Welcome to the S&T Bancorp Second Quarter 2025 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. All right, thank you. Good afternoon, everyone, and thank you for participating in today's earnings call. Before we begin the presentation, I want to take time to refer you to our statement about forward-looking statements and risk factors. This statement provides cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation. A copy of the Second Quarter 2025 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. Now I'd like to turn the program over to Chris. Chris? Mark, thank you, and good afternoon, everybody, and thank you for being on the call. I'm going to begin my comments on page three, and we look forward to your questions as we get to wrapping up our comments. Before I get started, I do want to thank our employees and shareholders and others listening onto the call. To our leadership team, as always, thank you for your great work. These results are yours, and you should certainly be very proud. Over the past several years, we've made significant strides in positioning our company for long-term success. You will see that focus in the numbers we discussed today, including, first, by strategically repositioning our balance sheet to reduce asset sensitivity. We've enhanced our ability to drive consistent net interest income growth throughout the interest rate cycle. Second, our focus on improving asset quality has laid a strong foundation for growth, enabling our shift and our intentions to that growth. Finally, our continued investment in our deposit franchise has resulted in a solid deposit mix with non-interest-bearing deposits representing 28% of our total deposits and eight straight quarters of deposit growth, while maintaining a very healthy net interest margin. Together, these strategic initiatives have created a solid platform for current strong performance and our confidence in our future. Additionally, this quarter's loan growth has driven total assets to over $9.8 billion. As we've shared on previous calls, we remain very optimistic about our ability to pursue future inorganic growth opportunities. Our robust capital level certainly gives us a lot of flexibility. At the same time, we are committed to a disciplined approach that aligns with our long-term strategic objectives, and we have a clear path to $10 billion through organic growth in the coming quarters. In summary, I'm very excited about how we're executing, delivering for our customers, and building our company for the future. Turning to page three, looking at the quarter, Q2 was another quarter of strong earnings and returns. EPS of $0.83 and net income of $32 million, while ROA came in at 1.32%, and our PP&R remained very solid at 1.73%. Our PP&R was aided by both NIM expansion, increasing to a robust 3.88%, up seven basis points linked quarter, while net interest income rose almost 4%. Asset quality and asset growth were both solid as loans increased 5%, while the ACL dropped two basis points linked quarter. While customer deposit growth was somewhat muted, as I said earlier, DDA balances remained very impressive at 28%, while contributing almost two-thirds of our overall deposit growth in the quarter. Expenses were a little bit higher this quarter, due primarily to some incentive accrual catch-up because of our performance, and Mark's going to get into that detail. I'm going to stop right now, turn it over to both Dave and Mark. Don't want to steal their thunder. Dave's going to talk a little bit more about the balance sheet as well as asset quality. Dave? Great, thank you, Chris, and good afternoon, everyone. Referring to page four of the earnings supplement, you'll see the continuation of our organic growth trends, evidenced by annualized loan growth of just over 5%, or $98 million in Q2. This growth was driven in large part by our commercial real estate balances, which experienced another solid quarter, increasing by $58 million. Categories of commercial real estate growth include multifamily and our retail segments. We also saw solid performance from our mortgage and home equity businesses, which combined for $26 million in net growth. Although C&I balances were flat for the quarter, we've seen an increase in calling efforts and pipelines in this category. The total commercial pipeline is now approximately 60% commercial real estate and 40% C&I, and overall remains robust. We believe that we can consistently deliver loan growth in the high mid-single-digit range for the second half of 2025 by maintaining commercial real estate, mortgage, and home equity activities and by executing on a strong pipeline of C&I opportunities. In support of these activities, we've added four new commercial bankers since the beginning of Q2, including a new C&I team leader in Central Ohio. Turning to deposits, as Chris mentioned, Q2 yielded our eighth consecutive quarter of customer deposit growth as we continued to leverage our banker-driven customer relationship sales process, which is supported by a maturing and robust deposit exception pricing platform that focuses on delivering first-class customer experience while maintaining our pricing discipline. In total, deposit balances grew by $28 million, or 1.42% annualized in Q2. As Chris mentioned, from a mix perspective, our growth in Q2 was largely driven by CD and money market activities, but we're very proud of our ability to track and maintain non-interest-bearing demand deposit balances, and those balances represent 28% of total deposits and grew by $18 million in the quarter. Turning to page five, which provides an update on our asset quality, our allowance for credit losses declined by two basis points from 1.26% to 1.24% of total loans. This reduction is an outcome of our teams focused on maintaining reduced levels of MPAs, as depicted on the slide, as well as maintaining a lower level of C&Cs. In total, C&Cs remained stable for the quarter. Charges were modest and in line with our expectations at $1.2 million for the quarter. As mentioned last quarter, we continue to monitor the potential impact of tariffs and a changing economic landscape. To date, these issues have had no impact on our growth, including pull-through rates from our pipelines, and we've heard little concern from our customer base. Customer conversations relative to this issue have quieted recently, and businesses continue to focus on managing the variables that they can directly control. Finally, our credit risk management practices rely heavily upon the collection of data and analysis of pertinent industry and customer-specific information. That data informs these banker-led conversations that I spoke of, and we use that data and those conversations to aggregate a segment-specific and overall credit risk. I'll now turn it over to Mark. Thanks, Dave. Second quarter net interest income improved by $3.3 million, 3.9% compared to the first quarter. The net interest margin expanded by seven basis points and combined with loan growth of 5% to produce the best quarterly growth we have seen in this revenue item since 2022. The net interest margin improvement came from earning asset repricing in both loans and securities, combined with a stable cost of funds. On the asset side, we saw additional benefits in the securities book, with a restructuring we executed at the very end of the first quarter, and with loans, we saw overall positive repricing of about 16 basis points. On the funding side, favorable CD pricing was offset by deposit and funding exchanges, along with some, but more limited deposit exception pricing. We expect the net interest margin to stay fairly stable if the Fed cuts rates twice this year as expected. There's some limited upside for us in a higher for longer scenario. Next slide on net interest income increased by $3.1 million in the second quarter, primarily due to the securities repositioning-related loss of $2.3 million in the first quarter that I referenced. The second quarter also saw a rebound in consumer activity from the first quarter, which is typically seasonally low for us. Our expectations for fees going forward remain at approximately $13 million to $14 million per quarter. Expenses on the next slide increased by $3 million in the second quarter compared to the first. Variances were concentrated in salaries and benefits. Base salaries were up about $900,000. About two-thirds of that was related to the annual merit increases, which became effective in the second quarter, and the rest with the new hires, primarily in our production areas that Dave referenced. Incentives were up about $1.2 million, with most of that being performance-related in both our long-term and annual plans. Finally, our self-funded medical expense increased by about $1.2 million. While we typically see an increase in medical expense in the second quarter compared to the first, the first quarter is typically lower due to resetting of annual deductibles. The increase this year in the second quarter was about double what we typically see. Moving on to other expense categories, the quarterly variances in other taxes and other offset are related to Pennsylvania shares tax credit programs. Professional services increased by about $500,000, mostly due to the timing of various projects. While some of the expense increase we had in the second quarter is temporary, the base salary increase and some of the medical we do expect to recur. Our quarterly expense run rate, we now expect to be approximately $57 million to $58 million for the second half of the year. Next, in capital, the tangible common equity ratio increased by 18 basis points this quarter, with AOCI improvement contributing eight basis points of that. Strong retained earnings were offset by asset growth for the remainder. Most regulatory ratios declined slightly due to risk-weighted asset growth, which also included an increase of over $80 million in loan commitments. Our tangible common equity and regulatory capital levels position us well for the environment and will enable us to take advantage of organic or inorganic growth opportunities. Thanks very much. At this time, I'd like to turn the call back over to the operator to provide instructions for asking questions. Thank you. The floor is now open for questions. If you have any questions, please press star one on your phone. We ask that while asking your question, you please pick up your phone and turn off the speaker phone for enhanced audio quality. Please just hold a moment while we poll for questions. It looks like our first question comes from the line of Justin Crowley with Piper Sandler. Justin, please go ahead. Hey, good afternoon, everyone. Hi, Justin. Hi, Justin. I Justin. I just wanted to start on some of the margin inputs here, in particular looking at funding costs where you saw things stabilize in the quarter. How do you see the progression there from here with the idea being to ramp up the pace of loan growth? Maybe just thinking about a flat rate environment for a second, could we see some upward pressure on deposit costs just given the need to fund the forward loan growth? To the extent that we're successful in our deposit raising effort, you know, over and above, we should be able to offset some of that with a decrease in borrowings, which are similarly priced. The incremental margin that we're getting, you know, might be a little bit lower than the 3.88%. There could be a little bit of pressure on growth on the margins. Okay, got it. Just to clarify, you'd mentioned perhaps some, you know, in a higher for longer environment, you know, there being potential upside. Could you just quantify that a little further and just talk about the drivers in the event that unfolds? Just the benefits that we've been seeing just in the repricing on both the security side and the loans, along with the swap book, that it is maturing for its receipt-based swap. We have about $50 million maturing each time. We'll get a little bit more of those benefits in a flat environment versus having to be more aggressive on the deposit repricing side should rates drop down. It'll probably be in a couple basis point range. It's not that significant. It's probably a couple, maybe a basis point or two per cut or as time goes on if they don't cut. Okay, got it. That's helpful. It sounds like there's still a lot of confidence in hitting that mid to high single-digit loan growth, pace of growth in the back half of the year, which would seem to put you over $10 billion by December 31. Is that kind of what you're planning on? Is that the most likely scenario, or are you giving much thought to managing below that level? How do you think about that? It'll be, I mean, if we hit the numbers that we expect, it will be close. We'll just play it by ear and see how that goes at the end. If it's close, you know, there's a few things we can do to stay under to maintain the under $10 billion for another year, but we're not going to do that for very long. It'd just be a one-time thing. Okay, got it. If I could just maybe sneak one last one in, just on M&A, it seems like we're seeing more deals get announced. Just curious the pace of conversations from your standpoint. I know you mentioned in the prepared remarks, Chris, that you know that remains a critical part of the strategy, but just curious how things might be developing on that side, just as we've seen bank share prices do better here. I'm not sure how that's informed discussions and just the likelihood of getting something penned. Yeah, Justin, thanks for that question. These are all long-term relationship-building exercises, and we're very diligent about that with those companies that we have potential interest in. The relationships continue to be built. I would agree with you that there is a lot less uncertainty today in the market than there was back three or four months ago. People are looking to move forward, and we would expect to be a participant. Overall, positive conversations. Okay, got it. Maybe just geographically speaking, I know you've discussed it before, but is there any reason to think the focus has shifted at all? Are there certain areas of your footprint or contiguous markets that look more favorable today? What's the thinking there? We're still very focused on how we define, you know, our core markets of today, Pennsylvania and Ohio, and then, you know, stretching a little further south and east into the Virginia, Maryland, D.C. markets. All of those are attractive to us. Okay, great. I will leave it there. Thanks so much for taking the question. Thank you. Appreciate it. Thanks, Justin. Thanks, Justin. Our next question comes from the line of Daniel Tamayo with Raymond James. Daniel, please go ahead. Thanks. Good afternoon, guys. Hey, Dan. Maybe first on credit, that's been a very good story for you guys for the last several quarters. It's kind of the early stage stuff has come down, and then really the net charge-offs have been almost nothing. Curious where you guys see it going from here, with reserves down to $1.24 of loans and net charge-offs bouncing around at the near zero levels. If you've got thoughts on a more normalized rate now that you're down to these levels. Yeah, I think at this point, Dan, we've focused on stabilizing. If we can keep NPLs at these levels, they're exceptionally low, as you know. If we can continue to keep C&C and new formation of NPL, if we can ward that off. We saw a little bit of rotation in and out of C&C during the quarter. Of course, as we grow, we're going to need to provision for that growth. I think those are the variables that are going to drive provisioning. I don't anticipate significant charge-offs. There may still be some room for improvement in C&Cs, but really we're looking at trying to stabilize and maintain our asset quality at this point. Dan, you were right on. This is a good three years' worth of work on our team's behalf, and it was rotation of assets that just didn't fit our long-term strategy. The team has done really, really good work there. As I said in my earlier remarks, since about midpoint last year, our focus has been very much on growth versus replacement of that which was running off. Great. At the end of the day, the reserves feel like we've hit kind of a stabilization point at this point. Do you think that there may be still a little bit left? There may be a little bit of room for improvement, but not a lot. I mean, we were in the mid-140s. Now we're at 124. We're getting closer to a stabilization point. Got it. Okay. Maybe just a cleanup question related to the $10 billion crossing that was asked earlier. Just if you could remind us what the Durbin hit is. I think I have just over $6 million as an annualized number in my notes, but if that's changed at all. If there's any other kind of impact from crossing $10 billion that you would expect. It's around, it's between $6 million and $7 million, the Durbin. We feel like we've done a lot of the infrastructure building, so we don't anticipate a lot of expense tied directly to the $10 billion. There's always expenses as we grow, but nothing else meaningful that's specific to the cross. Great. All right. That's all I had. Appreciate the color. Thank you. Thanks, Dan. Our next question comes from the line of Kelly Motta with KBW. Kelly, please go ahead. Hey, good afternoon. Thanks for the question. Maybe kicking back to loan growth, Chris, if I caught in the prepared remarks, it sounded like you're more optimistic for growth to potentially bump up here in the back half of the year. You've had a really strong start to the first half. Just wondering if you could go into a bit more detail as to where you're seeing the most opportunities, whether by market or specific categories, which of those would be the primary drivers of growth? I'll let Dave take that one. Yeah, thanks, Kelly, for the question. We saw commercial real estate growth kind of year-to-date in the 7% range. If we can continue to maintain that growth, our pipelines would tell us that we can, as well as the home equity and mortgage growth, which has been kind of 5%-ish, maintain that growth. We've seen essentially no growth in C&I. That C&I growth that would come from the pipeline that I spoke of would augment total growth and get us to a number that is above what we saw in the first two quarters. We've seen commercial construction commitments increase during the past two quarters. There will be some definite funding that comes in from that book. We've seen overall commitments rise as well, including C&I. If we can maintain an existing utilization rate from those two books, we'll see supplemental loan growth there as well. If you kind of blend all those things together, it's not one specific concentrated area of outsized growth. It's good, consistent growth throughout all of our business lines in each of the categories. Great. I believe you've added some commercial producers or teams here. Wondering how, if that's something you're looking to do here, or you feel like, at this stage, near term, you have the team in place. Just any color around that as a driver would be helpful. Yeah, so we added four bankers since the beginning of Q2, primarily focused on C&I. We will continue to recruit and add bankers to the commercial banking and business banking teams. That's where we see the most opportunity. They're largely focused on balancing their efforts between improving deposits, raising deposits, and booking loans as well. We think of them as bankers, and in a well-rounded way, we know we need to balance that deposit growth along with the loan growth. We believe that those additions are benefiting us by improving our pipelines. That's really what we saw in Q2, particularly in the C&I pipeline. It takes a little bit of time. Those calling processes and calling timeframes take a little while. We expect those to bear fruit in Q3 and Q4. Got it. Thanks. Last question to me, not to beat a dead horse on M&A, but obviously, it's becoming more of the discussion, so that could be picking up. Hopefully, we'll beat a dead horse. Can you just refresh us on kind of the size you feel you need to be to absorb the $10 billion cross? How would that be for potential partners, and how large you would go? Yeah, Mark touched on it a little while ago from the standpoint of the real hit to the $10 billion cross is the revenue hit with Durbin. We have built the team out from an infrastructure standpoint, and we worked closely with our regulators in preparation for all of this. There's nothing from an infrastructure standpoint, nothing meaningful from a staff standpoint that would cause any increase in expenses in how we run the company because we're over $10 billion. The revenue hit of $6 million or $7 million, you could say, replacing that would be a driver from an M&A standpoint. Hopefully, an M&A transaction contributes a lot more than just the $6 million or $7 million. We're looking at our geography. We're looking at, from a size standpoint, we've talked about in that $1 billion to $5 billion range, which seems to make a lot of sense for us. That's how we're looking at it and considering it. Got it. That's at that size. Yep. Got it. Thanks. Thanks for all the color there. Nice quarter. I'll step back. Thanks, Dan. Thank you, Kelly. Our next question comes from the line of Manuel Navas with D.A. Davidson. Manuel, please go ahead. Hey, everyone. This is Sharon Jeet on for Manuel. Thank you for taking my questions. For my first question, I was interested in seasonally weaker on deposits this quarter. Could you talk a little bit about what the pipeline for deposit growth looks like going into the second half of this year? Yeah, the pipeline at this point is similar to what we saw in Q2. We're focusing activities on, particularly in the business space. The bankers that I spoke about and some of the treasury management officers that we've added recently are really focused on that space. Historically, Q3 has always been boosted by public funds deposits, particularly in the municipal space as fall taxes hit. We'll have some tailwind in Q3 relative to the seasonal activities. Our focus is really on building that pipeline and driving more growth. The deposit growth in Q2 was mainly driven by consumer activities. I'm really proud of the job that we did there. The overwhelming majority of that balance growth came out of those activities. More focus on business and treasury management, and a continuation with what we saw in the consumer bank. Great. Thank you. Could you speak a little bit about what the competitive landscape looks like right now and potentially also what new loan yields are coming on at right now versus what's coming off? Yeah, I'll just speak to the competitive landscape. You know, it's continued to be an interesting conversation and geographically different, right? We've got an Eastern Pennsylvania presence. We've got the presence here in Western Pennsylvania, where we've got our core markets, where we have significant market share, and then Ohio, we're more of a disruptor. For us, it's about our ability to balance the customer conversation with the exception pricing process that we've put in place, that allows us to be competitive. All that being said, we're really happy that we were able to drive some deposit growth this quarter, where many others haven't. We know we can do better, and we've got some big bars set for ourselves in terms of goals for the balance of the year. Mark, I don't know if you want to take the yield question. Yeah, for overall weighted average, the new loans coming on were about $652 versus a payment or payoff rate of $636. We picked up about 16 basis points on the kind of the best replacement spreads. They're still coming out of the mortgage area, where we're picking up over a basis or over 100 basis points. The commercials, since a lot of that's floating, that's pretty flat. The replacement's pretty close because a lot of the activity happens on the floating side. In that business side, we're still picking up about 50 basis points on the turnover. Overall, it's about 16 for the quarter. That's great. Thank you so much for taking my questions. I'll step back. Thank you. Thank you, Sharon. Our next question comes from the line of Matthew Breese with Stephens. Matt, please go ahead. Hey, good afternoon, everybody. Hey, Matt. I'm sorry if I missed this. I think you touched on it at least once or twice in a different way. What was the back half of the year NIM guide, assuming you know we follow the curve and there's a couple of cuts? Yeah, Phil, if we, with a couple of cuts, we expect that NIM to stay pretty stable to where it's at right now. In that kind of mid -380s, should hold. Got it. Okay. On the securities front, you'd mentioned the increase in yields this quarter was tied to the restructuring at the end of the first quarter. Could you help me out? What are incremental securities being purchased at yield-wise today? What types of securities are interesting to you? If you take away the restructuring, what is kind of the normal pace of yield increase to be expected there? Yeah, so the new stuff we're putting in probably between 4.5% and 5%. We run a pretty conservative securities portfolio, so we stick with primarily agency-backed CMOs. We prefer to get pretty good structure with those, try and get some lockouts that help us. We still think there's a roller that's tilted toward rates down risk. We'll still buy some structure and a little bit of term on the security side. We're right now in that kind of 4.5% to 5% we're putting things on. Without the restructurings, I think we're getting around probably $50 million of maturities and cash flow back per quarter. That's our replacement opportunity going forward. Most of that is coming off with a three-handle or lower. There's still some pickup opportunity, but it's getting thinner. Okay. I wanted to talk about excess capital. Your tangible common equity ratio, I think, is over 11%. Curious what you think is kind of the normal place you should be, or our ideal target. How do you lever up? It doesn't feel like mid-single-digit growth or mid-to-high single-digit growth levers you up very quick. That's one of the reasons we talk a lot about the opportunity on the inorganic side. We think that capital that we have at over 11% is well more than we need to run the bank. We are actively looking for ways to play that. At this juncture, we don't have the internal growth opportunities to be able to use that effectively. That is part and parcel of the focus on the M&A. Okay. We'd be more comfortable with that, you know, something in the nine area or even lower in terms of tangible. Okay. Last one from me. You know, the good Senator Dave McCormick, who was out last week, held an energy and innovation summit right in your backyard in Pittsburgh. Talked about. I was there, Matt. Yeah, I mean, very cool. $90 billion of infrastructure investments, data centers, energy, power, a lot of which is across your footprint. Tell me about what you learned and how good it could be for Pennsylvania. It's generating a lot of enthusiasm and optimism here, particularly here in Western Pennsylvania and also very close to our headquarters here in Indiana. One of the biggest projects in the state is the power plant, the power generation facility that's being built in Homer City, Pennsylvania, which is just down the street. It's a home market to S&T Bank, where we've been a long time. We have meetings with lots of officials talking about everything that's going on, and a number of customers that are involved in various aspects of things. It's generated a heck of a lot of enthusiasm here throughout all of Western Pennsylvania. Obviously, Pittsburgh's important, but right here in the more community markets in Western Pennsylvania, critically important. We're very involved in working hard to be engaged. I was there the entire time last week at the event, and it was neat to see it. Dave did a great job putting it on. Great. I'll leave it there. Thank you for taking my questions. For the day. Thanks, Matt. Our final question today comes from the line of David Bishop, with Hovde Group. Dave, please go ahead. Yeah, thanks. Hey, good afternoon, gentlemen. Most of my questions have been asked and answered, but I'm curious, just in terms of overall loan originations production this quarter versus payoff this quarter versus last, I'm not sure if you have that number handy. I would be curious to hear how that transits. Thanks. Yeah, I know the payoffs were down slightly, but very similar to last quarter, just down very slightly. Got it. Do you have the production originations? Just curious how that compares as well. Yeah, production was up quarter over quarter, similar to Q4 of last year. Q4 of last year, we saw higher payoff levels. It's slightly lower payoffs, better production, resulting in the nearly $100 million in growth that we saw. The good news is the pipeline was effectively replaced as well. Got it. Appreciate the color. Sure thing. Thanks for joining the call. Thanks, Dave. That does conclude today's Q&A session. I would now like to turn the call over to Chief Executive Officer Chris McComish for closing remarks. Chris. Thank you all for your engagement and the great dialogue. We really appreciate your interest in our company, and we look forward to. If we don't talk or see you before next quarter's call, we know we'll talk to you then. Thanks so much. Bye-bye.