher interest rates.

Our deposits decreased $585.9 million to $7.4 billion at September 30, 2022 compared to $8.0 billion at December 31, 2021. Noninterest-bearing demand deposits decreased $85.4 million to $2.7 billion at September 30, 2022 compared to December 31, 2021. Interest-bearing demand deposits decreased $131.3 million and money market decreased $251.9 million. Certificates of deposits decreased $135.3 million due to maturities compared to December 31, 2021.The decline in deposit balances can be attributed to the competitive market given rising interest rates.

Total borrowings decreased $57.0 million to $104.3 million at September 30, 2022 compared to $161.3 million at December 31, 2021. The decrease in borrowings was primarily related to a decline in securities sold under repurchase agreements of $84.5 million offset by an increase in short-term borrowings of $35.0 million compared to December 31, 2021. We no longer offer repurchase agreements as a product for our customers.

Total shareholders’ equity decreased by $53.3 million to $1.2 billion at September 30, 2022 compared to December 31, 2021. The decrease was primarily due to other comprehensive losses of $107.9 million, dividends of $34.9 million and common stock repurchases of $7.6 million offset by net income of $95.3 million. The $107.9 million in other comprehensive losses was primarily due to net unrealized losses of $89.7 million on our available-for-sale bond portfolio due to interest rate increases, $17.9 million attributed to change in market value of interest rate swaps and $0.3 million due to change in market value of pension liability from December 31, 2021 to September 30, 2022.

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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)	September 30, 2021			December 31, 2020			$ Change			(dollars in thousands)	September 30, 2022			December 31, 2021			$ Change
U.S. Treasury securities	U.S. Treasury securities		$	85,300		$	10,282		$	75,018	U.S. Treasury securities		$	120,825		$	95,327		$	25,498
Obligations of U.S. government corporations and agencies	Obligations of U.S. government corporations and agencies		71,205			82,904			(11,699)		Obligations of U.S. government corporations and agencies		51,784			70,348			(18,564)
Collateralized mortgage obligations of U.S. government corporations and agencies	Collateralized mortgage obligations of U.S. government corporations and agencies		208,985			209,296			(311)		Collateralized mortgage obligations of U.S. government corporations and agencies		419,719			270,294			149,425
Residential mortgage-backed securities of U.S. government corporations and agencies	Residential mortgage-backed securities of U.S. government corporations and agencies		60,442			67,778			(7,336)		Residential mortgage-backed securities of U.S. government corporations and agencies		41,984			56,793			(14,809)
Commercial mortgage-backed securities of U.S. government corporations and agencies	Commercial mortgage-backed securities of U.S. government corporations and agencies		356,506			273,681			82,825		Commercial mortgage-backed securities of U.S. government corporations and agencies		323,469			341,300			(17,831)
Corporate obligations	Corporate obligations		500			2,025			(1,525)		Corporate obligations		500			500			—
Obligations of states and political subdivisions	Obligations of states and political subdivisions		86,056			124,427			(38,371)		Obligations of states and political subdivisions		38,122			75,089			(36,967)
Available-for-Sale Debt Securities	Available-for-Sale Debt Securities		868,994			770,393			98,601		Available-for-Sale Debt Securities		996,403			909,651			86,752
Marketable equity securities	Marketable equity securities		1,127			3,300			(2,173)		Marketable equity securities		1,025			1,142			(117)
Total Securities	Total Securities		$	870,121		$	773,693		$	96,428	Total Securities		$	997,428		$	910,793		$	86,635

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 ~~$96.4~~$86.6 million to ~~$870.1~~$997.4 million at September 30, ~~2021~~2022 from ~~$773.7~~$910.8 million at December 31, ~~2020.~~2021. The increase in securities iswas primarily due to ~~an increase in overall~~ investing ~~activities due to excess liquidity.~~interest-bearing deposits with banks into higher yielding assets.

At September 30, ~~2021~~2022, our bond portfolio was in a net unrealized ~~gain~~loss position of ~~$18.3~~$104.6 million compared to a net unrealized gain position of ~~$33.4~~$9.4 million at December 31, ~~2020.~~2021. At September 30, 2022, our bond portfolio had gross unrealized losses of $104.6 million compared to December 31, 2021, when total gross unrealized gains ~~in the bond portfolio~~ were ~~$21.4~~$15.2 million offset by gross unrealized losses of ~~$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~~$5.8 million. The decrease in the net unrealized gain position was primarily due to an increase in interest rates from December 31, ~~2020~~2021 to September 30, ~~2021.~~2022.

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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					September 30, 2022				December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		% of Loans		Amount		% of Loans		(dollars in thousands)	Amount		% of Loans		Amount		% of Loans		$ Change		% Change
Commercial	Commercial									Commercial
Commercial real estate	Commercial real estate	$	3,225,863	46.3	%	$	3,244,974	44.9	%	Commercial real estate	$	3,134,841	44.2	%	$	3,236,653	46.2	%	$	(101,812)	(3.1)	%
Commercial and industrial	Commercial and industrial	1,698,784		24.4	%	1,954,453		27.0	%	Commercial and industrial	1,714,714		24.2	%	1,728,969		24.7	%	(14,255)		(0.8)	%
Commercial construction	Commercial construction	499,317		7.2	%	474,280		6.6	%	Commercial construction	390,093		5.5	%	440,962		6.3	%	(50,869)		(11.5)	%

Total Commercial Loans	Total Commercial Loans	5,423,964		77.8	%	5,673,707		78.5	%	Total Commercial Loans	5,239,648		73.8	%	5,406,584		77.2	%	(166,936)		(3.1)	%
Consumer	Consumer									Consumer
Consumer real estate	Consumer real estate	1,448,517		20.8	%	1,471,238		20.4	%	Consumer real estate	1,730,639		24.4	%	1,485,478		21.2	%	245,161		16.5	%
Other consumer	Other consumer	97,606		1.4	%	80,915		1.1	%	Other consumer	126,629		1.8	%	107,928		1.5	%	18,701		17.3	%
Total Consumer Loans	Total Consumer Loans	1,546,123		22.2	%	1,552,153		21.5	%	Total Consumer Loans	1,857,268		26.2	%	1,593,406		22.8	%	263,862		16.6	%
Total Portfolio Loans	Total Portfolio Loans	6,970,087		100.0	%	7,225,860		100.0	%	Total Portfolio Loans	7,096,916		100.0	%	6,999,990		100.0	%	96,926		1.4	%
Loans held for sale	Loans held for sale	4,303				18,528				Loans held for sale	1,039				1,522				(483)		(31.7)	%
Total Loans	Total Loans	$	6,974,389			$	7,244,388			Total Loans	$	7,097,955			$	7,001,512			$	96,443	1.4	%

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.

Total portfolio loans increased $96.9 million to $7.1 billion at September 30, 2022 compared to December 31, 2021. Portfolio loans excluding PPP loans increased $180.6 million compared to December 31, 2021. As of September 30, ~~2021,~~ 2022, 73 percent of our total loans are variable rate loans and 27 percent are fixed rate loans. ~~Total portfolio loans decreased $255.8 million to $7.0 billion at September 30, 2021 compared to December 31, 2020. Portfolio loans excluding PPP loans increased $28.7 million compared to December 31, 2020.~~

Commercial loans, including CRE, C&I and commercial construction, comprised ~~77.8~~73.8 percent of total portfolio loans at September 30, ~~2021~~2022 and ~~78.5~~77.2 percent at December 31, ~~2020.~~2021. The commercial loan portfolio decreased ~~$249.7~~$166.9 million at September 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. CRE loans decreased $101.8 million and construction decreased $50.9 million compared to December 31, 2021 due to elevated loan pay-offs and lower origination volume in the current macro environment. C&I loans decreased ~~$255.7~~$14.3 million ~~at September 30, 2021~~ which mainly related to a ~~net~~ PPP loan decline of ~~$284.5~~$83.7 million offset by growth since December 31, ~~2020.~~2021.

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~~As of September 30, 2021, we~~

S&T BANCORP, INC. AND SUBSIDIARIES

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

We had ~~$181.0~~$4.7 million of PPP loans included in C&I at September 30, 2022 compared to ~~$465.5~~$88.3 million at December 31, ~~2020.~~2021. The decrease in PPP loans was due to loan forgiveness. 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 percent and a term of two years, or five years for loans approved by the SBA on or after June 5, 2020. Payments ~~are~~were 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~~26.2 percent of our total portfolio loans at September 30, ~~2021~~2022 and ~~21.5~~22.8 percent inat December 31, ~~2020.~~2021. The consumer loan portfolio ~~decreased $6.0~~increased $263.9 million at September 30, ~~2021~~2022 with ~~decreases in residential mortgage of $30.4 million and consumer construction of $5.5 million offset by~~ increases in ~~home equity~~consumer real estate of ~~$13.2~~$245.2 million and other consumer of ~~$16.7 million.~~

$18.7 million compared to December 31, 2021.
Portfolio consumer real estate loans increased in 2022 due to a shift from mortgage loans sold to loans held in the portfolio due to increased jumbo loans and the pricing of loans in the secondary market compared to December 31, 2021.

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. Refer to Part 1. Financial Information, Note 6. Allowance for Credit Losses for details on our portfolio segments.

The following table presents activity in the ACL for the periods presented:


	Nine Months Ended September 30, 2022
(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	$	50,700	$	19,727	$	5,355	$	11,338	$	8,733	$	2,723	$	98,576
Provision for credit losses on loans(1)	(8,471)		4,573		68		3,158		2,083		1,393		2,804
Charge-offs	(827)		(5,797)		—		(1,924)		(299)		(1,052)		(9,899)
Recoveries	432		6,835		1		599		109		237		8,213
Net (Charge-offs)/ Recoveries	(395)		1,038		1		(1,325)		(190)		(815)		(1,686)
Balance at End of Period	$	41,834	$	25,338	$	5,424	$	13,171	$	10,626	$	3,301	$	99,694
(1) Excludes the provision for credit losses for unfunded commitments.

The following table presents key ACL ratios for the periods presented:


	September 30, 2022		December 31, 2021
Ratio of net charge-offs to average loans outstanding(1)	0.03	%	0.49	%
Allowance for credit losses as a percentage of total portfolio loans	1.40	%	1.41	%
Allowance for credit losses as a percentage of total portfolio loans - excluding PPP loans	1.41	%	1.43	%
Allowance for credit losses to nonperforming loans	438	%	149	%

(1) Year-to-date net charge-offs annualized

The ACL was $99.7 million, or 1.40 percent of total portfolio loans, at September 30, 2022 compared to $98.6 million, or 1.41 percent of total portfolio loans, at December 31, 2021. The quantitative reserve decreased $5.3 million primarily due to significant improvement in our hotel portfolio. Specific reserves on loans individually assessed decreased $1.8 million due to the resolution of a C&I relationship through a note sale which resulted in a $5.5 million charge-off during the nine months ended September 30, 2022. The qualitative reserve increased $8.2 million primarily due to an increase in the economic forecast component which related to concerns with inflation and macroeconomic conditions.

Net loan charge-offs were $1.7 million, or 0.03 percent of average loans, for the nine months ended September 30, 2022. The most significant charge-off was the above mentioned C&I relationship for $5.5 million. Offsetting loan charge-offs were $6.6 million of loan recoveries related to two C&I relationships during the nine months ended September 30, 2022.

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

~~The following table presents activity in the ACL for the periods presented:~~

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.

September 30, 2021 December 31, 2020
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 1.55 % 1.63 %
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 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~~Substandard loans decreased ~~$9.3~~$70.9 million to ~~$108.3~~$164.3 million at September 30, ~~2021~~2022 compared to ~~$117.6~~$235.2 million at December 31, 2020. Our total qualitative reserve decreased $8.7 million for the period ended September 30, 2021 compared to December 31, 2020 due to improved economic trends and forecast. Specific reserves on loans individually assessed decreased $3.6 million to $9.9 million at September 30, 2021 compared to $13.5 million at December 31, 2020. The 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 due to fair value improvements during the three months ended September 30, 2021. ~~Offsetting this decrease in specific reserves was the addition of a $21.7 million C&I loan which required a $9.3 million specific reserve at September 30, 2021.~~

Net loan charge-offs were $3.6 million, or 0.21 percent of average loans and $16.9 million, or 0.32 percent of average loans for the three and nine months ended September 30, 2021. The most significant charge-offs for the nine months ending September 30, 2021 were three CRE relationships for a total of $10.1 million and a C&I relationship for $3.9 million. The charge-offs were the result of fair value declines.

~~Substandard loans decreased $3.9 million to $283.2 million at September 30, 2021 compared to $287.1 million at December 31, 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~~loan upgrades in our hotel portfolio and ~~two CRE loans for a total of $12.2 million that moved to OREO.~~loan payoffs. The decrease in substandard loans was partially offset by the addition of ~~two CRE relationships totaling $16.8~~a $28.5 million ~~and a~~ C&I relationship, ~~totaling $21.7 million~~ which ~~were all~~was downgraded to substandard due to financial deterioration that led to cash flow ~~shortfalls.~~shortfalls during the second quarter of 2022. Special mention loans ~~improved significantly from December 31, 2020 with a decrease of $58.2~~increased $13.6 million ~~or 21.6 percent,~~ to ~~$211.7~~$205.9 million at September 30, ~~2021~~2022 compared to ~~$269.9~~$192.3 million at December 31, ~~2020. The decrease in special mention loans was primarily due to various payoffs and upgrades to pass ratings.~~2021.

Troubled debt restructurings, or TDRs, decreased $18.9 million to ~~$27.8~~$12.8 million at September 30, ~~2021~~2022 compared to ~~$46.7~~$31.7 million at December 31, ~~2020.~~2021. The decrease in TDRs was primarily due to ~~payoffs~~the payoff of ~~$4.8~~two C&I relationships totaling $14.1 million. Total TDRs of $12.8 million included $8.9 million, or 69.5 percent, that were accruing and ~~$3.7~~$3.9 million, ~~on two CRE relationships and a $6.1 million CRE loan moved to OREO~~or 30.5 percent, that were nonaccruing at September 30, ~~2021. Total TDRs of $27.8 million included $13.8 million, or 49.6 percent, that were performing and $14.0 million, or 50.4 percent, that were nonperforming at September 30, 2021.~~2022.

Our allowance for credit losses on unfunded commercial ~~lending~~loan 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 (Loss). The allowance for unfunded loan commitments increased ~~$1.4~~$2.4 million to ~~$5.9~~$7.6 million at September 30, ~~2021~~2022 compared to ~~$4.5~~$5.2 million at December 31, ~~2020.~~2021. This change was ~~due~~primarily related to ~~an increase in the overall unused~~higher construction commitments ~~in the C&I portfolio~~ and ~~higher~~expected loss rates ~~primarily~~ in ~~the~~our construction portfolio. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

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

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

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

(dollars in thousands) September 30, 2021 December 31, 2020 $ Change
Nonperforming Loans
Commercial real estate $ 43,704 $ 84,416 $ (40,712)
Commercial and industrial 33,909 7,100 26,809
Commercial construction 4,053 384 3,669
Business banking 8,729 16,692 (7,963)
Consumer real estate 6,695 8,798 (2,103)
Other Consumer 189 96 93
Total Nonperforming Loans 97,279 117,486 (20,207)
Nonperforming Troubled Debt Restructurings
Commercial real estate 11,093 16,654 (5,561)
Commercial and industrial — 9,885 (9,885)
Commercial construction — — —
Business banking 1,492 430 1,062
Consumer real estate 1,448 2,319 (871)
Other Consumer — — —
Total Nonperforming Troubled Debt Restructurings 14,033 29,288 (15,255)
Total Nonperforming Loans(1)
111,312 146,774 (35,462)
OREO 13,370 2,155 11,215
Total Nonperforming Assets $ 124,682 $ 148,929 $ (24,247)
Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans 1.60 % 2.03 %
Nonperforming assets as a percent of total portfolio loans plus OREO 1.78 % 2.06 %
(1) Included in nonperforming commercial loans is $1.7 million of loans held for sale


(dollars in thousands)	September 30, 2022				December 31, 2021				$ Change
Nonperforming Loans (Excluding TDRs)
Commercial real estate		$	7,353			$	29,791			$	(22,438)
Commercial and industrial		335				350				(15)
Commercial construction		384				384				—
Business banking		5,353				7,945				(2,592)
Consumer real estate		5,094				5,889				(795)
Other Consumer		398				158				240
Total Nonperforming Loans (Excluding TDRs)		18,917				44,517				(25,600)
Nonperforming Troubled Debt Restructurings
Commercial real estate		480				1,697				(1,217)
Commercial and industrial		—				14,889				(14,889)
Commercial construction		—				2,087				(2,087)
Business banking		1,092				1,696				(604)
Consumer real estate		2,279				1,405				874
Other Consumer		9				—				9
Total Nonperforming Troubled Debt Restructurings		3,860				21,774				(17,914)
Total Nonperforming Loans		22,777				66,291				(43,514)
OREO		6,022				13,313				(7,291)
Total Nonperforming Assets		$	28,799			$	79,604			$	(50,805)
Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans		0.32		%		0.95		%
Nonperforming assets as a percent of total portfolio loans plus OREO		0.41		%		1.13		%

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 ~~$35.5~~$43.5 million, or 65.6 percent, to ~~$111.3~~$22.8 million at September 30, ~~2021~~2022 compared to ~~$146.8~~$66.3 million at December 31, ~~2020.~~2021. The significant decrease in nonperforming loans primarily related to ~~the payoff of three CRE relationships for a total of $14.4 million, charge-offs of four commercial relationships for a total of $14.3 million, two~~payoffs and loans ~~moving to OREO for a total of $12.2 million and two CRE~~in our hotel ~~loans returning~~portfolio that were returned to performing status ~~for a total of $11.8 million. Offsetting the decrease in nonperforming loans was the addition of a $21.7 million C&I loans~~ during the ~~three~~nine months ended September 30, ~~2021.~~2022. The decrease in OREO related to the sale of two properties during the nine months ended September 30, 2022.

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Deposits

(dollars in thousands) September 30, 2021 December 31, 2020 $ Change
Customer Deposits
Noninterest-bearing demand $ 2,652,314 $ 2,261,994 $ 390,320
Interest-bearing demand 971,321 864,510 106,811
Money market 2,045,320 1,887,051 158,269
Savings 1,074,896 969,508 105,388
Certificates of deposit 1,196,268 1,369,239 (172,971)
Total Customer Deposits 7,940,119 7,352,302 587,817
Brokered Deposits
Money market — 50,012 (50,012)
Certificates of deposit 5,000 18,224 (13,224)
Total Brokered Deposits 5,000 68,236 (63,236)
Total Deposits $ 7,945,119 $ 7,420,538 $ 524,581


(dollars in thousands)	September 30, 2022			December 31, 2021			$ Change

Noninterest-bearing demand		$	2,663,176		$	2,748,586		$	(85,410)
Interest-bearing demand		847,825			979,133			(131,308)
Money market		1,818,642			2,070,579			(251,937)
Savings		1,128,169			1,110,155			18,014
Certificates of deposit		952,785			1,088,071			(135,286)







Total Deposits		$	7,410,597		$	7,996,524		$	(585,927)

Deposits are our primary source of funds. ~~We believe that our~~Our deposit base ~~is stable~~increased substantially through the pandemic related to PPP and ~~that~~stimulus programs, but we have ~~the ability to attract new deposits.~~experienced a decrease in deposits during 2022. Total deposits ~~increased $524.6~~decreased $585.9 million, or ~~7.1 percent, at September 30, 2021~~7.3%, compared to December 31, ~~2020. Total customer~~2021. Noninterest-bearing demand deposits ~~increased $587.8~~decreased $85.4 million, ~~from~~interest-bearing demand deposits decreased $131.3 million, money market decreased $251.9 million and certificates of deposits decreased $135.3 million compared to December 31, ~~2020.~~2021. The ~~increase in customer deposits is~~decreases were 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 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.~~competitive market in the rising interest rate environment.

Borrowings


(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			$ Change			(dollars in thousands)	September 30, 2022			December 31, 2021			$ Change
Securities sold under repurchase agreements	Securities sold under repurchase agreements		$	72,586		$	65,163		$	7,423	Securities sold under repurchase agreements		$	—		$	84,491		$	(84,491)
Short-term borrowings	Short-term borrowings		—			75,000			(75,000)		Short-term borrowings		35,000			—			35,000
Long-term borrowings	Long-term borrowings		22,693			23,681			(988)		Long-term borrowings		14,853			22,430			(7,577)
Junior subordinated debt securities	Junior subordinated debt securities		64,128			64,083			45		Junior subordinated debt securities		54,438			54,393			45
Total Borrowings	Total Borrowings		$	159,407		$	227,927		$	(68,520)	Total Borrowings		$	104,291		$	161,314		$	(57,023)

Borrowings are an additional source of funding for us. Total borrowings decreased ~~$68.5~~$57.0 million compared to December 31, ~~2020~~2021 primarily due to the discontinuation of the customer repurchase agreement product and the repayment of a $7.6 million long-term borrowing which was offset by an increase of $35.0 million in short-term borrowings. Short-term borrowings increased ~~customer deposits. Total short-term borrowings decreased $75.0~~$35.0 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.~~2021 due to lower deposit levels.

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Information pertaining to short-term borrowings is summarized in the ~~tables~~table below for the nine months ended September 30, ~~2021~~2022 and for the twelve months ended December 31, ~~2020.~~2021.


		Securities Sold Under Repurchase Agreements							Securities Sold Under Repurchase Agreements
(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Balance at the period end	Balance at the period end	$	72,586		$	65,163		Balance at the period end	$	—		$	84,491
Average balance during the period	Average balance during the period	$	67,872		$	57,673		Average balance during the period	$	47,912		$	69,964
Average interest rate during the period	Average interest rate during the period	0.12		%	0.29		%	Average interest rate during the period	0.10		%	0.11		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	73,591		$	92,159		Maximum month-end balance during the period	$	89,366		$	84,491
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		%

		Short-Term Borrowings							Short-Term Borrowings
(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Balance at the period end	Balance at the period end	$	—		$	75,000		Balance at the period end	$	35,000		$	—
Average balance during the period	Average balance during the period	$	8,425		$	155,753		Average balance during the period	$	3,498		$	6,301
Average interest rate during the period	Average interest rate during the period	0.19		%	0.92		%	Average interest rate during the period	3.16		%	0.19		%
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	$	35,000		$	25,000
Average interest rate at the period end	Average interest rate at the period end	—		%	0.19		%	Average interest rate at the period end	3.11		%	—		%

Information pertaining to long-term borrowings is summarized in the tables below for the nine months ended September 30, ~~2021~~2022 and for the twelve months ended December 31, ~~2020.~~2021.


		Long-Term Borrowings							Long-Term Borrowings
(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Balance at the period end	Balance at the period end	$	22,693		$	23,681		Balance at the period end	$	14,853		$	22,430
Average balance during the period	Average balance during the period	$	23,139		$	47,953		Average balance during the period	$	20,535		$	22,995
Average interest rate during the period	Average interest rate during the period	2.00		%	2.50		%	Average interest rate during the period	2.06		%	1.99		%
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	$	22,344		$	23,549
Average interest rate at the period end	Average interest rate at the period end	1.96		%	2.03		%	Average interest rate at the period end	2.30		%	1.94		%

		Junior Subordinated Debt Securities							Junior Subordinated Debt Securities
(dollars in thousands)	(dollars in thousands)	September 30, 2021			December 31, 2020			(dollars in thousands)	September 30, 2022			December 31, 2021
Balance at the period end	Balance at the period end	$	64,128		$	64,083		Balance at the period end	$	54,438		$	54,393
Average balance during the period	Average balance during the period	$	64,103		$	64,092		Average balance during the period	$	54,413		$	61,653
Average interest rate during the period	Average interest rate during the period	3.05		%	3.57		%	Average interest rate during the period	3.79		%	2.99		%
Maximum month-end balance during the period	Maximum month-end balance during the period	$	64,128		$	64,848		Maximum month-end balance during the period	$	54,438		$	64,128
Average interest rate at the period end	Average interest rate at the period end	2.87		%	3.01		%	Average interest rate at the period end	5.74		%	2.69		%

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

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

Liquidity and Capital Resources

Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. ~~This includes~~Our primary future cash needs are centered on the ability to (i) satisfy the financial needs of depositors who may want to withdraw funds or of borrowers needing to access funds to meet their credit ~~needs.~~needs and (ii) to meet our future cash commitments under contractual obligations with third parties. 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"~~Condition as of September 30, 2022 - 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

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

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.

We have contractual obligations representing required future payments on certificates of deposit, securities sold under repurchase agreements, junior subordinated debt securities, operating and capital leases and purchase obligations. See the Liquidity and Capital Resources portion of our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K for more information on these future cash outflows.

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 September 30, ~~2021, we~~2022, S&T Bank had ~~$1.3 billion~~$767.9 million in highly liquid assets which consisted of ~~$855.6~~$60.7 million in interest-bearing deposits with banks, ~~$434.0~~$706.2 million in unpledged securities and ~~$4.3~~$1.0 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of ~~13.7~~8.6 percent at September 30, ~~2021. Also, at~~2022. Highly liquid assets have declined by $533.1 million when comparing September 30, ~~2021,~~2022 to December 31, 2021. The majority of the decrease in liquid assets is attributed to decreases in cash balances which are primarily a result of decreased deposits. At September 30, 2022, we had remaining borrowing availability of ~~$2.5~~$2.7 billion with the FHLB of Pittsburgh. For more information regarding our outstanding borrowings refer to the "Financial ~~Condition-~~Condition as of September 30, 2022 - Borrowings" section of this MD&A for more details.

We continue to maintain a strong capital position with our leverage ratio at 10.75 percent at September 30, 2022 compared to 9.74 percent at December 31, 2021, both in excess of the regulatory guideline of 5.00 percent. We continue to be well-capitalized with a risk-based Common Equity Tier 1 ratio of 12.53 percent at September 30, 2022 compared to 12.03 percent at December 31, 2021, both in excess of the regulatory guideline of 6.50 percent to be well-capitalized.

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

(dollars in thousands) Adequately
Capitalized Well-
Capitalized September 30, 2021 December 31, 2020
Amount Ratio Amount Ratio
S&T Bancorp, Inc.
Tier 1 leverage 4.00 % 5.00 % $ 881,306 9.65 % $ 825,515 9.43 %
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 6.00 % 8.00 % 881,306 12.48 % 825,515 11.74 %
Total capital to risk-weighted assets 8.00 % 10.00 % 992,685 14.06 % 944,686 13.44 %
S&T Bank
Tier 1 leverage 4.00 % 5.00 % $ 856,926 9.39 % $ 810,636 9.27 %
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 6.00 % 8.00 % 856,926 12.15 % 810,636 11.55 %
Total capital to risk-weighted assets 8.00 % 10.00 % 962,456 13.64 % 922,007 13.14 %


(dollars in thousands)	Adequately Capitalized		Well- Capitalized		September 30, 2022				December 31, 2021
					Amount		Ratio		Amount		Ratio
S&T Bancorp, Inc.
Tier 1 leverage	4.00	%	5.00	%	$	938,843	10.75	%	$	889,785	9.74	%
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	909,843		12.53	%	860,785		12.03	%
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	938,843		12.93	%	889,785		12.43	%
Total capital to risk-weighted assets	8.00	%	10.00	%	1,047,765		14.43	%	987,420		13.79	%
S&T Bank
Tier 1 leverage	4.00	%	5.00	%	$	915,006	10.48	%	$	864,127	9.46	%
Common equity tier 1 to risk-weighted assets	4.50	%	6.50	%	915,006		12.61	%	864,127		12.09	%
Tier 1 capital to risk-weighted assets	6.00	%	8.00	%	915,006		12.61	%	864,127		12.09	%
Total capital to risk-weighted assets	8.00	%	10.00	%	1,023,928		14.11	%	961,762		13.45	%

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

We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended, with the SEC, which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and warrants. We may use the proceeds from the sale of securities for general corporate purposes, which could include investments at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases. As of September 30, ~~2021,~~2022, 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.

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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.


	September 30, 2022			December 31, 2021
	1 - 12 Months	13 - 24 Months	% Change in EVE	1 - 12 Months	13 - 24 Months	% Change in EVE
Change in Interest Rate (basis points)	% Change in Pretax Net Interest Income	% Change in Pretax Net Interest Income		% Change in Pretax Net Interest Income	% Change in Pretax Net Interest Income
400	19.8	24.9	(10.6)	30.4	40.3	18.4
300	14.9	18.8	(4.8)	22.5	30.0	19.9
200	10.0	12.7	(0.8)	14.9	20.2	18.4
100	5.2	6.6	1.1	7.0	9.9	11.9
-100	(8.0)	(10.4)	(9.1)	(4.6)	(8.4)	(26.3)
-200	(14.7)	(19.0)	(19.0)	—	—	—

September 30, 2021 December 31, 2020
1 - 12 Months 13 - 24 Months % Change in EVE 1 - 12 Months 13 - 24 Months % Change in EVE
Change in Interest Rate (basis points) % Change in Pretax
Net Interest Income % Change in
Pretax
Net Interest Income % Change in Pretax
Net Interest Income % Change in Pretax
Net Interest Income
400 29.5 37.3 20.3 15.8 28.5 28.5
300 21.9 27.8 21.4 11.7 21.3 29.0
200 14.5 18.8 19.6 7.7 14.3 25.6
100 6.8 9.2 12.5 4.4 8.0 17.7
-100 (4.5) (8.3) (27.0) (2.8) (5.7) (28.2)

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S&T BANCORP, INC. AND SUBSIDIARIES

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 anless improvement in the percentage change in pretax net interest income in the rates up scenarios ~~and a decline~~when comparing September 30, 2022 to December 31, 2021 primarily because we have less interest bearing deposits with banks. The percentage change in pretax net interest income in the rates down ~~scenarios~~scenario shows a decline when comparing September 30, ~~2021~~2022 to December 31, ~~2020. We have become~~2021 because the higher rate environment has increased our asset yields more ~~asset sensitive due to~~than our ~~increased balances at the Federal Reserve.~~liability costs. A decline in interest rates would result in less interest income with limited interest expense reduction. 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 September 30, ~~2021~~2022 to December 31, ~~2020. The EVE decline is~~2021 due to the impact of ~~a steepened yield curve~~interest rates on the value of ~~non-maturity~~nonmaturity deposits.

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

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

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

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

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of S&T’s 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 September 30, ~~2021.~~2022. 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 September 30, ~~2021,~~2022, 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~~2021 Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on ~~March 1, 2021~~February 28, 2022 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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Russia’s invasion of Ukraine has created significant economic and financial disruptions and uncertainties, which could adversely affect our business, financial condition and results of operations

In late February 2022, Russia launched a large-scale military attack on Ukraine. In response to the military action by Russia, government actions, including broad-ranging economic sanctions against Russia, have been taken by the United States, the United Kingdom, the European Union and other countries. The U.S. and global markets are experiencing volatility and disruption following the start of this military conflict and imposition of sanctions, impacting the financial and commodities markets. The continued impact on financial markets, including the level and volatility of interest rates, could impact our earnings. Furthermore, continued increases in commodity prices contributing to higher inflation could negatively impact our customers and our earnings. Russian military actions and the resulting sanctions could further adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. In addition, Russia may take retaliatory actions and other counter measures including cyberattacks against the U.S., its government, infrastructure and businesses, including S&T. Although the extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility and the result of any diplomatic negotiations remains uncertain, these consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our common stock to be adversely affected.

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 third quarter of ~~2021:~~2022:

~~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~~

~~07/01/2021 - 07/31/2021~~

—

$—

—

~~37,441,683~~

~~08/01/2021 - 08/31/2021~~

—

~~37,441,683~~

~~09/01/2021 - 09/30/2021~~

—

~~37,441,683~~

~~Total~~

—

$—

—

~~$37,441,683~~


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plan(1)	Approximate dollar value of shares that may yet be purchased under the plan
				$33,289,015
07/01/2022 - 07/31/2022	—	$—	—	33,289,015

08/01/2022 - 08/31/2022	—	—	—	33,289,015

09/01/2022 - 09/30/2022	117,283	29.71	117,283	29,804,537
Total	117,283	$29.71	117,283	$29,804,537

(1) On March ~~15, 2021,~~21, 2022, our Board of Directors authorized an extension of the $50 million share repurchase plan, which was set to expire March 31, ~~2021.~~2022. This authorization extended the expiration date of the repurchase plan through March 31, ~~2022.~~2023. 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~~$29.8 million of capacity remaining at September 30, ~~2021,~~2022, 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 repurchases from cash on hand and internally generated funds. Share repurchases will not occur unless permissible under applicable laws.

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

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

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S&T BANCORP, INC. AND SUBSIDIARIES

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.
3.1			~~Amended and Restated Articles of Incorporation~~Bylaws of S&T Bancorp, Inc., as amended. Filed as Exhibit 3.1 to S&T Bancorp, Inc. ~~Quarterly~~Current Report on Form ~~10-Q filed for the quarter ended June 30, 2021~~8-K filed on ~~August 4, 2021,~~July 28,2022, and incorporated herein by reference.
10.1			Severance and General Release Agreement, dated October 12, 2022, by and between Charles Carroll and S&T Bancorp, Inc., S&T Bank and any of their subsidiaries or affiliated businesses. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K/A filed on October 17, 2022, and incorporated herein by reference.*
10.2			S&T Bancorp, Inc. Deferred Compensation Plan. Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on October 21, 2022, and incorporated herein by reference.*
31.1			Rule 13a-14(a) Certification of the Chief Executive Officer.
31.2			Rule 13a-14(a) Certification of the Chief Financial Officer.
32			Rule 13a-14(b) Certification of the Chief Executive Officer and Chief Financial Officer.
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)

November ~~3, 2021~~2, 2022			/ss/ Mark Kochvar
			Mark Kochvar Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory)

6052


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

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

Other liabilities		129,847			164,721
Total Liabilities		8,234,373			7,813,186
SHAREHOLDERS’ EQUITY
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		403,028			400,668
Retained earnings		762,374			710,061
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		(66,315)			(68,612)
Total Shareholders’ Equity		1,201,681			1,154,711
Total Liabilities and Shareholders’ Equity		$	9,436,054		$	8,967,897


	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:
Interest Rate Swap Contracts - Commercial Loans
Fair value		$	42,177		$	78,319		$	42,554		$	79,033
Notional amount		998,385			983,638			998,385			983,638
Collateral posted		—			—			43,190			77,930
Interest Rate Lock Commitments - Mortgage Loans
Fair value		812			2,900			—			—
Notional amount		22,674			51,053			—			—
Forward Sale Contracts - Mortgage Loans
Fair value		101			—			—			385
Notional amount		$	18,915		$	—		$	—		$	47,062


	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)	Volume (4)		Rate (4)		Total		Volume (4)		Rate (4)		Total
Interest earned on:
Interest-bearing deposits with banks	$	200	$	113	$	313	$	1,444	$	(1,280)	$	164
Securities, at fair value(1)(2)	463		(456)		7		717		(1,635)		(917)
Loans held for sale	(6)		2		(4)		(15)		(5)		(21)
Commercial real estate	(836)		(2,642)		(3,478)		(4,051)		(15,071)		(19,120)
Commercial and industrial	(3,152)		3,181		29		(4,482)		4,220		(262)
Commercial construction	187		(270)		(82)		1,486		(2,196)		(710)
Total Commercial Loans	(3,801)		270		(3,532)		(7,047)		(13,047)		(20,093)
Residential mortgage	(859)		(713)		(1,573)		(3,031)		(699)		(3,730)
Home equity	106		(530)		(425)		(39)		(2,405)		(2,445)
Installment and other consumer	211		(139)		71		291		(349)		(58)
Consumer construction	(9)		(22)		(31)		56		46		102
Total Consumer Loans	(552)		(1,405)		(1,958)		(2,723)		(3,408)		(6,131)
Total Portfolio Loans	(4,354)		(1,136)		(5,491)		(9,770)		(16,455)		(26,224)
Total Loans (1)(3)	(4,360)		(1,134)		(5,494)		(9,785)		(16,460)		(26,244)
Federal Home Loan Bank and other restricted stock	(66)		(62)		(128)		(359)		(104)		(462)
Change in Interest Earned on Interest-earning Assets	$	(3,762)	$	(1,539)	$	(5,301)	$	(7,981)	$	(19,478)	$	(27,460)
Interest paid on:
Interest-bearing demand	$	(3)	$	(247)	$	(250)	$	(71)	$	(1,718)	$	(1,789)
Money market	(10)		(793)		(803)		(129)		(7,733)		(7,862)
Savings	24		(117)		(93)		139		(649)		(510)
Certificates of deposit	(714)		(2,329)		(3,043)		(2,885)		(9,574)		(12,459)
Total Interest-bearing Deposits	(702)		(3,486)		(4,188)		(2,946)		(19,674)		(22,620)
Securities sold under repurchase agreements	4		(27)		(23)		18		(95)		(77)
Short-term borrowings	—		—		—		—		—		—
Long-term borrowings	(167)		(30)		(197)		(513)		(91)		(604)
Junior subordinated debt securities	—		(26)		(26)		—		(323)		(322)
Total Borrowings	(162)		(84)		(246)		(495)		(508)		(1,003)
Change in Interest Paid on Interest-bearing Liabilities	(864)		(3,569)		$	(4,433)	(3,441)		(20,182)		(23,623)
Change in Net Interest Income	$	(2,898)	$	2,030	$	(868)	$	(4,540)	$	703	$	(3,837)