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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-03-03 · 55 added, 894 removed, 15 unchanged (98% 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 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, 2024 as compared to the year ended December 31, 2023.

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, 2023 to the year ended December 31, 2022 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, 2023, filed with the Securities and Exchange Commission, or SEC, on February 27, 2024.

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

Important Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains or incorporates statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position and other matters regarding or affecting S&T and its future business and operations.

Forward-looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to:

credit losses and the credit risk of our commercial and consumer loan products;

changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL;

cybersecurity concerns;

rapid technological developments and changes;

operational risks or risk management failures by us or critical third parties, including fraud risk;

our ability to manage our reputational risks;

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;

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

unanticipated changes in our liquidity position;

unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets;

changes in accounting policies, practices or guidance;

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;

increasing price and product/service competition;

the ability to continue to introduce competitive new products and services on a timely, cost-effective basis;

managing our internal growth and acquisitions;

the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated;

containing costs and expenses;

reliance on significant customer relationships;

an interruption or cessation of an important service by a third-party provider;

our ability to attract and retain talented executives and other employees;

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

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;

deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income;

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 and geopolitical tensions and conflicts between nations.

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.

Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made.

We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results.

Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

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

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.

These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements;

accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions and judgments.

Certain policies are based, to a greater extent, on estimates, assumptions and judgments of management and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Our most significant accounting policies are presented in Note 1.

Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report.

These policies, along with the disclosures presented in the Notes to Consolidated Financial Statements, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined.

We view critical accounting policies to be those which are highly dependent on subjective or complex estimates, assumptions and judgments and where changes in those estimates and assumptions could have a significant impact on the consolidated financial statements.

Further, we view critical accounting estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

We currently view the determination of the ACL and goodwill to be critical accounting policies.

We did not significantly change the manner in which we applied our critical accounting policies or developed related assumptions or estimates during 2024.

We have reviewed these critical accounting estimates and related disclosures with the Audit Committee.

Allowance for Credit Losses

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.

It is an estimate of expected credit losses, measured over the contractual life of a loan, that considers historical loss experience, current conditions and forecasts of future economic conditions.

Management’s evaluation process used to determine the appropriateness of the ACL is complex and requires the use of estimates, assumptions and judgments which are inherently subject to high uncertainty.

The evaluation process combines several factors:

historical loan loss experience, managements ongoing review of lending policies and practices, experience and depth of staff, quality of the loan grading system, the fair value of underlying collateral, concentration of loans to specific borrowers or industries, existing economic conditions and forecasts, segment specific risks and other quantitative and qualitative factors which could affect future credit losses.

Our reasonable and supportable forecast is based primarily on the national unemployment forecast produced by the Federal Reserve and is for a period of two years.

For periods beyond our two-year forecast, we revert to historical loss rates utilizing a straight-line method over a one-year reversion period.

Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans and the appropriateness of the ACL could change significantly.

It is challenging to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

In conjunction with our capital stress testing process, we consider different economic scenarios that impact the ACL.

Among other balance sheet and income statement changes, our severely adverse scenario would have resulted in an increase to the ACL of approximately 75 percent.

This severely adverse scenario shows how sensitive the ACL can be to key qualitative and quantitative assumptions underlying the overall ACL calculation.

To the extent actual losses are higher than management estimates, additional provision for credit losses could be required and could adversely affect our earnings or financial position in future periods.

As a result of acquisitions, we have recorded goodwill in our Consolidated Balance Sheets.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired.

The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations are recorded at their fair values.

This often involves estimates based on third-party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques which are inherently subjective.

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.

AND SUBSIDIARIES

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

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.

The fair value of the reporting unit is determined by using both a discounted cash flow model and market based models.

The discounted cash flow model has many assumptions including future earnings projections, a long-term growth rate and discount rate.

The market based method calculates the fair value based on observed price multiples for similar companies.

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

Based upon our qualitative assessment performed for our annual impairment analysis as of October 1, 2024, we concluded that goodwill is not impaired.

Recent Accounting Pronouncements and Developments

Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, which is included in Part II, Item 8 Financial Statements and Supplementary Data of this Report, discusses new accounting pronouncements that we have adopted and the expected impact of accounting pronouncements recently issued or proposed, but not yet required to be adopted.

Explanation of Use of Non-GAAP Financial Measures

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.

The interest income on interest-earning assets, net interest income and net interest margin are presented on an FTE basis (non-GAAP).

The FTE basis (non-GAAP) 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 for each period.

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.

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) 2024 2023 2022

Total Interest and Dividend Income

$ 515,872 $ 477,901 $ 340,751

taxable equivalent adjustment 2,706 2,550 2,052

Interest and Dividend Income on an FTE Basis (Non-GAAP)

$ 518,578 $ 480,451 $ 342,803

Total Interest and Dividend Income

$ 515,872 $ 477,901 $ 340,751

Interest expense (181,066) (128,491) (24,968)

Net Interest Income

334,806 349,410 315,783

taxable equivalent adjustment 2,706 2,550 2,052

Net Interest Income on an FTE Basis (Non-GAAP) $ 337,512 $ 351,960 $ 317,835

Net interest margin 3.79 % 4.10 % 3.74 %

taxable equivalent adjustment 0.03 % 0.03 % 0.02 %

Net Interest Margin on an FTE Basis (Non-GAAP) 3.82 % 4.13 % 3.76 %

S&T BANCORP, INC.

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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.

Below is a reconciliation of the non-GAAP efficiency ratio.

Years ended December 31,

(dollars in thousands) 2024 2023 2022

Efficiency Ratio (Non-GAAP)

Noninterest expense $218,938 $210,334 $196,746

Net interest income

$334,806 $349,410 $315,783

taxable equivalent adjustment

2,706 2,550 2,052

Net interest income (FTE) (non-GAAP)

337,512 351,960 317,835

Noninterest income

49,083 57,620 58,259

net losses (gains) on sale of securities

7,938 — (198)

gain on Visa class B-1 exchange (3,492) — —

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

$391,041 $409,580 $375,896

Efficiency Ratio (Non-GAAP)

55.99 % 51.35 % 52.34 %

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

The following table provides a reconciliation of return on average tangible shareholders' equity (non-GAAP) by reconciling net income (GAAP) per the Consolidated Statements of Net Income to net income before amortization of intangibles and average shareholder's equity to average tangible shareholders' equity for the periods presented:

Years ended December 31,

(dollars in thousands) 2024 2023 2022

Net income $ 131,265 $ 144,781 $ 135,520

amortization of intangibles net of tax 904 1,042 1,199

Net income before amortization of intangibles $ 132,169 $ 145,823 $ 136,719

Average shareholders' equity $ 1,330,870 $ 1,227,332 $ 1,181,788

average goodwill and other intangible assets, net of deferred tax liability (376,181) (377,157) (378,303)

Average tangible shareholders' equity

$ 954,689 $ 850,175 $ 803,485

Return on Average Tangible Shareholders' Equity (non-GAAP) 13.84 % 17.15 % 17.02 %

Executive Overview

We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.7 billion at December 31, 2024.

We operate in Pennsylvania and Ohio providing a full range of financial services with retail and commercial banking products, cash management services, trust and brokerage services.

Our common stock trades on the NASDAQ Global Select Market under the symbol “STBA.”

We earn revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers.

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.

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 2025 and beyond will be focused on growing our deposit franchise, core profitability, asset quality and talent and engagement.

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

Earnings Summary

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

Years ended December 31,

(dollars in thousands) 2024 2023 2022

Net income $ 131,265 $ 144,781 $ 135,520

Earnings per share - diluted $ 3.41 $ 3.74 $ 3.46

Return on average assets 1.37 % 1.56 % 1.48 %

Return on average shareholders' equity 9.86 % 11.80 % 11.47 %

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

13.84 % 17.15 % 17.02 %

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

We earned net income of $131.3 million for 2024 compared to net income of $144.8 million in 2023.

Diluted earnings per share, or EPS, was $3.41 in 2024 compared to $3.74 in 2023.

The decrease in both net income and EPS in 2024 can be attributed to declining interest rates, as compared to 2023 when we had record net income and EPS due to the impact of rising interest rates on our net income.

Net interest income decreased $14.6 million, or 4.18 percent, to $334.8 million in 2024 compared to $349.4 million in 2023.

Net interest income on an FTE basis (non-GAAP) decreased $14.4 million, or 4.11 percent, compared to 2023.

The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 31 basis points to 3.82 percent in 2024 compared to 4.13 percent in 2023.

The decreases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to the impact of higher interest rates on total interest-bearing liabilities.

While higher interest rates positively impacted interest income and rates on interest-earning assets, it was more than offset by higher interest expense and rates on interest-bearing liabilities.

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 decreased $17.8 million to $0.1 million for 2024 compared to $17.9 million for 2023.

The significant decline in the provision for credit losses was mainly due to a lower level of ACL related to decreases in our criticized and classified loans and a decrease in net loan charge-offs.

Net loan charge-offs were $8.3 million, or 0.11 percent of average loans, in 2024 compared to $13.2 million, or 0.18 percent of average loans, in 2023.

Noninterest income decreased $8.5 million to $49.1 million in 2024 compared to $57.6 million in 2023.

was mainly related to $7.9 million of realized losses in 2024 from the repositioning of securities into longer duration, higher-yielding securities.

Other noninterest income decreased $0.8 million in 2024 compared to 2023 primarily due to a $3.9 million gain on the sale of other real estate owned, or OREO, in 2023 compared to a gain of $3.5 million from the exchange offer for Visa Class B-1 common stock in 2024.

Noninterest expense increased $8.6 million to $218.9 million in 2024 compared to $210.3 million in 2023.

Salaries and employee benefits increased $10.5 million primarily due to higher salaries related to annual merit increases, the acquisition of new talent and higher incentives and medical costs.

Professional services and legal decreased $2.4 million primarily due to higher consulting expenses in 2023 compared to 2024.

Other noninterest expense decreased $3.2 million primarily due to the adoption of PAM and a $2.1 million decrease in loan collection and appraisal expense compared to 2023.

As a result of adopting PAM, amortization expense related to tax credit equity investments of $4.3 million is included in income tax expense for 2024 compared to $2.1 million included in other noninterest expense in 2023.

The efficiency ratio (non-GAAP) for 2024 was 55.99 percent compared to 51.35 percent for 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.

The provision for income taxes decreased $0.4 million to $33.6 million in 2024 compared to $34.0 million in 2023.

The decrease in our income tax provision was primarily due to a $14.0 million decrease in income before taxes in 2024 compared to 2023 partially offset by the adoption of PAM as explained above.

The effective tax rate increased to 20.4 percent in 2024 compared to 19.0 percent in 2023.

The increase in the effective tax rate was primarily due to the adoption of PAM.

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

Twelve Months Ended December 31, 2024 Compared to

Twelve Months Ended December 31, 2023

Net Interest Income

Our principal source of revenue is net interest income.

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.

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.

A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what we believe is an acceptable level of net interest income.

As part of our interest rate risk management strategy, we use interest rate swaps to add stability to net interest income by managing our exposure to interest rate movements.

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.

There were no new interest rates swaps entered into in 2024 or 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 increased substantially in 2022 and 2023 followed by decreases in 2024 resulting in an unrealized loss on the cash flow hedges of $7.5 million at December 31, 2024, which is reported in Other Comprehensive Income (Loss), or OCI, net of applicable taxes.

This is an improvement of $4.1 million compared to the $11.6 million unrealized loss at December 31, 2023.

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 interest and rates paid on interest-bearing liabilities for the periods presented:

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

2024 2023 2022

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

Interest-bearing deposits with banks $ 165,275 $ 8,855 5.36 % $ 141,954 $ 7,344 5.17 % $ 378,323 $ 2,952 0.78 %

Securities, at fair value (1)(2)

977,896 29,860 3.05 % 976,095 25,445 2.61 % 1,017,471 22,880 2.25 %

Loans held for sale 85 6 6.95 % 121 8 6.71 % 1,115 49 4.38 %

Commercial real estate 3,334,518 197,406 5.92 % 3,216,593 183,204 5.70 % 3,182,821 139,575 4.39 %

Commercial and industrial 1,584,309 115,061 7.26 % 1,665,630 118,221 7.10 % 1,706,861 83,568 4.90 %

Commercial construction 378,755 29,677 7.84 % 381,838 28,835 7.55 % 401,780 18,795 4.68 %

Total Commercial Loans 5,297,582 342,144 6.46 % 5,264,061 330,260 6.27 % 5,291,462 241,938 4.57 %

Residential mortgage 1,558,277 78,676 5.05 % 1,282,078 59,170 4.62 % 980,134 40,146 4.10 %

Home equity 646,085 44,695 6.92 % 648,525 43,158 6.65 % 611,134 25,887 4.24 %

Installment and other consumer 106,260 9,058 8.52 % 117,807 9,929 8.43 % 119,703 7,177 6.00 %

Consumer construction 65,402 4,015 6.14 % 51,146 2,462 4.81 % 33,922 1,198 3.53 %

Total Consumer Loans 2,376,024 136,444 5.74 % 2,099,556 114,719 5.46 % 1,744,893 74,408 4.26 %

Total Portfolio Loans 7,673,606 478,588 6.24 % 7,363,617 444,979 6.04 % 7,036,355 316,346 4.50 %

Total Loans (1)(3)

7,673,691 478,594 6.24 % 7,363,738 444,987 6.04 % 7,037,470 316,395 4.50 %

Total other earning assets 18,606 1,269 6.82 % 37,988 2,675 7.04 % 12,694 576 4.54 %

Total Interest-earning Assets 8,835,468 $ 518,578 5.87 % 8,519,775 $ 480,451 5.64 % 8,445,958 $ 342,803 4.06 %

Noninterest-earning assets 737,366 756,481 721,080

Total Assets $ 9,572,834 $ 9,276,256 $ 9,167,038

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing demand $ 804,387 $ 8,837 1.10 % $ 844,588 $ 6,056 0.72 % $ 918,222 $ 1,025 0.11 %

Money market 1,993,053 64,666 3.24 % 1,677,584 39,480 2.33 % 1,909,208 11,948 0.63 %

Savings 905,351 6,273 0.69 % 1,020,314 4,352 0.43 % 1,121,818 1,121 0.10 %

Certificates of deposit 1,764,661 79,635 4.51 % 1,302,478 42,948 3.30 % 993,722 5,813 0.58 %

Total Interest-bearing Deposits 5,467,452 159,411 2.92 % 4,844,964 92,836 1.92 % 4,942,970 19,907 0.40 %

Short-term borrowings 257,524 13,206 5.12 % 500,421 27,238 5.44 % 75,849 1,695 2.23 %

Long-term borrowings 46,306 1,964 4.24 % 31,706 1,332 4.20 % 19,090 411 2.15 %

Junior subordinated debt securities 49,386 3,976 8.05 % 52,215 4,110 7.87 % 54,420 2,395 4.40 %

Total Borrowings 353,216 19,146 5.41 % 584,342 32,680 5.59 % 149,359 4,501 3.01 %

Other interest-bearing liabilities 47,727 2,509 5.26 % 58,135 2,975 5.12 % 15,163 560 3.69 %

Total Interest-bearing Liabilities 5,868,395 181,066 3.09 % 5,487,441 128,491 2.34 % 5,107,492 24,968 0.49 %

Noninterest-bearing liabilities 2,373,569 2,561,483 2,877,758

Shareholders' equity 1,330,870 1,227,332 1,181,788

Total Liabilities and Shareholders' Equity $ 9,572,834 $ 9,276,256 $ 9,167,038

Net Interest Income (FTE) (non-GAAP) (1)(2)

$ 337,512 $ 351,960 $ 317,835

Net Interest Margin (FTE) (non-GAAP) (1)(2)

3.82 % 4.13 % 3.76 %

(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.

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

Net interest income on an FTE basis (non-GAAP) decreased $14.4 million, or 4.11 percent to $337.5 million in 2024 compared to $351.9 million in 2023.

The net interest margin, or NIM, on an FTE basis (non-GAAP) decreased 31 basis points to 3.82 percent compared to 4.13 percent in 2023.

The decreases in net interest income and NIM on an FTE basis (non-GAAP) were primarily due to the impact of higher interest rates on total interest-bearing liabilities.

While higher interest rates positively impacted interest income and rates on interest-earning assets, it was more than offset by higher interest expense and rates on interest-bearing liabilities.

Strong customer deposit growth in 2024 has helped to improve our overall funding mix by reducing borrowings.

Interest income on an FTE basis (non-GAAP) increased $38.1 million to $518.6 million in 2024 compared to $480.5 million in 2023.

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

The average yield on loan balances increased 20 basis points compared to 2023 due to higher interest rates.

Average loan balances increased $0.3 billion to $7.7 billion in 2024 compared to $7.4 billion in 2023.

Overall, the FTE rate (non-GAAP) on interest-earning assets increased 23 basis points compared to 2023.

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

Interest expense increased $52.6 million to $181.1 million in 2024 compared to $128.5 million in 2023.

The increase in interest expense was primarily due to higher interest rates, a shift in our customer deposit mix to higher costing products and an increase in deposit balances.

Average interest-bearing deposits increased $0.7 billion to $5.5 billion in 2024, with $189.7 million of brokered deposits compared to $4.8 billion in 2023.

Average borrowings decreased $231.1 million to $353.2 million in 2024 compared to $584.3 in 2023 primarily due to an increase in deposits.

Overall, the cost of interest-bearing liabilities increased 75 basis points in 2024 compared to 2023.

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:

2024 Compared to 2023

Increase (Decrease) Due to

2023 Compared to 2022

Increase (Decrease) Due to

(dollars in thousands) Volume (4)

Total Volume (4)

Interest earned on:

Interest-bearing deposits with banks $ 1,207 $ 304 $ 1,511 $ (1,845) $ 6,236 $ 4,392

Securities, at fair value (2)(3)

47 4,368 4,415 (930) 3,495 2,565

Loans held for sale (2) — (2) (44) 3 (41)

Commercial real estate 6,717 7,487 14,204 1,481 42,149 43,630

Commercial and industrial (5,772) 2,612 (3,160) (2,019) 36,671 34,653

Commercial construction (233) 1,075 842 (933) 10,973 10,040

Total Commercial Loans 712 11,174 11,886 (1,471) 89,793 88,322

Residential mortgage 12,747 6,759 19,506 12,368 6,656 19,024

Home equity (162) 1,699 1,537 1,584 15,688 17,272

Installment and other consumer (973) 102 (871) (114) 2,866 2,752

Consumer construction 686 868 1,554 608 654 1,263

Total Consumer Loans 12,298 9,428 21,726 14,446 25,864 40,311

Total Portfolio Loans 13,010 20,602 33,612 12,976 115,657 128,633

Total Loans (1)(2)

13,008 20,602 33,610 12,932 115,660 128,592

Total other earning assets (1,365) (42) (1,407) 1,149 950 2,099

Change in Interest Earned on Interest-earning Assets $ 12,897 $ 25,232 $ 38,129 $ 11,306 $ 126,341 $ 137,647

Interest paid on:

Interest-bearing demand $ (288) $ 3,069 $ 2,781 $ (82) $ 5,114 $ 5,031

Money market 7,424 17,763 25,187 (1,449) 28,981 27,532

Savings (490) 2,411 1,921 (101) 3,332 3,231

Certificates of deposit 15,240 21,447 36,687 1,806 35,329 37,135

Total Interest-bearing Deposits 21,886 44,690 66,576 173 72,756 72,929

Short-term borrowings (13,221) (811) (14,032) 19,058 6,484 25,542

Long-term borrowings 614 18 632 272 650 921

Junior subordinated debt securities (223) 89 (134) (97) 1,811 1,714

Total Borrowings (12,830) (704) (13,534) 19,233 8,945 28,178

Other interest-bearing liabilities (533) 66 (467) 1,587 829 2,416

Change in Interest Paid on Interest-bearing Liabilities 8,523 44,052 52,575 20,993 82,530 103,523

Change in Net Interest Income $ 4,374 $ (18,820) $ (14,446) $ (9,687) $ 43,812 $ 34,124

(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.

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

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Provision for Credit Losses

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, loan risk ratings, net loan charge-offs/recoveries, the macro environment and our Current Expected Credit Loss, or CECL, forecast.

The provision for credit losses decreased $17.8 million to $0.1 million for 2024 compared to $17.9 million for 2023.

The decrease in the provision for credit losses was primarily due to a lower level of ACL and a decrease in net loan charge-offs.

The lower level of ACL was mainly related to improved asset quality, including a decrease in criticized and classified loans of $96.2 million, or 31.1 percent, during 2024.

Additionally, the provision for credit losses for the reserve for unfunded commitments was a negative $1.7 million for 2024 compared to a negative $1.4 million for 2023.

The decrease in the reserve for unfunded commitments for 2024 was primarily due to lower loss rates and fewer unused commitments in the construction portfolio.

Net loan charge-offs for 2024 were $8.3 million, or 0.11 percent of average loans, compared to $13.2 million, or 0.18 percent of average loans, for 2023.

Offsetting loan charge-offs of $24.6 million during 2023 was a $9.3 million recovery related to a 2020 customer fraud.

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

Noninterest Income

Years Ended December 31,

(dollars in thousands) 2024 2023 $ Change % Change

Net loss on sale of securities $ (7,938) $ — $ (7,938) — %

Debit and credit card 18,263 18,248 15 0.1 %

Service charges on deposit accounts 16,273 16,193 80 0.5 %

Wealth management 12,259 12,186 73 0.6 %

Other noninterest income 10,226 10,993 (767) (7.0) %

Total Noninterest Income $ 49,083 $ 57,620 $ (8,537) (14.8) %

Noninterest income decreased $8.5 million to $49.1 million compared to $57.6 million in 2023.

The decrease was mainly related to $7.9 million of realized losses from the repositioning of securities into longer duration, higher-yielding securities.

Other noninterest income decreased $0.8 million primarily related to a gain of $3.9 million on the sale of OREO in 2023 compared to a $3.5 million gain from the exchange offer for Visa Class B-1 common stock in 2024.

Noninterest Expense

Years Ended December 31,

(dollars in thousands) 2024 2023 $ Change % Change

Salaries and employee benefits $ 121,990 $ 111,462 $ 10,528 9.4 %

Data processing and information technology 19,510 17,437 2,073 11.9 %

Occupancy 15,102 14,814 288 1.9 %

Furniture, equipment and software 13,559 12,912 647 5.0 %

Marketing 6,351 6,488 (137) (2.1) %

Other taxes 7,452 6,813 639 9.4 %

Professional services and legal 5,468 7,823 (2,355) (30.1) %

FDIC insurance 4,201 4,122 79 1.9 %

Other 25,305 28,463 (3,158) (11.1) %

Total Noninterest Expense $ 218,938 $ 210,334 $ 8,604 4.1 %

Noninterest expense increased $8.6 million to $218.9 million compared to $210.3 million in 2023.

Salaries and employee benefits increased $10.5 million during 2024 primarily due to annual merit increases, the acquisition of new talent and higher incentives and medical costs.

Data processing and information technology increased $2.1 million due to higher outsourced processing costs related to additional products and higher transaction volume.

Professional services and legal decreased $2.4 million due to higher consulting expense in 2023 compared to 2024.

Other noninterest expense decreased $3.2 million primarily due to the adoption of PAM and a $2.1 million decrease in loan collection and appraisal expense compared to 2023.

As a result of adopting PAM, amortization expense of $4.3 million related to tax credit equity investments is included in income tax expense for 2024 compared to $2.1 million included in noninterest expense in 2023.

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Provision for Income Taxes

The provision for income taxes decreased by $0.4 million to $33.6 million in 2024 compared to $34.0 million for 2023.

The decrease in our income tax provision was primarily due to a $14.0 million decrease in income before taxes in 2024 compared to 2023 partially offset by the adoption of PAM on January 1, 2024.

The effective tax rate, which is total tax expense as a percentage of income before taxes, increased to 20.4 percent in 2024 compared to 19.0 percent in 2023.

The increase in the effective tax rate in 2024 compared to 2023 was primarily due to the adoption of PAM.

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, which is partially offset by PAM.

Financial Condition as of December 31, 2024

Total assets were $9.7 billion at December 31, 2024 compared to $9.6 billion at December 31, 2023.

Total portfolio loans increased $89.6 million, or 1.2 percent, to $7.7 billion at December 31, 2024 compared to December 31, 2023.

Loan growth was slow in 2024 due to higher interest rates and uncertainty in the macro environment and elevated loan-payoffs.

Loan growth improved in the fourth quarter of 2024, with expanding loan pipelines positioning us for better results in 2025.

Securities remained unchanged at $1.0 billion at December 31, 2024 and December 31, 2023.

The bond portfolio was in a net unrealized loss position of $71.7 million at December 31, 2024 compared to a net unrealized loss position of $82.0 million at December 31, 2023.

The improvement in the net unrealized loss position of $10.3 million was primarily due to realized losses of $7.9 million during 2024 as a result of repositioning $144.3 million of our securities portfolio into longer-duration, higher yielding securities.

Customer deposit growth continues to be strong, allowing for a reduction in higher costing borrowings and brokered deposits.

Total deposits increased $261.3 million with customer deposits increasing $411.7 million, or 5.8 percent, to $7.6 billion at December 31, 2024 compared to $7.1 billion at December 31, 2023.

Brokered deposits decreased $150.4 million, or 40.0 percent, to $225.3 million at December 31, 2024 compared to $375.7 million at December 31, 2023.

The increase in customer deposits is the result of our continued focus on our deposit franchise.

Total borrowings decreased $253.3 million, or 50.3 percent, to $250.3 million at December 31, 2024 compared to $503.6 million at December 31, 2023, primarily due to strong growth in customer deposits.

Total shareholders’ equity increased by $96.8 million to $1.4 billion at December 31, 2024 compared to $1.3 billion at December 31, 2023.

The increase was primarily due to net income of $131.3 million and other comprehensive income of $13.9 million offset by dividends of $51.1 million.

Securities Activity

2024 2023 2022

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

Treasury securities $ 92,768 2.72 % $ 133,786 1.71 % $ 131,695 1.71 %

Obligations of U.S.

government corporations and agencies 15,071 2.14 % 32,513 2.28 % 41,811 2.32 %

Collateralized mortgage obligations of U.S.

government corporations and agencies 596,284 3.62 % 460,939 3.04 % 428,407 2.56 %

Residential mortgage-backed securities of U.S.

government corporations and agencies 33,207 1.86 % 38,177 1.86 % 41,587 1.86 %

Commercial mortgage-backed securities of U.S.

government corporations and agencies 224,798 3.08 % 273,425 2.42 % 327,313 2.28 %

Corporate obligations — — % — — % 500 7.67 %

Obligations of states and political subdivisions 24,287 3.17 % 30,468 3.34 % 30,471 3.35 %

Available-for-Sale Debt Securities 986,415 969,308 1,001,784

Equity securities 1,176 2.59 % 1,083 3.06 % 994 3.32 %

Total Securities Available for Sale $ 987,591 3.32 % $ 970,391 2.62 % $ 1,002,778 2.34 %

We invest in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of ALCO to reposition the balance sheet for interest rate risk purposes.

Securities are subject to market risks that could negatively affect the level of liquidity available to us.

Security purchases are subject to an

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investment policy approved annually by our Board of Directors and administered through ALCO and our treasury function.

Our entire securities portfolio is classified as available for sale.

The portfolio primarily consists of structured agency-backed, fixed-income securities with limited credit exposure.

Total securities available for sale increased to $987.6 million at December 31, 2024 compared to $970.4 million at December 31, 2023.

At December 31, 2024, our bond portfolio was in a net unrealized loss position of $71.7 million compared to a net unrealized loss position of $82.0 million at December 31, 2023.

At December 31, 2024, our bond portfolio had gross unrealized losses of $72.7 million offset by $1.0 million in gross unrealized gains compared to December 31, 2023, when total gross unrealized losses were $83.8 million offset by gross unrealized gains of $1.8 million.

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, 2024 or December 31, 2023.

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

All debt securities were determined to be investment grade and paying principal and interest according to the contractual terms of the security at December 31, 2024.

We do not intend to sell and it is more likely than not that we will not be required to sell any of the securities in an unrealized loss position before recovery of their amortized cost.

We did not recognize any impairment charges on our securities portfolio in 2024, 2023 or 2022.

We recognized $7.9 million of realized losses as a result of repositioning $144.3 million of our securities portfolio into longer duration, higher-yielding securities during 2024.

We sold shorter duration U.S.

Treasury securities and commercial mortgage-backed securities and purchased a mix of collateralized mortgage obligations, U.S.

Treasury securities and commercial mortgage-backed securities with a longer duration and higher yield.

The following table sets forth the maturities of securities at December 31, 2024 and the weighted average yields of such securities.

Taxable-equivalent adjustments for 2024 have been made in calculating yields on obligations of state and political subdivisions.

One Year After

One But within

Five Years After

Five But Within

Ten Years After

Ten Years No Fixed

(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield

Available-for-Sale

Treasury securities $ 10,019 4.01 % $ 82,749 2.56 % $ — — % $ — — % $ — — %

Obligations of U.S.

government corporations and agencies 15,071 2.14 % — — % — — % — — % — — %

Collateralized mortgage obligations of U.S.

government corporations and agencies 51 2.50 % 12,125 3.08 % 33,021 3.84 % 551,087 3.62 % — — %

Residential mortgage-backed securities of U.S.

government corporations and agencies 20 5.00 % 807 2.60 % — — % 32,380 1.84 % — — %

Commercial mortgage-backed securities of U.S.

government corporations and agencies 2,620 2.82 % 153,610 2.45 % 68,568 4.50 % — — % — — %

Obligations of states and political subdivisions (1)

— — % 4,982 3.32 % 19,305 3.14 % — — % — — %

Marketable equity securities — — % — — % — — % — — % 1,176 3.00 %

Total $ 27,781 $ 254,273 $ 120,894 $ 583,467 $ 1,176

Weighted Average Yield 2.88 % 2.54 % 4.10 % 3.52 % 3.00 %

(1) Weighted-average yields are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent for 2024.

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Loan Composition

The following table summarizes our loan portfolio as of the dates presented:

2024 2023 2022 2021 2020

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

Commercial real estate $ 3,388,017 43.8 % $ 3,357,603 43.9 % $ 3,128,187 43.5 % $ 3,236,653 46.2 % $ 3,244,974 44.9 %

Commercial and industrial 1,540,397 19.9 % 1,642,106 21.5 % 1,718,976 23.9 % 1,728,969 24.7 % 1,954,453 27.0 %

Commercial construction 352,886 4.5 % 363,284 4.7 % 399,371 5.6 % 440,962 6.3 % 474,280 6.6 %

Total Commercial Loans 5,281,300 68.2 % 5,362,993 70.1 % 5,246,534 73.0 % 5,406,584 77.2 % 5,673,706 78.5 %

Consumer real estate 2,356,901 30.4 % 2,175,451 28.4 % 1,812,539 25.2 % 1,485,478 21.2 % 1,471,238 20.4 %

Other consumer 104,757 1.4 % 114,897 1.5 % 124,896 1.7 % 107,928 1.5 % 80,915 1.1 %

Total Consumer Loans 2,461,658 31.8 % 2,290,348 29.9 % 1,937,435 27.0 % 1,593,406 22.8 % 1,552,153 21.5 %

Total Portfolio Loans $ 7,742,958 100.0 % $ 7,653,341 100.0 % $ 7,183,969 100.0 % $ 6,999,990 100.0 % $ 7,225,859 100.0 %

The loan portfolio represents the most significant source of interest income for us.

The risk that borrowers will be unable to pay such obligations is inherent in the loan portfolio.

Other conditions, such as downturns in the borrower’s industry or the overall economic climate, can significantly impact the borrower’s ability to pay.

We adhere to a General Lending Policy to maintain the quality of our loan portfolio.

The policy delegates the authority to extend loans under specific guidelines and underwriting standards.

The General Lending Policy is formulated by management and reviewed and ratified annually by the Board of Directors.

We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry and actively managing concentrations.

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 represented 68.2 percent of total portfolio loans at December 31, 2024 compared to 70.1 percent at December 31, 2023.

Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 70.8 percent, of total commercial loans and 48.3 percent of total portfolio loans at December 31, 2024 compared to $3.7 billion, or 69.4 percent, of total commercial loans and 48.6 percent of total portfolio loans at December 31, 2023.

Our multi-family and office segments are the most significant CRE and commercial construction concentrations within our portfolio.

Approximately 95 percent of multifamily and 91 percent of office CRE loans are located within our market area, which includes Pennsylvania and the contiguous states of Ohio, New York, West Virginia, New Jersey, Delaware and Maryland.

In the CRE segment, multi-family represented $640.1 million, or 8.3 percent of total portfolio loans, at December 31, 2024 compared to $569.4 million, or 7.4 percent, at December 31, 2023.

The average loan size of multifamily CRE is $1.1 million with an average loan to value of 58 percent at December 31, 2024 compared to an average loan size of $0.9 million with an average loan to value of 58 percent at December 31, 2023.

There were no special mention loans and $7.3 million of substandard loans in the multifamily CRE segment at December 31, 2024 compared to special mention loans of $3.8 million and substandard loans of $13.0 million at December 31, 2023.

There were no nonperforming multifamily loans at December 31, 2024 and December 31, 2023.

Office CRE was $453.3 million, or 5.9 percent of total portfolio loans, at December 31, 2024 compared to $480.5 million, or 6.3 percent, at December 31, 2023.

The average loan size of office CRE is $1.1 million with an average loan to value of 56 percent at December 31, 2024 compared to an average loan size of $1.1 million with an average loan to value of 55 percent at December 31, 2023.

Special mention loans in the office CRE segment were $18.4 million and substandard loans were $2.1 million at December 31, 2024 compared to special mention loans of $9.1 million and substandard loans of $2.5 million at December 31, 2023.

There were $0.6 million of nonperforming loans at December 31, 2024 and $0.5 million at December 31, 2023.

In addition, within the commercial construction segment, multifamily represented $72.8 million, or 0.9 percent of total portfolio loans, at December 31, 2024 compared to $119.0 million, or 1.6 percent, at December 31, 2023.

Commercial construction office was $17.2 million, or 0.2 percent of total portfolio loans, at December 31, 2024 compared to $36.0 million, or 0.5 percent, at December 31, 2023.

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.

We believe our knowledge of these markets outweighs the geographic concentration risk.

Our operating knowledge at the local and regional level is derived from our front-line connection to the customer and our understanding of their businesses.

We also have a portfolio management group that utilizes multiple data sources including

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customer information, publicly available data and subscription service data to assess risk on an on-going basis and strong overall risk management practices which help us understand and evaluate concentration risk.

Our CRE and commercial construction portfolios have exposure outside this geography of 3.9 percent of the combined portfolios and 1.9 percent of total portfolio loans at December 31, 2024 and 2023.

Total portfolio loans increased $89.6 million, or 1.2 percent, to $7.7 billion at December 31, 2024 compared to $7.7 billion at December 31, 2023.

As of December 31, 2024, 62.0 percent of our total loans were variable rate loans and 38.0 percent were fixed rate loans compared to 65.0 percent variable rate loans and 35.0 percent fixed rate loans at December 31, 2023.

Commercial loans decreased $81.7 million to $5.3 billion at December 31, 2024, related to decreases of $101.7 million in C&I and $10.4 million in commercial construction offset by an increase of $30.4 million in CRE compared to $5.4 billion at December 31, 2023.

The decrease in commercial loans was primarily driven by lower loan demand due to higher interest rates and uncertainty in the macro environment and elevated loan pay-offs which in part were strategic exits related to our criticized and classified loans.

Loan activity improved in the fourth quarter of 2024, with expanding loan pipelines positioning us for better growth in 2025.

Consumer loans represented 31.8 percent of our total portfolio loans at December 31, 2024 and 29.9 percent at December 31, 2023.

Consumer loans increased $171.3 million to $2.5 billion at December 31, 2024 compared to $2.3 billion at December 31, 2023 primarily due to an increase of $181.4 million in consumer real estate offset by a decrease of $10.1 million in consumer installment loans.

Beginning in 2022, we shifted from selling mortgages in the secondary market to holding mortgages in our portfolio.

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.

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 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.

Beginning in 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 our strategy and may shift back to selling more residential mortgages into the secondary market in future periods.

At December 31, 2024, our servicing portfolio of mortgage loans that we originated and sold into the secondary market was $648.9 million at December 31, 2024 compared to $707.8 million at December 31, 2023.

The following table presents the maturity of commercial and consumer loans outstanding as of December 31, 2024:

(dollars in thousands) Within One Year After One But Within Five Years After Five Years

through 15 years After 15 years Total

Fixed interest rates $ 235,911 $ 973,194 $ 475,051 $ 10,624 $ 1,694,780

Variable interest rates 847,944 1,832,862 816,963 88,751 3,586,520

Total Commercial Loans $ 1,083,855 $ 2,806,056 $ 1,292,014 $ 99,375 $ 5,281,300

Fixed interest rates $ 60,026 $ 220,120 $ 493,230 $ 501,376 $ 1,274,752

Variable interest rates 57,984 187,772 539,672 401,478 1,186,906

Total Consumer Loans $ 118,010 $ 407,892 $ 1,032,902 $ 902,854 $ 2,461,658

Total Portfolio Loans $ 1,201,865 $ 3,213,948 $ 2,324,916 $ 1,002,229 $ 7,742,958

Off-Balance Sheet Arrangements

In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their financing objectives.

These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements.

Our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral.

We apply the same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers.

Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a fee.

Many of the commitments are expected to expire without being drawn upon, therefore, the total commitment amounts do not necessarily represent future cash requirements.

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The following table sets forth our commitments and letters of credit as of the dates presented:

(dollars in thousands)

Commitments to extend credit $ 2,382,847 $ 2,566,154

Standby letters of credit 69,558 61,889

Total $ 2,452,405 $ 2,628,043

Commitments and Contingencies in Part II, Item 8.

Financial Statements and Supplementary Data of this Report for details on the allowance for credit losses on unfunded commitments.

Credit Quality

On a quarterly basis, criticized asset meetings are held to monitor all special mention and substandard loans greater than $1.5 million and all business banking special mention and substandard loans greater than $0.5 million to establish action plans for these loans.

These loans typically represent the highest risk of loss to us.

We monitor these loans through regular contact with the borrower, review of current financial information and other documentation, review of all loan or potential loan restructures or modifications and the regular reevaluation of assets held as collateral.

We also have a quarterly criticized asset meeting for the retail portfolio to review delinquent and nonaccrual loans as well as individual portfolio reviews such as unsecured, private banking and first payment default loans.

Additional credit risk management practices include periodic loan reviews, 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 group that performs an annual review of all commercial and business banking 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.

Our credit risk review process serves to independently monitor credit quality and assess the effectiveness of credit risk management practices to provide oversight of all corporate lending activities.

The credit risk review function has the primary responsibility for assessing commercial credit administration and credit decision functions of consumer and mortgage underwriting, as well as providing input to the loan risk rating process.

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

The following represents NPAs as of December 31:

(dollars in thousands) 2024 2023

Nonaccrual Loans

Commercial real estate $ 4,173 $ 7,267

Commercial and industrial 12,570 3,244

Commercial construction — 4,960

Consumer real estate 10,964 7,146

Other consumer 230 330

Total Nonaccrual Loans 27,937 22,947

Total Nonperforming Assets $ 27,945 $ 23,022

Nonaccrual loans as a percent of total loans 0.36 % 0.30 %

Nonperforming assets as a percent of total loans plus OREO 0.36 % 0.30 %

Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful or generally when interest or principal payments are 90 days or more past the contractual due date.

Nonaccrual loans remain low at $27.9 million at December 31, 2024 compared to $22.9 million at December 31, 2023.

The increase in nonaccrual loans was due to the addition of a $10.7 million commercial and industrial, or C&I, relationship during the three months ended December 31, 2024.

A specific reserve of $4.2 million was added for this relationship based on the uncertainty of timing surrounding the execution of the resolution strategy.

Partially offsetting the increase in nonaccrual loans were payoffs in our commercial construction and CRE portfolios.

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The following represents delinquency as of December 31:

(dollars in thousands) Amount % of

Loans Amount % of

90 days or more:

Commercial real estate $ 4,173 0.12 % $ 7,267 0.22 %

Commercial and industrial 12,570 0.82 % 3,244 0.20 %

Commercial construction — — % 4,960 1.37 %

Consumer real estate 10,964 0.47 % 7,146 0.33 %

Other consumer 230 0.22 % 330 0.29 %

Total Loans $ 27,937 0.36 % $ 22,947 0.30 %

30 to 89 days:

Commercial real estate $ 1,846 0.05 % $ 7,665 0.23 %

Commercial and industrial 2,671 0.17 % 710 0.04 %

Commercial construction 1,036 0.29 % 22 0.01 %

Consumer real estate 5,554 0.24 % 6,295 0.29 %

Other consumer 372 0.35 % 429 0.37 %

Total Loans $ 11,479 0.15 % $ 15,121 0.20 %

Closed-end installment loans, amortizing loans secured by real estate and any other loans with payments scheduled monthly are reported past due when the borrower is in arrears two or more monthly payments.

Other multi-payment obligations with payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days or more.

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.

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:

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 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.

These factors may include, but are not limited to:

• the status of a bankruptcy proceeding;

• the value of collateral and probability of successful liquidation;

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

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:

Years Ended December 31,

(dollars in thousands) 2024 2023 2022

ACL Balance at Beginning of Year:

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

Commercial real estate (5,390) (1,706) (1,820)

Commercial and industrial (3,898) (20,535) (7,801)

Commercial construction — (451) —

Consumer real estate (1,446) (446) (621)

Other consumer (1,454) (1,500) (1,375)

Total (12,188) (24,638) (11,617)

Commercial real estate 1,921 1,084 1,052

Commercial and industrial 1,133 9,796 7,366

Commercial construction — 2 1

Consumer real estate 329 214 203

Other consumer 524 360 400

Total 3,907 11,456 9,022

Net Charge-offs (8,281) (13,182) (2,595)

Impact of adoption of ASU 2022-02 — 568 —

Provision for credit losses 1,809 19,240 5,359

ACL Balance at End of Year:

$ 101,494 $ 107,966 $ 101,340

Net loan charge-offs for 2024 were $8.3 million, or 0.11 percent of average loans, compared to $13.2 million, or 0.18 percent of average loans for 2023.

Offsetting loan charge-offs during 2024 were $3.9 million in recoveries compared to $11.5 million in recoveries in 2023, which included a $9.3 million recovery related to a 2020 customer fraud.

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

2024 2023 2022

Commercial real estate 0.10 % 0.02 % 0.02 %

Commercial and industrial 0.17 % 0.64 % 0.03 %

Commercial construction — % 0.12 % — %

Consumer real estate 0.05 % 0.01 % 0.03 %

Other consumer 0.88 % 0.97 % 0.81 %

Net charge-offs to average loans outstanding 0.11 % 0.18 % 0.04 %

Allowance for credit losses as a percentage of total portfolio loans 1.31 % 1.41 % 1.41 %

Allowance for credit losses to total nonaccrual loans 363 % 471 % 532 %

The following is the ACL balance by portfolio segment as of December 31:

(dollars in thousands) Amount % of

Total Amount % of

Commercial real estate $ 30,254 29.8 % $ 37,886 35.1 %

Commercial and industrial 37,084 36.5 % 34,538 32.0 %

Commercial construction 4,893 4.8 % 5,382 5.0 %

Business banking 10,681 10.6 % 12,858 11.9 %

Consumer real estate 15,776 15.5 % 14,663 13.6 %

Other consumer 2,806 2.8 % 2,639 2.4 %

Total $ 101,494 100.0 % $ 107,966 100.0 %

S&T BANCORP, INC.

AND SUBSIDIARIES

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

Significant to our ACL is a higher concentration of commercial loans.

The ability of borrowers to repay commercial loans is dependent upon the success of their business and general economic conditions.

Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system.

Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies.

Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

The ACL was $101.5 million, or 1.31 percent of total portfolio loans, at December 31, 2024 compared to $108.0 million, or 1.41 percent of total portfolio loans, at December 31, 2023.

The decrease in the ACL of $6.5 million is related to improvement in our overall asset quality resulting in a $7.7 million decrease in our quantitative reserve and a $2.9 million decrease in our qualitative reserve.

The decrease in the quantitative reserve was primarily due to a $96.2 million, or 31.1 percent, reduction in our criticized and classified loans and the decrease in the qualitative reserve was primarily related to improvement in our healthcare portfolio along with improvement in various other risk factors within our qualitative reserve.

These decreases were offset by the addition of a $4.2 specific reserve for loans individually evaluated related to a C&I relationship that was downgraded to nonaccrual during the three months ended December 31, 2024.

Federal Home Loan Bank and Other Restricted Stock

At December 31, 2024, we held FHLB of Pittsburgh stock of $15.2 million compared to $24.0 million at December 31, 2023.

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 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.

Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise.

Rather, members purchase stock to obtain access to the products and services offered by the FHLB.

Unlike equity securities of traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

We reviewed and evaluated the FHLB capital stock for impairment at December 31, 2024.

The FHLB exceeds all required capital ratios.

Additionally, we considered that the FHLB has been paying dividends and actively redeeming stock throughout 2024 and 2023.

Accordingly, we believe sufficient evidence exists to conclude that no impairment existed at December 31, 2024.

Deposits are our primary source of funds.

The following table presents the mix of deposits as of the dates presented:

December 31, 2024 December 31, 2023

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

Personal $ 4,533,149 58.2 % $ 4,244,386 56.4 % $ 288,763 6.8 %

Business 2,679,191 34.4 % 2,565,853 34.1 % 113,338 4.4 %

Public funds 345,512 4.5 % 335,876 4.5 % 9,636 2.9 %

Brokered 225,265 2.9 % 375,654 5.0 % (150,389) (40.0) %

Total Deposits $ 7,783,117 100.0 % $ 7,521,769 100.0 % $ 261,348 3.5 %

S&T BANCORP, INC.

AND SUBSIDIARIES

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

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

(dollars in thousands) 2024 2023 $ Change

Customer deposits

Noninterest-bearing demand $ 2,185,242 $ 2,221,942 $ (36,700)

Interest-bearing demand 812,768 825,787 (13,019)

Money market 1,939,980 1,741,189 198,791

Savings 877,859 950,546 (72,687)

Certificates of deposit 1,742,003 1,406,652 335,351

Total customer deposits 7,557,852 7,146,116 411,736

Brokered deposits

Money market 100,305 200,653 (100,348)

Certificates of deposit 124,960 175,000 (50,040)

Total brokered deposits 225,265 375,653 (150,388)

Total Deposits $ 7,783,117 $ 7,521,769 $ 261,348

We have a strong core deposit base with noninterest-bearing demand deposits representing 28.1 percent of total deposits at December 31, 2024 compared to 29.5 percent of total deposits at December 31, 2023.

Total deposits increased $261.3 million, or 3.5 percent, at December 31, 2024 compared to December 31, 2023.

Total customer deposits increased $411.7 million, or 5.8 percent, from December 31, 2023, as a result of our focus on our deposit franchise.

Total brokered deposits decreased $150.4 million from December 31, 2023 due to strong growth in customer deposits.

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 $47.1 million to $324.8 million at December 31, 2024 compared to $277.7 million at December 31, 2023.

We have total uninsured deposits of $2.6 billion, or 33.5 percent of our total deposit base, compared to $2.3 billion, or 30.0 percent, at December 31, 2023.

Included in uninsured deposits is $297.5 million of fully collateralized, municipal deposits, or 3.8 percent of our total deposit base.

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

2024 2023 2022

(dollars in thousands) Amount Rate Amount Rate Amount Rate

Noninterest-bearing demand $ 2,163,902 — $ 2,349,919 — $ 2,705,210 —

Interest-bearing demand 804,387 1.10 % 844,588 0.72 % 918,222 0.11 %

Money market 1,873,629 3.11 % 1,638,947 2.28 % 1,909,209 0.63 %

Savings 905,351 0.69 % 1,020,314 0.43 % 1,121,818 0.10 %

Certificates of deposit 1,580,025 4.41 % 1,226,989 3.17 % 991,396 0.58 %

Brokered deposits 304,060 5.35 % 114,322 5.43 % 2,323 2.10 %

Total $ 7,631,354 2.09 % $ 7,195,079 1.29 % $ 7,648,178 0.26 %

CDs of $250,000 and over accounted for 6.2 percent and 4.7 percent of total deposits at December 31, 2024 and December 31, 2023.

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

Maturities of CDs of $250,000 or more outstanding at December 31, 2024 are summarized as follows:

(dollars in thousands) 2024

Three months or less $ 239,924

Over three through six months 128,980

Over six through twelve months 88,729

Over twelve months 21,611

Total $ 479,244

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.

Short-term borrowings are for terms under or equal to one year at December 31, 2024 and are comprised of FHLB Advances.

Long-term borrowings are for original terms greater than one year and are comprised of FHLB advances and finance leases.

Total borrowings decreased $253.3 million to $250.3 million at December 31, 2024 compared to $503.6 million at December 31, 2023, primarily due to strong growth in customer deposits.

(dollars in thousands) December 31, 2024 December 31, 2023 $ Change

Short-term borrowings $ 150,000 $ 415,000 $ (265,000)

Long-term borrowings 50,896 39,277 11,619

Junior subordinated debt securities 49,418 49,358 60

Total Borrowings $ 250,314 $ 503,635 $ (253,321)

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

Short-Term Borrowings

(dollars in thousands) December 31, 2024 December 31, 2023

Balance at the period end $ 150,000 $ 415,000

Average balance during the period $ 257,524 $ 500,421

Average interest rate during the period 5.12 % 5.44 %

Maximum month-end balance during the period $ 465,000 $ 630,000

Average interest rate at the period end 4.60 % 5.65 %

Information pertaining to long-term borrowings and junior subordinated debt securities is summarized in the tables below for the years ended December 31, 2024 and December 31, 2023.

Long-Term Borrowings

(dollars in thousands) December 31, 2024 December 31, 2023

Balance at the period end $ 50,896 $ 39,277

Average balance during the period $ 46,306 $ 31,706

Average interest rate during the period 4.24 % 4.20 %

Maximum month-end balance during the period $ 64,015 $ 39,589

Average interest rate at the period end 3.75 % 4.52 %

Junior Subordinated Debt Securities

(dollars in thousands) December 31, 2024 December 31, 2023

Balance at the period end $ 49,418 $ 49,358

Average balance during the period $ 49,386 $ 52,215

Average interest rate during the period 8.05 % 7.87 %

Maximum month-end balance during the period $ 49,418 $ 54,483

Average interest rate at the period end 6.96 % 7.98 %

Wealth Management Assets

The fair value of the S&T Bank Wealth Management assets under administration, which are not accounted for as part of our assets, amounted to $2.0 billion at December 31, 2024 and $2.2 billion at December 31, 2023.

At December 31, 2024, assets under administration consisted of $0.7 billion in S&T Trust and $1.3 billion in S&T Financial Services.

S&T BANCORP, INC.

AND SUBSIDIARIES

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

Liquidity and Capital Resources

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.

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.

The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events.

The ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and having a detailed contingency funding plan.

The ALCO policy guidelines define graduated risk tolerance levels.

If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position.

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

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, 2024 - 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 FHLB, federal funds lines with other financial institutions and the brokered deposit market.

We also have borrowing availability at the Federal Reserve Discount Window through the Borrower-in-Custody Program.

In response to the bank failures in March 2023, the Federal Reserve authorized additional funding availability to eligible depository institutions through the Federal Reserve Bank Term Funding Program, or BTFP.

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

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

Treasury securities, U.S.

Agencies and U.S.

Agency mortgage-backed securities.

Collateral advances were equal to 100 percent of the par value of the collateral pledged with a term of up to one year.

Interest was charged at a fixed rate equal to the one-year overnight index swap rate plus 10 basis points with no prepayment penalty.

The BTFP ceased making new fundings on March 11, 2024.

Available borrowing capacity exceeds uninsured deposits of $2.6 billion at December 31, 2024 and $2.3 billion at December 31, 2023.

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

December 31, 2024 December 31, 2023

(dollars in thousands) Borrowing Capacity Balance (1)

Available Borrowing Capacity Balance Available

FHLB $ 1,980,615 $ 304,565 $ 1,676,050 $ 3,241,098 $ 552,136 $ 2,688,962

Borrower-in-Custody Program $ 1,995,489 $ — $ 1,995,489 769,653 — 769,653

Federal Reserve BTFP (2)

$ — $ — $ — 636,963 — 636,963

Total $ 3,976,104 $ 304,565 $ 3,671,539 $ 4,647,714 $ 552,136 $ 4,095,578

(1) FHLB balances include advances, letters of credit, interest due on advances and the credit enhancement obligation on mortgages sold to the FHLB.

(2) Emergency lending program created by the Federal Reserve in March 2023 which ceased making new fundings in March 2024.

At December 31, 2024, we had available borrowing capacity of $3.7 billion, $2.0 billion at the Federal Reserve and $1.7 billion at the FHLB of Pittsburgh.

In 2024, we strengthened our contingency funding position by shifting loan collateral from the FHLB of Pittsburgh to the Federal Reserve.

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, 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 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.

S&T BANCORP, INC.

AND SUBSIDIARIES

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

The following table summarizes our material contractual obligations as of December 31, 2024:

Payments Due In

(dollars in thousands) 2025 2026-2027 2028-2029 Later Years Total

Certificates of deposit (1)

1,745,518 104,794 13,844 2,807 1,866,963

Short-term borrowings (1)

150,000 — — — 150,000

Long-term borrowings (1)

81 50,180 122 513 50,896

Junior subordinated debt securities (1)

— — — 49,418 49,418

Operating and finance leases 5,052 9,648 9,254 55,724 79,678

Funding commitments on Low Income Housing Partnerships 5,887 — — — 5,887

Total $ 1,906,538 $ 164,622 $ 23,220 $ 108,462 $ 2,202,842

(1) Excludes interest

An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets.

Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet financial obligations.

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

At December 31, 2024, S&T Bank had $938.2 million in highly liquid assets, which consisted primarily of $175.2 million in interest-bearing deposits with banks and $763.0 million in unpledged securities.

This resulted in a highly liquid assets to total assets ratio of 9.7 percent at December 31, 2024 compared to 9.4 percent at December 31, 2023.

Refer to Note 12.

Tax Credit Equity Investments, 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 increased $96.8 million, or 7.6 percent, to $1.4 billion at December 31, 2024 compared to $1.3 billion at December 31, 2023.

The increase was primarily due to net income of $131.3 million and other comprehensive income of $13.9 million, partially offset by dividends of $51.1 million.

The other comprehensive income was primarily due to a $8.2 million improvement in unrealized losses on our available-for-sale debt securities, net of tax and an improvement of $4.1 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 11.98 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 14.58 percent compared to the regulatory guideline of 6.50 percent to be well-capitalized.

Our risk-based Tier 1 and Total capital ratios were 14.90 percent and 16.49 percent, which places us above the federal bank regulatory agencies’ well-capitalized guidelines of 8.00 percent and 10.00 percent, respectively.

Our ratios are also above the required minimum ratios after the capital conservation buffer, discussed further below, of common equity tier 1 risk-based capital ratio greater than 7.00 percent, tier 1 risk-based capital ratio greater than 8.50 percent and a total risk-based capital ratio greater than 10.50 percent.

We believe that we have the ability to raise additional capital, if necessary.

On March 27, 2020, the regulators issued interim final rule, or IFR, “Regulatory Capital Rule:

Revised Transition of the Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity from the spread of COVID-19.

The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”).

We adopted CECL effective January 1, 2020 and elected to implement the five-year transition.

Banking organizations are required to maintain a capital conservation buffer composed of common equity tier 1 capital in an amount greater than 2.50 percent of total risk-weighted assets.

Banking organizations must maintain a common equity tier 1 risk-based capital ratio greater than 7.00 percent, a tier 1 risk-based capital ratio greater than 8.50 percent and a total risk-based capital ratio greater than 10.50 percent;

otherwise, it will be subject to restrictions on capital distributions and discretionary bonus payments.

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.

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.

The timing of adoption, ultimate form and effect of any such proposed amendments cannot be predicted.

We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933 as amended, with the SEC, which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and warrants.

We may use the proceeds from the sale of securities for general corporate purposes, which could include investments

S&T BANCORP, INC.

AND SUBSIDIARIES

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

at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases.

4 unchanged sentences

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 monitor the mix of interest-rate sensitive assets and liabilities through 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.

4 unchanged sentences

See Risk Factors in Item 1A for further information regarding the impact of inflation on the economy and on S&T.

Market risk is defined as the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity prices can adversely affect a financial institution’s earnings or capital.

For most financial institutions, including S&T, market risk primarily reflects exposures to changes in interest rates.

Interest rate fluctuations affect earnings by changing net interest income and other interest-sensitive income and expense levels.

Interest rate changes also affect capital by changing the net present value of a bank’s future cash flows, and the cash flows themselves, as rates change.

Accepting this risk is a normal part of banking and can be an important source of profitability and enhancing shareholder value.

However, excessive interest rate risk can threaten a bank’s earnings, capital, liquidity and solvency.

Our sensitivity to changes in interest rate movements is continually monitored by ALCO.

ALCO monitors and manages market risk through rate shock analyses, economic value of equity, or EVE, analyses and by performing stress tests and simulations to mitigate earnings and market value fluctuations due to changes in interest rates.

Rate shock analyses results are compared to a base case to provide an estimate of the impact that market rate changes may have on 12 and 24 months of pretax net interest income.

The base case and rate shock analyses are performed on a static balance sheet.

A static balance sheet is a no growth balance sheet in which all maturing and/or repricing cash flows are reinvested in the same product at the existing product spread.

Rate shock analyses assume an immediate parallel shift in market interest rates and also include management assumptions regarding the impact of interest rate changes on non-maturity deposit products (noninterest-bearing demand, interest-bearing demand, money market and savings) and changes in the prepayment behavior of loans and securities with optionality.

S&T policy guidelines limit the change in pretax net interest income over 12 and 24 month horizons using rate shocks in increments of +/- 100 basis points.

Policy guidelines define the percentage change in pretax net interest income by graduated risk tolerance levels of minimal, moderate and high.

In order to monitor interest rate risk beyond the 24 month time horizon of rate shocks on pretax net interest income, we also perform EVE analyses.

EVE represents the present value of all asset cash flows minus the present value of all liability cash flows.

EVE change results are compared to a base case to determine the impact that market rate changes may have on our EVE.

As with rate shock analyses on pretax net interest income, EVE analyses incorporate management assumptions regarding prepayment behavior of fixed rate loans and securities with optionality and the behavior and value of non-maturity deposit products.

S&T policy guidelines limit the change in EVE using rate shocks in increments of +/- 100 basis points.

Policy guidelines define the percentage change in EVE by graduated risk tolerance levels of minimal, moderate and high.

S&T BANCORP, INC.

AND SUBSIDIARIES

The table below reflects the rate shock analyses results for the 1-12 and 13-24 month periods of pretax net interest income and EVE.

December 31, 2025 December 31, 2024

1 - 12 Months 13 - 24 Months % Change in EVE 1 - 12 Months 13 - 24 Months % Change in EVE

Change in Interest Rate (basis points) % Change in Pretax

Net Interest Income % Change in

Net Interest Income % Change in Pretax

Net Interest Income % Change in

Net Interest Income

400 1.7 9.4 (12.4) 3.2 8.4 (32.3)

300 1.1 6.9 (7.9) 1.9 5.8 (24.1)

200 0.9 5.0 (3.6) 0.8 3.7 (15.4)

100 0.6 2.9 (0.6) (0.1) 1.7 (7.2)

-100 (1.8) (4.5) (3.1) (3.4) (5.2) 3.0

-200 (4.0) (10.2) (9.7) (6.2) (10.3) 3.5

-300 (6.8) (17.0) (21.2) (9.2) (16.2) 0.2

-400 (8.7) (21.1) (39.9) (12.9) (22.7) (7.9)

The results from the rate shock analyses on net interest income are generally consistent with having an asset sensitive balance sheet.

Having an asset sensitive balance sheet means more assets than liabilities will reprice during the measured time frames.

The implications of an asset sensitive balance sheet will differ depending upon the change in market interest rates.

For example, with an asset sensitive balance sheet in a declining interest rate environment, more assets than liabilities will decrease in rate.

This situation could result in a decrease in net interest income and operating income.

Conversely, with an asset sensitive balance sheet in a rising interest rate environment, more assets than liabilities will increase in rate.

This situation could result in an increase in net interest income and operating income.

Our rate shock analyses show less improvement in the percentage change in pretax net interest income in the 1-12 month rates up scenarios when comparing December 31, 2025 to December 31, 2024 primarily because of changes to our funding mix and upcoming maturities within our receive-fixed balance sheet swap portfolio.

The percentage change in pretax net interest income in the 1-12 month rates down scenarios remain relatively unchanged when comparing December 31, 2025 to December 31, 2024.

Our rate shock analyses remain relatively unchanged in the percentage change in pretax net interest income in the 13-24 month scenarios when comparing December 31, 2025 to December 31, 2024.

Our EVE analyses show an improvement in the rates up scenarios and a decline in the rates down scenarios when comparing December 31, 2025 to December 31, 2024 primarily due to an updated analysis that shows that our deposit retention is expected to be stronger than previously modeled.

In addition to rate shocks and EVE analyses, we perform a market risk stress test at least annually.

The market risk stress test includes sensitivity analyses and simulations.

Sensitivity analyses are performed to help us identify which model assumptions cause the greatest impact on pretax net interest income.

Sensitivity analyses may include changing prepayment behavior of loans and securities with optionality and the impact of interest rate changes on non-maturity deposit products.

Simulation analyses may include the potential impact of rate changes other than the policy guidelines, yield curve shape changes, significant balance mix changes and various growth scenarios.

S&T BANCORP, INC.

AND SUBSIDIARIES

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What changed 10-K

Item 7. Management’s Discussion and Analysis