Q2 2026 S&T Bancorp Inc Earnings Call

July 23, 2026

Speaker #1: Welcome to the S&T Bancorp Q2 2026 earnings conference call. After management's remarks, there will be a Q&A session. Now, I would like to turn the call over to Chief Financial Officer Mark Kochvar.

Operator: Welcome to the S&T Bancorp Q2 2026 earnings 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.

Speaker #1: Please go ahead.

Speaker #2: Great, thank you. And good afternoon, everyone, and 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.

Mark Kochvar: Great. Thank you, and good afternoon, everyone, and 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. The 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 Q2 2026 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 CEO, and David Antolik, S&T's President. I'd now like to turn the call over to Chris. Chris?

Speaker #2: The 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 Q2 2026 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.

Speaker #2: 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 stbankcorp.com.

Speaker #2: With me today are Chris McComish, S&T's CEO, and David Antolik, S&T's President. I'd now like to turn the call over to Chris. Chris?

Speaker #3: Mark, thank you. Good afternoon, everyone, and thank you for joining us today. We appreciate the analysts and investors being with us, and, as always, we look forward to your questions.

Chris McComish: Mark, thank you, and good afternoon, everyone, and thank you for joining us today. We appreciate the analysts and investors being with us, and as always, we look forward to your questions. Before I get into the quarter, I did want to take a minute to recognize the broader momentum we are seeing across S&T. Our financial performance is one important measure of that momentum, but we also continue to see it reflected in the strength of our customer relationships and the trust customers place in our company. That was reinforced this quarter when S&T was named to the Forbes America's Best-In-State Banks 2026 list. This is a recognition based upon direct customer feedback across areas such as trust, customer service, financial advice, digital experiences, and overall satisfaction. Also, during the quarter, we celebrated our 124th year, which means we begin celebrating S&T's 125th year legacy this quarter.

Speaker #3: Before I get into the quarter, I did want to take a minute to recognize the broader momentum we are seeing across S&T. Our financial performance is one important measure of that momentum, but we also continue to see it reflected in the strength of our customer relationships and the trust customers place in our company.

Speaker #3: That was reinforced this quarter when S&T was named to the Forbes America's Best In-State Banks 2026 list. This is a recognition based upon direct customer feedback across areas such as trust, customer service, financial advice, digital experiences, and overall satisfaction.

Speaker #3: Also, during the quarter, we celebrated our 124th year, which means we begin celebrating S&T's 125-year legacy this quarter. This recognition is a timely reminder that our long-term success has been built on those same fundamentals: serving customers well, investing in our communities, and delivering value for our shareholders over time.

Chris McComish: This recognition is a timely reminder that our long-term success has been built on those same fundamentals, serving customers well, investing in our communities, and delivering value for our shareholders over time. These commitments have helped us navigate change, strengthen our culture, and position the bank to thrive for the next 125 years and beyond. Now turning to our financial results. I'll start on slide three. Turning to the quarter, we delivered a very strong performance. Net income was $36.6 million, or $1.02 per diluted share, up 8.5% from the Q1 2026, and 22.9% from the Q2 of last year. Return metrics were also solid. We reported ROA of 149, ROE of 10.375, and a ROTCE of over 14. These results reflected the benefit of higher earnings, continued discipline across the company, and the impact of our share repurchase activity. Our operating performance was also strong.

Speaker #3: These commitments have helped us navigate change, strengthen our culture, and position the bank to thrive for the next 125 years and beyond. Now, turning to our financial results, I'll start on slide 3.

Speaker #3: Turning to the quarter, we delivered a very strong performance. Net income was $36.6 million, or $1.02 per diluted share, up 8.5% from the first quarter of '26, and 22.9% from the second quarter of last year.

Speaker #3: Return metrics were also solid. We reported an ROA of 1.49%, ROE of 10.38%, and an ROTCE of over 14%. These results reflected the benefit of higher earnings, continued discipline across the company, and the impact of our share repurchase activity.

Speaker #3: Our operating performance was also strong. Net interest margin expanded 7 basis points from the linked quarter to 3.99%, supported by both higher loan yields and a better funding mix.

Chris McComish: Net interest margin expanded seven basis points from the linked quarter to 399, supported by both higher loan yields and a better funding mix. Net interest income increased to $90.4 million compared to $88.4 million in Q1 and $86.6 million a year ago. Importantly, we're seeing positive year-to-date operating leverage. Through the H1 of the year, revenue growth has outpaced expense growth meaningfully, and our efficiency ratio improved to 55.38% compared to 57% for the H1 2025. As is noted, asset quality showed improvement during the quarter with low net charge-offs of just $1 million and non-performing assets decreased by almost $10 million to 0.5% of total loans in OREO. On page four, loan growth was $99 million, or 5% annualized. On the deposit side, customer deposits were stable in Q2 after very strong growth in Q1.

Speaker #3: Net interest income increased to $90.4 million, compared to $88.4 million in the first quarter, and $86.6 million a year ago. Importantly, we're seeing positive year-to-date operating leverage.

Speaker #3: Through the first six months of the year, revenue growth has outpaced expense growth meaningfully, and our efficiency ratio improved to 55.38% compared to 57% for the first six months of 2025.

Speaker #3: As noted, asset quality showed improvement during the quarter, with low net charge-offs of just $1 million, and non-performing assets decreased by almost $10 million.

Speaker #3: To 0.5% of total loans in OREO. On page 4, loan growth was $99 million, or 5% annualized. On the deposit side, customer deposits were stable in the second quarter after very strong growth in the first quarter. Year-to-date, deposits are up approximately 8% annualized.

Chris McComish: Year-to-date deposits are up approximately 8% annualized. At the same time, we reduced broker deposits $100 million during the quarter and $180 million year-to-date, which again improved the quality of our funding mix. DDA levels remain at an industry-leading 28% of total deposits, highlighting the value of our relationship-based model and the quality of our core deposit base. We continue to actively manage capital also. As you know, over the past three quarters, we've repurchased almost 3.2 million shares, representing 8% of outstanding shares, for a total of $133 million. We also got board approval yesterday for reauthorization of another $100 million opportunity. Our strong capital position gives us the flexibility to continue to support organic growth, remain disciplined around capital returns, and evaluating strategic opportunities as they arise. In summary, this was a very good quarter for our bank.

Speaker #3: At the same time, we reduced brokered deposits by $100 million during the quarter and $180 million year-to-date, which again improved the quality of our funding mix.

Speaker #3: DDA levels remain at an industry-leading 28% of total deposits, highlighting the value of our relationship-based model and the quality of our core deposit base.

Speaker #3: We continue to actively manage capital also. As you know, over the past three quarters, we've repurchased almost 3.2 million shares, representing 8% of outstanding shares, for a total of $133 million.

Speaker #3: We also got board approval yesterday for a reauthorization of another $100 million. Our strong capital position gives us the flexibility to continue to support organic growth, remain disciplined around capital returns, and evaluate strategic opportunities as they arise.

Speaker #3: In summary, this was a very good quarter for our bank. We delivered meaningful EPS growth, solid returns, favorable asset quality, positive year-to-date operating leverage, and continued capital management through share repurchases.

Chris McComish: We delivered meaningful EPS growth, solid returns, favorable asset quality, positive year-to-date operating leverage, and continued capital management through share repurchases. I'm going to stop right there and turn it over to Dave, who can talk about asset growth pipelines and asset quality.

Speaker #3: I'm going to stop right there and turn it over to Dave. He can talk about asset growth, pipelines, and asset quality.

Speaker #2: Great. Thank you, Chris. And as Chris mentioned in referring to page 4, total loans increased by $99 million during Q2, representing approximately 5% annualized growth, driving balances to over $8 billion.

Mark Kochvar: Great. Thank you, Chris, and as Chris mentioned in referring to page four

David Antolik: Great. Thank you, Chris, and as Chris mentioned in referring to page four. Total loans increased by $99 million during Q2, representing approximately 5% annualized growth, driving balances to over $8 billion. We are encouraged by both the composition and the quality of this growth. As discussed on previous calls, we are strategically focused on building our C&I capabilities. Our investment in talent is beginning to pay off. During the quarter, we increased our C&I banker count, have increased our total commercial banking team by approximately 20% year to date, with a goal of reaching 30% by year-end. These hires strengthen our ability to deepen customer relationships, expand our presence in attractive markets, and support long-term loan and deposit growth.

David Antolik: Total loans increased by $99 million during Q2, representing approximately 5% annualized growth, driving balances to over $8 billion. We are encouraged by both the composition and the quality of this growth. As discussed on previous calls, we are strategically focused on building our C&I capabilities. Our investment in talent is beginning to pay off. During the quarter, we increased our C&I banker count, have increased our total commercial banking team by approximately 20% year to date, with a goal of reaching 30% by year-end. These hires strengthen our ability to deepen customer relationships, expand our presence in attractive markets, and support long-term loan and deposit growth. The results can be seen in our C&I portfolios. During the quarter, C&I balances increased by $79 million. We saw encouraging signs from our C&I customer base with revolving line utilization increasing from 41% to 44% quarter over quarter.

Speaker #2: We're encouraged by both the composition and the quality of this growth. As discussed on previous calls, we are strategically focused on building our C&I capabilities, and our investment in talent is beginning to pay off.

Speaker #2: During the quarter, we increased our C&I bank account and have increased our total commercial banking team by approximately 20% year-to-date, with a goal of reaching 30% by year-end.

Speaker #2: These hires strengthen our ability to deepen customer relationships and expand our presence in attractive markets, and support long-term loan and deposit growth. The results can be seen in our C&I portfolio.

David Antolik: The results can be seen in our C&I portfolios. During the quarter, C&I balances increased by $79 million. We saw encouraging signs from our C&I customer base with revolving line utilization increasing from 41% to 44% quarter over quarter. At the same time, total C&I revolving commitments grew at 6% annualized, demonstrating continued demand from our customers, along with increased banker productivity. Permanent commercial real estate balances declined by $46 million, primarily driven by loans that were paid off by non-bank lenders. While this created a headwind to the portfolio growth, it also reflects the continued quality of our borrower base and the attractiveness of these projects to the permanent market. Importantly, we remain committed to supporting well-capitalized developers within our footprint.

Speaker #2: During the quarter, C&I balances increased by $79 million. We saw encouraging signs from our C&I customer base, with revolving line utilization increasing from 41% to 44% quarter over quarter. At the same time, total C&I revolving commitments grew at a 6% annualized rate, demonstrating continued demand from our customers along with increased banker productivity.

David Antolik: At the same time, total C&I revolving commitments grew at 6% annualized, demonstrating continued demand from our customers, along with increased banker productivity. Permanent commercial real estate balances declined by $46 million, primarily driven by loans that were paid off by non-bank lenders. While this created a headwind to the portfolio growth, it also reflects the continued quality of our borrower base and the attractiveness of these projects to the permanent market. Importantly, we remain committed to supporting well-capitalized developers within our footprint. As a result, commercial construction balances increased by $71 million during the quarter. Additionally, total construction commitments increased by $65 million, the total number of commitments increased by nearly 19% in Q2, providing further evidence of solid customer activity. Looking ahead, our CRE and C&I pipeline activities remain solid and support our expectation for annualized mid-single-digit loan growth for the balance of 2026.

Speaker #2: Permanent commercial real estate balances declined by $46 million, primarily driven by loans that were paid off by non-bank lenders. While this created a headwind to portfolio growth, it also reflects the continued quality of our borrower base and the attractiveness of these projects to the permanent market.

Speaker #2: Importantly, we remain committed to supporting well-capitalized developers within our footprint. As a result, commercial construction balances increased by $71 million during the quarter. Additionally, total construction commitments increased by $65 million, and the total number of commitments increased by nearly 19% in Q2, providing further evidence of solid customer activity.

David Antolik: As a result, commercial construction balances increased by $71 million during the quarter. Additionally, total construction commitments increased by $65 million, the total number of commitments increased by nearly 19% in Q2, providing further evidence of solid customer activity. Looking ahead, our CRE and C&I pipeline activities remain solid and support our expectation for annualized mid-single-digit loan growth for the balance of 2026.

Speaker #2: Looking ahead, our CRE and C&I pipeline activities remain solid and support our expectation for annualized mid-single-digit loan growth for the balance of 2026. Turn to asset quality on page 5.

David Antolik: Turning to asset quality on page five, our portfolio continues to perform in line with our expectations, demonstrating our disciplined underwriting approach and ongoing portfolio management efforts. Non-performing assets declined by $9.7 million during the quarter to $40.2 million, or 0.5% of total loans plus OREO. Criticized and classified assets remained stable during the quarter, while losses were very low. Net charge-offs totaled just $1 million during Q2, resulting in a modest provision expense of $1.1 million. Given the continued stability of the loan portfolio, the allowance for credit losses remained essentially unchanged at 1.16% of total loans, compared to 1.17% at the end of Q1. I will now turn the program over to Mark.

Speaker #2: Our portfolio continues to perform in line with our expectations, demonstrating our disciplined underwriting approach and ongoing portfolio management efforts. Non-performing assets declined by $9.7 million during the quarter, to $40.2 million, or 0.5% of total loans plus OREO.

Speaker #2: Classified assets remained stable during the quarter, while losses were very low. Net charge-offs totaled just $1 million during Q2, resulting in a modest provision expense of $1.1 million.

Speaker #2: Given the continued stability of the loan portfolio, the allowance for credit losses remained essentially unchanged at 1.16% of total loans, compared to 1.17% at the end of Q1.

Speaker #2: And now I'll turn the program over to Mark.

Speaker #4: Hey, thanks, Dave. In the second quarter, net interest income increased by $2 million, due to an additional day combined with improvements on both the yield on earning assets—which are up 4 basis points with better commercial performance—and the cost of funding, which was down 4 basis points due to lower interest-bearing deposit rates and also a better funding mix.

Mark Kochvar: Hey, thanks, Dave. Q2 net interest income increased by $2 million due to an additional day, combined with improvements on both the yield on earning assets, which were up four basis points with better commercial performance, the cost of funding, which was down four basis points due to lower interest-bearing deposit rates, and also a better funding mix. We expect relative net interest margin stability around the current high 390s level to continue for the next several quarters and believe we are well-positioned should interest rate conditions change. Tailwinds from our maturing receipt fixed swap, along with some remaining security fixed-rate loan and CD repricing all contribute to stability in the face of heightened loan and deposit pricing competition. Net interest income growth will be supported by improved loan growth.

Speaker #4: We expect relative net interest margin stability around the current high 3.90s level to continue for the next several quarters and believe we are well-positioned should interest rate conditions change.

Speaker #4: Tailwinds from our maturing receipts, pick swaps, along with some remaining security fixed-rate loan and CD repricing, all contribute to stability in the face of heightened loan and deposit pricing competition.

Speaker #4: Net interest income growth will be supported by improved loan growth. Average loan balances were actually down in the second quarter due to the timing of the growth in the first half, but we expect average loan balance growth going forward.

Mark Kochvar: Average loan balances were actually down in Q2 due to the timing of the growth in H1, but we expect average loan balance growth going forward. Customer deposit growth momentum remains good even in the face of this increased competition, which should contribute to maintaining spreads and net interest margin rates. Next, on non-interest income, we saw an increase of $1.3 million in Q2. Increases were broad-based with improvements in really every category. Debit and credit card activity was higher after a seasonally slower Q1. Investment services is up with better customer activity and market improvements. The gain on sale is a net of a $1.9 million gain on the conversion of Visa Class B2 shares. We offset that for the most part with a $1.7 million loss on a small $34 million bond portfolio repositioning.

Speaker #4: Customer deposit growth momentum remains good, even in the face of this increased competition, which should contribute to maintaining spreads and net interest margin rates.

Speaker #4: Next, on non-interest income, we saw an increase of $1.3 million in the second quarter. Increases were broad-based, with improvements in really every category. Debit and credit card activity was higher after a seasonally slower first quarter. Investment services is up with better customer activity and market improvements.

Speaker #4: The gain on sale is the net of a $1.9 million gain on the conversion of Visa Class B2 shares. We offset that, for the most part, with a $1.7 million loss on a small $34 million bond portfolio repositioning.

Speaker #4: The bond repositioning hasn't earned back for about 1.4 years. It will add $300,000 per quarter to net interest income for the next several quarters.

Mark Kochvar: The bond repositioning has an earn back of about 1.4 years. It will add $300,000 per quarter to net interest income for the next several quarters. The other category variance is due to one-time items. We had some partnership income and an unrealized gain on some equities that we own. Our expectations for fees in H2 of 2026 is approximately $14 million per quarter. On to non-interest expenses, which increased by $2 million in Q2. The largest variance was in salaries and benefits. Within that, salaries were up due to merit increases going into effect in April. We also had some higher medical costs as deductibles were met during the first part of the year. Occupancy improvement was impacted by higher seasonal snow removal and utility costs in Q1. Marketing reflects just the timing of various promotional efforts.

Speaker #4: The "Other" category variance is due to one-time items. We had some partnership income and an unrealized gain on some equities that we have. Our expectations for fees in the second half of 2026 is approximately $14 million per quarter.

Speaker #4: On the non-interest expenses, which increased by $2 million in Q2, the largest variance was in salaries and benefits; and within that, salaries were up due to merit increases going into effect in April. We also had some higher medical costs as deductibles were met during the first part of the year.

Speaker #4: Occupancy improvement was impacted by higher seasonal snow removal and utility costs, and the costs in the first quarter marketing reflect just the timing of various promotional efforts.

Speaker #4: Other variances include tax-related contributions, which are offset by a favorable variance in other taxes. We had some higher T&E and employee recognition, along with some recruiting fees.

Mark Kochvar: Other variances include tax-related contributions, which are offset by a favorable variance in other taxes. We had some higher P&E and employee recognition, along with some recruiting fees. We expect to manage our 2026 non-interest expense year-over-year to around 3% increase, which implies a quarterly run rate of around $58 million. For capital, the TCE ratio decreased by 28 basis points this quarter, primarily due to the share repurchases we completed in Q2. Again, for the quarter, we repurchased about 1.1 million shares. Average price is $44.24, with a total of $47.6 million. Our regulatory ratios continue to be very strong, with significant excess capital. We are evaluating next steps with respect to our capital management strategy and further buybacks.

Speaker #4: We expect to manage our 2026 non-interest expense year-over-year to around a 3% increase, which implies a quarterly run rate of around $58 million. For capital, the TCE ratio decreased by 28 basis points this quarter, primarily due to the share repurchases we completed in the second quarter.

Speaker #4: Again, for the quarter, we repurchased about 1.1 million shares at an average price of $44.24, for a total of $47.6 million. Our regulatory ratios continue to be very strong, with significant excess capital.

Speaker #4: We are evaluating next steps with respect to our capital management strategy and further buybacks. We're comfortable that, even considering additional repurchases that were recently authorized by the board, we have more than sufficient capital currently and the generation capabilities that will position us well for the environment and enable us to take advantage of organic or inorganic growth opportunities should they arise.

Mark Kochvar: We're comfortable that even considering additional repurchases that were recently authorized by the board, we have more than sufficient capital currently, and the generation capabilities that will position us well for the environment and enable us to take advantage of organic or inorganic growth opportunities should they arise. Thanks very much. At this time, I'd like to turn the call back over to the operator to provide instructions for asking questions.

Speaker #4: Thank you very much. At this time, I'd like to turn the call back over to the operator to provide instructions for asking questions.

Speaker #5: The floor is now open for questions. If you have a question, please press star 1 on your device. We ask that, while asking your question, you please pick up your phone and turn off speakerphone for enhanced audio quality.

Operator: The floor is now open for questions. If you have a question, please press star one on your device. We ask that while asking your question, please pick up your phone and turn off speakerphone for enhanced audio quality. Please remember to unmute your device. Please hold while we poll for questions. Your first question comes from the line of Daniel Tamayo with Raymond James. Your line is now open. Please go ahead.

Speaker #5: Please remember to unmute your device. Please hold while we queue up questions. Your first question comes from the line of Daniel Tomeo with Raymond James.

Speaker #5: Your line is now open. Please go ahead.

Speaker #1: Thank you. Good afternoon, everybody.

Daniel Tamayo: Thank you. Good afternoon, everybody.

Speaker #6: Hey, Danny.

Chris McComish: Danny.

Speaker #1: How's it going? I apologize if you already gave this, but the loan growth guide—did we get a, was it mid-single digit again that we're looking for the rest of the year?

Daniel Tamayo: How's it going? I apologize if you gave this already. The loan growth guide, was it mid-single digit again that we're looking for-

Mark Kochvar: Yeah

Mark Kochvar: rest of the year?

Speaker #6: Yeah. Exactly, Dan. Mid-single digit.

David Antolik: Exactly, Dan. Mid-single digit.

Speaker #1: Okay, all right, great. And in terms of the deposits, I know you called out it's been strong year-to-date. Still thinking that kind of full year will fund the loan growth, or how are you thinking through the deposit?

Daniel Tamayo: Okay. All right, great. In terms of the deposits, I know you called out it's been strong year to date. Still thinking that kind of full year will fund the loan growth, or how are you thinking through the deposit trajectory?

Speaker #6: Yeah. Yeah, we fully anticipate, based on pipelines and activity we've seen year-to-date, that we'll be able to sell funds through deposit growth.

David Antolik: Yeah. Based on pipelines activity we've seen year to date, we'll be able to self-fund through deposit growth.

Speaker #1: Okay, great. And then I appreciate the commentary on the buybacks, but maybe if you could just put a little more clarity around how you're thinking about that. Other than opportunistic, you've got the $100 million re-up there, and then is that assuming kind of a stable stock price or stable growth in the stock price? Do you think that's something that you expect to use on a somewhat regular basis over the next several quarters?

Daniel Tamayo: Okay, great. I appreciate the commentary on the buybacks, maybe if you could just put a little more clarity around how you're thinking about that other than opportunistic. You got the $100 million re-up there, assuming a stable stock price or stable growth in the stock price, you think that's something that you expect to use on a somewhat regular basis over the next several quarters? Obviously, it's dependent in part on the loan growth that comes through. I get that. Just your thoughts on your intention to use that over the next year, I guess, is the authorization.

Speaker #1: Obviously, it's dependent in part on the loan growth that comes through—I get that. But just your thoughts on your intention to use that over the next year, I guess, as the authorization.

Speaker #6: Yeah, I mean, it does last for a while. I mean, with the stock price moving higher, the calculus does change. So, we are taking a closer look at that.

Mark Kochvar: Yeah. It does last for a while. With the stock price moving higher, the calculus does change. We are taking a closer look at that. I think it is something that we'll have opportunity to use over the next year. Again, the dynamics have changed as the prices move higher.

Speaker #6: I think it is something that we'll have the opportunity to use over the next year. But again, the dynamics have changed as the prices move higher.

Speaker #1: So, based on today's price, I mean, do you think that's something you're still interested in utilizing?

Daniel Tamayo: Based on today's price, do you think that's something you're still interested in utilizing?

Speaker #6: Probably not to the same degree as we have been. We’ve been pretty active the last three quarters, so we would consider or look more closely at potentially stepping that back somewhat.

Mark Kochvar: Probably not to the same degree as we've been. We've been pretty active the last three quarters. We would consider or look more closely at potentially stepping that back somewhat at current levels.

Speaker #6: At current levels.

Speaker #1: Okay. And if that happens, and maybe the stock goes higher and it becomes less attractive, what do you think you would do with the capital at that point, absent kind of looking for other M&A opportunities?

Daniel Tamayo: Okay. If that happens and maybe the stock goes higher and it becomes less attractive, what do you think you would do with the capital at that point, absent looking for other M&A opportunities?

Speaker #6: Yeah. I mean, we haven't stopped looking for M&A opportunities and other things to do, both organically. So we would continue on that. With the buybacks that we've made, the improvements to returns are meaningful.

Chris McComish: Yeah. We haven't stopped looking for M&A opportunities and other things to do both organically. We would continue on that. With the buybacks that we've made, the improvements to the returns are meaningful. Again, the kind of incremental improvement that we get from the buyback begins to get a little bit more constrained. I think that's one of the things as we go into our planning process for the year, that's something that we'll have to look a lot closer at over the next quarter or so.

Speaker #6: But again, that kind of incremental improvement that we get from the buybacks begins to get a little bit more constrained. So I think that's one of the things, as we go into our planning process for the year, that we'll have to look a lot closer at over the next quarter or so.

Speaker #1: All right. Understood. Well, thanks for the call, guys. Appreciate it. Nice quarter.

Daniel Tamayo: All right. Understood. Well, thanks for the call, guys. Appreciate it. Nice quarter.

Speaker #6: Okay. Thank you.

Mark Kochvar: Okay.

Chris McComish: Thank you.

Speaker #5: Your next call comes from the line of David Bishop with Hovde Group. Your line is now open. Please go ahead.

Operator: Your next call comes from the line of David Bishop with Hovde Group. Your line is now open. Please go ahead.

Speaker #4: Yeah, good afternoon. Hey, Chris, you mentioned the ability to attract new commercial bankers, and you called out the C&I growth. Just maybe some color on the increase there?

David Bishop: Yeah, good afternoon. Hey, Chris, you mentioned the ability to attract new commercial bankers, and you called out the C&I growth. Just maybe some color on the increase there. How much represented maybe new client penetration versus existing customers getting more aggressive and utilizing lines and getting more optimistic on lending? Thanks.

Speaker #4: How much was represented by new client penetration versus existing customers getting more aggressive and utilizing lines, and getting more optimistic on lending? Thanks.

David Antolik: Hey, Dave. David Antolik. The majority of the growth was related to utilization rates increasing. As I mentioned, we've seen the total revolving commitment grow as well, which would represent additional credit extended to existing clients as well as new customers. It's a good mix. The growth in C&I was outsized and a little more than what we'd expected from the quarter because of the increased utilization rates.

Speaker #6: Yes. Hey, Dave Antolik. So, the majority of the growth was related to utilization rates increasing. But as I mentioned, we've seen the total revolving commitment grow as well, which would represent additional credit extended to existing clients, as well as new customers.

Speaker #6: So, it's a good mix, but the growth in C&I was outsized and a little more than what we'd expected for the quarter because of the increased utilization rates. Which was interesting, because utilization had dropped a little bit in Q1, and then it came back.

Mark Kochvar: Which was interesting because utilization had dropped a little bit in Q1, it came back somewhat in Q2 and pushed a little bit higher.

David Bishop: Which was interesting because utilization had dropped a little bit in Q1, it came back somewhat in Q2 and pushed a little bit higher.

Speaker #6: Some in Q2, and pushed a little bit higher. So the math becomes, keep the utilization rate because it's now at a level where it was prior to Q1.

David Antolik: The math becomes keep the utilization rate because it's now at a level where it was prior to Q1, keep that consistent, grow the overall customer base, which is the purpose behind hiring these new C&I bankers.

Speaker #6: Keep that consistent, grow the overall customer base, which is the purpose behind hiring these new C&I bankers.

Speaker #1: Got it. And then, I'm not sure if I missed it during the preamble, but positioning for potential rate hikes here in terms of the margin—just curious about your thoughts on the puts and takes there as we head into the second half of the year.

David Bishop: Got it. I'm not sure if I missed it during the preamble, but positioning for potential rate hikes here in terms of the margin. Just curious thoughts on the sort of the puts and takes there as we head into H2 of the year. Thanks.

Speaker #1: Thanks.

Speaker #6: Yeah, I think with respect to our rate sensitivity, we feel like within 25 or 50 basis points, or at least even a little bit more either way, that we're fairly neutrally positioned right now.

Mark Kochvar: Yeah. I think with respect to our rate sensitivity, we feel like within 25, 50 basis points, or even a little bit more either way, that we're fairly neutrally positioned right now. We still have those tailwinds that I mentioned with the swaps and some of the back book repricing that should support us over the next several quarters. It's hard to know what the Fed's going to do, but we think that we can hold on the margin for the next several quarters at least, in spite of any rate changes that might happen.

Speaker #6: We still have some tailwinds that I mentioned with the swaps and some of the back book repricing that's going to support us over the next several quarters.

Speaker #6: So it's hard to know what the Fed's going to do, but we think that we can hold on to that on the margin for the next several quarters at least, in spite of any rate changes that might happen.

Speaker #1: Great. Thank you.

David Bishop: Great. Thank you.

Speaker #5: Your next call comes from the line of Kelly Motta with KBW. Your line is now open. Please go ahead.

Operator: Your next call comes from the line of Kelly Motta with KBW. Your line is now open. Please go ahead.

Speaker #7: Hi. Good afternoon. Maybe speaking on the point of the margin, it was really nice to see deposit costs come down in the quarter, including the rate on CDs.

Kelly Motta: Hi, good afternoon. Maybe sticking on the point of the margin. It was really nice to see deposit costs come down in the quarter, including the rate on CDs. I'm wondering, as you look out from here, is that tailwind kind of leveling off with the upcoming maturities coming up, and can you provide any spot color on deposit costs or what the incremental cost of new funding is coming in at? Thank you.

Speaker #7: I'm wondering, as you look out from here, is that tailwind kind of leveling off with the upcoming maturities coming up? And can you provide any spot color on deposit costs, or what the incremental cost of new funding is coming in at?

Speaker #7: Thank you.

Speaker #6: Yeah, so I mean, you're right. The CD—we still have some repricing benefit on the CD book. That has maybe a couple more months to run.

Mark Kochvar: Yeah. I mean, you're right. We still got some repricing benefit on the CD book. That has maybe a couple more months to run, so we might see a little bit more benefit in Q3. After that, we're pretty much leveled off and repricing at the same cost because that book is fairly short. We're still highly concentrated in that six-month timeframe. That's why we'll start to see some uptick potentially after Q3 in deposit costs, as there's still some repricing and some exception pricing being made. To the extent we can hold onto the good mix that we have, we shouldn't see it move too much going forward.

Speaker #6: So, we might see a little bit more benefit in Q3. But after that, we're pretty much leveled off and repricing at the same cost because that book is fairly short.

Speaker #6: We're still highly concentrated in that six-month timeframe, so that's why we'll start to see some uptick potentially after Q3 in deposit costs, as there's still some repricing and some exception pricing being made.

Speaker #6: So, to the extent we can hold on to the good mix that we have, we shouldn't see it move too much going forward.

Speaker #7: Got it, that's helpful. Maybe one last question from me, just refreshing—Durban, it looks like you're at $9.94 billion in assets, very flat quarter over quarter.

Kelly Motta: Got it. That's helpful. Maybe one last question from me, just refreshing Durbin. It looks like you're $9.94 billion in assets, very flat quarter over quarter. It seems like given your mid-single-digit growth outlook on loans, you will potentially run through that. Is that still a good assumption, or do you have some levers here that if you don't get a deal you can plan to navigate under on an organic basis? Thank you.

Speaker #7: It seems like, given your kind of mid-single-digit growth outlook on loans, you will potentially run through that. Is that still a good assumption, or do you have some levers here that, if you don't get a deal, you can plan to navigate under on an organic basis?

Speaker #7: Thank you.

Speaker #6: I mean, given the trajectory that Dave described on the loan side, if we're successful with that, we would anticipate a cross here in the second half.

Mark Kochvar: I think given the trajectory that Dave described on the loan side, if we're successful with that, we would anticipate a cross here in H2. As long as that comes true, we will go. In H1 of the year, we saw a decrease in loan balances in Q1. That sat in cash for the most part at the end of Q1. In Q2, even though we had loan growth, we right-sized the cash balance. It looked like we were flat, but it was really back to the balance sheet actually being probably down under the hood in Q1, and it's just kind of bounced back during Q2. Our trajectory should take us over $10 billion in H2.

Speaker #6: So, as long as that comes through, we will go. In the first half of the year, we saw a decrease in loan balances in the first quarter.

Speaker #6: That sat in cash for the most part at the end of the first quarter. So, in the second quarter, even though we had loan growth, we got to right-size the cash balance.

Speaker #6: So it looked like we were flat, but it was really back to the balance sheet actually being probably down under the hood in the first quarter.

Speaker #6: And it's just kind of bounced back here in the second quarter. But our trajectory should take us half.

Speaker #7: Got it. Thank you so much.

Kelly Motta: Got it. Thank you so much.

Speaker #5: Your next.

Operator: Your next-

Chris McComish: Yeah. Kelly, it's Chris. As we've talked about before, we're talking about a little over $6 million annualized. Doesn't impact us assuming we went over at 1,231, it wouldn't impact half of that would hit in 2027, the other full amount of that would hit in 2028. Our job is to lead the company through that, and we feel very confident that we can.

Speaker #6: Dave Kelly: Chris, as we've talked about before, we're talking about a little over $6 million annualized. It doesn't impact us—assuming we went over a 12/31, it wouldn't impact us. Half of that would hit in '27.

Speaker #6: The other full amount of that would hit in '28. And our job is to delever the company through that. And we feel very confident that we can.

Speaker #5: Your next call comes from the line of Daniel Cardenas with Breen Capital. Your line is now open. Please go ahead.

Operator: Your next call comes from the line of Daniel Cardenas with Brean Capital. Your line is now open. Please go ahead.

Speaker #8: Hey. Good afternoon, guys.

Daniel Cardenas: Hey, good afternoon, guys.

Speaker #6: Hey, Dave.

Chris McComish: Hey, Dan.

Speaker #8: Hey, Dan. So just kind of just kind of following up on Kelly's question with the crossing of the $10 billion threshold. And the $6 million gap that would be created there, how long do you think it would take your new hires to kind of fill that gap?

David Antolik: Hey, Dan.

David Antolik: Just kind of following up on Kelly's question with the crossing of the $10 billion threshold, and the $6 million gap that would be created there. How long do you think it would take your new hires to fill that gap? Do you think that can happen in 2028, or is that going to take a little bit longer for that to really occur?

Speaker #8: Do you think that can kind of happen in '28, or is that going to take a little bit longer for that to really occur?

Chris McComish: Well, yeah, I mean the new hires and the growth of the balance sheet is just one lever that we would pull. We're not going to take on additional risk from an asset growth standpoint to have that overcome. We're going to remain disciplined. We'll continue to look at expense-saving opportunities that could make up some of that and generating other forms of fee income. If you think about an $8 billion balance sheet on either side of the loan and deposit makeup, you're talking about a basis point or 2 to make up $6 million annualized in net interest income. Dan, we just feel confident that we're going to be able to pull any number of levers in order to overcome that kind of number. Yeah, we made $36 million this quarter. It's quite consistent in the growth that we're seeing.

Speaker #6: Well, yeah. I mean, the new hires and the growth of the balance sheet—it was just one lever that we would pull.

Speaker #6: We're not going to take on additional risk from an asset growth standpoint to have that overcome. So we're going to remain disciplined.

Speaker #6: We'll continue to look at expense-saving opportunities that could make up some of that, and generating other forms, about an $8 billion balance sheet on either side.

Speaker #6: The loan and deposit makeup—you're talking about a basis point or two to make up $6 million annualized in net interest income. And so we just feel confident that we're going to be able to pull any number of levers in order to overcome that kind of number.

Speaker #6: We've made $36 million this quarter. It's quite consistent with the growth that we're seeing, and so we don't want to do anything that is overly aggressive to make up that number.

Chris McComish: We don't want to do anything that is overly aggressive to make up that number. We believe we can do it through what we've shown over time, and that's the effective running of the company. If you look at the operating leverage that we have right now, we grew revenue, net interest income, close around 5% H1. Expenses were closer to 1%. That operating leverage is pretty significant, and that can translate to making up those kinds of savings.

Speaker #6: We believe we can do it through what we've shown over time, and that's the effective running of the company. You look at the operating leverage that we have right now—we grew revenue, net interest income, around 5% for the first six months of the year.

Speaker #6: Expenses were close to 1%. That operating leverage is pretty significant, and that can translate to making up those kinds of savings. And just to clarify, we had a question come in on the timing of the impact.

Mark Kochvar: Actually, just to clarify that, we had a question come in on the timing of the impact. If we crossed here in the H2, that would start in the H2 of 2027.

Speaker #6: If we cross here in the second half, that would start in the second half of '27. Right.

Chris McComish: Right.

Speaker #8: Okay, got it. Perfect. And then, just returning to loan growth in the quarter, what was the impact from paydowns and payoffs in the quarter?

Daniel Cardenas: Okay. Got it. Perfect. Just returning to loan growth in the quarter, what was the impact from pay downs and payoffs in the quarter?

Speaker #6: Well, we did see that commercial real estate permanent loan bucket decline. As you may know, the CMBS market is relatively active in the permanent, and insurance market.

David Antolik: Well, we did see that commercial real estate permanent loan bucket decline. As you may know, the CMBS market is relatively active in the permanent insurance market. We continue to fund through on our construction loans in support of those same borrowers. Based on what we see from existing commitments and demand in the market, we believe that that kind of pace can be continued. That pressure, that headwind from the permanent market is going to continue to be something that we're going to face throughout the balance of the year and certainly in the next year. The pay downs were a little bit lighter than typical in the quarter. We did get a little bit of a benefit there in terms of the net growth by having slightly lighter. Looking ahead, we don't see that as being a trend.

Speaker #6: But we continue to fund through on our construction loans in support of those same borrowers. So, based on what we see from existing commitments and demand in the market, we believe that kind of pace can be continued.

Speaker #6: But that pressure, that headwind from the permanent market, is going to continue to be something that we're going to face throughout the balance of the year, and certainly into next year.

Speaker #6: But paydowns were a little bit lighter than typical in the quarter, so we did get a little bit of a benefit there in terms of the net growth by having slightly lighter paydowns.

Speaker #6: But looking ahead, you don't see that. We don't see that as being a trend.

Speaker #8: Okay, got it. Perfect. All right. All my other questions have been asked and answered. Thank you, guys.

Daniel Cardenas: Okay. Got it. Perfect. All right. All my other questions have been asked and answered. Thank you, guys.

Speaker #6: Thanks. Thanks, Dan.

David Antolik: Thanks. Thanks, Dan.

Speaker #5: Your next question comes from the line of Matthew Brief with Stevens, Inc. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Matthew Breese with Stephens Inc. Your line is now open. Please go ahead.

Speaker #9: Hey. Good afternoon, guys.

Matthew Breese: Hey, good afternoon, guys.

Speaker #6: Hi, Matt. Hi, Matt.

David Antolik: Hi, Matt.

Speaker #9: Maybe we could just touch on pipeline—pipeline yields, spreads, and between CNI and commercial real estate. I'm curious how competitive dynamics are playing out in your markets.

Matthew Breese: Maybe we could just touch on pipeline yields, spreads between C&I and commercial real estate, and curious how competitive dynamics are playing out in your markets. It just sounds like elsewhere in kind of the mid-Atlantic things are heating up competition-wise, and I'm curious what you're experiencing.

Speaker #9: It just sounds like, elsewhere in kind of the admin Atlantic, things are heating up competition-wise. I'm curious what you're experiencing.

Speaker #6: Yeah. So, if I look at just strictly pipeline—approved pipeline—from first quarter versus second quarter, we're up modestly in both CRE and C&I. More so in the CRE space, as a recognition of those hirings.

David Antolik: Yes. If I look at just strictly pipeline approved pipeline from Q1 versus Q2, we're up modestly in both CRE and C&I, more so in the CRE space as a recognition of those hirings that we've made. We have some pretty decent ABL pipeline activity that's headed our way that could help us with incremental growth. If I turn to consumer, mortgages similar to where it was Q1. I would expect mortgage activity to look in Q2 similar to how it did in Q1. Looking at consumer home equity, I would expect Q3, based on pipelines today, to show similar growth, maybe a little higher in Q3 than we saw in Q2. Kind of all those things combined give us that outlook to a guidance of mid-single digit total loan growth for Q2 or, I'm sorry, for the balance of the year.

Speaker #6: That we've made. We have some pretty decent ABL pipeline activity that's headed our way that could help us with incremental growth. Turning to consumer mortgages, they're similar to where they were in Q1.

Speaker #6: And I would expect mortgage activity to look, in Q2, similar to how it did in Q1. And then, looking at consumer home equity, I would expect Q3, based on pipelines today, to show similar growth—maybe a little higher in Q3 than we saw in Q2.

Speaker #6: So, kind of all those things combined give us that outlook to a guidance of mid-single-digit total loan growth for Q2—or, I'm sorry, for the balance of the year.

Speaker #8: And how are yields holding up?

Matthew Breese: How are yields and spreads holding up?

Speaker #6: Yeah, they're holding up. I mean, there's still competitive pressure, but so far, so good. We're disciplined relative to how we price, and the market—particularly in the areas where we see the most activity, like construction—there's still a reasonable return based on the risk that we take in that book.

David Antolik: Yeah. Yields, they're holding up. There's still competitive pressure but so far so good. We're disciplined relative to how we price in the market, particularly in the areas where we see the most activity. Construction, there's still a reasonable return based on the risk that we take in that book. The market's willing to accept that pricing. We haven't seen any significant pressure there. We've seen some additional pressure in the deposit book. You're seeing CD pricing and money market pricing competition become more aggressive, particularly from smaller banks. Our larger bank brethren aren't as aggressive when it comes to deposit rates, but there are some smaller bank competition who tend to be a little peskier when it comes to pricing deposits.

Speaker #6: And the market's willing to accept that pricing. We haven't seen any significant pressure there. We've seen some additional pressure in the deposit book. I mean, you're seeing CD pricing and money market pricing competition become more aggressive, particularly from smaller banks.

Speaker #6: The larger bank brethren aren't as aggressive when it comes to deposit rates. But there are some smaller bank competitors who tend to be a little peskier when it comes to pricing deposits.

Speaker #9: Yeah, maybe we'd put a finer point on it. I mean, educated guess—are your pipeline yields still better than 6.50%?

Matthew Breese: Yeah. Maybe to put a finer point on it, educated guess, are your pipeline yields still better than 650?

Speaker #6: No. No.

David Antolik: No.

Speaker #9: Okay.

Matthew Breese: Okay.

David Antolik: Overall, the new loan rate over the quarter was just over six. I anticipate that the pipeline probably reflects a very similar sort of rate.

Speaker #6: Overall, the new loan rate over the quarter was just over 6%. I anticipate that the pipeline probably reflects a very similar sort of rate.

Speaker #9: Got it. Okay. Chris, I know this comes up every quarter now, especially as you kind of inch towards $10 billion. But how are M&A discussions coming along?

Matthew Breese: Got it. Okay. Chris, I know this comes up every quarter now, especially as you kind of inch towards $10 billion, how are M&A discussions coming along?

Speaker #9: And are conversation activities mimicking overall deal volumes that we're seeing in the space, which is pretty slow?

Chris McComish: Yeah

Matthew Breese: Are conversation activities mimicking overall deal volumes that we're seeing in the space, which is pretty slow?

Speaker #6: Yeah. I would say conversation activities haven't slowed down from the standpoint of thinking strategically about partnerships. I think those activities continue to be at an acceptable pace.

Chris McComish: Yeah. I would say conversation activities haven't slowed down from the standpoint of thinking strategically about partnerships. I think those activities continue to be at an acceptable pace. I haven't seen any significant decline in those sorts of things. We continue to remain in the market and proactive with potential partners as we do believe it's an opportunity for us down the road.

Speaker #6: And I haven't seen any significant decline in those sorts of things. And so we continue to remain in the market and proactive with potential partners, as we do believe it's an opportunity for us down the road.

Speaker #9: Are there a number of deals that, since you stepped into the seat, you've passed on? And maybe elaborate on whether or not that makes you a more selective buyer than we might normally see?

Matthew Breese: Are there a number of deals that, since you stepped into the seat, that you've passed on? Maybe elaborate on whether or not that makes you a more selective buyer than we might normally see.

Speaker #6: Yeah, I'm not going to go there, comparing myself with others or ourselves with others. But yeah, there are a number of deals that we've chosen not to move forward with.

Chris McComish: Yeah. I'm not going to go there comparing myself with others or ourselves with others. Yeah, there are a number of deals that we've chosen not to move forward with. It may be, we think about what is important to our company, cultural fit, business mix, makeup of the company. One of the things that we've been working on hard over the past few years is continuing to grow and enhance and build that deposit franchise. Some of the targets that we'd look at may be more of an asset play than a customer deposit play, and that something like that may not be as appealing to us as it would be to somebody else.

Speaker #6: It may be, we think about what is important to our company: cultural fit, business mix, makeup of the company—we know ourselves. So, one of the things that we've been working on hard over the past few years is continuing to grow, enhance, and build that deposit franchise.

Speaker #6: So, some of the targets that we look at may be more of an asset play than a customer deposit play, and something like that may not be as appealing to us as it would be to somebody else.

Speaker #6: And then we also, as we've talked about in other quarters, Matt, we think about geographic expansion and those contiguous markets south and east of us.

Chris McComish: We also, as we've talked about in other quarters, Matt, we think about geographic expansion in those contiguous markets south and east of us and through the state of Ohio are all very attractive to us. We're not slowing down in the number of conversations and that remains active. Yeah, we've looked at a number of things that we've chosen not to pursue.

Speaker #6: And through the state of Ohio, we're all very attractive to us. So we're not slowing down in the number of conversations, and that remains active.

Speaker #6: But, yeah, we've looked at a number of things that we've chosen not to pursue.

Speaker #9: Great. I really appreciate that. I'll leave it there. Thank you.

Matthew Breese: Great. I really appreciate that. I'll leave it there. Thank you.

Speaker #6: Sure thing.

Chris McComish: Sure thing.

Speaker #1: Your next call comes from the line of Justin Crowley with Piper Sandler. Your line is now open. Please go ahead.

Operator: Your next call comes from the line of Justin Crowley with Piper Sandler. Your line is now open. Please go ahead.

Speaker #10: Hey, good afternoon, guys. On the loan growth, in particular C&I, and I know you folks have been talking about that as a focus for a while.

Justin Crowley: Hey, good afternoon, guys. On the loan growth, in particular C&I know you folks have been talking about that as a focus for a while and of course for this quarter. I know it can be a lumpy area, but can you talk about expectations there going forward and perhaps just any comments on are there any specialty groups or certain geographies driving that growth?

Speaker #10: And, of course, poor fruit this quarter. I know it can be a lumpy area, but can you talk about expectations there going forward, and perhaps just any comments on whether there are any specialty groups or certain geographies driving that growth?

Speaker #6: So, Justin, if you look at where we've hired—because I think about this more geographically than by industry, since we're pretty well diversified when it comes to industry.

David Antolik: Justin, if you look at where we've hired, if I think about this more geographically because we're pretty well-diversified when it comes to industry. Geographically, the majority of the hires were in Western Pennsylvania, that's where we're seeing activity. We've also made a number of hires in Northeast Ohio, where we're seeing some increase to pipeline. We also added 1 C&I banker in Eastern PA. It's pretty well-diversified both geographically and again, looking at industry and concentration, there's nothing meaningfully that's moved, nor do we anticipate that. We're relatively opportunistic, making sure that we have the right people in place, disciplined on your writers and portfolio managers.

Speaker #6: But geographically, the majority of the hires were in western Pennsylvania, so that's where we're seeing activity. We've also made a number of hires in northeast Ohio.

Speaker #6: We're seeing some increased pipeline. We also added one C&I banker in eastern PA. So it's pretty well diversified both geographically and, again, looking at industry and concentration, there's nothing meaningful that's moved.

Speaker #6: And nor do we anticipate that. So we're relatively opportunistic, making sure that we have the right people in place, disciplined on your writers and portfolio managers.

Speaker #6: One area that Dave touched on earlier was our asset-based lending group, which has seen nice activity, and the pipeline looks solid there. It's part of the growth equation as we move forward.

Chris McComish: One area that Dave touched on earlier was our asset-based lending group that is seeing nice activity and the pipeline looks solid there and is part of the growth equation as we move forward.

Speaker #10: Okay, got it. And then, I guess just pivoting a little—just sort of related to the conversation on buybacks—what are your broader thoughts on capital levels? Where are they? Certainly still very strong, but of course, down from the peak.

Justin Crowley: Okay. Got it. I guess just pivoting a little, just sort of related to the conversation on buybacks. What are sort of your broader thoughts on capital levels, where they are? Certainly still very strong, but of course, down from the peak. Is there a certain ratio or ratios where you look at targeting a certain threshold? What does that thought process look like?

Speaker #10: Is there a certain ratio or ratios where you look at targeting a certain threshold? What does that thought process look like?

Speaker #6: Yeah. I mean, we take a combined, sort of a bottoms-up approach to try to build at least some levels that we're comfortable at above.

Mark Kochvar: Yeah, we take a combined sort of bottoms-up approach to try to build at least some levels above which we're comfortable at based on regulatory environment plus our internal capital stress testing that we do to see how much capital we need as a cushion, and then making sure that we have that plus. We still think we have some room to reduce that. The decision really becomes how do we manage that better? It was so large that buybacks, I think made sense for that first round of it. As we're starting to utilize that more, some other avenues like different types of asset growth and certainly the M&A piece comes into play. We have some internal targets, but we still feel like we have space above that to maneuver.

Speaker #6: Based on the regulatory environment, plus our internal capital stress testing that we do to see how much capital we need as a cushion.

Speaker #6: And then making sure that we have that plus, and we still think we have some room to reduce that. So, the decision really becomes, how do we manage that better?

Speaker #6: We did. It was so large that buybacks, I think, made sense for that first round of it. But as we're starting to utilize that more, some other avenues, like different types of asset growth and certainly the M&A piece, come into play.

Speaker #6: So, we have some internal targets, but we still feel like we have space above that to maneuver.

Speaker #10: Okay. And I don't know if you're really able to quantify that much further, but do you look at regulatory ratios in terms of staying above a certain level?

Justin Crowley: Okay. I don't know if you're really able to quantify that much further, but do you look at regulatory ratios in terms of staying above a certain level?

Speaker #6: Yes. I mean, that's the part of the building blocks. We would start with the regulatory definitions and then add a cushion to that, and then build upon that with what our stress testing is telling us that we would need to cover in an extreme event in the market.

Mark Kochvar: Yes. That's the part of the building blocks. We would start with the regulatory definitions and then add a cushion to that, and then build upon that with what our stress testing is telling us that we would need to cover an extreme event in the market. That becomes kind of the floor of the target range for us.

Speaker #6: And that becomes kind of the floor of the target range for us.

Speaker #10: Okay, got it. And then just one quick last question—kind of like a modeling question, but just on expenses. If I heard it correctly, I think you threw out the $58 million number in terms of the right way to think about the base going forward.

Justin Crowley: Okay. Got it. One just quick last one, kind of like a modeling question. Just on expenses, if I heard it correctly, I think you threw out the $58 million number in terms of the right way to think about the base going forward. Just curious what is going to drive that lower from where you were in Q2, just as we think about the next few periods modeling ahead.

Speaker #10: And so, just kind of curious, what is going to drive that lower from where you were in the second quarter?

Speaker #10: Just as we kind of think about the next few periods, modeling ahead.

Speaker #6: Yeah. I mean, quarter to quarter, there's always a little bit of lumpiness on the margin. So, this particular quarter, there were a couple of things that don't necessarily repeat that were slightly higher.

Mark Kochvar: Yeah. Quarter-to-quarter, there's always a little bit of lumpiness on the margin. This particular quarter, there were a couple things that don't necessarily repeat that were slightly higher. The main drivers of our expense, the amount of people that we have and how much we spend, we anticipate that to be fairly consistent. We think, just given the minor lumpiness of expenses just generally, that that $58 million level is something we should be able to manage to for at least the rest of this year.

Speaker #6: Our main drivers are expense. The amount of people that we have and how much we spend—that's been, and we anticipate that to be, fairly consistent.

Speaker #6: So we think, just given the kind of minor lumpiness of expenses generally, that that $58 million-ish level is something we should be able to manage to for at least the rest of this year.

Speaker #10: Okay, got it. Great. I will leave it there. Thank you guys so much.

Justin Crowley: Okay. Got it. Great. I will leave it there. Thank you guys so much.

Speaker #6: Thank you.

Mark Kochvar: Thank you.

Speaker #10: Thank you.

Speaker #1: There are no further questions at this time. I would now like to turn the call over to Chief Executive Officer, Chris McComish, for closing remarks.

Operator: There are no further questions at this time. I would now like to turn the call over to Chief Executive Officer, Chris McComish, for closing remarks.

Chris McComish: Well, listen, thanks everybody for being on the call. I know these are busy days for all of you with the number of earnings announcements, we certainly appreciate your engagement with our company and your very good questions. Have a great rest of the day, and we look forward to talking to you soon. Thanks.

Speaker #11: Well, thanks, everybody, for being on the call. I know these are busy days for all of you with the number of earnings announcements, but we certainly appreciate your engagement with our company and your very good questions.

Speaker #11: Have a great rest of the day, and we look forward to talking to you soon. Thanks.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 S&T Bancorp Inc Earnings Call

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