S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Bank, with operations in five markets including Western Pennsylvania, Central Pennsylvania, Northeast Ohio, Central Ohio, and Upstate New York, announced its first quarter 2019 earnings. First quarter net income was $22.9 million, or $0.66 diluted earnings per share (EPS), compared to fourth quarter of 2018 net income of $26.9 million, or $0.77 diluted EPS, and first quarter of 2018 net income of $26.2 million, or $0.75 diluted EPS.

First Quarter of 2019 Highlights:

• Return on average assets (ROA) was 1.29%, return on average equity (ROE) was 9.84% and return on average tangible equity (ROTE) (non-GAAP) was 14.27%.
• Net interest margin (FTE) (non-GAAP) increased 6 basis points to 3.71% and net interest income increased $0.5 million to $60.3 million compared to the fourth quarter of 2018.
• Average loan balances increased $75.3 million compared to the fourth quarter of 2018.
• Deposits increased $159.5 million, or 11.4% annualized, compared to the fourth quarter of 2018.
• S&T's Board of Directors declared a $0.27 per share dividend, which is an increase of 8% compared to a $0.25dividend in the same period last year.
• Recognized as a World's Best Bank by Forbes receiving the #3 ranking in the United States out of 60 institutions.

"Relationship banking has been the foundation of our business for over 115 years and we are thrilled that our customers recognized us through the Forbes World's Best Bank award," said Todd Brice, chief executive officer of S&T. "We are pleased with our deposit growth and new customer acquisition during the quarter. While our performance did not meet our expectations this quarter, we are encouraged by the level of new business activity across our markets which will support future growth."

Net Interest Income

Net interest income increased $0.5 million to $60.3 million for the first quarter of 2019 compared to $59.8 million for the fourth quarter of 2018. Net interest margin on a fully taxable equivalent basis (FTE) (non-GAAP) increased 6 basis points to 3.71% from 3.65% in the fourth quarter of 2018. Higher interest adjustments and prepayment fees increased the net interest margin by 4 basis points compared to the fourth quarter of 2018. Average loan balances increased $75.3 millioncompared to the fourth quarter of 2018. Loan rates increased 16 basis points to 5.06% compared to 4.90% in the prior quarter and total interest-bearing liabilities increased 14 basis points to 1.55% compared to 1.41%.

Asset Quality

Net loan charge-offs increased $2.9 million to $5.2 million compared to $2.3 million in the fourth quarter of 2018. Net loan charge-offs were significantly impacted by two commercial and industrial borrowers that resulted in charge-offs of $5.1 million during the first quarter of 2019. The provision for loan losses increased $2.9 million to $5.6 million compared to $2.7 million in the fourth quarter of 2018 mainly due to higher charge-offs. The allowance for loan losses to total portfolio loans was 1.03% at both March 31, 2019 and December 31, 2018. Total nonperforming loans were $48.0 million, or 0.81% of total loans, at March 31, 2019 compared to $46.1 million, or 0.77% of total loans at December 31, 2018. The increase in nonperforming loans was primarily due to a new $5.3 million commercial real estate nonperforming loan in the first quarter of 2019.

Noninterest Income and Expense

The volatility in the stock market in the fourth quarter of 2018 and the first quarter of 2019 have had a significant impact on our noninterest income and noninterest expense. A mark-to-market adjustment for a deferred compensation plan is reported in both other income and salary and employee benefits expense resulting in no impact to net income. The adjustment added $0.6 million to both other income and salary and employee benefits expense in the first quarter of 2019 compared to a subtraction of $0.8 million in the fourth quarter of 2018, resulting in a net increase of $1.4 million in both total noninterest income and noninterest expense.

Noninterest income increased $0.3 million to $11.4 million compared to $11.1 million for the fourth quarter of 2018. The increase was mainly due to an increase in other income of $0.8 million primarily related to the deferred compensation mark-to-market adjustment noted above offset by a decrease in commercial loan swap fees of $0.3 million compared to the fourth quarter of 2018. Noninterest income was also impacted negatively by fewer days in the first quarter of 2019 compared to the fourth quarter of 2018 and seasonality in debit and credit card fees. Wealth management income decreased $0.3 million due to lower financial services activity and declines in the stock market compared to the fourth quarter of 2018.

Noninterest expense increased $2.5 million to $38.9 million compared to $36.4 million in the fourth quarter of 2018. The increase was mainly due to an increase in salaries and employee benefits of $2.0 million compared to the fourth quarter of 2018. In addition to the $1.4 million deferred compensation increase noted above, salaries and employee benefits increased due to higher incentive costs and seasonally higher payroll taxes. Net occupancy increased $0.3 million due to seasonally higher branch maintenance costs and a new location.

Financial Condition

Total assets were $7.2 billion at March 31, 2019 compared to $7.3 billion at December 31, 2018. Total portfolio loans decreased $11.2 million compared to December 31, 2018 with a decline of $12.2 million in commercial loans. Deposits increased $159.5 million, or 11.4% annualized, to $5.8 billion at March 31, 2019 compared to $5.7 billion at December 31, 2018. Money market accounts increased $218.9 million partially due to successful marketing campaigns in targeted markets during the quarter. All capital ratios remain above the well-capitalized thresholds of federal bank regulatory agencies.

Dividend

The Board of Directors of S&T declared a $0.27 per share cash dividend at its regular meeting held April 15, 2019. This dividend is an 8% increase compared to a $0.25 dividend in the same period last year. The dividend is payable May 16, 2019 to shareholders of record on May 2, 2019.

About S&T Bancorp, Inc. and S&T Bank

S&T Bancorp, Inc. is a $7.2 billion bank holding company that is headquartered in Indiana, Pennsylvania and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank, was recently named by Forbes as a 2019 World's Best Bank and a 2018 Best-in-State Bank. Established in 1902, S&T Bank operates in five markets including Western Pennsylvania, Central Pennsylvania, Northeast Ohio, Central Ohio, and Upstate New York. For more information visit stbancorp.com, stbank.com, and follow us on Facebook, Instagram, and LinkedIn.