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| Statement |
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| Regarding our residential mortgage activities, we continue to see solid demand for construction and purchase related products and anticipate this demand to -- and the pace of this growth to continue in the coming quarters |
| We’ve enhanced significantly our compliance and risk management capabilities and our team, all under the guidance of building a foundation for growth |
| We’ve got very strong customer loyalty and very high customer engagement |
| Our capital positions us well for the environment and to take advantage of organic or inorganic growth opportunities |
| TCE remains quite strong and has been stable over the last year due to good earnings and a relatively small securities portfolio |
| This purpose is guided by our values that shape who we are as a company and is propelled by our key performance drivers, one, growth in health of our deposit franchise; two, solid credit quality; three, best in class core profitability; and four, all of this is underpinned by our focus on enhancing employee engagement and talent |
| I mean, we are very pleased with that |
| And these are -- we’re very pleased with the progress there |
| And Mike, we believe that gives us an opportunity as we move forward in addition to the capital levels and strength of our balance sheet |
| We’re very happy with our continued top quartile net interest margin at 4.09%, though it did decline quarter-to-quarter |
| Our PPNR again is top quartile at just under 2% at 1.99%, and our return metrics are also very strong |
| We come into this situation with a very efficient company and a PPNR that’s really strong |
| We think we’ll do a little bit better than that just because we have a much better mix |
| In the third quarter of 2023, the net interest margin is 97 basis points higher, and we’re generating almost 28% or $19 million of additional revenue per quarter compared to the beginning of the cycle |
| While there has been and will continue to be some pressure on funding costs, our asset sensitive balance sheet has provided significant revenue improvements over the past seven quarters |
| We are closely monitoring the pricing of these products and believe that keeping this activity on our balance sheet provides for the most favorable economic benefit for S&T |
| And again, there’s a lot to feel proud of in the quarter |
| So, one of the surprising, in a very good way, things about this interest rate cycle for you all is how noninterest-bearing deposits have kind of really held up a lot better than your peers |
| Expenses continue to be well controlled with an efficiency ratio of 52.68% |
| But that’s also embedded in there as we’re able to do that is some opportunity back to the kind of the margin argument as we’re able to replace some of the borrowings and wholesale funding that we have with deposit growth there’s an opportunity to improve margin by adding deposits replacing some of those wholesale borrowings |
| In addition to that, we’ve enhanced our product set for our customers as well as our delivery mechanisms, including some inside -- what we would define as inside customer relationship teams that are very focused on proactively managing and growing these relationships |
| So, we have some more positive headwinds like that farther out beyond ‘24 and into ‘25 that should help us out as well |
| We look forward to finishing the year strong and moving on to a productive 2024 |
| It’s our employee commitment and engagement that drives these results, and we’re all proud to share them with you |
| So, we view that as a way to help build and enhance the relationship that we have with customers |
| Before I get into the numbers, I want to further emphasize how good I feel about the progress we’re making to move S&T forward around what we have defined as our people forward purpose |
| And that has resulted in significant numbers of new opportunities that -- as Dave talked about, that were latent opportunities, our job was to make it easier for our teams to fulfill those opportunities and develop expertise |
| But with that, that is a better scenario for us than a rate down on the front-end scenario |
| This work translates in delivering for both, our customers in the communities that we serve in a differentiated way, and it’s further evidenced by the efforts of all of our team and in the results that we’ll discuss today |
| Chris McComish You’re good |
| Statement |
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| The third quarter net interest margin rate of 4.09% is down 13 basis points from the second quarter as earning asset yield improvement of 13 basis points not keep pace with the 35 basis points increase in costing liabilities |
| Obviously, it’s tough to put a bogey on there from a balance sheet growth standpoint because as you know, you look year-over-year and the whole industry is down about 6% |
| On top of that, there is significant disruption in the marketplace |
| I guess, I mean just a few comments I’ll make is that, as I said, kind of our baseline, just given where we’re at is that we are going to have some margin compression |
| In the second quarter, we lowered our incentive accruals as full year expectations have changed, and this quarter we’re back on a more normal pace |
| So we are anticipating that there may be some headwinds in terms of macroeconomic conditions that will impact our customers |
| We expect the funding cost pressure to continue with the net interest margin compression of approximately 10 to 12 basis points in the fourth quarter and into the first quarter of ‘24 |
| So, we exited the quarter a couple of basis points below the full quarter number |
| DDA declines were $54 million in third quarter, that’s far less than the $138 million decline in the second quarter and the lowest decline since this rate cycle began |
| So, we would expect that to be down quite a bit |
| Non-interest income decreased by $2 million in the third quarter compared to the second |
| For example, we’re -- historically been much more concerned about rates down than rates up, especially now that rates are higher |
| So, we’re still better off with a higher rate environment on the front end than we were if they were to cut 100 or 200 basis points, we would have more difficulty on the margin side, keeping pace with that |
| We have seen reduced payoff levels in both our resi mortgage and CRE books primarily related to increased interest rates |
| Obviously, the uncertain -- not uncertain, but an unusual rate cycle, right, just the rapidness of it and in the short time period in which we saw the increases |
| Mark Kochvar Again, it’s trending down slightly |
| Turning to asset quality, non-performing assets declined by $1.6 million to $16.4 million when compared to Q2 |
| Obviously, it sounds like NIM pressure will persist into the early part of next year |
| The TCE ratio declined 11 basis points this quarter due to loan growth and higher AOCI |
| And so as those come off, those are going to provide some relief to the margin |
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