S&T Bancorp (NASDAQ:STBA) reported higher second-quarter 2026 earnings, improved net interest income and stronger asset quality, while management said the bank remains positioned for mid-single-digit loan growth over the rest of the year.
Chief Executive Officer Chris McComish said net income was $36.6 million, or $1.02 per diluted share, up 8.5% from the first quarter of 2026 and 22.9% from the second quarter of 2025. The company reported return on assets of 1.49%, return on equity of 10.375% and return on tangible common equity of more than 14%.
Net Interest Margin Expands as Funding Mix Improves
Net interest income rose to $90.4 million, compared with $88.4 million in the first quarter and $86.6 million a year earlier. McComish said the net interest margin expanded seven basis points from the linked quarter to 3.99%, supported by higher loan yields and a better funding mix.
Chief Financial Officer Mark Kochvar said second-quarter net interest income benefited from an additional day in the quarter, a four-basis-point increase in earning asset yields and a four-basis-point decline in funding costs. He attributed the lower funding cost to reduced interest-bearing deposit rates and an improved funding mix.
Kochvar said management expects “relative net interest margin stability” around the current high-3.90% level over the next several quarters. He cited tailwinds from maturing receive-fixed swaps, as well as repricing in securities, fixed-rate loans and certificates of deposit, though he also acknowledged heightened loan and deposit pricing competition.
During the question-and-answer session, Kochvar said the company is “fairly neutrally positioned” for interest rate moves within a range of 25 to 50 basis points, and possibly more, in either direction.
Loan Growth Led by C&I Activity
President Dave Antolik said total loans increased by $99 million during the quarter, representing approximately 5% annualized growth and bringing balances to more than $8 billion. He said the company was encouraged by both the composition and quality of the growth.
Commercial and industrial balances increased by $79 million during the quarter. Antolik said revolving line utilization among C&I customers increased to 44% from 41% in the prior quarter, while total C&I revolving commitments grew at a 6% annualized pace.
Management said S&T has been investing in its commercial banking team, increasing the number of C&I bankers during the quarter and expanding the total commercial banking team by approximately 20% year to date. Antolik said the company’s goal is to reach 30% growth in the team by year-end.
Permanent commercial real estate balances declined by $46 million, which Antolik attributed primarily to loans paid off by non-bank lenders. At the same time, commercial construction balances increased by $71 million. Total construction commitments rose by $65 million, and the number of commitments increased by nearly 19% in the quarter.
Antolik said C&I and CRE pipeline activity remains solid and supports management’s expectation for annualized mid-single-digit loan growth for the balance of 2026. In response to an analyst question, management said the bank expects deposit growth to self-fund loan growth.
Deposits Stable After Strong First Quarter
McComish said customer deposits were stable in the second quarter after strong growth in the first quarter. Year-to-date deposits are up approximately 8% annualized. The company reduced brokered deposits by $100 million during the quarter and by $180 million year to date, which McComish said improved the quality of the funding mix.
Demand deposit accounts remained at 28% of total deposits, a level McComish described as industry-leading and reflective of S&T’s relationship-based model and core deposit base.
Kochvar said the company may see a bit more benefit from CD repricing in the third quarter, but said that tailwind is expected to level off afterward. He added that S&T is seeing more aggressive competition in CD and money market pricing, particularly from smaller banks.
Asset Quality Improves, Provision Remains Modest
Asset quality improved during the quarter. Antolik said non-performing assets declined by $9.7 million to $40.2 million, or 0.5% of total loans plus other real estate owned. Criticized and classified assets remained stable.
Net charge-offs totaled $1 million in the quarter, and provision expense was $1.1 million. The allowance for credit losses was essentially unchanged at 1.16% of total loans, compared with 1.17% at the end of the first quarter.
Antolik said the portfolio is performing in line with management’s expectations, reflecting what he described as disciplined underwriting and ongoing portfolio management.
Buybacks Continue, New Authorization Approved
McComish said S&T has repurchased nearly 3.2 million shares over the past three quarters, representing 8% of outstanding shares, for a total of $133 million. The board approved a new $100 million repurchase authorization.
Kochvar said S&T repurchased about 1.1 million shares in the second quarter at an average price of $44.24, totaling $47.6 million. The tangible common equity ratio declined by 28 basis points during the quarter, primarily because of the repurchases, but management said regulatory capital ratios remain strong.
Asked about the new buyback authorization, Kochvar said the company could use it over the next year, but noted that the stock price has moved higher and “the calculus does change.” He said buybacks may be stepped back somewhat at current levels compared with the activity of the past three quarters.
Management also discussed the bank’s approach to potential M&A. McComish said S&T continues to have strategic conversations and remains proactive with potential partners. He said the company is focused on cultural fit, business mix, deposit franchise strength and geographic opportunities in contiguous markets south and east of its footprint and in Ohio.
Kochvar said second-quarter non-interest income increased by $1.3 million, with improvements across categories. He said the gain on sale included a $1.9 million gain from the conversion of Visa Class V2 shares, offset in large part by a $1.7 million loss tied to a $34 million bond portfolio repositioning. He said the repositioning has an earnback period of about 1.4 years and is expected to add $300,000 per quarter to net interest income for the next several quarters.
Non-interest expenses increased by $2 million in the quarter. Kochvar said the largest variance came from salaries and benefits, including April merit increases and higher medical costs. He said S&T expects to manage 2026 non-interest expense to an approximately 3% year-over-year increase, implying a quarterly run rate of about $58 million.
Management also addressed the potential crossing of the $10 billion asset threshold. Kochvar said the current trajectory could take the company above $10 billion in the second half of 2026. McComish said the estimated annualized impact would be a little over $6 million, with half of that beginning in 2027 if the company crossed the threshold at year-end, and the full amount in 2028.
About S&T Bancorp (NASDAQ:STBA)
S&T Bancorp, Inc is a bank holding company headquartered in Indiana, Pennsylvania, serving as the parent of S&T Bank. Established as a banking organization in 1902 with the holding company formation following in the early 1980s, S&T Bancorp has built its reputation on delivering community-oriented financial services. The company operates under the NASDAQ ticker STBA, maintaining a focus on personalized banking solutions and local decision-making.
The company’s main business activities encompass a full suite of retail and commercial banking products.
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