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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-24 · 307 added, 573 removed, 611 unchanged (59% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section reviews our financial condition for each of the past two years and results of operations for each of the past three years.

This section reviews our financial condition for each of the past two fiscal years and results of operations for each of the past three fiscal years.

The Company's discussion and analysis focuses on significant factors impacting the financial condition and results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

This discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Supplementary Data and related notes within this Annual Report on Form 10-K.

A similar discussion and analysis that compares the year ended December 31, 2022 to the year ended December 31, 2021 may be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations” on our Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on February 24, 2023.

Certain reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

Some tables may include additional time periods to illustrate trends within our consolidated financial statements.

The results of operations reported in the accompanying consolidated financial statements are not necessarily indicative of results to be expected in future periods.

Important Note Regarding Forward-Looking Statements

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our ability to manage our reputational risks;

sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve;

sensitivity to the interest rate environment, a rapid increase in interest rates or a change in the shape of the yield curve;

a change in spreads on interest-earning assets and interest-bearing liabilities;

the transition from LIBOR as a reference rate;

any remaining uncertainties with the transition from LIBOR as a reference rate;

regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those requirements;

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legislation affecting the financial services industry as a whole, and S&T, in particular;

developments affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S.

banking system;

the outcome of pending and future litigation and governmental proceedings;

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general economic or business conditions, including the strength of regional economic conditions in our market area;

environmental, social and governance practices and disclosures, including climate change, hiring practices, the diversity of the work force, and racial and social justice issues;

the duration and severity of the coronavirus, or COVID-19 pandemic, both in our principal area of operations and nationally, including the ultimate impact of the pandemic on the economy generally and on our operations;

our participation in the Paycheck Protection Program;

ESG practices and disclosures, including climate change, hiring practices, the diversity of the work force, and racial and social justice issues;

deterioration of the housing market and reduced demand for mortgages;

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the stability of our core deposit base and access to contingency funding;

re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described elsewhere in this report, including Part I, Item 1A, Risk Factors and any of our subsequent filings with the SEC.

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Allowance for Credit Losses

In January 2020, we adopted ASC 326, which replaced the former incurred loss methodology with an expected credit loss methodology that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of an asset.

Our expected credit loss methodology requires consideration of a broader range of information to estimate expected credit losses over the lifetime of an asset.

The ACL is a valuation reserve established and maintained by charges against operating income.

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Business combinations also typically result in goodwill which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the acquired goodwill relates.

The carrying value of goodwill is tested annually for impairment each October 1st or more frequently if events and circumstances indicate that it may be impaired.

We test for impairment by comparing the fair value of the reporting unit with its

S&T BANCORP, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The carrying value of goodwill is tested annually for impairment each October 1st or more frequently if events and circumstances indicate that it may be impaired.

We test for impairment by comparing the fair value of the reporting unit with its carrying amount.

carrying amount.

An impairment charge would be recognized if the carrying amount exceeds the reporting unit's fair value.

A qualitative assessment is performed to determine whether it is more likely than not that the reporting unit's fair value is less than it's carrying value.

We perform a quantitative impairment test only if we conclude that it is more likely than not that a reporting unit's fair value is less than the carrying amount.

Determining the fair value of a reporting unit is judgmental and involves the use of significant estimates and assumptions.

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The fair values of each method are then weighted based on the relevance and reliability in the current economic environment.

We last completed a quantitative goodwill impairment test as of November 30, 2020 and concluded that goodwill was not impaired.

A discount rate of 11.50 percent was used for the income approach.

If the discount rate was increased 2 percent to 13.50 percent, our fair value would have still exceeded carrying value resulting in no goodwill impairment.

Based upon our qualitative assessment performed for our annual impairment analysis as of October 1, 2023, we concluded that goodwill is not impaired.

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Explanation of Use of Non-GAAP Financial Measures

In addition to traditional measures presented in accordance with GAAP, our management uses, and this report contains or references, certain non-GAAP financial measures identified below.

We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry.

In addition to traditional financial measures presented in accordance with GAAP, our management uses, and this report contains or references, certain non-GAAP financial measures discussed below.

We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying business, operational performance and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry.

Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies.

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We believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between taxable and non-taxable sources of interest income.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table reconciles interest and dividend income per the Consolidated Statements of Net Income to interest income, net interest income and net interest margin on an FTE basis (non-GAAP) for the periods presented:

The following table reconciles interest and dividend income and net interest income per the Consolidated Statements of Net Income to interest income, net interest income and net interest margin on an FTE basis (non-GAAP) for the periods presented:

Years ended December 31,

(dollars in thousands) 2023 2022 2021

Total interest and dividend income per Consolidated Statements of Net Income $ 340,751 $ 289,262 $ 320,464

Adjustment to FTE basis 2,052 2,316 3,202

Interest and dividend income per Consolidated Statements of Net Income $ 477,901 $ 340,751 $ 289,262

taxable equivalent adjustment 2,550 2,052 2,316

Interest Income on an FTE Basis (Non-GAAP) $ 480,451 $ 342,803 $ 291,578

Total interest and dividend income per Consolidated Statements of Net Income 340,751 289,262 320,464

Total interest expense 24,968 13,150 41,076

Interest and dividend income per Consolidated Statements of Net Income $ 477,901 $ 340,751 $ 289,262

Interest expense (128,491) (24,968) (13,150)

Net Interest Income per Consolidated Statements of Net Income 349,410 315,783 276,112

Adjustment to FTE basis 2,052 2,316 3,202

taxable equivalent adjustment 2,550 2,052 2,316

Net Interest Income on an FTE Basis (Non-GAAP) $ 351,960 $ 317,835 $ 278,428

Net interest margin 4.10 % 3.74 % 3.19 %

Adjustment to FTE basis 0.02 0.03 0.04

taxable equivalent adjustment 0.03 % 0.02 % 0.03 %

Net Interest Margin on an FTE Basis (Non-GAAP) 4.13 % 3.76 % 3.22 %

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The efficiency ratio is noninterest expense divided by noninterest income plus net interest income, on an FTE basis (non-GAAP), which ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

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Noninterest expense per Consolidated Statements of Net Income $210,334 $196,746 $188,925

merger related expenses

Noninterest expense excluding nonrecurring items $196,746 $188,925 $184,329

Net interest income per Consolidated Statements of Net Income

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57,620 58,259 64,696

net (gains) losses on sale of securities

(198) (29) (142)

net gains on sale of securities

Net interest income (FTE) (non-GAAP) plus noninterest income

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51.35 % 52.34 % 55.06 %

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Return on average tangible shareholders' equity (non-GAAP) is a key profitability metric used by management to measure financial performance.

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Average tangible shareholders' equity

$ 850,175 $ 803,485 $ 806,549

Return on Average Tangible Shareholders' Equity (non-GAAP) 17.15 % 17.02 % 13.85 %

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We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.6 billion at December 31, 2023.

We operate in Pennsylvania and Ohio.

We provide a full range of financial services with retail and commercial banking products, cash management services, trust and brokerage services.

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”.

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We incur expenses for the cost of deposits and other funding sources, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, occupancy and tax expense.

In 2022, we celebrated a great milestone, our 120-year anniversary.

We finished 2022 with two consecutive quarters of record net income and earnings per share and record full year net income and earnings per share.

We are focused on living our purpose of building a better future together through people-forward banking.

Our future at S&T is a world where everything we do daily reflects our purpose and is guided by our values.

Our purpose is building a better future together through people-forward banking.

We believe that all banking should be personal.

We cultivate relationships rooted in trust, strengthened by going above and beyond and renewed with every interaction.

Our strategic priorities for 2024 and beyond will be focused on our deposit franchise, core profitability, asset quality and talent and engagement.

During the first quarter of 2023, the banking industry experienced significant volatility with several high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system.

Despite these negative industry developments, our liquidity position and balance sheet remain well-positioned.

We have a well-diversified deposit base with a balance mix of 56.4 percent personal, 34.1 percent business, 4.5 percent public funds and 5.0 percent brokered deposits at December 31, 2023.

We have total uninsured deposits of $2.3 billion, or 30 percent of our total deposit base.

At December 31, 2023, we had remaining borrowing availability of $4.1 billion, which includes $2.7 billion with the FHLB of Pittsburgh, $769.7 million from the Federal Reserve Borrower-in-Custody Program and $637.0 million from the Federal Reserve Bank Term Funding Program, or BTFP.

Furthermore, our capital remains strong with a Common Equity Tier 1 Ratio of 13.37 percent and a total capital ratio of 15.27 percent at December 31, 2023.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

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Earnings Summary

The following table presents a summary of key profitability metrics for the periods presented:

Years ended December 31,

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Return on average tangible shareholders' equity (non-GAAP) (1)

We earned record net income of $135.5 million, an increase of $25.2 million or 22.8 percent, compared to net income of $110.3 million in 2021.

Earnings per diluted share increased 23.1 percent to $3.46 in 2022 compared to $2.81 in 2021.The increase in net income was primarily due to higher net interest income related to rising interest rates and a lower provision for credit losses related to improving economic conditions.

Net income in 2020 was impacted by a pre-tax loss of $58.7 million related to a customer fraud resulting from a check kiting scheme.

The fraud was perpetrated by a single business customer and the customer has plead guilty in a criminal investigation.

We continue to pursue all available sources of recovery to mitigate the loss.

17.15 % 17.02 % 13.85 %

(1) Reconciled to GAAP in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

We earned record net income of $144.8 million for the second consecutive year, representing an increase of $9.3 million or 6.83 percent, compared to net income of $135.5 million in 2022.

Earnings per diluted share increased 8.1 percent to a record $3.74 in 2023 compared to $3.46 in 2022.

The increase in net income was primarily due to higher net interest income related to higher interest rates.

Return on average assets increased 8 basis points to 1.56 percent for 2023 compared to 1.48 percent for 2022.

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Interest and dividend income increased $137.2 million and interest expense increased $103.5 million compared to 2022.

S&T BANCORP, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

interest margin, or NIM, on an FTE basis (non-GAAP) increased 54 basis points to 3.76 percent compared to 3.22 percent in 2021.

The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates during 2022.

NIM is reconciled to net interest margin adjusted to an FTE basis (non-GAAP) above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

The provision for credit losses decreased $7.8 million to $8.4 million for 2022 compared to $16.2 million for 2021.

The decrease in the provision for credit losses during 2022 was mainly due to a reduction in net charge-offs in 2022.

The net interest margin, or NIM, on an FTE basis (non-GAAP) increased 37 basis points to 4.13 percent compared to 3.76 percent in 2022.

The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates during 2023 and an asset sensitive balance sheet.

NIM is reconciled to net interest margin adjusted to an FTE basis (non-GAAP) above in the "Explanation of Use of Non-GAAP Financial Measures" section of this Management’s Discussion and Analysis, or MD&A.

The provision for credit losses increased $9.5 million to $17.9 million for 2023 compared to $8.4 million for 2022.

The increase in the provision for credit losses was mainly due to an increase in net charge-offs in 2023 and our qualitative reserve.

Net loan charge-offs were $13.2 million, or 0.18 percent of average loans, in 2023 compared to $2.6 million, or 0.04 percent of average loans, in 2022.

Noninterest income decreased $6.4 million to $58.3 million compared to $64.7 million in 2021.

Mortgage banking decreased $7.5 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated mortgage loans.

Other noninterest income decreased $1.8 million primarily related to a $3.1 million decline in the fair value of assets in a nonqualified benefit plan partially offset by a net gain on the sale of OREO.

Service charges on deposit accounts and debit and credit card fees increased $2.8 million due to increased customer activity.

Noninterest income was relatively consistent at $57.6 million compared to $58.3 million in 2022.

Mortgage banking income decreased $1.1 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated mortgage loans on the balance sheet.

Various other customer fees were down compared to the prior year due to lower activity.

Offsetting these decreases was an increase of $2.5 million in other noninterest income primarily related to valuation adjustments and a $0.8 million increase in net gain on the sale of OREO partially offset by a $0.8 million decrease in fees on commercial loan swaps.

Noninterest expense increased $13.6 million to $210.3 million compared to $196.7 million in 2022.

Salaries and employee benefits increased $3.0 million primarily due to base rate increases and higher incentives.

Professional and legal increased $2.0 million due to increased consulting engagements compared to 2021.

Marketing increased $1.0 million due to increased marketing efforts.

Other noninterest expense increased $1.8 million in 2022 primarily due to a lease impairment and increased travel and entertainment expenses.

These higher expenses were offset by decreases in FDIC insurance of $1.4 million in 2022 compared to 2021.

The efficiency ratio (non-GAAP) for 2022 improved to 52.34 percent compared to 55.06 percent for 2021.

Salaries and employee benefits increased $8.2 million primarily due to higher salaries related to inflationary wage pressure, the acquisition of new talent and a change in the valuation adjustment on a nonqualified benefit plan.

Loan-related expense increased $2.1 million primarily due to an increase in loan collection and legal expenses for the workout of criticized and classified loans.

Furniture, equipment and software expense increased $1.3 million due to new software implemented in 2023.

FDIC insurance increased $1.3 million due to a two basis point increase in the assessment rate.

The efficiency ratio (non-GAAP) for 2023 improved to 51.35 percent compared to 52.34 percent for 2022 due to higher revenue in 2023.

A reconciliation of the efficiency ratio (non-GAAP) is provided above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

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The increase in our income tax provision was primarily due to a $9.9 million increase in pretax income in 2023 compared to 2022.

The effective tax rate increased 1.1 percent to 19.8 percent in 2022 compared to 18.7 percent in 2021.

The increase in the effective tax rate was primarily due to significantly higher income before taxes in 2022 compared to 2021.

The effective tax rate decreased 0.8 percent to 19.0 percent in 2023 compared to 19.8 percent in 2022.

The decrease in the effective tax rate was primarily due to an increase in Low Income Housing Tax Credits, or LIHTCs, in 2023 compared to 2022.

Net Interest Income

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Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities.

Net interest income is affected by changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and spreads.

Net interest income is affected by changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee, or ALCO, in order to mitigate interest rate and liquidity risks of the balance sheet.

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During 2022, we entered into interest rate swaps with a total notional amount of $500.0 million with original maturities ranging from three to five years.

Our strategy is to reduce our exposure to variability in expected future cash flows related to interest payments on commercial loans that are currently indexed to the 1-month LIBOR rate.

Interest rates have increased substantially in 2022 resulting in a loss on the cash flow hedges of $16.8 million which is reported in Other Comprehensive Income (Loss), or OCI, net of applicable taxes.

Average Balance Sheet and Net Interest Income Analysis

The following table provides information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the years ended December 31:

There were no new interest rates swaps entered into in 2023.

Our strategy is to reduce our exposure to variability in expected future cash flows related to interest payments on commercial loans that are currently indexed to the 1-month SOFR rate.

Interest rates have increased substantially in 2022 and 2023 resulting in an unrealized loss on the cash flow hedges of $11.6 million, which is reported in Other Comprehensive Income (Loss), or OCI, net of applicable taxes.

Average Balance Sheet and Net Interest Income Analysis (FTE) (non-GAAP)

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

S&T BANCORP, INC.

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2023 2022 2021

(dollars in thousands) Average

Balance Interest Rate Average

Balance Interest Rate

(dollars in thousands) Average Balance Interest Rate Average Balance Interest Rate Average Balance Interest Rate

Interest-bearing deposits with banks $ 141,954 $ 7,344 5.17 % $ 378,323 $ 2,952 0.78 % $ 722,057 $ 973 0.13 %

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Total Borrowings 584,342 32,680 5.59 % 149,359 4,501 3.01 % 160,913 2,392 1.49 %

Total other costing liabilities 15,163 560 3.69 % — — — % — — — %

Other interest-bearing liabilities 58,135 2,975 5.12 % 15,163 560 3.69 %

Total Interest-bearing Liabilities 5,487,441 128,491 2.34 % 5,107,492 24,968 0.49 % 5,453,979 13,150 0.24 %

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4.13 % 3.76 % 3.22 %

(1) Nonaccruing loans are included in the daily average loan amounts outstanding.

(2) Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent .

(1) Tax-exempt interest income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent.

(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

S&T BANCORP, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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:

2022 Compared to 2021

Increase (Decrease) Due to 2021 Compared to 2020

Increase (Decrease) Due to

(dollars in thousands) Volume (4)

Net Volume (4)

Interest earned on:

Interest-bearing deposits with banks $ (463) $ 2,443 $ 1,980 $ 1,552 $ (1,095) $ 457

Securities at fair value (2)(3)

4,035 710 4,745 1,691 (2,566) (875)

Loans held for sale (90) 15 (75) (32) (4) (36)

Commercial real estate (2,456) 22,437 19,981 (4,094) (16,601) (20,695)

Commercial and industrial (5,088) 12,796 7,708 (7,271) 5,380 (1,892)

Commercial construction (2,278) 5,630 3,352 1,103 (2,362) (1,259)

Total commercial loans (9,822) 40,863 31,041 (10,262) (13,584) (23,846)

Residential mortgage 4,052 (117) 3,935 (3,538) (1,249) (4,787)

Home equity 2,332 4,733 7,065 172 (2,819) (2,647)

Installment and other consumer 1,756 70 1,826 662 (559) 103

Consumer construction 868 (338) 530 56 19 74

Total consumer loans 9,008 4,348 13,356 (2,648) (4,609) (7,257)

Total portfolio loans (814) 45,211 44,397 (12,910) (18,193) (31,103)

Total loans (1)(2)

(904) 45,226 44,322 (12,942) (18,197) (31,139)

Total other earning assets 89 90 179 (401) (131) (533)

Change in Interest Earned on Interest-earning Assets $ 2,757 $ 48,469 $ 51,226 $ (10,100) $ (21,989) $ (32,089)

Interest paid on:

Interest-bearing demand $ (32) $ 248 $ 216 $ (16) $ (1,857) $ (1,872)

Money market (224) 8,520 8,296 (37) (7,957) (7,994)

Savings 26 728 754 160 (765) (605)

Certificates of deposit (1,236) 1,119 (117) (3,575) (11,182) (14,757)

Total interest-bearing deposits (1,466) 10,615 9,149 (3,468) (21,761) (25,229)

Securities sold under repurchase agreements (38) (5) (43) 36 (126) (90)

Short-term borrowings 65 1,582 1,647 (1,376) (46) (1,422)

Long-term borrowings (78) 31 (47) (625) (118) (743)

Junior subordinated debt securities (216) 768 552 (87) (356) (443)

Total borrowings (267) 2,376 2,109 (2,052) (645) (2,697)

Total other costing liabilities $ 560 $ — $ 560 $ — $ — $ —

Change in Interest Paid on Interest-bearing Liabilities $ (1,173) $ 12,991 $ 11,818 $ (5,520) $ (22,406) $ (27,926)

Change in Net Interest Income $ 3,930 $ 35,478 $ 39,408 $ (4,580) $ 417 $ (4,163)

(3) Nonaccruing loans are included in the daily average loan amounts outstanding.

(2) Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent.

(3) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Net interest income on an FTE basis (non-GAAP) increased $34.1 million, or 10.7 percent, compared to 2022.

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The increases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to higher interest rates during 2023.

NIM on an FTE basis (non-GAAP) was also positively impacted by lower average cash balances.

Average interest-bearing deposits with banks decreased $343.7 million compared to 2021.

Interest income on an FTE basis (non-GAAP) increased $137.6 million compared to 2022.

The increase in interest income was primarily due to higher interest rates partially offset by lower Paycheck Protection Program, or PPP, income.

Average PPP loans decreased $301.7 million compared to 2021.

Average loan balances, excluding PPP loans, increased $254.5 million compared to 2021.

The average yield on loans increased 66 basis points compared to 2021 due to higher interest rates.

Average securities increased $185.2 million compared to 2021 due to interest-bearing deposits with banks being redeployed to higher yielding assets.

Average interest-bearing deposits with banks decreased $343.7 million compared to 2021 due to decreased deposit balances and increased securities.

Overall, the FTE rate (non-GAAP) on interest-earning assets increased 69 basis points compared to 2021.

The increase in interest income on an FTE basis (non-GAAP) was primarily due to higher interest rates.

Average loan balances increased $326.3 million compared to 2022.

The average yield on loan balances increased 154 basis points compared to 2022 due to higher interest rates.

Average interest-bearing deposits with banks decreased $236.4 million compared to 2022 due to declines in deposit balances and loan growth.

The average yield on interest-bearing deposits with banks increased 439 basis points compared to 2022 due to

S&T BANCORP, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

increased interest rates.

Overall, the FTE rate (non-GAAP) on interest-earning assets increased 158 basis points compared to 2022.

Interest expense increased $103.5 million compared to 2022.

The increase in interest expense was primarily due to higher interest rates.

The increase in interest expense was primarily due to higher interest rates and a shift in our funding mix to higher cost certificates of deposits and borrowings.

Average interest-bearing deposits decreased $98.0 million compared to 2022 due to the competitive market driven by rising interest rates.

The average rate paid on interest-bearing deposits increased 20 basis points due to increased interest rates.

Average demand deposits increased $111.1 million compared to 2021;

however, overall deposit balances were down year-over-year.

Average borrowings decreased $11.6 million compared to 2021 primarily due to the discontinuation of the customer repurchase agreement product and the payoff of a subordinated debt.

Short-term borrowings increased $33.7 million and the average rate paid increased 396 basis points.

The average rate paid on interest-bearing deposits increased 152 basis points due to higher interest rates.

Certificates of deposit increased $308.8 million compared to 2022.

The increase in certificates of deposits was primarily due to higher interest rates resulting in customers moving deposits to higher yield accounts.

Average borrowings increased $435.0 million compared to 2022 primarily due to decreased deposit balances and increased loans.

The average rate paid on borrowings increased 258 basis points compared to 2022 due to higher interest rates.

Overall, the cost of interest-bearing liabilities increased 185 basis points compared to 2022.

Provision for Credit Losses

The provision for credit losses includes a provision for losses on loans and on unfunded loan commitments.

The provision for credit losses fluctuates based on changes in loan balances, risk ratings, net loan charge-offs and our CECL assumptions.

The provision for credit losses decreased $7.8 million to $8.4 million for 2022 compared to $16.2 million for 2021.

The provision for credit losses included $3.0 million for the reserve for unfunded commitments for 2022 compared to $0.7 million for 2021.

The decrease in the provision for credit losses was primarily due to significantly lower net charge-offs in 2022 compared to 2021.

Net loan charge-offs were $2.6 million in 2022 compared to $34.5 million in 2021.

Contributing to the decrease in the provision for credit losses was a $1.7 million reduction in specific reserves on loans individually assessed due to the resolution of a C&I relationship through a note sale which resulted in a $5.5 million charge-off during the second quarter of 2022.

Offsetting the decrease in provision for credit losses during 2022 was a $2.3 million increase in the provision for unfunded loan commitments primarily due to an increase in loss rates and unused commitments in the construction portfolio.

Refer to the Credit Quality section of this MD&A for further details.

Noninterest Income

Years Ended December 31,

(dollars in thousands) 2022 2021 $ Change % Change

Securities gains, net $ 198 $ 29 $ 169 582.8 %

Debit and credit card 19,008 17,952 1,056 5.9 %

Service charges on deposit accounts 16,829 15,040 1,789 11.9 %

Wealth management 12,717 12,889 (172) (1.3) %

Mortgage banking 2,215 9,734 (7,519) (77.2) %

Other 7,292 9,052 (1,760) (19.4) %

Total Noninterest Income $ 58,259 $ 64,696 $ (6,437) (9.9) %

Noninterest income decreased $6.4 million to $58.3 million compared to $64.7 million in 2021.

Mortgage banking decreased $7.5 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated mortgage loans.

Other noninterest income decreased $1.8 million primarily related to a $3.1 million decline in the fair value of assets in a nonqualified benefit plan, which has a corresponding offset in salaries and benefits resulting in no impact to net income, partially offset by a net gain on the sale of OREO.

Service charges on deposit accounts increased $1.8 million and debit and credit card fees increased $1.1 million due to increased customer activity.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Noninterest Expense

Years Ended December 31,

(dollars in thousands) 2022 2021 $ Change % Change

Salaries and employee benefits $ 103,221 $ 100,214 $ 3,007 3.0 %

Data processing and information technology 16,918 16,681 237 1.4 %

Occupancy 14,812 14,544 268 1.8 %

Furniture, equipment and software 11,606 10,684 922 8.6 %

Professional services and legal 8,318 6,368 1,950 30.6 %

Other taxes 6,620 6,644 (24) (0.4) %

FDIC insurance 2,854 4,224 (1,370) (32.4) %

Marketing 5,600 4,553 1,047 23.0 %

Other 26,797 25,013 1,784 7.1 %

Total Other Noninterest Expense $ 196,746 $ 188,925 $ 7,821 4.1 %

Noninterest expense increased $7.8 million to $196.7 million compared to $188.9 million in 2021.

Salaries and employee benefits increased $3.0 million during 2022 primarily due to base rate increases and higher incentives offset by a change in the fair value of assets in a nonqualified benefit plan.

Professional services and legal increased $2.0 million due to higher consulting expense compared to 2021.

Marketing expense increased $1.0 million due to increased marketing efforts and timing of various promotions.

Other noninterest expense increased $1.8 million primarily due to a lease impairment and increased travel and entertainment expenses.

FDIC insurance expense decreased $1.4 million due to a lower assessment base and improvements in the components used to determine the assessment.

The provision for income taxes increased to $33.4 million in 2022 compared to $25.3 million for 2021.

The increase in our income tax provision was primarily due to a $33.3 million increase in income before taxes in 2022 compared to 2021.

The effective tax rate, which is total tax expense as a percentage of income before taxes, increased to 19.8 percent in 2022 compared to 18.7 percent in 2021.

The increase in the effective tax rate was primarily due to significantly higher income before taxes in 2022 compared to 2021.

We have generated an annual effective tax rate that is less than the statutory rate of 21 percent due to benefits resulting from tax-exempt interest, excludable dividend income, tax-exempt income on Bank Owned Life Insurance, or BOLI, and tax benefits associated with Low Income Housing Tax Credits, or LIHTC.

Results of Operations

Year Ended December 31, 2021

COVID-19 Pandemic Update

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law.

It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic.

The CARES Act included the Paycheck Protection Program, or PPP, a $349 billion program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks.

The PPP and Health Care Enhancement Act, or PPP/HCEA, was signed into law on April 24, 2020.

The PPP/HCEA authorized an additional $310 billion of funding under the CARES Act for PPP loans among other provisions.

On July 4, 2020, legislation was passed to extend the application period for the PPP through August 8, 2020.These loans are intended to cover eight weeks of payroll and other permitted expenses to help those businesses remain viable.

The PPP ended on May 31, 2021.

We originated $771.5 million of PPP loans during 2020 and 2021.

PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP.

These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA, on or after June 5, 2020.

Payments are deferred for at least six months of the loan.

The loans are 100 percent guaranteed by the SBA.

We increased our ACL in 2021 to be responsive to the additional risk related to the COVID-19 pandemic.

We did experience improvement in our asset quality during 2021, but remain cautious given the current environment.

The hotel portfolio improved in the second half of 2021 with $34.0 million of loans being returned to performing status due to improved operating performance.

Our balance sheet is asset sensitive resulting in our net interest income and net interest margin, or NIM, being negatively impacted in this low interest rate environment.

Loan demand was challenging in the first half of 2021, but we saw growth trends improving late in the second quarter and for the third and fourth quarter of 2021.

Net interest income was favorably impacted by PPP loans which contributed to net interest income $17.3 million for 2021 and $11.4 million for 2020.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In order to assist our customers through this difficult period, we have provided the following assistance, which may have an adverse impact on our results in the short term, but which we believe will provide better outcomes in the long term for our customers and for S&T.

• We provided needs-based payment deferrals and modifications to interest only periods to commercial loans during 2020 and 2021 totaling $995.7 million.

Only $28.8 million remain on deferral at December 31, 2021.

• We provided loan payment deferrals, with no negative credit bureau reporting, to mortgage and consumer loans during 2020 and 2021 totaling $81.6 million.

No loans remain on deferral at December 31, 2021.

None of these were designated troubled debt restructurings, or TDRs, for accounting purposes.

Earnings Summary

Net income increased $89.3 million to $110.3 million, or $2.81 per diluted share, in 2021 compared to $21.0 million, or $0.53 per diluted share in 2020.

This net increase was primarily due to a lower provision for credit losses related to improving economic conditions, as well the offsetting impact of the 2020 customer fraud that reduced net income by $46.3 million, or $1.19 per share.

We experienced a pre-tax loss of $58.7 million related to a customer fraud resulting from a check kiting scheme during 2020.

The fraud was perpetrated by a single business customer and the customer has plead guilty in a criminal investigation.

We continue to pursue all available sources of recovery to mitigate the loss.

Return on average assets, or ROA, was 1.18 percent and return on average equity, or ROE, was 9.30 percent for 2021 compared to ROA of 0.23 percent and ROE of 1.80 percent for 2020.

Net interest income decreased $3.3 million to $276.1 million compared to 2020.

The decrease in interest income was primarily due to lower average loan balances and the low rate interest environment compared to 2020.

Average loan balances decreased $325.8 million compared to 2020.

Net interest income was favorably impacted by PPP loans which contributed $17.3 million compared to $11.4 million in 2020.

Average interest-bearing deposits decreased $126.2 million compared to 2020.

The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 16 basis points compared to 2020.

The decrease is primarily due to higher average cash balances and the low interest rate environment.

PPP loans positively impacted the NIM on an FTE basis (non-GAAP) by 8 basis points compared to the negative impact of 3 basis points in 2020.

NIM is reconciled to net interest income adjusted to an FTE basis (non-GAAP) above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

The provision for credit losses was $16.2 million for 2021 compared to $131.4 million in 2020.

Excluding a customer fraud loss of $58.7 million, the provision for credit losses was $72.7 million for 2020.

The significant decrease in the provision for credit losses during 2021 was mainly due to the customer fraud in 2020 and an improved outlook for the economy and our loan portfolio.

Net loan charge-offs were $34.5 million, or 0.49 percent of average loans, in 2021 compared to $103.4 million, or 1.40 percent of average loans, during 2020.

Excluding the customer fraud, net loan charge-offs were $44.7 million, or 0.61 percent of average loans in 2020.

Noninterest income increased $4.9 million to $64.6 million compared to $59.7 million in 2020.

Wealth management income increased $2.9 million due to customer growth and improved market conditions.

Debit and credit card fees increased $2.9 million and service charges on deposit accounts increased $1.4 million due to increased customer activity.

These were offset by lower commercial loan swap income of $3.6 million and mortgage banking income of $1.2 million.

Noninterest expense increased $2.2 million to $188.8 million compared to $186.6 million in 2020.

Salaries and employee benefits increased $10.1 million primarily due to higher incentives.

Data processing and information technology increased $1.2 million due to new products and services in 2021.

These higher expenses were offset by decreases in other noninterest expense of $4.1 million, merger related expenses of $2.3 million and marketing of $1.4 million.

The efficiency ratio (non-GAAP) for 2021 was 55.05 percent compared to 53.86 percent for 2020.

The efficiency ratio is noninterest expense divided by noninterest income plus net interest income, on an FTE basis, which ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

A reconciliation of the efficiency ratio (non-GAAP) is provided above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

The provision for income taxes increased to $25.3 million in 2021 compared to nearly zero for 2020.

The increase in our income tax provision was primarily due to a $114.6 million increase in pretax income in 2021 compared to 2020 when pretax income was impacted by significantly higher provision for credit losses.

The effective tax rate increased to 18.7 percent in 2021 compared to a nominal negative annual effective tax rate in 2020.

The increase in the effective tax rate was primarily due to significantly higher income before taxes in 2021 compared to 2020.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Interest Income

The interest income on interest-earning assets and the net interest margin are presented on an FTE basis.

The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities and the dividend-received deduction for equity securities using the federal statutory tax rate of 21 percent and the dividend-received deduction for equity securities.

We believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between taxable and non-taxable sources of interest income.

Interest and dividend income per the Consolidated Statements of Net Income is reconciled to interest income, net interest income and net interest margin on an FTE basis (non-GAAP) above in the "Explanation of Use of Non-GAAP Financial Measures" section of this MD&A.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Average Balance Sheet and Net Interest Income Analysis

2021 2020 2019

(dollars in thousands) Average

Balance Interest Rate Average

Balance Interest Rate

Interest-bearing deposits with banks $ 722,057 $ 973 0.13 % $ 179,887 $ 515 0.29 % $ 59,941 $ 1,233 2.06 %

Securities at fair value (2)(3)

832,304 18,135 2.18 % 764,311 19,011 2.49 % 678,069 17,876 2.64 %

Loans held for sale 4,094 124 3.03 % 5,105 160 3.13 % 2,169 84 3.88 %

Commercial real estate 3,249,559 119,594 3.68 % 3,347,234 140,288 4.19 % 2,945,278 144,877 4.92 %

Commercial and industrial 1,829,563 75,860 4.15 % 2,018,318 77,752 3.85 % 1,575,485 79,429 5.04 %

Commercial construction 471,286 15,443 3.28 % 442,088 16,702 3.78 % 278,665 14,237 5.11 %

Total commercial loans 5,550,407 210,897 3.80 % 5,807,640 234,742 4.04 % 4,799,428 238,543 4.97 %

Residential mortgage 881,494 36,211 4.11 % 964,740 40,998 4.25 % 765,604 33,889 4.43 %

Home equity 543,777 18,822 3.46 % 539,461 21,469 3.98 % 475,149 25,208 5.31 %

Installment and other consumer 90,129 5,351 5.94 % 80,032 5,248 6.56 % 72,283 5,173 7.16 %

Consumer construction 14,748 668 4.53 % 13,484 594 4.40 % 10,896 593 5.44 %

Total consumer loans 1,530,148 61,052 3.99 % 1,597,717 68,309 4.28 % 1,323,932 64,863 4.90 %

Total portfolio loans 7,080,555 271,949 3.84 % 7,405,357 303,051 4.09 % 6,123,360 303,406 4.95 %

Total Loans (1)(2)

7,084,649 272,073 3.84 % 7,410,462 303,211 4.09 % 6,125,529 303,490 4.95 %

Federal Home Loan Bank and other restricted stock 10,363 397 3.83 % 18,234 929 5.10 % 21,833 1,642 7.52 %

Total Interest-earning Assets 8,649,372 291,578 3.37 % 8,372,894 323,666 3.87 % 6,885,372 324,241 4.71 %

Noninterest-earning assets 726,478 779,853 550,164

Total Assets $ 9,375,850 $ 9,152,747 $ 7,435,536

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing demand $ 956,211 $ 809 0.08 % $ 961,823 $ 2,681 0.28 % $ 641,403 $ 3,915 0.61 %

Money market 2,033,631 3,651 0.18 % 2,040,116 11,645 0.57 % 1,691,910 30,236 1.79 %

Savings 1,047,855 366 0.03 % 899,717 972 0.11 % 766,142 1,928 0.25 %

Certificates of deposit 1,255,370 5,930 0.47 % 1,517,643 20,688 1.36 % 1,396,706 26,947 1.93 %

Total Interest-bearing deposits 5,293,066 10,757 0.20 % 5,419,299 35,986 0.66 % 4,496,161 63,026 1.40 %

Securities sold under repurchase agreements 69,964 79 0.11 % 57,673 169 0.29 % 16,863 110 0.65 %

Short-term borrowings 6,301 12 0.19 % 155,753 1,434 0.92 % 255,264 6,416 2.51 %

Long-term borrowings 22,995 458 1.99 % 47,953 1,201 2.50 % 66,392 1,831 2.76 %

Junior subordinated debt securities 61,653 1,843 2.99 % 64,092 2,286 3.57 % 47,934 2,310 4.82 %

Total borrowings 160,913 2,392 1.49 % 325,471 5,090 1.56 % 386,453 10,667 2.76 %

Total Interest-bearing Liabilities 5,453,979 13,150 0.24 % 5,744,770 41,076 0.72 % 4,882,614 73,693 1.51 %

Noninterest-bearing liabilities 2,735,710 2,238,488 1,569,014

Shareholders’ equity 1,186,161 1,169,489 983,908

Total Liabilities and Shareholders’ Equity $ 9,375,850 $ 9,152,747 $ 7,435,536

Net Interest Income (2)(3)

$ 278,428 $ 282,590 $ 250,548

Net Interest Margin (2)(3)

3.22 % 3.38 % 3.64 %

(1) Nonaccruing loans are included in the daily average loan amounts outstanding.

(2) Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent .

(3) Taxable investment income is adjusted for the dividend-received deduction for equity securities.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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:

2023 Compared to 2022

Increase (Decrease) Due to 2020 Compared to 2019

Increase (Decrease) Due to

2022 Compared to 2021

Increase (Decrease) Due to

(dollars in thousands) Volume (4)

Net Volume (4)

Total Volume (4)

Interest earned on:

15 unchanged sentences

12,932 115,660 128,592 (904) 45,226 44,322

Federal Home Loan Bank and other restricted stock (401) (131) (533) (271) (442) (713)

Total other earning assets 1,149 950 2,099 89 90 179

Change in Interest Earned on Interest-earning Assets $ 11,306 $ 126,341 $ 137,647 $ 2,757 $ 48,469 $ 51,226

10 unchanged sentences

Total Borrowings 19,233 8,945 28,178 (267) 2,376 2,109

Other interest-bearing liabilities 1,587 829 2,416 560 — 560

Change in Interest Paid on Interest-bearing Liabilities 20,993 82,530 103,523 (1,173) 12,991 11,818

4 unchanged sentences

(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Net interest income on an FTE basis (non-GAAP) decreased $4.2 million compared to 2020.

The decline was primarily due to lower average loan balances compared to 2020.

Net interest income was favorably impacted by PPP loans which contributed $17.3 million compared to $11.4 million in 2020.

The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 16 basis points compared to 2020.

The decrease is primarily due to higher average cash balances and the low interest rate environment.

PPP loans positively impacted the net interest margin on an FTE basis (non-GAAP) by 8 basis points compared to the negative impact of 3 basis points in 2020.

Interest income on an FTE basis (non-GAAP) decreased $32.1 million compared to 2020.

The decrease in interest income was primarily due to lower average loan balances compared to 2020 and the continued low interest rate environment.

Average loan balances decreased $325.8 million compared to 2020.

Average PPP loans decreased $53.7 million compared to 2020.

The average rate earned on loans decreased 25 basis points primarily due to lower short-term interest rates.

Average interest-bearing deposits with banks increased $542.2 million compared to 2020 due to PPP loan forgiveness, lower loan balances and a significant increase in average deposits as a result of customer PPP loans and stimulus payments along with customers' liquidity preferences.

Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 50 basis points compared to 2020.

S&T BANCORP, INC.

1 unchanged sentence

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest expense decreased $27.9 million compared to 2020.

The decrease was primarily due to lower short-term interest rates.

Average interest-bearing deposits decreased $126.2 million compared to 2020.

The average rate paid on interest-bearing deposits decreased 46 basis points compared to 2020 primarily due to lower short-term interest rates.

The interest-bearing deposit decreases are favorably offset by a $521.8 million increase in demand deposits.

We experienced demand deposit growth due to customer PPP loans and stimulus payments along with customers' liquidity preferences.

Brokered deposits decreased $216.0 million and borrowings decreased $164.6 million compared to 2020 due to maturities and a reduced need for wholesale funding.

Overall, the cost of interest-bearing liabilities decreased 48 basis points compared to 2020.

Provision for Credit Losses

The provision for credit losses, which includes a provision for losses on loans and on unfunded loan commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date.

The provision for credit losses decreased $115.2 million to $16.2 million for 2021 compared to $131.4 million for 2020.

Excluding the customer fraud loss of $58.7 million, the provision for credit losses was $72.7 million for 2020.

The significant decrease in the provision for credit losses during 2021 was mainly due to the customer fraud in 2020 and an improved outlook for the economy and our loan portfolio.

Our total qualitative reserve decreased $7.3 million compared to 2020.

The decrease was primarily due to improved economic conditions offset by additional segment allocations for our healthcare and C&I portfolios along with the increased uncertainty at year-end related to the COVID-19 Omicron variant.

Specific reserves on loans individually assessed decreased $11.7 million to $1.8 million at December 31, 2021 compared to $13.5 million in 2020.

The decrease in specific reserves was the result of approximately $7.8 million of loan charge-offs and the release of $5.7 million of specific reserves due to improved operating performance within our hotel portfolio.

Offsetting this decrease in specific reserve was the addition of a $1.8 million specific reserve related to a $21.7 million C&I relationship that also had a $10.3 million charge-off in 2021 based on an estimated enterprise value of the company.

Net loan charge-offs were $34.5 million, or 0.49 percent of average loans, in 2021 compared to $103.4 million, or 1.40 percent of average loans, during 2020.

Excluding the customer fraud, net loan charge-offs were $44.7 million, or 0.61 percent of average loans in 2020.

The decrease in net loan charge-offs in 2021 was primarily due to improving economic conditions.

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 $9.5 million to $17.9 million for 2023 compared to $8.4 million for 2022.

The provision for credit losses included a reduction of $1.4 million for the reserve for unfunded commitments for 2023 compared to an increase of $3.0 million for 2022.

The increase in the provision for credit losses for 2023 compared to 2022 was primarily due to increases in net loan charge-offs and our qualitative reserve.

Net loan charge-offs for 2023 were $13.2 million, or 0.18 percent of average loans, compared to $2.6 million, or 0.04 percent of average loans for 2022.

Offsetting loan charge-offs during 2023 were $11.5 million of loan recoveries which included a $9.3 million recovery related to a 2020 customer fraud compared to $9.0 million of loan recoveries during 2022.

The increase in qualitative reserve was primarily due to deterioration in the CRE Price Index and our qualitative reserve capturing additional expected losses in commercial loans that are not included in the model.

Offsetting the increase in provision for credit losses during 2023 was a $4.4 million decrease in the provision for unfunded loan commitments primarily due to a decrease in loss rates and unused commitments in the construction portfolio.

Refer to the "Credit Quality" section of this MD&A for further details.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Noninterest Income

Years Ended December 31,

Twelve Months Ended December 31,

(dollars in thousands) 2023 2022 $ Change % Change

Net gain on sale of securities $ — $ 198 $ (198) (100.0) %

Debit and credit card 18,248 19,008 (760) (4.0) %

2 unchanged sentences

Mortgage banking 1,164 2,215 (1,051) (47.4) %

Commercial loan swap income 1,146 4,740 (3,594) (75.8) %

Securities gains, net 29 142 (113) (79.6) %

Other 7,820 5,267 2,553 48.5 %

Other noninterest income 9,829 7,292 2,537 34.8 %

Total Noninterest Income $ 57,620 $ 58,259 $ (639) (1.1) %

Noninterest income increased $4.9 million, or 8.2 percent, in 2021 compared to 2020.

Wealth management fees increased $2.9 million compared to the prior year.

Brokerage fees increased $1.6 million primarily due to the addition of six new financial advisors added during 2021.

Trust income increased $1.3 million mainly due to new customer growth resulting in higher assets under management and improved market conditions.

Debit and credit card fees increased $2.9 million due to increased debit and credit card usage.

Other noninterest income increased $2.6 million due to a $1.4 million change in the credit valuation adjustment for our commercial loan swaps for risk associated with our hotel loan portfolio, a $0.8 million change in the equity securities portfolio and a $0.5 million change in the valuation of a deferred compensation plan, which has a corresponding offset in salaries and benefit expense resulting in no impact to net income.

Service charges on deposit accounts increased $1.4 million due to the improving economic environment which drove higher customer activity.

Commercial loan swap income decreased $3.6 million due to the lower customer activity related to the pandemic and interest rate environment.

Mortgage banking decreased $1.2 million due to changes in the valuation of the mortgage interest rate locks offset by an improved mortgage servicing rights valuation compared to 2020.

NM - not meaningful

Noninterest income decreased $0.6 million to $57.6 million compared to $58.2 million in 2022.

Mortgage banking income decreased $1.1 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated mortgage loans on the balance sheet.

Debit and credit card income decreased by $0.8 million due to decreased customer activity.

Service charges on deposit accounts decreased by $0.6 million due to decreases in returned check and the elimination of non-sufficient funds, or NSF, fees.

Other noninterest income increased $2.5 million primarily related to a $3.3 million increase in the fair value of assets in a nonqualified benefit plan, which has a corresponding offset in salaries and benefits resulting in no impact to net income, and an increase in net gain on the sale of OREO of $0.8 million, partially offset by a $0.7 million decrease in the valuation of our commercial loan swaps and a $0.8 million decrease in fees on our commercial loan swaps.

Noninterest Expense

5 unchanged sentences

Furniture, equipment and software 12,912 11,606 1,306 11.3 %

Other taxes 6,644 6,622 22 0.3 %

Professional services and legal 7,823 8,318 (495) (6.0) %

Other taxes 6,813 6,620 193 2.9 %

Marketing 6,488 5,600 888 15.9 %

FDIC insurance 4,122 2,854 1,268 44.4 %

Merger-related expenses — 2,342 (2,342) NM

Loan-related expense 5,391 3,337 2,054 61.6 %

Other 23,072 23,460 (388) (1.7) %

Total Other Noninterest Expense $ 188,839 $ 186,644 $ 2,195 1.2 %

NM - percentage not meaningful

Noninterest expense increased $2.2 million, or 1.2 percent, to $188.8 million in 2021 compared to 2020.

Total merger-related expense decreased $2.3 million compared to 2020 due to no merger during 2021.

Salaries and employee benefits increased $10.1 million during 2021 primarily due to higher incentive, restricted stock, commissions and pension expense due to an increase in retirees electing lump-sum distributions.

Data processing and information technology increased $1.2 million due to new products and services in 2021.

Offsetting these increases, other noninterest expense decreased $4.1 million due to lower loan related expenses and lower amortization of both our qualified affordable housing projects and core deposit intangible assets.

Marketing expense decreased $1.4 million due to the pandemic and a reduction in promotions.

FDIC insurance decreased $0.9 million due to the improvement of the financial ratios used to determine the assessment.

Total Noninterest Expense $ 210,334 $ 196,746 $ 13,588 6.9 %

Noninterest expense increased $13.6 million to $210.3 million compared to $196.7 million in 2022.

Salaries and employee benefits increased $8.2 million during 2023 primarily due to inflationary wage pressure, the acquisition of new talent, higher

S&T BANCORP, INC.

1 unchanged sentence

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The provision for income taxes increased to $25.3 million in 2021 compared to nearly zero for 2020.

The increase in our income tax provision was primarily due to a $114.6 million increase in income before taxes in 2021 compared to 2020 when income before taxes was impacted by a customer fraud of $58.7 million.

The effective tax rate, which is total tax expense as a percentage of income before taxes, increased to 18.7 percent in 2021 compared to a nominal negative annual effective tax rate in 2020.

The increase in the effective tax rate was primarily due to significantly higher income before taxes in 2021 compared to 2020.

Historically, we have generated an annual effective tax rate that is less than the statutory rate of 21 percent due to benefits resulting from tax-exempt interest, excludable dividend income, tax-exempt income on Bank Owned Life Insurance, or BOLI, and tax benefits associated with Low Income Housing Tax Credits, or LIHTC.

Financial Condition

December 31, 2022

Total assets decreased $378.0 million to $9.1 billion at December 31, 2022 compared to $9.5 billion at December 31, 2021.

Cash and due from banks decreased $712.2 million to $210.0 million at December 31, 2022 compared to $922.2 million at December 31, 2021 primarily related to decreases in deposits due to competition driven by rising interest rates.

Total portfolio loans increased $184.0 million, or 2.6 percent, to $7.2 billion at December 31, 2022 compared to $7.0 billion at December 31, 2021.

The increase in portfolio loans is primarily related to an increase in the consumer loan portfolio of $344.0 million due to $327.1 million of growth in consumer real estate.

The consumer loan portfolio increase was offset by decreases in commercial loans.

Commercial loans decreased $160.1 million with decreases of commercial real estate loans of $108.5 million, C&I loans of $10.0 million, which included a decrease of $84.3 million of loans from the PPP, and a decrease of $41.6 million in commercial construction compared to December 31, 2021.

Excluding the PPP loans, portfolio loans increased $268.3 million compared to December 31, 2021 due a modest increase in activity.

Securities increased $92.0 million to $1.0 billion at December 31, 2022 from $910.8 million at December 31, 2021.

The increase in securities was primarily due to interest-bearing deposits with banks being redeployed to higher yielding assets earlier in 2022.

The bond portfolio had an unrealized loss of $102.3 million at December 31, 2022 compared to an unrealized gain of $9.4 million at December 31, 2021 due to higher interest rates.

Our deposits decreased $776.6 million, with total deposits of $7.2 billion at December 31, 2022 compared to $8.0 billion at December 31, 2021.

Customer deposits decreased $771.6 million from December 31, 2021.

The decrease in customer deposits was driven by competition related to rising interest rates.

Customer noninterest-bearing demand deposits decreased $159.9 million, interest-bearing demand decreased $132.5 million, money market deposits decreased $339.1 million and certificates of deposits decreased $148.5 million offset by an increase in savings of $8.4 million.

Total borrowings increased $277.9 million to $439.2 million at December 31, 2022 compared to $161.3 million at December 31, 2021 due to a decrease in funding provided by customer deposits.

The increase in borrowings consisted of increases in short-term borrowings of $370.0 million offset by decreases in long term borrowings of $7.7 million and a decrease of $84.5 million due to the discontinuation of securities sold under repurchase agreements.

Total shareholders’ equity decreased $21.8 million to $1.2 billion at December 31, 2022 compared to $1.2 billion at December 31, 2021.

The decrease was primarily due to other comprehensive losses of $105.0 million and dividends paid of $47.0 million offset by net income of $135.5 million.

Other comprehensive losses were mainly due to unrealized losses of $87.9 million, net of tax, on our available-for-sale debt securities and $16.8 million, net of tax, on interest rate swaps due to the rising interest rate environment.

medical costs and an increase in the fair value of assets in a nonqualified benefit plan, partially offset by a decrease in incentives.

Loan-related expense increased $2.1 million primarily due to an increase in loan collection and legal expenses for the workout of criticized and classified loans.

Furniture, equipment and software expense increased $1.3 million mainly due to new software implemented in 2023.

FDIC insurance increased $1.3 million due to a two basis point increase in the assessment rate.

Provision for Income Taxes

The provision for income taxes increased $0.6 million to $34.0 million in 2023 compared to $33.4 million for 2022.

The increase in our income tax provision was primarily due to a $9.9 million increase in income before taxes in 2023 compared to 2022.

The effective tax rate, which is total tax expense as a percentage of income before taxes, decreased to 19.0 percent in 2023 compared to 19.8 percent in 2022.

The decrease in the effective tax rate was primarily due to an increase in LIHTCs in 2023 compared to 2022.

Financial Condition as of December 31, 2023

Total assets increased $441.0 million to $9.6 billion at December 31, 2023 compared to $9.1 billion at December 31, 2022.

Total portfolio loans increased $469.4 million to $7.7 billion at December 31, 2023 compared to $7.2 billion at December 31, 2022.

The increase in loans is primarily related to consumer loan growth of $352.9 million with an increase in consumer real estate of $362.9 million compared to December 31, 2022.

The commercial loan portfolio increased $116.5 million at December 31, 2023 compared to December 31, 2022 due to an increase of $229.4 million in CRE loans offset by decreases of $76.9 million in C&I and $36.1 million in construction.

Securities remained relatively unchanged at $970.4 million at December 31, 2023 compared to $1.0 billion at December 31, 2022.

The bond portfolio was in a net unrealized loss position of $82.0 million at December 31, 2023 compared to a net unrealized loss position of $102.3 million at December 31, 2022.

The decrease in the net unrealized loss portion of the bond portfolio of $20.3 million was due to a change in interest rates.

Our deposits increased $301.8 million to $7.5 billion at December 31, 2023 compared to $7.2 billion at December 31, 2022.

The increase related to the addition of $375.7 million of brokered deposits, including $200.7 million of brokered money market accounts and $175.0 million of brokered certificates of deposit.

Customer deposits decreased $73.9 million compared to the prior year with decreases in noninterest-bearing demand deposits of $366.8 million and savings of $168.0 million partially offset by an increase in certificates of deposit of $472.1 million.

Customer deposits decreased primarily due to lower commercial and consumer deposits due to the competitive pricing in this higher interest rate environment.

Additionally, noninterest-bearing demand decreased due to the shift into interest-bearing deposits as a result of the elevated interest rate environment.

Total borrowings increased $64.4 million to $503.6 million at December 31, 2023 compared to $439.2 million at December 31, 2022 primarily due to loan growth.

Total shareholders’ equity increased by $98.8 million to $1.3 billion at December 31, 2023 compared to $1.2 billion at December 31, 2022.

The increase was primarily due to net income of $144.8 million and other comprehensive income of $21.2 million, offset by dividends of $49.9 million and common stock repurchases of $20.0 million.

S&T BANCORP, INC.

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2023 2022 2021

(dollars in thousands) Balance Weighted-Average

Yield Balance Weighted-Average

(dollars in thousands) Balance Weighted-Average Yield Balance Weighted-Average Yield Balance Weighted-Average Yield

Treasury securities $ 133,786 1.71 % $ 131,695 1.71 % $ 95,327 1.26 %

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government corporations and agencies 273,425 2.42 % 327,313 2.28 % 341,300 2.09 %

Corporate securities 500 7.67 % 500 3.22 % 2,025 3.90 %

Corporate obligations — — % 500 7.67 % 500 3.22 %

Obligations of states and political subdivisions 30,468 3.34 % 30,471 3.35 % 75,089 3.28 %

30,471 3.35 % 75,089 3.28 % 124,427 3.49 %

Marketable equity securities 994 3.32 % 1,142 2.93 % 3,300 2.90 %

Total Securities $ 1,002,778 2.34 % $ 910,793 2.05 % $ 773,693 2.42 %

(1) Weighted-average yields are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent for 2022, 2021 and 2020.

Available-for-Sale Debt Securities 969,308 1,001,784 909,651

Equity securities 1,083 3.06 % 994 3.32 % 1,142 2.93 %

Total Securities Available for Sale $ 970,391 2.62 % $ 1,002,778 2.34 % $ 910,793 2.05 %

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.

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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 $92.0 million to $1.0 billion at December 31, 2022 from $910.8 million at December 31, 2021.

The increase in securities is primarily due to increased investing activities due to excess liquidity earlier in 2022.

These increases were partially offset by unrealized losses due to a rising interest rate environment.

At December 31, 2022 our bond portfolio was in a net unrealized loss position of $102.3 million compared to a net unrealized gain position of $9.4 million at December 31, 2021.

At December 31, 2022, total gross unrealized gains in the bond portfolio were $0.3 million offset by gross unrealized losses of $102.6 million compared to December 31, 2021, when total gross unrealized gains were $15.2 million offset by gross unrealized losses of $5.8 million.

The decrease in the net unrealized gain position was primarily due to an increase in interest rates from December 31, 2021 to December 31, 2022.

Our securities portfolio represents 10.2 percent of total assets and is classified as available for sale.The portfolio primarily consists of structured agency backed fixed income securities with limited credit exposure.

Securities decreased $32.4 million to $970.4 million at December 31, 2023 compared to $1.0 billion at December 31, 2022.

At December 31, 2023, our bond portfolio was in a net unrealized loss position of $82.0 million compared to a net unrealized loss position of $102.3 million at December 31, 2022.

At December 31, 2023, our bond portfolio had gross unrealized losses of $83.8 million offset by $1.8 million in gross unrealized gains, compared to December 31, 2022, when total gross unrealized losses were $102.6 million offset by gross unrealized gains of $0.3 million.

Management evaluates the securities portfolio to determine if an ACL is needed each quarter.

We did not record an ACL related to the securities portfolio at December 31, 2023 or December 31, 2022.

Management evaluates the bond portfolio for impairment on a quarterly basis.

The unrealized losses on debt securities were primarily attributable to changes in interest rates and not related to the credit quality of these securities.

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We did not recognize any impairment charges on our securities portfolio in 2023, 2022 or 2021.

The performance of the debt securities markets could generate impairments in future periods requiring realized losses to be reported.

The securities portfolio could generate impairments in future periods requiring realized losses to be reported.

S&T BANCORP, INC.

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2023 2022 2021 2020 2019

(dollars in thousands) Amount % of

Total Amount % of

(dollars in thousands) Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total

Commercial real estate $ 3,357,603 43.9 % $ 3,128,187 43.5 % $ 3,236,653 46.2 % $ 3,244,974 44.9 % $ 3,416,518 47.9 %

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Total Commercial Loans 5,362,993 70.1 % 5,246,534 73.0 % 5,406,584 77.2 % 5,673,706 78.5 % 5,512,796 77.2 %

Residential mortgage 1,116,528 15.5 % 899,956 12.9 % 918,398 12.7 % 998,585 14.0 % 726,679 12.2 %

Home equity 652,066 9.1 % 564,219 8.1 % 535,165 7.4 % 538,348 7.5 % 471,562 7.9 %

Installment and other consumer 124,896 1.7 % 107,928 1.5 % 80,915 1.1 % 79,033 1.1 % 67,546 1.1 %

Consumer construction 43,945 0.6 % 21,303 0.3 % 17,675 0.2 % 8,390 0.1 % 8,416 0.1 %

Consumer real estate 2,175,451 28.4 % 1,812,539 25.2 % 1,485,478 21.2 % 1,471,238 20.4 % 1,545,323 21.7 %

Other consumer 114,897 1.5 % 124,896 1.7 % 107,928 1.5 % 80,915 1.1 % 79,033 1.1 %

Total Consumer Loans 2,290,348 29.9 % 1,937,435 27.0 % 1,593,406 22.8 % 1,552,153 21.5 % 1,624,356 22.8 %

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When concentrations exist in certain segments, we assess the credit risk within those segments to determine if additional reserve is needed in the qualitative portion of the ACL.

Total commercial loans

Total commercial loans represented 70.1 percent of total portfolio loans at December 31, 2023 compared to 73.0 percent at December 31, 2022.

Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 69.4 percent, of total commercial loans and 48.6 percent of total portfolio loans at December 31, 2023 compared to $3.5 billion, or 67.2 percent, of total commercial loans and 49.1 percent of total portfolio loans at December 31, 2022.

S&T BANCORP, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

represented 73.0 percent of total portfolio loans at December 31, 2022 compared to 77.2 percent at December 31, 2021.

Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.5 billion, or 67.2 percent, of total commercial loans and 49.1 percent of total portfolio loans at December 31, 2022 compared to $3.7 billion, or 68.0 percent, of total commercial loans and 52.5 percent of total portfolio loans at December 31, 2021.

We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia and Maryland.

Our multi-family and office segments are the most significant CRE and commercial construction concentrations for us.

The multi-family segment was $658.9 million, or 8.6 percent of total portfolio loans at December 31, 2023 compared to $568.3 million, or 7.9 percent at December 31, 2022.

Criticized and classified loans in the multi-family segment are minimal at only $7.4 million at December 31, 2023.

The office segment represents $516.5 million, or 6.7 percent of total portfolio loans at December 31, 2023 compared to $511.8 million, or 7.1 percent at December 31, 2022.

Criticized and classified loans in the office segment were only $11.6 million at December 31, 2023.

Approximately 85 percent of the office portfolio is located in non central business districts, or CBD, with the remaining 15 percent in CBD within our direct markets.

We completed a target review of the office portfolio in the third quarter of 2023 and did not identify any material credit risk.

We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware and Maryland.

The majority of our commercial and consumer loans are made to businesses and individuals in these states resulting in a geographic concentration.

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Total portfolio loans increased $469.4 million, or 6.5 percent, to $7.7 billion at December 31, 2023 compared to $7.2 billion at December 31, 2022.

Commercial and industrial loans, or C&I, included $4.0 million of loans originated under the PPP at December 31, 2022 compared to $88.3 million at December 31, 2021.

On March 27, 2020, the CARES Act was signed into law.

The CARES Act included the PPP, a program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks.

As of December 31, 2023, 65.0 percent of our total loans were variable rate loans and 35.0 percent were fixed rate loans.

Commercial loans, including CRE, C&I and commercial construction, comprised 73.0 percent of total portfolio loans at December 31, 2022 and 77.2 percent at December 31, 2021.

The decrease of $160.1 million in commercial loans related to a decrease of $108.5 million in CRE, $41.6 million in commercial construction loans and $10.0 million in C&I, which included a decrease of $84.3 million of loans from the PPP compared to December 31, 2021.

Excluding the PPP loans, portfolio loans increased $268.3 million compared to December 31, 2021.

Our loan demand was influenced by the downturn of the macroeconomic environment during 2022, but we did see loan growth in the second half of 2022.

Commercial loans increased $116.5 million related to an increase of $229.4 million in CRE offset by decreases of $76.9 million in C&I and $36.1 million in commercial construction compared to December 31, 2022.

Our loan demand was influenced by the uncertain macroeconomic environment during 2023.

Consumer loans represent 29.9 percent of our total portfolio loans at December 31, 2023 and 27.0 percent at December 31, 2022.

Consumer loans increased $344.0 million compared to December 31, 2021 primarily due to an increase of $216.6 million in the residential real estate portfolio, $87.8 million in the home equity portfolio and $39.6 million in installment and other consumer loans.

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

The consumer loan portfolio increase was offset by decreases in commercial loans.

Residential mortgage lending continues to be a focus for us.

Consumer loans increased $352.9 million compared to December 31, 2022 primarily due to an increase of $343.2 million in the residential real estate portfolio and $19.7 million in consumer construction.

Portfolio consumer real estate loans increased in 2023 based on a shift from mortgage loans sold to loans held in the portfolio on our balance sheet due to increased jumbo loans and the pricing of loans in the secondary market compared to December 31, 2022 .

We originate traditional fixed rate mortgage loans and adjustable rate mortgages with a maximum amortization term of 30 years.

The loan to value, or LTV, policy guideline is 80 percent for residential first lien mortgages.

Higher LTV loans may be approved within unique program guidelines and the appropriate private mortgage insurance coverage.

We originate traditional fixed rate mortgage loans and adjustable rate or balloon mortgages with a maximum amortization term of 30 years.

Higher LTV loans may be approved within unique program guidelines.

We may originate home equity loans with a lien position that is second to unrelated third-party lenders, but normally only to the extent that the combined LTV considering both the first and second liens does not exceed 100 percent of the fair value of the property.

Combo mortgage loans consisting of a residential first mortgage and a home equity second mortgage are also available.

We originate and sell loans into the secondary market, primarily to Fannie Mae.

We typically originate and sell loans into the secondary market, primarily to Fannie Mae.

We sell these loans in order to mitigate interest-rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to generate fee revenue from sales and servicing of the loans.

During 2023, our strategy changed whereby we held more mortgages on our balance sheet versus selling these loans in the secondary market.

This shift in strategy was mainly due to loan pricing in the secondary market and the desire to reduce our variable rate loan exposure in this interest rate environment.

We continue to monitor this strategy and could shift back to selling more residential mortgages into the secondary market in future periods.

We sold $0.2 million of 1-4 family mortgages in 2023 and $28.6 million in 2022 to Fannie Mae.

The volume of loans sold to Fannie Mae decreased due to a shift from mortgage loans sold to loans held in the portfolio due to increased jumbo loans and the pricing of loans in the secondary market compared to December 31, 2021.

Our servicing portfolio of mortgage loans that we had originated and sold into the secondary market was $707.8 million at December 31, 2023 compared to $772.9 million at December 31, 2022.

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Commitments to extend credit $ 2,566,154 $ 2,713,586

$ 2,713,586 $ 2,583,957

Standby letters of credit 61,889 64,356

64,356 87,335

$ 2,777,942 $ 2,671,292

Total $ 2,628,043 $ 2,777,942

See Note 16 Commitments and Contingencies in Part II, Item 8.

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Additional credit risk management practices include periodic review, at least annually, and updates of our lending policies and procedures to support sound underwriting practices and portfolio management through portfolio stress testing.

We have a portfolio monitoring process in place that includes an annual review of all commercial relationships greater than $1.5 million.

We have a portfolio monitoring group that performs an annual review of all commercial relationships greater than $1.5 million and a quarterly review of our Watch rated portfolio.

Business banking relationships less than $1.5 million are monitored through portfolio management software that identifies credit risk indicators.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nonperforming assets, or NPAs, consist of nonaccrual loans, nonaccrual TDRs and OREO.

Nonperforming assets, or NPAs, consist of nonaccrual loans and OREO.

The following represents NPAs as of December 31:

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Total Nonaccrual Loans 22,947 19,052

Nonaccrual Troubled Debt Restructurings

Commercial real estate — 1,968

Commercial and industrial 1,087 16,235

Commercial construction — 2,087

Consumer real estate 1,798 1,484

Other consumer 9 —

Total Nonaccrual Troubled Debt Restructurings 2,894 21,774

Total Nonaccrual Loans 19,052 66,291

OREO 75 3,065

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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 due.

Nonperforming assets decreased $57.5 million, or 72.2 percent, resulting in a nonperforming assets to total loans plus OREO ratio of 0.31% at December 31, 2022 compared to 1.13% at December 31, 2021.

Nonaccrual loans decreased $47.2 million, or 71.3 percent, to $19.1 million at December 31, 2022 compared to $66.3 million at December 31, 2021.

The significant decrease in nonaccrual loans during 2022 primarily related to minimal inflow of new nonaccrual loans and the payoff of two C&I relationships totaling $14.1 million, two CRE relationships totaling $9.2 million and the return to performing status of hotel loans totaling $9.1 million.

The significant decrease in OREO related to the sale of two properties during 2022.

TDRs decreased $19.9 million to $11.8 million at December 31, 2022 compared to $31.7 million at December 31, 2021.

Total TDRs of $11.8 million at December 31, 2022 included $8.9 million, or 75.4 percent, that were accrual and $2.9 million, or 24.6 percent, that were nonaccrual.

This is a decrease from December 31, 2021 when we had $31.7 million in TDRs, including $9.9 million, or 31.2 percent, that were accrual and $21.8 million, or 68.8 percent, that were nonaccrual.

The decrease in nonaccrual TDRs during 2022 primarily related to the payoff of two C&I relationships totaling $14.1 million.

Loan modifications resulting in new TDRs during 2022 included 27 modifications for $2.2 million compared to 40 modifications for $17.6 million in 2021.

Included in the 2022 new TDRs were 23 loans totaling $1.4 million related to consumer bankruptcy filings that were not reaffirmed, thus resulting in discharged debt, which compares to 25 loans totaling $1.1 million in 2021.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nonperforming assets increased $0.9 million, or 4.1 percent, resulting in a nonperforming assets to total loans plus OREO ratio of 0.30% at December 31, 2023 compared to 0.31% at December 31, 2022.

Nonaccrual loans increased $3.9 million, or 20.4 percent, to $22.9 million at December 31, 2023 compared to $19.1 million at December 31, 2022.

The decrease in OREO related to the sale of a commercial property that resulted in a gain on sale of OREO of $3.9 million, which is included in other noninterest income.

The following represents delinquency as of December 31:

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Other consumer 429 0.37 % 225 0.18 %

Loans held for sale — — % — — %

Total Loans $ 15,121 0.20 % $ 20,341 0.28 %

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We monitor delinquency on a monthly basis, including early-stage delinquencies of 30 to 89 days past due for early identification of potential problem loans.

Loans past due 90 days or more decreased $47.2 million compared to December 31, 2021 and represented 0.27 percent of total loans at December 31, 2022.

The change in loans past due 90 days or more is explained above in nonperforming assets discussion under Credit Quality.

Loans past due by 30 to 89 days increased $14.6 million and represented 0.28 percent of total loans at December 31, 2022.

Loans past due 90 days or more increased $3.9 million compared to December 31, 2022 and represented 0.30 percent of total loans at December 31, 2023.

Loans past due by 30 to 89 days decreased $5.2 million and represented 0.20 percent of total loans at December 31, 2023.

Allowance for Credit Losses

We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of a loan that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date.

We develop and document a systematic ACL methodology based on the following portfolio segments:

We develop and document a systematic ACL methodology based on

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

the following portfolio segments:

1) CRE, 2) C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.

Our charge-off policy for commercial loans requires that loans and other obligations that are not collectible be promptly charged-off when the loss is confirmed, regardless of the delinquency status of the loan.

We may elect to recognize a partial charge-off when management has determined that the value of collateral is less than the remaining investment in the loan.

A loan or obligation does not need to be charged-off, regardless of delinquency status, if (i) management has determined there exists sufficient collateral to protect the remaining loan balance and (ii) there exists a strategy to liquidate the collateral.

We may elect to recognize a partial charge-off when management has determined that the value of collateral or present value of expected future cash flows is less than the remaining investment in the loan.

A loan or obligation does not need to be charged-off, regardless of delinquency status, if (i) management has determined that sufficient collateral exists to protect the remaining loan balance and a strategy exists to liquidate the collateral, or (ii) management has determined that the present value of expected future cash flows is sufficient to protect the remaining loan balance.

Management may also consider a number of other factors to determine when a charge-off is appropriate.

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• The status of adverse proceedings or litigation that may result in collection.

Consumer unsecured loans and secured loans are evaluated for charge-off after the loan becomes 90 days past due.

Consumer loans are evaluated for charge-off after the loan becomes 90 days past due.

Unsecured loans are fully charged off and secured loans are charged down to the estimated fair value of the collateral less the cost to sell.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents activity in the ACL for each of the three years presented below:

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Net Charge-offs (13,182) (2,595) (34,530)

Impact of CECL adoption — — 27,346

Impact of adoption of ASU 2022-02 568 — —

Provision for credit losses 19,240 5,359 15,494

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$ 107,966 $ 101,340 $ 98,576

(1) Represents ALL for year presented

Net loan charge-offs for 2023 were $13.2 million, or 0.18 percent of average loans, compared to $2.6 million, or 0.04 percent of average loans for 2022.

The most significant charge-off during 2022 was to a C&I relationship in the amount of $5.5 million.

Offsetting loan charge-offs during 2022 were $6.6 million of loan recoveries related to two C&I relationships.

The most significant charge-offs during 2023 were for three C&I relationships totaling $16.9 million.

Offsetting loan charge-offs during 2023 were $11.5 million of loan recoveries, which included a $9.3 million recovery related to a 2020 customer fraud compared to $9.0 million of loan recoveries during 2022.

The following table summarizes net charge-offs as a percentage of average loans for the years presented:

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Allowance for credit losses as a percentage of total portfolio loans 1.41 % 1.41 % 1.41 %

Allowance for credit losses as a percentage of total portfolio loans excluding PPP 1.41 % 1.43 % 1.74 %

Allowance for credit losses to total nonaccrual loans 471 % 532 % 149 %

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The ACL was $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023, compared to $101.3 million, or 1.41 percent of total portfolio loans, at December 31, 2022.

The increase in the ACL of $2.8 million was due to a shift between the qualitative and quantitative reserves as well as loan growth.

Our total qualitative reserve increased $9.3 million primarily related to a $4.0 million increase in our forecast due to concern with the overall outlook of the economy and a $5.3 million increase in other qualitative factors.

Our quantitative reserve decreased $4.8 million primarily due to significant improvement in our CRE hotel portfolio, which was partially offset by deterioration in the C&I portfolio primarily related to a large relationship downgraded to substandard during the year.

Specific reserves on loans individually assessed decreased $1.7 million from prior year due to the resolution of a C&I relationship through a note sale.

The increase in the ACL of $6.7 million was primarily due to a $7.7 million increase in our qualitative reserve mainly related to deterioration in the Commercial Real Estate Price Index and a higher C&I segment specific reserve which captures additional expected losses that are not included in the quantitative model.

Our quantitative reserve decreased $1.0 million primarily due to a reduction in criticized and classified loans mainly in our CRE healthcare and CRE hotel portfolios partially offset by higher C&I substandard loans and loan growth during 2023.

Federal Home Loan Bank and Other Restricted Stock

At December 31, 2022 and 2021, we held FHLB of Pittsburgh stock of $22.0 million and $8.5 million.

At December 31, 2023, we held FHLB of Pittsburgh stock of $24.0 million compared to $22.0 million at December 31, 2022.

This investment is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value.

We hold FHLB stock because we are a member of the FHLB of Pittsburgh.

The FHLB requires members to purchase and hold a specified level of FHLB stock based upon on the members’ asset values, level of borrowings and participation in other programs offered.

The FHLB requires members to purchase and hold a specified level of FHLB stock based upon the members’ asset values, level of borrowings and participation in other programs offered.

Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Deposits are our primary source of funds.

We have a well-diversified deposit base with a balance mix of 56.4 percent personal, 34.1 percent business, 4.5 percent public funds and 5.0 percent brokered at December 31, 2023.

December 31, 2023 December 31, 2022

(dollars in thousands) Amount % of Deposits Amount % of Deposits $ Change % Change

Personal $ 4,244,386 56.4 % $ 4,171,701 57.8 % $ 72,685 1.0 %

Business 2,565,853 34.1 % 2,666,995 36.9 % (101,142) (1.4) %

Public funds 335,876 4.5 % 381,274 5.3 % (45,398) (0.6) %

Brokered 375,654 5.0 % — — % 375,654 5.2 %

Total Deposits $ 7,521,769 100.0 % $ 7,219,970 100.0 % $ 301,799 4.2 %

The following table presents the composition of deposits at December 31:

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Brokered deposits

Money market 200,653 — 200,653

Certificates of deposit 175,000 — 175,000

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Total Deposits $ 7,521,769 $ 7,219,970 $ 301,799

Deposits are our primary source of funds.

Our deposit base increased substantially through the pandemic related to PPP and stimulus programs, but we have experienced a decrease in deposits during 2022 related to the competitive market driven by rising interest rates.

Total deposits decreased $776.6 million, or 10 percent, at December 31, 2022 compared to December 31, 2021.

Total customer deposits decreased $771.6 million from December 31, 2021.

Total brokered deposits decreased $5.0 million from December 31, 2021 due to a reduced need for this type of funding.

Total deposits increased $301.8 million, or 4.18 percent, at December 31, 2023 compared to December 31, 2022.

Total customer deposits decreased $73.9 million from December 31, 2022 primarily due to lower commercial and consumer deposits due to the competitive pricing in this higher interest rate environment.

Additionally, noninterest-bearing demand decreased due to the shift into interest-bearing deposits as a result of the elevated interest rate environment.

Total brokered deposits increased $375.7 million from December 31, 2022.

Brokered deposits are an additional source of funds utilized by ALCO as a way to diversify funding sources, as well as manage our funding costs and structure.

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 $210.4 million to $277.7 million at December 31, 2023 compared to $67.3 million at December 31, 2022.

We have total uninsured deposits of $2.3 billion, or 30.0 percent of our total deposit base, compared to $2.5 billion, or 34.0 percent, at December 31, 2022.

Included in uninsured deposits is $296.0 million, or 4.0 percent of our total deposit base, of municipal deposits which are fully collateralized.

The daily average balance of deposits and rates paid on deposits are summarized in the following table for the years ended December 31:

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Total $ 7,195,079 1.29 % $ 7,648,178 0.26 % $ 7,887,219 0.14 %

CDs of $250,000 and over accounted for 3.0 percent of total deposits at December 31, 2022 and December 31, 2021 and primarily represent deposit relationships with local customers in our market area.

CDs of $250,000 and over accounted for 4.7 percent and 3.0 percent of total deposits at December 31, 2023 and December 31, 2022.

These primarily represent deposit relationships with local customers in our market area.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Maturities of CDs of $250,000 or more outstanding at December 31, 2023 are summarized as follows:

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Total $ 350,727

The following table represents the composition of borrowings for the years ended December 31:

(dollars in thousands) 2022 2021 $ Change

Securities sold under repurchase agreements, retail $ — $ 84,491 $ (84,491)

(dollars in thousands) December 31, 2023 December 31, 2022 $ Change

Short-term borrowings $ 415,000 $ 370,000 $ 45,000

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Total Borrowings $ 503,635 $ 439,194 $ 64,441

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Borrowings are an additional source of funding for us.

Total borrowings increased $277.9 million compared to December 31, 2021 due to a decrease in funding from lower deposit levels.

Short-term borrowings increased $370.0 million offset by the discontinuation of the customer repurchase agreement product and the maturity of a $7.0 million long-term borrowing compared to December 31, 2021.

Information pertaining to short-term borrowings is summarized in the tables below:

Securities Sold Under Repurchase Agreements

(dollars in thousands) 2022 2021 2020

Balance at December 31 $ — $ 84,491 $ 65,163

Average balance during the year $ 35,836 $ 69,964 $ 57,673

Average interest rate during the year 0.10 % 0.11 % 0.29 %

Maximum month-end balance during the year $ 89,366 $ 84,491 $ 92,159

Average interest rate at December 31 — % 0.10 % 0.25 %

Total borrowings increased $64.4 million to $503.6 million compared to $439.2 million at December 31, 2022 primarily due to loan growth.

Information pertaining to short-term borrowings is summarized in the table below for the years ended December 31, 2023 and December 31, 2022.

Short-Term Borrowings

(dollars in thousands) 2023 2022

Balance at December 31 $ 370,000 $ — $ 75,000

Average balance during the year $ 40,013 $ 6,301 $ 155,753

Average interest rate during the year 4.15 % 0.19 % 0.92 %

Maximum month-end balance during the year $ 370,000 $ 25,000 $ 40,240

Average interest rate at December 31 4.49 % — % 0.19 %

Information pertaining to long-term borrowings is summarized in the tables below:

Balance at the period end $ 415,000 $ 370,000

Average balance during the period $ 500,421 $ 40,013

Average interest rate during the period 5.44 % 4.15 %

Maximum month-end balance during the period $ 630,000 $ 370,000

Average interest rate at the period end 5.65 % 4.49 %

Information pertaining to long-term borrowings and junior subordinated debt securities is summarized in the tables below for the years ended December 31, 2023 and December 31, 2022.

Long-Term Borrowings

(dollars in thousands) 2023 2022

Balance at December 31 $ 14,741 $ 22,430 $ 23,681

Average balance during the year $ 19,090 $ 22,995 $ 47,953

Average interest rate during the year 2.15 % 1.99 % 2.50 %

Maximum month-end balance during the year $ 22,344 $ 23,549 $ 50,635

Average interest rate at December 31 2.61 % 1.94 % 2.03 %

Balance at the period end $ 39,277 $ 14,741

Average balance during the period $ 31,706 $ 19,090

Average interest rate during the period 4.20 % 2.15 %

Maximum month-end balance during the period $ 39,589 $ 22,344

Average interest rate at the period end 4.52 % 2.61 %

Junior Subordinated Debt Securities

(dollars in thousands) 2023 2022

Balance at December 31 $ 54,453 $ 54,393 $ 64,083

Average balance during the year $ 54,421 $ 61,653 $ 64,092

Average interest rate during the year 4.40 % 2.99 % 3.57 %

Maximum month-end balance during the year $ 54,453 $ 64,128 $ 64,848

Average interest rate at December 31 7.09 % 2.69 % 3.01 %

We have completed three private placements of trust preferred securities to financial institutions.

As a result, we own 100 percent of the common equity of STBA Capital Trust I, DNB Capital Trust I, and DNB Capital Trust II, or the Trusts.

The Trusts were formed to issue mandatorily redeemable capital securities to third-party investors.

The proceeds from the sale of the securities and the issuance of the common equity by the Trusts were invested in junior subordinated debt securities issued by us.

The third-party investors are considered the primary beneficiaries of the Trusts;

therefore, the Trusts qualify as variable interest entities, but are not consolidated into our financial statements.

The Trusts pays dividends on the securities at the same rate as the interest paid by us on the junior subordinated debt held by the Trusts.

DNB Capital Trust I and DNB Capital Trust II were acquired with the DNB Merger.

Refer to Note 16 Short-Term Borrowings and Note 17 Long-Term Borrowings and Subordinated Debt to the consolidated financial statements included in Part II, Item 8.

Financial Statements and Supplementary Data, of this Report, for more details.

Balance at the period end $ 49,358 $ 54,453

Average balance during the period $ 52,215 $ 54,421

Average interest rate during the period 7.87 % 4.40 %

Maximum month-end balance during the period $ 54,483 $ 54,453

Average interest rate at the period end 7.98 % 7.09 %

In 2023, we redeemed $5.0 million of junior subordinated debt securities, along with $0.2 million in common equity issued by DNB Capital Trust I and held by us.

S&T BANCORP, INC.

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Wealth Management Assets

As of December 31, 2022, the fair value of the S&T Bank Wealth Management assets under administration, which are not accounted for as part of our assets, decreased to $2.2 billion from $2.3 billion as of December 31, 2021.

The fair value of the S&T Bank Wealth Management assets under administration, which are not accounted for as part of our assets, remained unchanged at $2.2 billion at December 31, 2023 and December 31, 2022.

Assets under administration consisted of $1.0 billion in S&T Trust, $1.0 billion in S&T Financial Services and $0.2 billion in Stewart Capital Advisors.

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Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost.

Our primary future cash needs are centered on the ability to (i) satisfy the financial needs of depositors who may want to

withdraw funds or of borrowers needing to access funds to meet their credit needs and (ii) to meet our future cash commitments

under contractual obligations with third parties.

Our primary future cash needs are centered on the ability to (i) satisfy the financial needs of depositors who may want to withdraw funds or of borrowers needing to access funds to meet their credit needs and (ii) to meet our future cash commitments under contractual obligations with third parties.

In order to manage liquidity risk, our Board of Directors has delegated authority to ALCO for the formulation, implementation and oversight of liquidity risk management for S&T.

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Our primary funding and liquidity source is a stable customer deposit base.

We believe S&T has the ability to retain existing and attract new deposits, mitigating any funding dependency on other more volatile sources.

Refer to the Deposits section of this MD&A for additional discussion on deposits.

Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified.

Additional funding sources accessible to S&T include borrowing availability at the Federal Home Loan Bank, or FHLB, of Pittsburgh, federal funds lines with other financial institutions, the brokered deposit market and borrowing availability through the Federal Reserve Borrower-In-Custody program.

We believe S&T has the ability to retain existing deposits and attract new deposits, mitigating any funding dependency on other more volatile funding sources.

Refer to the "Financial Condition as of December 31, 2023 - Deposits" section of this MD&A, for additional discussion on deposits.

Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of our normal funding program.

Additional funding sources accessible to S&T include borrowing availability at the Federal Home Loan Bank of Pittsburgh, or FHLB, federal funds lines with other financial institutions and the brokered deposit market.

Additionally, S&T has borrowing availability through the Federal Reserve Borrower-in-Custody Program and the Federal Reserve BTFP.

In response to recent bank failures, the Federal Reserve authorized additional funding availability to eligible depository institutions through the BTFP.

The program is intended to help assure depositors that their institutions have an additional source of liquidity to meet their needs.

Under the BTFP, any collateral eligible for purchase by the Federal Reserve Banks in open market operations can be pledged including U.S.

Treasury securities, U.S.

Agencies and U.S.

Agency mortgage-backed securities.

Collateral advances will be 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 rate on new advances, beginning on January 25, 2024, is set to be no lower than the interest rate on reserve balances in effect on the day the loan is made.

As of December 31, 2023, we have $637.0 million of collateral available to pledge under the program and no outstanding balance.

The Federal Reserve has announced that it is ending the BTFP and will cease making new loans under this program on March 11, 2024.

Available borrowing capacity exceeds uninsured deposits of $2.3 billion at December 31, 2023 and $2.5 billion at December 31, 2022.

The following table summarizes borrowing funding sources available as of the dates presented:

December 31, 2023 December 31, 2022

(dollars in thousands) Borrowing Capacity Balance Available Borrowing Capacity Balance Available

FHLB $ 3,241,098 $ 552,136 $ 2,688,962 $ 2,925,614 $ 491,288 $ 2,434,326

Borrower-in-Custody Program $ 769,653 $ — $ 769,653 839,836 — 839,836

Federal Reserve BTFP (1)

$ 636,963 $ — $ 636,963 — — —

Total $ 4,647,714 $ 552,136 $ 4,095,578 $ 3,765,450 $ 491,288 $ 3,274,162

(1) Emergency lending program created by the Federal Reserve in March 2023.

At December 31, 2023, we had available borrowing capacity of $4.1 billion, of which $2.7 billion was remaining borrowing availability with the FHLB of Pittsburgh.

We believe that these funding sources will provide adequate resources to fund our short-term and long-term operating and financing needs.

In addition, our ability to access capital markets provides additional sources of funding with respect to strategic investing opportunities.

Our access to and the availability of funds in the future will be affected by many factors, including, but not limited to our financial condition and prospects, our credit rating, the liquidity of the overall capital markets and the current state of the economy.

Our access to and the availability of funds in the future will be affected by many factors, including, but not limited to our financial condition and prospects, the liquidity of the overall capital markets and the current state of the economy.

In the normal course of business, we enter into various contractual obligations, which require future payments that could impact our liquidity and capital resources.

We also utilize interest rate swaps to add stability and manage exposure to interest rate movements, under which we are required to either receive cash from, or pay cash to, counterparties depending on changes

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in interest rates.

Derivative contracts are carried at fair value representing the net present value of expected future cash receipts or payments based on market rates as of the balance sheet date.

The following table summarizes our material contractual obligations as of December 31, 2023:

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Operating and finance leases 4,995 9,881 9,302 59,550 83,728

Purchase obligations 32,555 62,656 53,190 — 148,401

Funding commitments on Low Income Housing Partnerships 7,262 4,727 — — 11,989

Total $ 1,786,226 $ 253,965 $ 28,588 $ 112,225 $ 2,181,004

(1) Excludes interest

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ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate and high.

At December 31, 2022, S&T Bank had $870.0 million in highly liquid assets, which consisted of $137.6 million in interest-bearing deposits with banks and $732.4 million in unpledged securities.

This resulted in a highly liquid assets to total assets ratio of 9.6 percent at December 31, 2022.

Highly liquid assets have declined by $431.0 million when comparing December 31, 2022 to December 31, 2021.

The majority of the decrease in liquid assets is attributed to decreases in cash balances which are primarily a result of decreased deposits.

At December 31, 2022, we had remaining borrowing availability of $2.4 billion with the FHLB of Pittsburgh.

Refer to Note 16 Short-Term Borrowings and Note 17 Long-Term Borrowings and Subordinated Debt to the consolidated financial statements included in Part II, Item 8.

Financial Statements and Supplementary Data, and the Borrowings section of this MD&A, for more details.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At December 31, 2023, S&T Bank had $897.4 million in highly liquid assets, which consisted primarily of $160.3 million in interest-bearing deposits with banks and $736.9 million in unpledged securities.

This resulted in a highly liquid assets to total assets ratio of 9.4 percent at December 31, 2023 compared to 9.6 percent at December 31, 2022.

Highly liquid assets have increased by $27.3 million when comparing December 31, 2023 to December 31, 2022.

The majority of the increase in liquid assets is attributed to increases in cash balances.

Refer to Note 12.

Qualified Affordable Housing, Note 13 Deposits, Note 14 Short Term Borrowings, Note 15 Long Term Borrowings and Subordinated Debt and Note 7 Right-Of-Use Assets and Lease Liabilities to the consolidated financial statements included in Part II, Item 8.

Financial Statements and Supplementary Data, and the Deposits and Borrowings section of this MD&A, for more details.

Capital Resources

Shareholders’ equity decreased $21.8 million, or 1.8 percent, to $1.2 billion at December 31, 2022 compared to $1.2 billion at December 31, 2021.

The decrease was primarily due to a $105.0 million decrease in other comprehensive income and dividends of $47.0 million, partially offset by net income of $135.5 million.

The decrease in other comprehensive income was primarily due to a $87.9 million increase in unrealized losses on our available-for-sale securities, net of tax and an increase of $16.8 million in unrealized losses on our interest rate swaps.

We continue to maintain our capital position with a leverage ratio of 11.06 percent as compared to the regulatory guideline of 5.00 percent to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 12.81 percent compared to the regulatory guideline of 6.50 percent to be well-capitalized.

Shareholders’ equity increased $98.8 million, or 8.3 percent, to $1.3 billion at December 31, 2023 compared to $1.2 billion at December 31, 2022.

The increase was primarily due to net income of $144.8 million and other comprehensive income of $21.2 million, partially offset by dividends of $49.9 million and common stock repurchases of $20.0 million.

The other comprehensive income was primarily due to a $15.9 million improvement in unrealized losses on our available-for-sale debt securities, net of tax and an improvement of $5.2 million in unrealized losses on our interest rate swaps, net of tax.

We continue to maintain a strong capital position with a leverage ratio of 11.21 percent as compared to the regulatory guideline of 5.00 percent to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 13.37 percent compared to the regulatory guideline of 6.50 percent to be well-capitalized.

Our risk-based Tier 1 and Total capital ratios were 13.69 percent and 15.27 percent, which places us above the federal bank regulatory agencies’ well-capitalized guidelines of 8.00 percent and 10.00 percent, respectively.

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The minimum capital requirements plus the capital conservation buffer exceeds the regulatory capital ratios required for an insured depository institution to be well-capitalized under the FDIC's prompt corrective action framework.

S&T BANCORP, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Federal regulators periodically propose amendments to the regulatory capital rules and the related regulatory framework and consider changes to the capital standards that could significantly increase the amount of capital needed to meet applicable standards.

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As of December 31, 2023, we had not issued any securities pursuant to the shelf registration statement.

Management is aware of the significant effect inflation has on interest rates and can have on financial performance and is closely monitoring the increased inflation rates being experienced in the economy.

Our ability to cope with this is best determined by analyzing our capability to respond to changing interest rates and our ability to manage noninterest income and expense.

We monitor the mix of interest-rate sensitive assets and liabilities through ALCO in order to reduce the impact of inflation on net interest income.

We also control the effects of inflation by reviewing the prices of our products and services, by introducing new products and services and by controlling overhead expenses.

Inflation can have a significant impact on interest rates and, accordingly, can impact our financial performance.

Inflation can influence our asset growth, deposits, noninterest income and expense and credit quality.

As a result, we closely monitor the the rate of inflation in the economy.

We do so by analyzing our capability to respond to changing interest rates and our ability to manage noninterest income and expense.

We monitor the mix of interest-rate sensitive assets and liabilities through our management committee, ALCO, in order to manage the impact of inflation and the level of interest rates on net interest income.

We also manage the effects of inflation on S&T by reviewing the prices of our products and services, by introducing new products and services and by controlling overhead expenses.

Additionally, management is aware of the potential impacts that inflation can have on our loan portfolio and our customer's ability to operate their businesses.

We seek to minimize the various inflationary inputs through a robust annual review process and sensitivity analysis when considering extensions of credit.

Additionally, we leverage our internal credit risk review in support of the current economic cycle.

We continuously monitor our portfolio for potential and emerging risks.

See Risk Factors in Item 1A for further information regarding the impact of inflation on the economy and on S&T.

S&T BANCORP, INC.

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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.

What changed 10-K

Item 7. Management’s Discussion and Analysis