BUSINESS -- continued
−Removed: Other Safety and Soundness Regulations
−Removed: There are a number of obligations and restrictions imposed on bank holding companies such as us and our depository institution subsidiary by federal law and regulatory policy.
−Removed: These obligations and restrictions are designed to reduce potential loss exposure to the FDIC’s DIF in the event an insured depository institution becomes in danger of default or is in default.
−Removed: Under current federal law, for example, the federal banking agencies possess broad powers to take prompt corrective action to resolve problems of insured depository institutions.
−Removed: The extent of these powers depends upon whether the institution in question is “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” as defined by the law.
−Removed: As of December 31, 2020, S&T Bank was classified as “well-capitalized.” New definitions of these categories, as set forth in the federal banking agencies’ final rule to implement Basel III and the minimum leverage and risk-based capital requirements of the Dodd-Frank Act, became effective as of January 1, 2015.
−Removed: To be well-capitalized, an insured depository institution must have a common equity Tier 1 risk-based capital ratio of at least 6.50 percent, a Tier 1 risk-based capital ratio of at least 8.00 percent, a total risk-based capital ratio of at least 10.00 percent and a leverage ratio of at least 5.00 percent, and the institution must not be subject to any written agreement, order, capital directive or prompt corrective action directive by its primary federal regulator.
−Removed: To be adequately capitalized, an insured depository institution must have a common equity Tier 1 risk-based capital ratio of at least 4.50 percent, a Tier 1 risk-based capital ratio of at least 6.00 percent, a total risk-based capital ratio of at least 8.00 percent and a leverage ratio of at least 4.00 percent.
−Removed: The classification of depository institutions is primarily for the purpose of applying the federal banking agencies’ prompt corrective action provisions and is not intended to be and should not be interpreted as a representation of overall financial condition or prospects of any financial institution.
−Removed: The federal banking agencies’ prompt corrective action powers, which increase depending upon the degree to which an institution is undercapitalized, can include, among other things, requiring an insured depository institution to adopt a capital restoration plan, which cannot be approved unless guaranteed by the institution’s parent company;
−Removed: placing limits on asset growth and restrictions on activities, including restrictions on transactions with affiliates;
−Removed: restricting the interest rates the institution may pay on deposits;
−Removed: restricting the institution from accepting brokered deposits;
−Removed: prohibiting the payment of principal or interest on subordinated debt;
−Removed: prohibiting the holding company from making capital distributions, including payment of dividends, without prior regulatory approval;
−Removed: and, ultimately, appointing a receiver for the institution.
−Removed: The federal banking agencies have also adopted guidelines prescribing safety and soundness standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, fees and compensation and benefits.
−Removed: In general, the guidelines require appropriate systems and practices to identify and manage specified risks and exposures.
−Removed: The guidelines prohibit excessive compensation as an unsafe and unsound practice and characterize compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder.
−Removed: In addition, the agencies have adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not in compliance with any of such safety and soundness standards to submit a compliance plan.
−Removed: If, after being so notified, an institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an “undercapitalized” institution is subject under the prompt corrective action provisions described above.
−Removed: Regulatory Enforcement Authority
−Removed: The enforcement powers available to federal banking agencies are substantial and include, among other things and in addition to other powers described herein, the ability to assess civil money penalties and impose other civil and criminal penalties, to issue cease-and-desist or removal orders, to appoint a conservator to conserve the assets of an institution for the benefit of its depositors and creditors and to initiate injunctive actions against banks and bank holding companies and “institution affiliated parties,” as defined in the Federal Deposit Insurance Act.
−Removed: In general, these enforcement actions may be initiated for violations of laws and regulations, and engagement in unsafe or unsound practices.
−Removed: Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.
−Removed: At the state level, the PADBS also has broad enforcement powers over S&T Bank, including the power to impose fines and other penalties and to appoint a conservator or receiver.
−Removed: Interstate Banking and Branching
−Removed: The BHCA currently permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including certain nationwide and state-imposed deposit concentration limits.
−Removed: In addition, because of changes to law made by the Dodd-Frank Act, S&T Bank may now establish de novo branches in any state to the same extent that a bank chartered in that state could establish a branch.
−Removed: BUSINESS -- continued
−Removed: Community Reinvestment, Fair Lending and Consumer Protection Laws
−Removed: In connection with its lending activities, S&T Bank is subject to a number of state and federal laws designed to protect borrowers and promote lending to various sectors of the economy and population.
−Removed: The federal laws include, among others, the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Truth-in-Savings Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act and the CRA.
−Removed: In addition, federal rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent the disclosure of certain personal information to nonaffiliated third parties.
−Removed: The CRA requires the appropriate federal banking agency, in connection with its examination of a bank, to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low and moderate-income neighborhoods.
−Removed: Furthermore, such assessment is required of any bank that has applied, among other things, to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch office.
−Removed: In the case of a bank holding company, including a financial holding company, applying for approval to acquire a bank or bank holding company, the Federal Reserve Board will assess the record of each subsidiary bank of the applicant bank holding company in considering the application.
−Removed: Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve” or “unsatisfactory.” S&T Bank was rated “satisfactory” in its most recent CRA evaluation.
−Removed: With respect to consumer protection, the Dodd-Frank Act created the Consumer Financial Protection Bureau, or the CFPB, which took over rulemaking responsibility on July 21, 2011 for the principal federal consumer financial protection laws, such as those identified above.
−Removed: Institutions that have assets of $10 billion or less, such as S&T Bank, are subject to the rules established by the CFPB but will continue to be supervised in this area by their state and primary federal regulators, which in the case of S&T Bank is the FDIC.
−Removed: The Dodd-Frank Act also gives the CFPB expanded data collection powers for fair lending purposes for both small business and mortgage loans, as well as expanded authority to prevent unfair, deceptive and abusive practices.
−Removed: The consumer complaint function also has been consolidated into the CFPB with respect to the institutions it supervises.
−Removed: The CFPB established an Office of Community Banks and Credit Unions, with a mission to ensure that the CFPB incorporates the perspectives of small depository institutions into the policy-making process, communicates relevant policy initiatives to community banks and credit unions, and works with community banks and credit unions to identify potential areas for regulatory simplification.
−Removed: Fair lending laws prohibit discrimination in the provision of banking services, and the enforcement of these laws has been a focus for bank regulators.
−Removed: Fair lending laws include the Equal Credit Opportunity Act and the Fair Housing Act, which outlaw discrimination in credit transactions and residential real estate on the basis of prohibited factors including, among others, race, color, national origin, sex and religion.
−Removed: A lender may be liable for policies that result in a disparate treatment of or have a disparate impact on a protected class of applicants or borrowers.
−Removed: If a pattern or practice of lending discrimination is alleged by a regulator, then that agency may refer the matter to the U.S.
−Removed: Department of Justice, or DOJ, for investigation.
−Removed: In December of 2012, the DOJ and the CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations and have generally committed to strengthen their coordination efforts.
−Removed: S&T Bank is required to have a fair lending program that is of sufficient scope to monitor the inherent fair lending risk of the institution and that appropriately remediates issues which are identified.
−Removed: During 2013, the CFPB issued a series of final rules related to mortgage loan origination and mortgage loan servicing.
+Added: During 2013, the CFPB issued a series of final rules related to mortgage loan origination and mortgage loan servicing, which became effective in 2014.
In particular, on January 10, 2013, the CFPB issued a final rule implementing the ability-to-repay and qualified mortgage (QM) provisions of the Truth-in-Lending Act, as amended by the Dodd-Frank Act (“QM Rule”).
2 unchanged sentences
The presumption is a conclusive presumption/safe harbor for prime loans meeting the QM requirements, and a rebuttable presumption for higher-priced/subprime loans meeting the QM requirements.
−Removed: The definition of a QM incorporates the statutory requirements, such as not allowing negative amortization or terms longer than 30 years.
−Removed: The QM Rule also adds an explicit maximum 43 percent debt-to-income ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet government-sponsored enterprise, or GSE, Federal Housing Administration, or FHA, and Veterans Affairs, or VA, underwriting guidelines may, for a period not to exceed seven years, meet the QM definition without being subject to the 43 percent debt-to-income limits.
−Removed: The QM Rule became effective on January 10, 2014.
−Removed: These rules did not have a material impact on our mortgage business.
−Removed: BUSINESS -- continued
−Removed: In November 2013, the CFPB issued a final rule implementing the Dodd-Frank Act requirement to establish integrated disclosures in connection with mortgage origination, which incorporates disclosure requirements under the Real Estate Settlement Procedures Act and the Truth-in-Lending Act.
−Removed: The requirements of the final rule apply to all covered mortgage transactions for which S&T Bank receives a consumer application on or after October 3, 2015.
−Removed: The CFPB issued a final rule regarding the integrated disclosures in December 2013, and the disclosure requirement became effective in October 2015.
+Added: The QM Rule also adds an explicit maximum
+Added: 43 percent debt-to-income ratio (DTI) for borrowers if the loan is to meet the QM definition, though some mortgages that meet government-sponsored enterprise, or GSE, Federal Housing Administration, or FHA, and Veterans Affairs, or VA, underwriting guidelines may, for a period not to exceed seven years, meet the QM definition without being subject to the
+Added: 43 percent DTI limits (GSE Patch).
These rules did not have a material impact on our mortgage business.
+Added: In December 2020, the CFPB published a final rule that replaced the 43 percent DTI ratio limit in the general QM definition (the “General QM Rule”) and a final rule that created a new category of qualified mortgage, called a seasoned qualified mortgage, for first lien, fixed rate covered loans that meet certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.
+Added: The initial compliance date of the final rules was July 1, 2021.
+Added: In April 2021, the CFPB published a final rule extending the mandatory compliance date of the General QM Rule to October 1, 2022 and thereby also extending the GSE Patch to October 1, 2022 or the date the applicable GSE exits conservatorship, whichever happens first.
Anti-Money Laundering Rules
13 unchanged sentences
This rule, Regulation II, which was effective October 1, 2011, does not apply to a bank that, together with its affiliates, has less than $10 billion in assets, which includes S&T.
−Removed: S&T Bank competes with other local, regional and national financial services providers, such as other financial holding companies, commercial banks, credit unions, finance companies and brokerage and insurance firms, including competitors that provide their products and services online and through mobile devices.
+Added: S&T Bank competes with other local, regional and national financial services providers, such as other financial holding companies, commercial banks, credit unions, finance companies, brokerage and insurance firms and financial technology companies, including competitors that provide their products and services online and through mobile devices.
Some of our competitors are not subject to the same level of regulation and oversight that is required of banks and bank holding companies and are thus able to operate under lower cost structures.
Our wealth management business competes with trust companies, mutual fund companies, investment advisory firms, law firms, brokerage firms and other financial services companies.
+Added: BUSINESS -- continued
Changes in bank regulation, such as changes in the products and services banks can offer and permitted involvement in non-banking activities by bank holding companies, as well as bank mergers and acquisitions, can affect our ability to compete with other financial services providers.
Our ability to do so will depend upon how successfully we can respond to the evolving competitive, regulatory, technological and demographic developments affecting our operations.
−Removed: BUSINESS -- continued
Our customers are primarily in Pennsylvania and the contiguous states of Ohio, West Virginia, New York, Maryland and Delaware.
3 unchanged sentences
Our most direct competition for deposits has historically come from commercial banks and credit unions.
−Removed: We face additional competition for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies.
+Added: We face additional competition for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms, insurance companies and financial technology companies.
Because larger competitors have advantages in attracting business from larger corporations, we do not generally attempt to compete for that business.
10 unchanged sentences
Therefore, the risk factors below do necessarily include all risks that we may face.
−Removed: Risks Related to the COVID-19 Pandemic
−Removed: The duration and severity of the COVID-19 pandemic, in our principal area of operations, nationally and globally, has adversely impacted and will likely continue to adversely impact S&T’s business, results of operations and financial condition.
−Removed: While it is difficult to predict the further impact of the COVID-19 pandemic (or any other outbreak) on the economy and S&T, the future impacts may include, but are not limited to, the following:
−Removed: • Our results of operations may continue to be negatively impacted by general economic or business conditions and uncertainty, including the strength of economic conditions in our principal area of operations impacting the demand for our products and services.
−Removed: • The low interest rate environment will continue to negatively impact our net interest income and net interest margin.
−Removed: • Credit losses may be higher and our provision for credit losses may continue to increase, due to deterioration in the financial condition of S&T’s commercial and consumer loan customers.
−Removed: • Declining asset and collateral values may necessitate increases in our provision for credit losses and net charge-offs.
−Removed: • Continued negative impact on the hospitality industry and our hotel portfolio, which could result in additional credit losses and net charge-offs.
−Removed: • Expense management will be impacted by the uncertainty of the effects of the pandemic and S&T’s continued efforts to promote the health and safety of our employees, and the customers and communities we serve.
−Removed: • We may have an interruption or cessation of an important service provided by a third-party provider.
−Removed: • S&T’s liquidity and regulatory capital could be adversely impacted.
−Removed: • Any new or revised regulations regarding capital and liquidity adopted in response to the COVID-19 pandemic may require us to maintain materially more capital or liquidity.
−Removed: • Investors may have less confidence in the equity markets in general and in financial services industry in particular, which could have a negative impact on S&T’s stock price and resulting market valuation.
−Removed: • The economic downturn caused by the pandemic may be deeper and last longer in the areas where we do business, relative to other areas of the country, which could negatively affect our relative financial performance.
−Removed: • We face heightened cyber security risk in connection with our operation in a remote working environment.
−Removed: • It may become harder to maintain our corporate culture, which is somewhat dependent on a level of in-person interaction.
−Removed: Even after the COVID-19 pandemic subsides, the U.S.
−Removed: economy will likely require time to recover.
−Removed: It is uncertain how long this recovery will take.
−Removed: As a result, we anticipate our business may be adversely affected during this recovery.
−Removed: To the extent the COVID-19 pandemic continues to adversely affect the global economy it may also increase the likelihood and/or magnitude of other risks described in this section.
−Removed: The impact that the COVID-19 pandemic will have on S&T’s credit losses is uncertain, and continued economic uncertainty and deterioration in the forward looking economic forecasts used to estimate credit losses, as well as the potential inability of our credit models to accurately predict the relevant financial metrics, may adversely affect our ACL.
−Removed: S&T calculates the ACL in accordance with Current Expected Credit Loss, or CECL, accounting standard adopted January 1, 2020.
−Removed: The CECL methodology reflects expected credit losses and requires consideration of a broad range of reasonable and supportable information to form credit loss estimates.
−Removed: The CECL accounting standard bases the measurement of expected credit losses on historical loss experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount.
−Removed: S&T’s ability to assess expected credit losses may be impaired if the models and approaches we use become less predictive of future behaviors.
−Removed: In particular, the reliance on supportable economic forecasts in light of the COVID-19 pandemic has had and is expected to have an impact on the estimates of our ACL.
−Removed: These forecasts have deteriorated this year and continue to reflect adverse economic conditions and economic uncertainty.
−Removed: Given the unprecedented nature of the COVID-19 pandemic, if our credit models fail to adequately predict or forecast relevant financial metrics during and after the pandemic and these forecasts deteriorate and contain economic uncertainty, our ACL may be adversely affected.
−Removed: RISK FACTORS - continued
−Removed: Risks Related to Fraudulent Activity
−Removed: Fraudulent activity associated with our products and services could adversely affect our results of operations, financial condition and stock price, negatively impact our brand and reputation, and result in regulatory intervention or sanctions.
−Removed: As a financial institution we are exposed to operational risk in the form of fraudulent activity that may be committed by customers, other third parties, or employees, targeting us and our customers.
−Removed: The risk of fraud continues to increase for the financial services industry.
−Removed: Fraudulent activity has escalated, become more sophisticated, and continues to evolve, as there are more options to access financial services.
−Removed: In our Form 8-K filed May 26, 2020, we disclosed that we discovered customer fraud resulting from a check kiting scheme by a business customer of S&T.
−Removed: We recognized a pre-tax loss of $58.7 million during the second quarter of 2020 related to this customer fraud.
−Removed: As a result of our internal review of the fraud, we have made process and monitoring enhancements.
−Removed: While we believe we have operational risk controls in place to prevent or detect future instances of fraud or to mitigate the impact of any fraud, we cannot provide assurance that we can prevent or detect fraud or that we will not experience future fraud losses or incur costs or other damage related to such fraud, at levels that adversely affect our results of operation, financial condition, or stock price.
−Removed: Furthermore, fraudulent activity could negatively impact our brand and reputation, which could also adversely affect our results of operation, financial condition, or stock price.
−Removed: Fraudulent activity could also lead to regulatory intervention or regulatory sanctions.
Risks Related to Credit
14 unchanged sentences
Like other lenders, we face the risk that our customers will not repay their loans.
−Removed: We reserve for losses in our loan portfolio based on our assessment of inherent credit losses.
+Added: We reserve for losses in our loan portfolio based on our assessment of expected credit losses.
This process, which is critical to our financial results and condition, requires complex judgment including our assessment of economic conditions, which are difficult to predict.
2 unchanged sentences
Although we have policies and procedures in place to determine future losses, due to the subjective nature of this area, there can be no assurance that our management has accurately assessed the level of allowances reflected in our Consolidated Financial Statements.
−Removed: We may underestimate our inherent losses and fail to hold an ACL sufficient to account for these losses.
−Removed: Incorrect assumptions could lead to material underestimates of inherent losses and an inadequate ACL.
−Removed: As our assessment of inherent losses changes, we may need to increase or decrease our ACL, which could significantly impact our financial results and profitability.
−Removed: RISK FACTORS - continued
+Added: We may underestimate our expected credit losses and fail to hold an ACL sufficient to account for these losses.
+Added: Incorrect assumptions could lead to material underestimates of expected losses and an inadequate ACL.
+Added: As our assessment of expected losses changes, we may need to increase or decrease our ACL, which could significantly impact our financial results and profitability.
The adoption of ASU No.
5 unchanged sentences
This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.
−Removed: This differs significantly from the incurred loss model which delayed recognition until it was probable a loss had been incurred.
+Added: This differs significantly from the incurred loss model which delayed
+Added: RISK FACTORS - continued
+Added: recognition until it was probable a loss had been incurred.
Upon origination of a loan, the estimate of expected credit losses, and any subsequent changes to such estimate, will be recorded through provision for credit losses in our consolidated statement of income.
12 unchanged sentences
Moreover, we cannot give any assurance that we will benefit from any market growth or favorable economic conditions in our primary market area.
−Removed: Our loan portfolio has a significant concentration of commercial real estate loans.
−Removed: The majority of our loans are to commercial borrowers and 53 percent of our total loans are commercial real estate, or CRE, and construction loans with real estate as the primary collateral.
−Removed: The CRE segment of our loan portfolio typically involves higher loan principal amounts, and the repayment of these loans is generally dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service.
+Added: Our loan portfolio has a significant concentration of commercial loans that have a higher risk of loss.
+Added: The majority of our loans are to commercial borrowers including commercial and industrial, or C&I, commercial real estate, or CRE, and construction loans with real estate as the primary collateral.
+Added: The commercial loan portfolio typically involves a higher degree of credit risk than other types of loans.
+Added: For the C&I segment this is due to the customer’s repayment ability being based upon the success of its business operations, the susceptibility of the customer’s business to changing economic conditions, the dependence of our customer on maintaining sufficient cash flow to make payments on the loan and our reliance on the underlying collateral, which is usually only the business assets that may not have sufficient value when the borrower encounters financial difficulties.
+Added: For the CRE segment higher risk is due to higher loan principal amounts, where the repayment of these loans is generally dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service.
Because payments on loans secured by CRE often depend upon the successful operation and management of the properties, repayment of these loans may be affected by factors outside the borrower’s control, including adverse conditions in the real estate market or the economy.
Additionally, we have a number of significant credit exposures to commercial borrowers, and while the majority of these borrowers have numerous projects that make up the total aggregate exposure, if one or more of these borrowers default or have financial difficulties, we could experience higher credit losses, which could adversely impact our financial condition and results of operations.
−Removed: In December 2015, the FDIC and the other federal financial institution regulatory agencies released a new statement on prudent risk management for commercial real estate lending.
−Removed: In this statement, the agencies express concerns about easing commercial real estate underwriting standards, direct financial institutions to maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks, and indicate that they will continue to pay special attention to commercial real estate lending activities and concentrations going forward.
+Added: Further, an individual commercial loan balance is typically larger than other loans in our portfolio, creating the potential for larger credit losses on an individual loan.
+Added: The deterioration of one or a few of these loans could have a material adverse effect on our financial condition and results of operations.
+Added: Risks Related to General Economic Conditions
+Added: General economic conditions may harm our industry, business and results of operations.
+Added: Various aspects of our business could be impacted by general macroeconomic conditions including, among others, inflation, interest rates, supply chain complications and economic uncertainty.
+Added: Inflation rates in the United States have increased to levels not experienced in several years.
+Added: Inflation, interest rates and related economic volatility, as well as supply chain complications, could adversely affect our business, financial condition, results of operations and cash flows.
+Added: These unfavorable economic conditions could, among other things, impact the value of our securities portfolio, impact our net interest margin, adversely impact our customer’s ability to make payments on floating rate loans, if interest rates rise, and increase the risk of default by our customers experiencing financial difficulties and business disruptions.
RISK FACTORS - continued
19 unchanged sentences
Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, and cause reputational harm.
+Added: A cyber attack, information or security breach, or a technology failure of ours or of a third-party could adversely affect our ability to conduct our business or manage our exposure to risk, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm.
+Added: Our business is highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact.
+Added: Cyber security risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors.
+Added: Our operations rely on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties.
+Added: We rely on digital technologies, computer, database and email systems, software, and networks to conduct our operations.
+Added: In addition, to access our network and products and services, our customers and third parties may use personal mobile devices or computing devices that are outside of our network environment.
+Added: Financial services institutions have been subject to, and are likely to continue to be the target of, cyber attacks, including computer viruses, malicious or destructive code, phishing attacks, denial of service or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of the institution, its employees or customers or of third parties, or otherwise materially disrupt network access or business
+Added: RISK FACTORS - continued
+Added: For example, denial of service attacks have been launched against a number of large financial institutions and several large retailers have disclosed substantial cyber security breaches affecting debit and credit card accounts of their customers.
+Added: We have experienced cyber security incidents in the past and although not material, we anticipate that, as a growing regional bank, we could experience further incidents.
+Added: There can be no assurance that we will not suffer material losses or other material consequences relating to technology failure, cyber attacks or other information or security breaches.
+Added: In addition to external threats, insider threats also present a risk to us.
+Added: Insiders, having legitimate access to our systems and the information contained in them, have the opportunity to make inappropriate use of the systems and information.
+Added: We have policies, procedures, and controls in place designed to prevent or limit this risk, but we cannot guarantee that these policies, procedures and controls fully mitigate this risk.
+Added: As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents.
+Added: Any of these matters could result in our loss of customers and business opportunities, significant disruption to our operations and business, misappropriation or destruction of our confidential information and/or that of our customers, or damage to our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs.
+Added: In addition, any of the matters described above could adversely impact our results of operations and financial condition.
+Added: Fraudulent activity associated with our products and services could adversely affect our results of operations, financial condition and stock price, negatively impact our brand and reputation, and result in regulatory intervention or sanctions.
+Added: As a financial institution we are exposed to operational risk in the form of fraudulent activity that may be committed by customers, other third parties, or employees, targeting us and our customers.
+Added: The risk of fraud continues to increase for the financial services industry.
+Added: Fraudulent activity has escalated, become more sophisticated, and continues to evolve, as there are more options to access financial services.
+Added: In our Form 8-K filed May 26, 2020, we disclosed that we discovered customer fraud resulting from a check kiting scheme by a business customer of S&T.
+Added: We recognized a pre-tax loss of $58.7 million during the second quarter of 2020 related to this customer fraud.
+Added: As a result of our internal review of the fraud, we have made process and monitoring enhancements.
+Added: While we believe we have operational risk controls in place to prevent or detect future instances of fraud or to mitigate the impact of any fraud, we cannot provide assurance that we can prevent or detect fraud or that we will not experience future fraud losses or incur costs or other damage related to such fraud, at levels that adversely affect our results of operation, financial condition, or stock price.
+Added: Furthermore, fraudulent activity could negatively impact our brand and reputation, which could also adversely affect our results of operation, financial condition, or stock price.
+Added: Fraudulent activity could also lead to regulatory intervention or regulatory sanctions.
+Added: We rely on third-party providers and other suppliers for a number of services that are important to our business.
+Added: An interruption or cessation of an important service by any third-party could have a material adverse effect on our business.
+Added: We are dependent for the majority of our technology, including our core operating system, on third-party providers.
+Added: If these companies were to discontinue providing services to us, we may experience significant disruption to our business.
+Added: In addition, each of these third parties faces the risk of cyber attack, information breach or loss, or technology failure.
+Added: If any of our third-party service providers experience such difficulties, or if there is any other disruption in our relationships with them, we may be required to find alternative sources of such services.
+Added: We are dependent on these third-party providers securing their information systems, over which we have limited control, and a breach of their information systems could adversely affect our ability to process transactions, service our clients or manage our exposure to risk and could result in the disclosure of sensitive, personal customer information, which could have a material adverse impact on our business through damage to our reputation, loss of business, remedial costs, additional regulatory scrutiny or exposure to civil litigation and possible financial liability.
+Added: Assurance cannot be provided that we could negotiate terms with alternative service sources that are as favorable or could obtain services with similar functionality as found in existing systems without the need to expend substantial resources, if at all, thereby resulting in a material adverse impact on our business and results of operations.
+Added: Failure to continue to attract, develop, and maintain a highly skilled workforce may have an adverse effect on our business.
+Added: Our business requires that we attract, develop, and maintain a highly skilled workforce.
+Added: Competition for qualified employees and personnel in the banking industry is strong, and there are a limited number of qualified persons with knowledge of, and experience in, the banking industry where we conduct our business.
+Added: Our ability to attract and retain skilled personnel cost effectively is subject to a variety of external factors, including the limited availability of qualified personnel in the
+Added: RISK FACTORS - continued
+Added: workforce in the local markets in which we operate, unemployment levels within those markets, prevailing wage rates, which have increased significantly, health and other insurance costs, and changes in employment and labor laws.
+Added: Furthermore, the complexities introduced into the labor market as a result of the transition to increased work-from-home arrangements have impacted the competitive landscape in our labor market.
+Added: Based on current conditions in the labor market, we have experienced some difficulty in retaining and attracting personnel and there is no assurance that we will be able to continue to successfully do so.
+Added: Risks Related to Our Business Strategy
+Added: Our strategy includes growth plans through organic growth and by means of acquisitions.
+Added: Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
+Added: We intend to continue pursuing a growth strategy through organic growth within our current footprint and through market expansion.
+Added: We also actively evaluate acquisition opportunities as another source of growth.
+Added: We cannot give assurance that we will be able to expand our existing market presence, or successfully enter new markets or that any such expansion will not adversely affect our results of operations.
+Added: Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully implement our business strategy.
+Added: Our failure to find suitable acquisition candidates, or successfully bid against other competitors for acquisitions, could adversely affect our ability to fully implement our business strategy.
+Added: If we are successful in acquiring other entities, the process of integrating such entities will divert significant management time and resources.
+Added: We may not be able to integrate efficiently or operate profitably any entity we may acquire.
+Added: We may experience disruption and incur unexpected expenses in integrating acquisitions.
+Added: These failures could adversely impact our future prospects and results of operation.
+Added: Our future performance will depend, in part, on the successful transition of our new CEO.
+Added: Christopher J.
+Added: 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.
+Added: 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.
+Added: Our future performance will depend, in part, on the successful transition of our new CEO.
+Added: 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.
+Added: 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.
+Added: We are subject to competition from both banks and non-banking companies.
+Added: The financial services industry is highly competitive, and we encounter strong competition for deposits, loans and other financial services in our market area, including online providers of these products and services.
+Added: Our principal competitors include other local, regional and national financial services providers, such as other financial holding companies, commercial banks, credit unions, finance companies and brokerage and insurance firms, including competitors that provide their products and services online.
+Added: Many of our non-bank competitors are not subject to the same degree of regulation that we are and have advantages over us in providing certain services.
+Added: Additionally, many of our competitors are significantly larger than we are and have greater access to capital and other resources.
+Added: Failure to compete effectively for deposit, loan and other financial services customers in our markets could cause us to lose market share, slow our growth rate and have an adverse effect on our financial condition and results of operations.
+Added: We may be required to raise capital in the future, but that capital may not be available or may not be on acceptable terms when it is needed.
+Added: We are required by federal regulatory authorities to maintain adequate capital levels to support operations.
+Added: While we believe we currently have sufficient capital, if we cannot raise additional capital when needed, we may not be able to meet these requirements.
+Added: In addition, our ability to further expand our operations through organic growth, which includes growth within our current footprint and growth through market expansion, may be adversely affected by any inability to raise necessary capital.
+Added: Our ability to raise additional capital at any given time is dependent on capital market conditions at that time and on our financial performance and outlook.
+Added: RISK FACTORS - continued
+Added: Risks Related to Interest Rates and Investments
+Added: Our net interest income could be negatively affected by interest rate changes which may adversely affect our financial condition.
+Added: Our results of operations are largely dependent on net interest income, which is the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities.
+Added: Therefore, any change in general market interest rates, including changes resulting from the Federal Reserve Board’s policies, can have a significant effect on our net interest income and total income.
+Added: There may be mismatches between the maturity and repricing of our assets and liabilities that could cause the net interest rate spread to compress, depending on the level and type of changes in the interest rate environment.
+Added: Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and the policies of various governmental agencies.
+Added: In addition, some of our customers often have the ability to prepay loans or redeem deposits with either no penalties or penalties that are insufficient to compensate us for the lost income.
+Added: A significant reduction in our net interest income will adversely affect our business and results of operations.
+Added: If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially harmed.
+Added: Declines in the value of investment securities held by us could require write-downs, which would reduce our earnings.
+Added: In order to diversify earnings and enhance liquidity, we own debt instruments of government agencies and municipalities.
+Added: We may be required to record impairment charges on our debt securities if they suffer a decline in value due to the underlying credit of the issuer.
+Added: Additionally, the value of these investments may fluctuate depending on the interest rate environment, general economic conditions and circumstances specific to the issuer.
+Added: Volatile market conditions may detrimentally affect the value of these securities, such as through reduced valuations due to the perception of heightened credit or liquidity risks.
+Added: Changes in the value of these instruments may result in a reduction to earnings and/or capital, which may adversely affect our results of operations and financial condition.
+Added: Risks Related to Regulatory Compliance and Legal Matters
+Added: We are subject to extensive governmental regulation and supervision.
+Added: We are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of our operations.
+Added: The regulations are primarily intended to protect depositors, customers and the banking system as a whole, not shareholders.
+Added: These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things.
+Added: Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.
+Added: The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes.
+Added: Other changes to statutes, regulations or policies could affect us in substantial and unpredictable ways.
+Added: The regulatory environment of the current administration may take a more active approach to financial services regulation with respect to its major policy goals, such as climate change, racial equity, and consumer protection.
+Added: Any regulatory changes could subject us to additional costs of regulatory compliance and of doing business, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things, and could divert management’s time from other business activities.
+Added: Failure to comply with applicable laws, regulations, policies or supervisory guidance could lead to enforcement and other legal actions by federal or state authorities, including criminal or civil penalties, the loss of FDIC insurance, the revocation of a banking charter, other sanctions by regulatory agencies, and/or damage to our reputation.
+Added: The ramifications and uncertainties of the level of government intervention in the U.S.
+Added: financial system could also adversely affect us.
+Added: Our controls and policies and procedures may fail or be circumvented, which may result in a material adverse effect on our business, financial condition and results of operations.
+Added: Management regularly reviews and updates our internal controls, disclosure controls and procedures, operating, risk management and corporate governance policies and procedures.
+Added: Any system of controls, policies and procedures, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
+Added: Any failure or circumvention of internal controls, disclosure controls and procedures, or operating, risk management and corporate governance policies and procedures, whether as a result of human error, misconduct or malfeasance, or failure to comply with regulations related to controls and policies and procedures could have a material adverse effect on our business, results of operations and financial condition.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.