Welcome to the S&T Bancorp fourth quarter 2023 conference call. After the management's remarks, there will be a question and answer session. Now, I would like to turn the call over to Chief Financial Officer, Mark Kochvar. Please go ahead. Thank you very much, and good afternoon, everyone. Thank you for participating in today's earnings call. Before beginning the presentation, I want to take time to refer you to our statement about forward-looking statements and risk factors. This statement provides the cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation. A copy of the fourth quarter and full year 2023 earnings release, as well as this earnings supplement slide deck can be obtained by clicking on the Materials button in the lower right section of your screen. This will open up a panel on the right, where you can download these items. You can also obtain a copy of these materials by visiting our investor relations website at stbancorp.com. With me today are Chris McComish, S&T's CEO, and Dave Antolik, S&T's President. I'd now like to turn the program over to Chris. Chris? Mark, thank you, and good afternoon, everyone. I certainly appreciate the analysts being here with us on the call, and we look forward to your questions. I also want to take a minute to thank our employees, shareholders, customers that are also listening to the call. To our leadership team and employees, your commitment and engagement is what drives these financial results, and these results are yours, and you should be very, very proud of them. You know, 2023 was a historic year for S&T in many ways. As for the second year in a row, we produced record net income and earnings per share. For a company that is almost 122 years old, we certainly feel very good about these results. Before we get into the numbers, I also want to express how good I feel about the progress that we've made, centered on S&T's people-forward purpose and guided by the values that define who we aspire to be as a company. This purpose and these values connected to our core drivers of performance, the health of our deposit franchise and growth of our deposit franchise, solid credit quality, and best-in-class core profitability, are where we are focused to deliver for our shareholders, not just in any one quarter or year, but over the long term. I'm going to begin my remarks on the numbers on page three, and in the fourth quarter and in 2023, we saw great progress on all of our drivers of performance. For the year, net income was just under $144 million, with an EPS, again, a record EPS of $3.74. We achieved excellent return metrics with an ROTCE above 17 and profitability metrics, including our top-tier PPNR and efficiency of two point one two percent and 51% respectively. Our net interest margin remained above 4% for the year, and we delivered an excellent efficiency ratio, as I said, of just over 51%. Turning to page four, and for the quarter, we made $0.96 a share or $37 million, which was up $0.09 from Q3 and up more than 10% on a linked quarter basis. Our return metrics were again excellent with a 17% ROTCE, while our PPNR remained relatively flat, again at a very strong 1.97% for Q3. Our NIM did see some contraction, however, our net interest income remained above $85 million for the quarter, and Mark's going to provide some additional color here. Net charge-offs at 19 basis points were flat, while our efficiency ratio did rise but still remains quite strong. Moving to page five, we saw solid loan growth of over 7% annualized, with both our commercial and consumer lines of business contributing. On the deposit side, our customer deposit growth of just under $100 million produced 5.5% growth annualized, which is a number we feel very good about in the quarter. While the mix shift continued, we do see a slowing rate of decline in DDA balances, while also the stabilization of the NIM during the quarter. Mark is going to again, provide a lot more, details on that. Next, I'm going to turn it over to Dave to talk a little bit more about the loan book and certainly about credit quality, and then Mark will come in and talk about the income statement and capital further. I also look forward to your questions following their remarks. Dave, over to you. Well, thank you, Chris, and good afternoon, everyone. Further reviewing our balance sheet, we saw loans increase by $137 million, or 7.25% during Q4. This growth was driven by commercial real estate and residential mortgage activities. Growth in our CRE book was primarily a result of increased multifamily and storage facility balances. We continue to experience declines in our hotel, office, and healthcare balances as we manage through the changing economic landscape that has impacted these segments. We are confident that the progress we've made in managing segment exposure and our overall approach to portfolio management will serve us well in future quarters. In our C&I book, we didn't experience meaningful changes in, in any of our, key performance indicators, relative to, utilization or collateral advance rates, with the exception of our floor plan utilization, which increased from 43% to 52% and resulted in balance growth of around $21 million. A continuing theme in our commercial book is reduced demand for and exposure to construction-related borrowings in both the CRE and C&I books. Conversely, in our residential mortgage book, we continue to see demand for our construction-related products as well as purchase activity. Based on our current pipelines and some adjustments to our, residential mortgage strategy to further enhance and support our deposit franchise, we anticipate total annualized growth, loan growth of low- to mid-single digits for 2024. I'd also mention that, as in the past years, we would expect there to be some seasonality in this growth, with the majority of that growth coming in the back half of the year. Also, that growth will be focused on commercial and small business lending. Turning to asset quality on the next page, our ACL remained relatively stable at 1.41% of gross loans, reflecting some moderate improvement in the rating stack and accommodating the loan growth that we saw in the quarter. Net charges were $3.6 million or 0.19% annualized, and NPAs increased $6.6 million to $23 million and remain at what we believe is a very manageable 30 basis points at year-end. I'll now turn the call over to Mark. Oh, great. Thanks, Dave. We're now on slide seven, net interest income. You know, before rates started moving higher back in the fourth quarter of 2021, our quarterly net interest income was about $68.4 million, and the margin stood at 3.12%. While there has been and will continue to be some pressure on funding costs, our asset-sensitive balance sheet has provided significant revenue improvements over the past eight quarters. In the fourth quarter of 2023, the net interest margin remained 80 basis points higher, and we are generating a 24.4% or $16.7 million of additional revenue per quarter compared to the beginning of this rate cycle. The fourth quarter net interest margin rate of 3.92% is down 17 basis points from the third quarter, as earning asset yield improvement of 7 basis points did not keep pace with 33 basis points increase in cost of liability. The cost of total deposits, including DDA, increased by 38 basis points to 1.76%, bringing the cycle-to-date beta to 31%. We did shift about $200 million of wholesale borrowings to brokered deposits. While these were at about the same cost and had no impact on the net interest margin, it did account for about 10 basis points of the 38 basis point increase in the total deposit cost. Our deposit mix remains much improved compared to the end of the last rate upcycle in 2019, when we had just 24% of deposits in DDA, compared to just under 30% today. Customers continue to seek higher rates, but the pace has moderated. We expect funding cost pressure to continue in the first half of the year, with the net interest margin bottoming out in the 3.70% range by mid-year. We saw a more stable monthly net interest margins in the fourth quarter. All three individual months were fairly consistent in the low 3.90s. The first quarter of 2024, though, will be challenging from a funding cost perspective, as we along with many other competitors, have a higher-than-normal amount of repricing CDs. Next, on non-interest income. We saw an increase of $5.9 million in the fourth quarter compared to the third. Most of the variance is in the other category. The largest impact was from a $2.3 million OREO gain. We also benefited from favorable non-cash valuation adjustments of $2.2 million. A little over half of this is due to the transition from LIBOR to SOFR and its impact on our back-to-back customer swap program. We had a negative adjustment in the third quarter of $850,000 and a positive adjustment in Q4 of about $300,000, resulting in a quarter-over-quarter favorable variance of about $1.1 million. The remainder of the valuation adjustment is related to changes in the value of a deferred benefit plan, which accounts for an additional $1 million of the favorable variance. That is offset as higher expenses and is P&L neutral. Remaining fee category line items are fairly consistent quarter over quarter. Our recurring fee outlook going into 2024 is approximately $13 million per quarter. Next slide is expenses, which were somewhat elevated in the fourth quarter, up $3.5 million compared to the third quarter. The increase in expenses came primarily in salaries and benefits. We do operate a self-funded medical plan and saw expenses in the fourth quarter, about $1 million higher than in the third quarter. While some of that is seasonal due to the timing of participants reaching their deductibles, we did experience unusually higher claim activity. Incentives were also higher by about $800,000 due to better full year performance than expected, given strong earnings and activity levels in the fourth quarter. Finally, the offset of the change in the value of the deferred benefit plan I mentioned in fees accounted for another $1 million of the increase. After all that, we expect expenses to normalize in the first quarter of 2024, as these three items aren't likely to repeat at nearly the same levels, leaving us with a run rate in the $53 million-$54 million per quarter range. Next slide is capital. The TCE ratio increased by 57 basis points this quarter. About 37 basis points of that increase was due to lower AOCI. TCE remains quite strong due to good earnings and a relatively small securities portfolio. All of our securities are classified as AFS. Our capital levels position us well for the environment and will enable us to take advantage of organic or inorganic growth opportunities that may come our way. Lastly, the board of directors authorized a new share repurchase program of $50 million. We will cautiously look for opportunities for repurchases, depending on the economic conditions, our financial performance and outlook, and the price of our stock. Thanks very much. At this time, I'd like to turn the call back over to the operator to provide some instructions for asking questions. Thanks. ... The floor is now open for questions. If you have any questions, please press star one on your phone, and we ask that while asking your question, please pick up your phone and turn off speakerphone for enhanced audio quality. Please hold while we poll for questions. Your first question comes from the line of Daniel Tamayo from Raymond James. Your line is open. Good afternoon, guys. Thanks for taking my questions. Good day. Hi, Dan. Maybe we start just on the NIM and NII outlook. So I appreciate the color you gave on the NIM expected to bottom in the 3.70 range mid-year. What is the rate outlook or the rate cut outlook that you have baked into that? And then just curious how you expect the margin to react to each 25 basis point rate cut. Okay, so in our, in our base forecast in that, we don't have a lot of impact from Fed decreases. That will increase us negatively. We still have some exposure to the front end of the curve. We were-- You know, as we look at it, every 100 basis points on an annualized basis will impact our net interest income by about 4%-4.5%. So sorry if I don't have the 25 basis point impact, but depending on the pace and the timing of the Fed increase, we do have some sensitivity to rate down. That 3.70 outlook mid-year is pre any Fed increases, just due to the uncertainty that we see with that, you know, with the progression there. Okay. And the 100 basis point impact, is that kind of an immediate impact or a gradual or what, what's baked into that assumption? That would be like an immediate but annualized. So, for example, if you go by the one of the recent paths, it'd take us down 125 basis points. That would average for the year of, like, 55 basis points. So we would expect, you know, about half of that 4.5% impact on margin for the margin, or net interest income for the calendar year. Okay. Sorry to keep digging here, but just curious- Sure. I mean, is some of the, the regulatory disclosures don't account for, you know, what you might do in that actual situation, were it to occur. Is that, is that something you think is, is realistic, or, or would you be, managing the balance sheet differently in that scenario? What do you mean by regulatory disclosures? Just the sensitivity disclosures that are in regulatory filings that give the 100 basis points down scenarios or up. I mean, the assumptions I'm giving you would be kind of reflective of those. I mean, the actual outcome is going to be dependent on how well we are able to pass those rate declines onto our customers in the form of interest, you know, interest expense. We have assumptions built in on how well we'll be able to do that, and those are also built in with betas in that sensitivity analysis. So, at the end of the day, it'll depend on how well we perform against those assumptions. Not sure if I'm getting at your question. Yeah. No, I think it's a good answer. I appreciate it. Secondly, just on the asset side, so appreciate the low to mid-single-digit loan growth forecast. Are you assuming the, I think, securities have essentially bottomed, you're going to be growing that portfolio with loan growth from here on out? Right. It'll be modest, though. Like, as Dave mentioned, you know, our loan growth assumptions are pretty low, so we would expect not a lot of change on the securities size of the securities book. Okay, great. I guess lastly, just on the buyback that you, that you established, the $50 million, I appreciate the color there. But, maybe if you have any thoughts on what would—what you're thinking about in terms of using that, what, what would drive utilization either on a normalized or a greater use of that, you know, within the $50 million? Thanks. Yeah, so I mean, our preference for using capital, we think we're in a good position, where we have a - we think we have a very robust capital position to work from. Our preference is for organic and inorganic, so the buybacks would be, you know, really our third choice when it comes to that. But we look for, you know, kind of price action that we don't think is warranted over the long term. So, I mean, in the event of a significant recession that caused all prices to go down, we'd probably be cautious about buybacks, given the need for potential capital to protect equity, given a higher loss scenario. But short of that, if we felt it was just market dislocation, that would be a place where we would probably jump in and look at the opportunities to repurchase. Understood. All right. Thank you for all the color. That's it for me. Sure. Your next question comes from the line of Michael Perito from KBW. Your line is open. Hey, guys. Good afternoon. Thanks for taking my questions. Sure thing, Mike. Hey, Mike. Just a couple clarification comments around, or questions rather, around some of the guidance commentary. On the loan growth, you provided a little context. I wonder if you could just take it a layer deeper. The low single digits, is that pipeline competitive response, kind of just taking into consideration the increased funding costs, all three, just kind of how do you guys get to that level, based on what you're seeing today? ... Yeah, primarily the pipelines at this point, right? And we're also looking at where we want to participate in the residential mortgage space, and making sure that it complements our desire to enhance the deposit franchise. So we're looking hard at those activities and make sure that they make sense and that they're profitable, and it's not just growth for the sake of growth. So our focus is really going to be on commercial small business growth. And we've got the teams in place, we've got pipelines that are building, so you know, I feel pretty confident that we can get there. But as you've seen historically, our growth tends to come in the back half of the year, and that's where you know, the commercial activity generally comes from. Yeah, Mike, there's some real seasonality to the way, the way we've analyzed, you know, the growth in our balance sheet. Typically, the first quarter's a little bit slower than the remaining quarters. We see good activity and you know good opportunities in the marketplace, but we certainly don't want to guide to something that's you know unreasonable relative to the growth rates in the economy and what we're seeing in the general marketplace. So that kind of you know lower part of the mid-single-digit side of loan growth makes a lot of sense. We feel really good about the past quarter and the growth that we've had in the past couple of quarters. And you know that's the range that makes a lot of sense right now. Got it. Helpful. And then on the deposit cost side and NIM bottoming out in the midpoint of the year, how far along, I mean, how much is that, like, on the edges, like, trying to grow deposits or, you know, versus kind of legacy customers that are still coming to you guys and looking to reprice higher on things? Like, where are you guys kind of at in that cycle? Yeah, you know, I, I would say that, you know, if you, if you look through the year of 2023, Mike, you know, as, as Fed funds got to the four handle is when the competitive intensity for rates in the marketplace really picked up, and that was significant. You know, all the way, all the way through, the, the third quarter, we, we took the approach of being, you know, proactively working very closely with our customers to retain and grow deposits as they made, made sense. We built a very efficient pricing process to be able, to be able to be, to be beneficial to our customers, while at the same time, doing everything we could to, to manage the margin. We feel very good about that performance, and we're seeing it in our, you know, customer experience surveys and how we manage through that. We will continue to stay focused on, you know, customer retention and as well as expansion of wallet within our customer base, as well as new customers out there. There's, you know, the deposit intensity is still there. I would say it's a notch lower than it may have been earlier in the year. That $100 million worth of customer deposit growth, you know, that's the best quarter we've had in a while, and it's representative of a couple of things. One, just day-to-day, everyday outreach, but two, some of the work we've been doing, particularly in the commercial business around development of some treasury products, treasury management products and capabilities, and distribution networks, that's helped increase a lot of activity. Great. And then just lastly for me, you know, you guys, even current, you know, the tougher market performance today for the bank group aside, I mean, you guys still have a pretty decent relative currency here. Any updated thoughts, Chris, on where the M&A market kind of stands here? I mean, it feels like there's, we're close to maybe turning the page a little bit and at least seeing some- Yeah ... smaller side deal activity. Would love to hear what you're seeing. Yeah, I would say that, you know what? I would characterize it. You're using a little bit different words than I would, but I've taken the way I've described it is people seem to be talking about talking about it. Where earlier in the year, they weren't talking about it. And so, yes, we absolutely expect to and desire to participate in consolidation and lead that those opportunities. And it's the work we've done. Mark talked a little, you know, a little bit of the, you know, expense growth that we've had, and a lot of that's been built on adding talent and infrastructure, both within the front line, to be able to support the growth of the company, but also in risk management areas and other functions of the company to be able to, you know, build that foundation for growth. That's. I've been here now just, you know, look, almost 2.5 years, and that's been 2 years of solid work, and I feel great about about where we are from a foundational standpoint. And we think the opportunities are going to be more attractive as we move forward into 2024 and 2025. Great. Thank you, guys. I appreciate it. Sure thing. Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Manuel Navas from D.A. Davidson. Your line is open. Hey, hey, good afternoon. In the past, you've talked a little bit about some NIM protection. With rate cuts kind of a little bit more closer to happening, what have you added more since last time we talked? What added more swaps? What are you kind of thinking on how the NIM can perform on the way down? We haven't had any more swaps, but we've continued to add some fixed rate loan exposure. You know, unfortunately or fortunately, or depending on how you look at it, the increase in our cost of deposits, especially those that are non-CDs, gives us you know, something to reduce on the way down. In the last cycle, from the last cycle current to now, we've reduced our sensitivity to rates by about half. So even though we still have that exposure that I talked about before, that is about half of what it was in previous cycles due to the better mix of deposits that we have, and the swaps and better loan mix from a fixed to float standpoint. I appreciate that. Chris was excited about the 5.5% core deposit growth. Is that and you talked about some of the initiatives that you're doing. Is that kind of all tied up to, like, keeping the loan to deposit ratio where it is? Do you see it improving? Just can you talk a little bit about deposit trends on the volume side? Yeah. So it is whether it's to keep the loan to deposit ratio at a certain level or not, we firmly believe that, you know, the essence of a customer relationship stops and starts with their deposit relationship. It's been the focus that we've had for a while. And so we've added talent, we've built product, and we've done a lot of work within our company from a data and customer analytics standpoint, which is allowing us to be a lot more targeted from the standpoint of spending time with those customers we believe have more opportunities. And a lot of proactive customer outreach, and it's a positive thing for our company. If you look at our net promoter scores and some of the things we have from a customer experience standpoint, you know, we've got really strong relationships, and that gives us an expansion opportunity. So the team, their focus, their skill set, the product capability that we have, the data and information that we've got backing us up, you know, you know, all of those things factor into some of that loan or that deposit growth that you're seeing. And you know, our goal is to continue on those trends. I appreciate that. My last question is on, like, loan growth speed. I understand there's some seasonality. Yeah. But do you need rates to improve that pace if they come down? Like, how do rates kind of impact your appetite for the loan? Well, I'll ask Dave to jump in, but one argument could be if rates go down really fast, that might tell you there's, you know, there's a slowdown in the economy- Oh. -which might, you know, be a slowdown in loan demand for our entire industry. I don't-- you know, we have a lot of conversations with customers. They're certainly attuned to the rate environment, but for the most part, they've, you know, they've worked through this rate cycle, and it's really more of, you know, being with the right companies at the right time that are looking for growth and being able to deliver for them. And that's where the work that Dave and the teams have done to, you know, add talent to the company and stay focused. Dave, do you want to add more? Yeah, I don't see the growth being impacted significantly by changes in rates, unless there is a dramatic reduction in term rates, which might cause some refinance activity. You know, I think we understand our customers. We know where they're headed. Our job is to help them, you know, achieve their goals. And then adding to the team and making sure that we're focused on rounding out the relationships is what we're focused on. So I wouldn't put two and two together and get four relative to loan growth and a reduction in rates. Perfect. Thank you, guys. Mm-hmm. Your next question comes from the line of Matthew Breese from Stephens Inc. Your line is open. Hey, good afternoon. Hey, Matt. Hey, Matt. Just a few follow-ups for me. The first one is just, you know, what proportion of the loan portfolio and what proportion of deposits reprice immediately? So on the loan side, it's kind of low 40s that would reprice immediately. On the deposit side, on the immediate side, there really isn't very much at all. We've you know, at one point, we had a product that was tied to Fed funds and, but we suspended that or changed that going into this cycle. So we have, as Dave had alluded to, made a lot of, we've done some exception pricing. So a lot of those we feel like are, you know, will reprice down as rates go down, but it's more on a, you know, one-by-one basis that we'll go through and work through that book. Got it. Okay. Well, most of our immediate liabilities are going to be borrowings. We do have a fair amount of brokered deposits and all of our borrowings. All of those, there's, you know, $800 million of that will reprice down pretty much immediately, though. Okay. And then excluding the broker, what are expectations for core deposit betas as rates decline? As rates decline? Yeah, on the way down. Yeah, I mean, we haven't fully modeled that, modeled that out. I think we still have a little bit of ways to go. Even if rates were to move down, there's probably going to be a little bit of a push and pull, as certainly not all of our customers have gotten higher rates from where they were yet. So I think we'll be, the response from the net deposit side on that initial rate down, the first couple of cuts will probably have not a very high down beta, I would expect. ... All right, and then last one for me, you know, we're with every incremental quarter, we get a little closer to that $10 billion threshold, and I was curious, is it in your budget to cross $10 billion this year or 2025? And then just remind us all the kind of necessary details in terms of expenses, Durbin, and whether you plan to cross organically or through a deal. Well, you know, you could just, you know, map out our expected asset growth, and you could see it. It could be, you know, within 2024, but certainly by the end of 2025. Mark has the Durbin number that we've calculated in the past, $6 million-$7 million approximately. I would say that a lot of the work that we've done on the expense side from a people standpoint has been to build out the infrastructure for the expectation of just that. So you don't cross, and then you go do the work. You prepare to do that from an additional regulatory oversight, you know, three lines of defense, risk management standpoint, all of the things that are there. I would tell you, we're essentially there. We've got the teams in place, we've got the infrastructure in place, so there's no big investment that's needed from the standpoint of how we run the place on a daily, weekly, monthly basis. It's gonna change dramatically. As it relates to organically or inorganic, we have a lot more control over the organic growth, and that's where we're focused, while at the same time, doing everything we can to prepare for inorganic opportunities. Got it. Okay, that's all I had. I'll leave it there. Thanks for taking my questions. Okay, thanks. Your next question comes from the line of Daniel Cardenas from Janney Montgomery Scott. Your line is open. Good afternoon, guys. Hey, Dan. Hey, Dan. Can you remind me how much cash flow is generated each quarter from your securities portfolio? And is that gonna be put back into the securities portfolio, or are you gonna use that to fund expected loan growth? We'll probably keep the securities portfolio at least where it's at, and if depending on the asset growth, we might add a little bit to that to keep that level, just to maintain our asset liquidity levels. We do have a relatively small securities portfolio, so we don't see that going any lower. On a quarterly basis, I think we're in kind of the $30 million-$40 million per quarter range of cash flow coming back. But as I said, we'll probably reinvest, we'll reinvest that into the bond portfolio. Okay. Good. And then, maybe just going back to the M&A question that you had earlier, geographically, would... And I know you guys are opportunistic, but would where would the focus be? Would it remain in Pennsylvania, or would you go outside of the state? No, we've talked about our Dan, our core and contiguous markets. So we love the geography that we're in, which is inclusive of, you know, the state of Pennsylvania and Ohio, and the marketplace is one that we know very well, and so that's, you know, kind of that general geography relative to our headquarters here and would be where we're focused. Would this be more for deposit plays? Would you be looking for, like, a deposit-heavy institution? Well, yeah, whether it's the deposit plays or deposit heavy, I think typically in an acquisition, yeah, the franchise starts and stops with the deposits franchise and the quality thereof. That, you know, if a customer defines their relationship by where they have their deposits, that's where you need to start to understand the customer base that you're picking up. It may be additional infill in a geography or expansion into a geography that would, you know, an area that we already know well, we just want greater share or greater presence. Those things would go into it, you know, strategic fit with our organization. That would make a lot of sense. And then, you know, obviously, a good understanding of the asset quality would be a driver as well. But, you know, most opportunities like this do start, you know, on the deposit side of things, because again, that represents the quality of the, and the potential long-term earnings power and the additive nature of the enterprise to our company. Got it. Okay, good. Thank you. All of my other questions have been asked and answered. I'll step back. Okay. There are no further questions at this time. I would like to turn the call over to Chief Executive Officer, Chris McComish, for closing remarks. Okay, well, thanks, and listen, we really appreciate everybody's attention and your thoughtful questions and engagement. We certainly are available if you've got any follow-up at all and wanna dialogue further. We're again, we're really proud of 2023, and those record earnings and record earnings per share. That's two years in a row that this performance has been achieved, and we're quite optimistic about it as we head into 2024 and everything that we're doing to execute on and deliver. So, hope everybody has a great rest of the day, and thank you for your time. This concludes today's conference call. Thank you for your participation. You may now disconnect.