S&T BANCORP INC

Previous wording

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 for the three months ended March 31, 2024 and 2023. 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.

Current wording

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 for the three and six months ended June 30, 2024 and 2023. 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.

Previous wording

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.5 billion at March 31, 2024. We operate in Pennsylvania and Ohio providing 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”.

Current wording

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.6 billion at June 30, 2024. We operate in Pennsylvania and Ohio providing 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”.

Previous wording

Net interest income decreased $5.3 million for the three months ended March 31, 2024, compared to the same period in 2023. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 48 basis points to 3.84% for the three months ended March 31, 2024, compared to 4.32% for the same period in 2023. The decrease in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher cost of funds in the current period compared to the same period in 2023. NIM is reconciled to net interest margin adjusted to an FTE basis (non-GAAP) in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

Current wording

Net interest income decreased $4.5 million, or 5.14 percent, and $9.8 million, or 5.56 percent, for the three and six months ended June 30, 2024 compared to the same periods in 2023. Net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 37 and 43 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023. The decreases in both net interest income and NIM on an FTE basis (non-GAAP) were primarily due to the impact of higher interest rates on total interest-bearing liabilities compared to the same period in 2023. NIM is reconciled to net interest margin adjusted to an FTE basis (non-GAAP) in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

Previous wording

compared to 2023. Our effective tax rate was 20.2 percent for the three months ended March 31, 2024 compared to 19.4 percent for the three months ended March 31, 2023. The increase in our effective tax rate for the three month period ended March 31, 2024 was primarily due to the adoption of new accounting guidance on January 1, 2024.

Current wording

Our effective tax rate was 19.8 percent and 20.0 percent for the three and six months ended June 30, 2024 compared to 18.2 percent and 18.8 percent for the three and six months ended June 30, 2023. The increase in the effective tax rate for the three and six months ended June 30, 2024 was primarily due to the adoption of the PAM related to tax credit equity investments on January 1, 2024.

Previous wording

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Current wording

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023

Previous wording

Net interest income on an FTE basis (non-GAAP) decreased $5.2 million, or 5.8 percent, for the three months ended March 31, 2024, compared to the same period in 2023. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 48 basis points for the three months ended March 31, 2024, compared to the same period in 2023. The decreases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates and a shift in our funding mix to higher cost money market and certificates of deposits.

Current wording

Net interest income on an FTE basis (non-GAAP) decreased $4.5 million, or 5.1 percent, and $9.7 million, or 5.4 percent, for the three and six months ended June 30, 2024 compared to the same periods in 2023. The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 37 and 43 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023. The decreases in both net interest income and NIM on an FTE basis (non-GAAP) were primarily due to the impact of higher interest rates on total interest-bearing liabilities. While higher interest rates positively impacted interest income and rates on interest-earning assets, it was more than offset by higher interest expense and rates on interest-bearing liabilities. Additionally, there was a significant shift in the funding mix to higher costing money market and certificates of deposit accounts.

Previous wording

Interest income on an FTE basis (non-GAAP) increased $17.0 million for the three months ended March 31, 2024, compared to the same period in 2023. The increased interest income on an FTE basis (non-GAAP) was primarily due to higher interest rates. Average loan balances increased $468.1 million for the three months ended March 31, 2024, compared to the same period in 2023. The average yield on loan balances increased 44 basis points for the three months ended March 31, 2024 compared to the same period in 2023, due to increased interest rates. Overall, the FTE rate (non-GAAP) on interest-earning assets increased 47 basis points for the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Interest income on an FTE basis (non-GAAP) increased $11.5 million and $28.5 million for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase in interest income on an FTE basis (non-GAAP) was primarily due to higher interest rates on interest-earning assets. Average loan balances increased $395.5 million and $431.6 million for the three and six months ended June 30, 2024 compared to the same periods in 2023. The average yield on loan balances increased 28 and 36 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023 due to higher interest rates. Overall, the FTE rate (non-GAAP) on interest-earning assets increased 30 and 39 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023.

Previous wording

Interest expense increased $22.2 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase in interest expense was primarily due to higher interest rates and a shift in our funding mix to higher cost products. Average interest-bearing deposits increased $689.4 million, of which $377.8 million was brokered deposits, for the three months ended March 31, 2024, compared to the same period in 2023. The average rate paid on interest-bearing deposits increased 147 basis points for the three months ended March 31, 2024, compared to the same period in 2023, due to higher interest rates. Certificates of deposits increased $586.6 million and the average rate paid on certificates of deposits increased 218 basis points. The increase to certificate of deposits was due to higher interest rates resulting in customers moving deposits to higher yield accounts and the addition of $199.8 million of brokered certificates of deposits. The average rate paid on borrowings increased 46 basis points for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to increased interest rates. Overall, the cost of interest-bearing liabilities increased 131 basis points for the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Interest expense increased $16.0 million and $38.1 million for the three and six months ended June 30, 2024 compared to the same periods in 2023. The increase in interest expense was primarily due to higher interest rates, a shift in our customer deposit mix to higher costing products and higher deposit volume. Average interest-bearing deposits increased $731.2 million and $710.1 million, of which $331.5 million and $354.6 million was brokered deposits, for the three and six months ended June 30, 2024 compared to the same periods in 2023. Average borrowings decreased $266.1 million and $145.2 million for the three and six months ended June 30, 2024 compared to the same periods in 2023 primarily due to increased deposit balances. Overall, the cost of interest-bearing liabilities increased 92 and 111 basis points for the three and six months ended June 30, 2024 compared to the same periods in 2023.

Previous wording

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

Current wording

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:

Previous wording

The provision for credit losses includes a provision for losses on loans and on unfunded commitments. The provision for credit losses fluctuates based on changes in loan balances, risk ratings, net loan charge-offs/recoveries, the macro environment and our Current Expected Credit Loss, or CECL, forecast. The provision for credit losses increased $1.7 million to $2.6 million for the three months ended March 31, 2024, compared to $0.9 million for the same period in 2023. The increase in the

Current wording

The provision for credit losses includes a provision for losses on loans and on unfunded commitments. The provision for credit losses fluctuates based on changes in loan balances, risk ratings, net loan charge-offs/recoveries, the macro environment and our Current Expected Credit Loss, or CECL, forecast. The provision for credit losses decreased $10.1 million and $8.5 million to $0.4 million and $3.0 for the three and six months ended June 30, 2024, compared to $10.5 million and $11.5 million for the same periods in 2023. The decrease in the provision for credit losses for the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to lower net charge-offs. The decrease in the provision for credit losses for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to reductions in our special mention and substandard loans, which lowered the quantitative reserve. Partially offsetting the decrease in the provision for credit losses was the addition of $3.6 million of specific reserves for loans individually evaluated related to two commercial relationships, which occurred during the three months ended June 30, 2024. Additionally, the provision for credit losses included reductions of $0.5 million and $1.3 million for the reserve for unfunded commitments for the three and six months ended June 30, 2024 compared to an increase of $1.9 million and $1.7 million for the same periods in 2023.

Previous wording

Net loan charge-offs for the three months ended March 31, 2024 were $6.6 million, or 0.35 percent of average loans, compared to net recoveries of $5.1 million, or 0.29 percent of average loans, for the same period in 2023. Net loan charge-offs for the three months ended March 31, 2024 were primarily related to two commercial real estate, or CRE, relationships totaling $5.3 million and a commercial and industrial, or C&I, relationship totaling $1.1 million. Offsetting loan charge-offs of $4.5 million during the three months ended March 31, 2023 was a $9.3 million recovery related to a 2020 customer fraud. Refer to the "Allowance for Credit Losses" section of this MD&A for further details.

Current wording

For the three and six months ended June 30, 2024, we had net loan recoveries of $0.4 million and net loan charge-offs of $6.2 million compared to net loan charge-offs of $11.0 million and $5.9 million for the same periods in 2023. The $0.4 million of net loan recoveries during the three months ended June 30, 2024 was the result of loan charge-offs of $0.8 million, which was offset by recoveries of $1.2 million. The most significant charge-off during the six months ended June 30, 2024 related to a $16.3 million CRE relationship that had a $3.2 million charge-off. Offsetting loan charge-offs of $16.7 million during the six months ended June 30, 2023 was a $9.3 million recovery related to a 2020 customer fraud. Refer to the "Allowance for Credit Losses" section of this MD&A for further details.

Previous wording

Noninterest expense increased $2.8 million to $54.5 million for the three months ended March 31, 2024 compared to the same period in 2023. Salaries and employee benefits increased $1.9 million for the three months ended March 31, 2024 due to annual merit increases, inflationary wage pressure and the acquisition of new talent. Data processing and information technology increased $0.7 million due to additional services provided through our third party provider. Furniture, equipment and software expenses increased $0.6 million as a result of software and technology investments, which further contributed to the overall increase in noninterest expense. Other noninterest expense decreased $0.5 million primarily due to the adoption of new accounting guidance on January 1, 2024. Amortization expense of $0.8 million related to tax credit equity investments is included in income tax expense for the three months ended March 31, 2024, compared to amortization expense of $0.5 million included in other noninterest expense for the same period in 2023.

Current wording

Noninterest expense increased $4.0 million to $53.6 million for the three months ended June 30, 2024 and increased $6.8 million to $108.1 million for the six months ended June 30, 2024 compared to the same periods in 2023. Salaries and employee benefits increased for both the three and six months ended June 30, 2024 due to higher salary expense related to annual merit increases, inflationary wage pressure, the acquisition of new talent, higher incentives and medical costs. Other noninterest expense decreased $0.6 million and $1.1 million for the three and six months ended June 30, 2024 primarily due to the adoption of PAM. Amortization expense related to tax credit equity investments is included in income tax expense for 2024, while included in noninterest expense for 2023, Professional services and legal expense decreased $0.7 million for the three months and $0.8 million for the six months ended June 30, 2024 due to expiring consulting engagements and a decrease in legal expenses. Furniture, equipment and software increased $0.2 million for the three months and $0.8 million for the six months ended June 30, 2024 due to software and technology investments. Data processing and information technology increased $0.7 million for the six months ended June 30, 2024 due to additional services provided through our third party vendor.

Previous wording

The effective tax rate, which is total tax expense as a percentage of income before taxes, increased to 20.2 percent for the three months ended March 31, 2024, compared to 19.4 percent in the same period in 2023. The increase in the effective tax rate for the three months ended March 31, 2024 was primarily due to the adoption of the proportional amortization method, or PAM, related to tax credit equity investments on January 1, 2024. Under the PAM, amortization expense related to tax credit equity investments is included in income tax expense for the three months ended March 31, 2024, compared to other noninterest expense for the same period in 2023.

Current wording

The effective tax rate, which is total tax expense as a percentage of income before taxes, was 19.8 percent and 20.0 percent for the three and six months ended June 30, 2024, compared to 18.2 percent and 18.8 percent in the same periods in 2023. The increase in the effective tax rate for the three and six months ended June 30, 2024 was primarily due to the adoption of the PAM related to tax credit equity investments on January 1, 2024. Under the PAM, amortization expense related to tax credit equity investments is included in income tax expense for the three and six months ended June 30, 2024, and included in other noninterest expense for the same periods in 2023.

Previous wording

Securities remained unchanged at $1.0 billion at March 31, 2024 and December 31, 2023. Thebond portfolio was in a net unrealized loss position of $87.8 millionat March 31, 2024, compared to a net unrealized loss position of $82.0 million at December 31, 2023. The increase in the net unrealized loss portion of the bond portfolio of $5.8 million was due to a change in interest rates.

Current wording

Total assets were $9.6 billion at both June 30, 2024 and December 31, 2023. Total portfolio loans remained relatively unchanged at $7.7 billion at June 30, 2024 and December 31, 2023. Loan volume has slowed due to higher interest rates and an uncertain macro environment. Securities remained unchanged at $1.0 billion at June 30, 2024 and December 31, 2023. Thebond portfolio was in a net unrealized loss position of $84.6 millionat June 30, 2024, compared to a net unrealized loss position of $82.0 million at December 31, 2023. The increase in the net unrealized loss position of the bond portfolio of $2.6 million was primarily due to changes in interest rates.

Previous wording

Our total deposits increased $78.6 million at March 31, 2024, compared to December 31, 2023. Customer deposits increased $77.8 million compared to December 31, 2023, as a result of our focus on deposit franchise. The pace of customers moving deposits to higher costing deposit types has moderated compared to the prior year

Current wording

Total deposits increased $158.6 million with customer deposits increasing $232.9 million, or 3.26 percent, at June 30, 2024 compared to December 31, 2023. The increase in customer deposits is the result of our continued focus on the deposit franchise. The pace of customers moving deposits to higher costing deposit types has moderated compared to the prior year. Total borrowings decreased $140.2 million, or 27.84 percent, to $363.4 million at June 30, 2024 primarily due to deposit growth, compared to $503.6 million at December 31, 2023.

Previous wording

Total shareholders’ equity increased by $11.6 million to $1.3 billion at March 31, 2024, compared to December 31, 2023. The increase was primarily due to net income of $31.2 million, offset by other comprehensive loss of $6.8 million and dividends of $12.7 million.

Current wording

Total shareholders’ equity increased by $38.0 million to $1.3 billion at June 30, 2024, compared to December 31, 2023. The increase was primarily due to net income of $65.6 million, offset by dividends of $25.3 million and other comprehensive loss of $3.0 million.

Previous wording

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 remained unchanged at $1.0 billion at March 31, 2024 compared to December 31, 2023.

Current wording

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 by $7.6 million at June 30, 2024 to $978.0 million, compared to $970.4 million at December 31, 2023. During the three months ended June 30, 2024, we repositioned $49.0 million of our securities portfolio, selling shorter duration U.S. Treasury securities and commercial mortgage-backed securities and replacing them with collateralized mortgage obligations with a longer duration and higher yield.

Previous wording

At March 31, 2024, our bond portfolio was in a net unrealized loss position of $87.8 million compared to a net unrealized loss position of $82.0 million at December 31, 2023. At March 31, 2024, our bond portfolio had gross unrealized losses of $88.4 million and $0.6 million in gross unrealized gains, compared to December 31, 2023, when total gross unrealized losses were $83.8 million offset by gross unrealized gains of $1.8 million.

Current wording

At June 30, 2024, our bond portfolio was in a net unrealized loss position of $84.6 million compared to a net unrealized loss position of $82.0 million at December 31, 2023. At June 30, 2024, our bond portfolio had gross unrealized losses of $85.1 million and $0.5 million in gross unrealized gains, compared to December 31, 2023, when total gross unrealized losses were $83.8 million offset by gross unrealized gains of $1.8 million.

Previous wording

Total portfolio loans remained unchanged at $7.7 billion at March 31, 2024 and December 31, 2023. As of March 31, 2024, 64 percent of our total loans were variable rate loans and 36 percent were fixed rate loans, compared to 65 percent variable rate and 35 percent fixed rate at December 31, 2023. Commercial loans, including CRE, C&I and commercial construction, comprised 69.6 percent of total portfolio loans at March 31, 2024 and 70.1 percent at December 31, 2023. The commercial loan portfolio decreased $38.1 million at March 31, 2024 compared to December 31, 2023, primarily due to a decrease of $45.0 million in C&I, offset by an increase of $10.1 million in CRE. Loan volume has slowed due to higher interest rates and an uncertain macro environment.

Current wording

Total portfolio loans were $7.7 billion at both June 30, 2024 and December 31, 2023. As of June 30, 2024, 64 percent of our total loans were variable rate loans and 36 percent were fixed rate loans, compared to 65 percent variable rate and 35 percent fixed rate at December 31, 2023. Commercial loans, including CRE, C&I and commercial construction, comprised 69.2 percent of total portfolio loans at June 30, 2024 and 70.1 percent at December 31, 2023. The commercial loan portfolio decreased $24.0 million at June 30, 2024 compared to December 31, 2023, primarily due to a decrease of $30.9 million in C&I, offset by an increase of $16.8 million in commercial construction. Loan volume has slowed due to higher interest rates and an uncertain macro environment.

Previous wording

Our multifamily and office segments are the most significant CRE and commercial construction concentrations within our portfolio. Approximately 95 percent of multifamily and office CRE loans are located within our market area, which includes Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware and Maryland

Current wording

Our multifamily and office segments are the most significant CRE and commercial construction concentrations within our portfolio. Approximately 95 percent of multifamily and 90 percent of office CRE loans are located within our market area, which includes Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware and Maryland.

Previous wording

In the CRE segment, multifamily represented $580.8 million, or 7.6 percent of total portfolio loans, at March 31, 2024, compared to $569.4 million, or 7.4 percent, at December 31, 2023. The average loan size of multifamily CRE is $1.0 million, with an average loan-to-value of 56 percent. There were no special mention loans and $6.9 million substandard in the multifamily CRE segment at March 31, 2024, compared to special mention loans of $3.8 million and substandard of $13.0 million at December 31, 2023.

Current wording

In the CRE segment, multifamily represented $605.4 million, or 7.8 percent of total portfolio loans, at June 30, 2024, compared to $569.4 million, or 7.4 percent, at December 31, 2023. The average loan size of multifamily CRE is $1.0 million, with an average loan-to-value of 58 percent. There were no special mention loans and $6.9 million of substandard loans in the multifamily CRE segment at June 30, 2024, compared to special mention loans of $3.8 million and substandard loans of $13.0 million at December 31, 2023. There were no nonperforming multi-family loans at June 30, 2024 and December 31, 2023.

Previous wording

Office CRE was $482.0 million, or 6.3 percent of total portfolio loans, at March 31, 2024, compared to $480.5 million, or 6.3 percent, at December 31, 2023. The average loan size within the office CRE portfolio is $1.1 million, with an average loan-to-value of approximately 55 percent. Special mention loans in the office CRE segment were $12.3 million and substandard were $2.1 million at March 31, 2024, compared to special mention loans of $9.1 million and substandard of $2.5 million at December 31, 2023. Approximately 90 percent of the office portfolio is located in non-central business districts, with the remaining 10 percent in central business districts within our market area.

Current wording

Office CRE was $462.4 million, or 6.0 percent of total portfolio loans, at June 30, 2024, compared to $480.5 million, or 6.3 percent, at December 31, 2023. The average loan size of office CRE is $1.1 million, with an average loan-to-value of 56 percent. Special mention loans in the office CRE segment were $16.0 million and substandard loans were $2.1 million at June 30, 2024, compared to special mention loans of $9.1 million and substandard loans of $2.5 million at December 31, 2023. There was $0.4 million of nonperforming office loans at June 30, 2024 and $0.5 million at December 31, 2023.

Previous wording

In addition, within the commercial construction segment, multifamily represented $115.3 million, or 1.5 percent of total portfolio loans, at March 31, 2024, compared to $119.0 million, or 1.6 percent, at December 31, 2023. Commercial construction office was $29.5 million, or 0.4 percent of total portfolio loans, at December 31, 2024, compared to $36.0 million, or 0.5 percent, at December 31, 2023. There were no special mention or substandard commercial construction loans within our multifamily or office segments for the periods presented.

Current wording

In addition, within the commercial construction segment, multifamily represented $130.7 million, or 1.7 percent of total portfolio loans, at June 30, 2024, compared to $119.0 million, or 1.6 percent, at December 31, 2023. Commercial construction office was $28.7 million, or 0.4 percent of total portfolio loans, at June 30, 2024, compared to $36.0 million, or 0.5 percent, at December 31, 2023. There were no special mention or substandard commercial construction loans within our multifamily or office segments for the periods presented.

Previous wording

Consumer loans represent 30.4 percent of our total portfolio loans at March 31, 2024 and 29.9 percent at December 31, 2023. The consumer loan portfolio increased $40.8 million at March 31, 2024, primarily due to growth in our consumer real estate portfolio of $47.4 million compared to December 31, 2023. Consistent with 2023, we continue to retain consumer real estate loans on our balance sheet as portfolio loans, versus selling these loans due to the loan pricing in the secondary market.

Current wording

Consumer loans represent 30.8 percent of our total portfolio loans at June 30, 2024 and 29.9 percent at December 31, 2023. The consumer loan portfolio increased $84.2 million at June 30, 2024, primarily due to growth in our consumer real estate portfolio of $96.4 million compared to December 31, 2023. Consistent with 2023, we continue to retain consumer real estate loans on our balance sheet as portfolio loans, versus selling these loans due to the loan pricing in the secondary market.

Previous wording

Net loan charge-offs were $6.6 million, or 0.35 percent of average loans, for the three months ended March 31, 2024. Refer to the "Provision for Credit Losses" section of this MD&A for further details.

Current wording

Net loan charge-offs were $6.2 million, or 0.16 percent of average loans, for the six months ended June 30, 2024. Refer to the "Provision for Credit Losses" section of this MD&A for further details.

Previous wording

The ACL was $104.8 million, or 1.37 percent of total portfolio loans, at March 31, 2024, compared to $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023. The decrease in the ACL of $3.2 million was primarily related to decreased exposure in our healthcare portfolio.

Current wording

The ACL was $106.2 million, or 1.38 percent of total portfolio loans, at June 30, 2024, compared to $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023. The decrease in the ACL of $1.8 million was primarily related to decreased exposure in our healthcare portfolio, which was partially offset by the addition of $3.6 million in specific reserves for loans individually assessed related to two commercial customers during the three months ended June 30, 2024.

Previous wording

Substandard loans decreased $20.3 million to $153.0 million at March 31, 2024, compared to $173.3 million at December 31, 2023. The decrease in substandard loans was primarily due to loan payoffs and commercial charge-offs of $6.6 million. Special mention loans increased $11.5 million to $147.3 million at March 31, 2024, compared to $135.8 million at December 31, 2023. The increase in special mention loans was primarily due to risk rating downgrades in our C&I portfolio.

Current wording

Substandard loans decreased $33.9 million to $139.4 million at June 30, 2024, compared to $173.3 million at December 31, 2023. The decrease in substandard loans was primarily due to loan payoffs and commercial charge-offs. Special mention loans decreased $16.1 million to $119.7 million at June 30, 2024, compared to $135.8 million at December 31, 2023. The decrease in special mention loans was primarily due to risk rating upgrades in our CRE healthcare portfolio.

Previous wording

Our allowance on unfunded 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 the Condensed Consolidated Statements of Comprehensive Income. The allowance for unfunded loan commitments decreased $0.8 million to $6.0 million at March 31, 2024, compared to $6.8 million at December 31, 2023. The decrease was due to decreased loss rates and a reduction in unused commitments in our construction portfolio. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

Current wording

Our allowance on unfunded 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 the Condensed Consolidated Statements of Comprehensive Income. The allowance for unfunded loan commitments decreased $1.3 million to $5.5 million at June 30, 2024, compared to $6.8 million at December 31, 2023. The decrease was due to decreased loss rates and a reduction in unused commitments in our construction portfolio. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

Previous wording

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. Nonaccrual loans increased $10.3 million to $33.2 million at March 31, 2024, compared to $22.9 million at December 31, 2023. The increase in nonaccrual loans primarily related to the addition of a $16.4 million CRE loan, which was written down to the value of an asset sale agreement and a $3.2 million partial charge-off was processed. The sale is expected to take place later in 2024. Partially offsetting the increase in nonaccrual loans for the three months ended March 31, 2024, was the payoff of a $5.9 million CRE loan.

Current wording

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. Nonaccrual loans increased $12.0 million to $34.9 million at June 30, 2024, compared to $22.9 million at December 31, 2023. The increase in nonaccrual loans primarily related to the addition of a $16.3 million CRE relationship, which had a $3.2 million partial charge-off during the three months ended March 31, 2024. A specific reserve of $2.9 million was added for this relationship during the three months ended June 30, 2024 based on uncertainty surrounding a potential sale of the company. Partially offsetting the increase in nonaccrual loans at June 30, 2024 was the payoff of a $5.9 million CRE loan and a $3.4 million CRE loan was returned to accruing status.

Previous wording

Deposits are our primary source of funds. We have a well-diversified deposit base with a balance mix of 58.3 percent personal, 32.1 percent business, 4.6 percent public funds and 5.0 percent brokered at March 31, 2024.

Current wording

Deposits are our primary source of funds. We have a well-diversified deposit base with a balance mix of 58.4 percent personal, 32.9 percent business, 4.8 percent public funds and 3.9 percent brokered at June 30, 2024.

Previous wording

Our total deposits increased $78.6 million at March 31, 2024, compared to December 31, 2023. Customer deposits increased $77.8 million compared to December 31, 2023, as a result of our focus on deposit franchise. While we are still seeing movement by customers to higher cost certificate of deposits, the rate of customers moving deposits to higher costing deposit types has moderated compared to the prior year.

Current wording

Our total deposits increased $158.6 million at June 30, 2024, compared to December 31, 2023. Customer deposits increased $232.9 million compared to December 31, 2023, as a result of our focus on growing our deposit franchise. While we are still seeing movement by customers to higher cost certificates of deposit and money market accounts, the rate of customers moving deposits to higher costing deposit types has moderated compared to the prior year.

Previous wording

As a member of the IntraFi network, we are able to offer our customers insurance coverage on interest-bearing demand, money market and certificate of deposit balances in excess of the FDIC insurance limits. IntraFi balances increased $29.1 million to $306.8 million at March 31, 2024, compared to $277.7 million at December 31, 2023. We had total uninsured deposits of $2.3 billion, or 30 percent of our total deposit base, at both March 31, 2024 and December 31, 2023.

Current wording

As a member of the IntraFi network, we are able to offer our customers insurance coverage on interest-bearing demand, money market and certificates of deposit balances in excess of the FDIC insurance limits. IntraFi balances decreased $5.6 million to $272.1 million at June 30, 2024, compared to $277.7 million at December 31, 2023. We had total uninsured deposits of $2.5 billion, or 32 percent of our total deposit base, at June 30, 2024 compared to $2.3 billion, or 30 percent or our total deposit base, at December 31, 2023.

Previous wording

Borrowings are an additional source of funding for us. Total borrowings decreased $130.1 million to $373.5 million at March 31, 2024, compared to $503.6 million at December 31, 2023, primarily due to deposit growth.

Current wording

Borrowings are an additional source of funding for us. Total borrowings decreased $140.2 million to $363.4 million at June 30, 2024, compared to $503.6 million at December 31, 2023, primarily due to deposit growth.

Previous wording

Information pertaining to short-term borrowings is summarized in the table below for the three months ended March 31, 2024 and the twelve months ended December 31, 2023.

Current wording

Information pertaining to short-term borrowings is summarized in the table below for the six months ended June 30, 2024 and the twelve months ended December 31, 2023.

Previous wording

In response to the bank failures in March 2023, the Federal Reserve authorized additional funding availability to eligible depository institutions through the Federal Reserve Bank Term Funding Program, or BTFP. The temporary program was intended to help assure depositors that their institutions have an additional source of liquidity to meet their needs. Under the program, any collateral eligible for purchase by the Federal Reserve Banks in open market operations could be pledged, including U.S. Treasury securities, U.S. Agencies and U.S. Agency mortgage-backed securities. Collateral advances were equal to 100 percent of the par value of the collateral pledged with a term of up to one year. Interest was charged at a fixed rate equal to the one-year overnight index swap rate plus 10 basis points with no prepayment penalty. The BTFP ceased making new loans as scheduled on March 11, 2024.

Current wording

In response to the bank failures in March 2023, the Federal Reserve authorized additional funding availability to eligible depository institutions through the Federal Reserve Bank Term Funding Program, or BTFP. The temporary program was intended to help assure depositors that their institutions have an additional source of liquidity to meet their needs. Under the program, any collateral eligible for purchase by the Federal Reserve Banks in open market operations could be pledged, including U.S. Treasury securities, U.S. Agencies and U.S. Agency mortgage-backed securities. Collateral advances were equal to 100 percent of the par value of the collateral pledged with a term of up to one year. Interest was charged at a fixed rate equal to the one-year overnight index swap rate plus 10 basis points with no prepayment penalty. The BTFP ceased making new fundings on March 11, 2024.

Previous wording

Available borrowing capacity exceeds uninsured deposits of $2.3 billion. The following table summarizes funding sources available as of the dates presented:

Current wording

Available borrowing capacity exceeds uninsured deposits of $2.5 billion. The following table summarizes funding sources available as of the dates presented:

Previous wording

We have contractual obligations representing required future payments on certificates of deposit, junior subordinated debt securities, short-term borrowings, long-term borrowings, operating and capital leases, funding commitments on tax credit equity investments 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 2023 Form 10-K for more information on these future cash outflows. Customer certificates of deposit increased $61.8 million to $1.5 billion at March 31, 2024, compared to December 31, 2023 and short-term borrowings decreased $130.0 million to $285.0 million at March 31, 2024, compared to December 31, 2023. Other than these changes, there have been no material changes to the contractual obligations previously disclosed in our 2023 Form 10-K.

Current wording

We have contractual obligations representing required future payments on certificates of deposit, junior subordinated debt securities, short-term borrowings, long-term borrowings, operating and capital leases, funding commitments on tax credit equity investments 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 2023 Form 10-K for more information on these future cash outflows. Total certificates of deposit increased $187.5 million to $1.8 billion at June 30, 2024, compared to December 31, 2023 and short-term borrowings decreased $140.0 million to $275.0 million at June 30, 2024, compared to December 31, 2023. Other than these changes, there have been no material changes to the contractual obligations previously disclosed in our 2023 Form 10-K.

Previous wording

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 to meet financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate and high. At March 31, 2024, S&T Bank had $711.0 million in highly liquid assets, which consisted primarily of $143.3 million in interest-bearing deposits with banks and $567.7 million in unpledged securities. This resulted in a highly liquid assets to total assets ratio of 7.5 percent at March 31, 2024.

Current wording

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 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 June 30, 2024, S&T Bank had $742.3 million in highly liquid assets, which consisted primarily of $172.2 million in interest-bearing deposits with banks and $569.9 million in unpledged securities. This resulted in a highly liquid assets to total assets ratio of 7.7 percent at June 30, 2024.

Previous wording

We continue to maintain a strong capital position with our leverage ratio at 11.30 percent at March 31, 2024, compared to 11.21 percent at December 31,2023, both in excess of the well-capitalized regulatory guideline of 5.00 percent. We continue to be well-capitalized with a risk-based Common Equity Tier 1 ratio of 13.59 percent at March 31, 2024, compared to 13.37 percent at December 31,2023, both in excess of the well-capitalized regulatory guideline of 6.50 percent.

Current wording

We continue to maintain a strong capital position with our leverage ratio at 11.51 percent at June 30, 2024, compared to 11.21 percent at December 31,2023, both in excess of the well-capitalized regulatory guideline of 5.00 percent. We continue to be well-capitalized with a risk-based Common Equity Tier 1 ratio of 13.89 percent at June 30, 2024, compared to 13.37 percent at December 31,2023, both in excess of the well-capitalized regulatory guideline of 6.50 percent.