STBA Q3 Deep Dive: Deposit Mix, Margin Expansion, and Loan Growth Set the Stage

Regional banking company S&T Bancorp (NASDAQ:STBA) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 6.9% year on year to $103 million. Its non-GAAP profit of $0.91 per share was 6% above analysts’ consensus estimates.

Is now the time to buy STBA? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

S&T Bancorp’s third quarter results were well received by the market, as the company delivered consistent revenue growth and a notable non-GAAP earnings per share beat. Management attributed performance to strategic repositioning of the balance sheet, which reduced asset sensitivity and enabled stronger net interest income through interest rate cycles. CEO Christopher McComish emphasized the benefit of maintaining a stable deposit mix, with noninterest-bearing deposits comprising 28% of total deposits, supporting net interest margin expansion. He also noted that while nonperforming assets increased, they remained within manageable levels and did not raise concern over specific asset classes or regions. Expenses were tightly managed, contributing to improved operating efficiency.

Looking forward, S&T Bancorp’s guidance is shaped by expectations of mid-single-digit loan growth, ongoing investments in its deposit franchise, and careful navigation of the interest rate environment. Management highlighted that construction commitments are expected to support future commercial real estate lending, while staffing additions are planned to drive both deposit and loan growth. CFO Mark Kochvar indicated that the company’s neutral interest rate position and disciplined pricing should help mitigate margin pressure even as the Federal Reserve continues to cut rates. CEO McComish reiterated, “Building the growth of our deposit franchise is a key driver of our performance,” emphasizing a focus on balance sheet strength and measured expansion.

Key Insights from Management’s Remarks

Management pointed to the company’s deposit mix, margin improvement, and commercial real estate lending as the main drivers of the quarter, while also highlighting disciplined expense management and stable asset quality.

• Deposit franchise focus: S&T Bancorp’s investment in its deposit franchise resulted in a 28% share of noninterest-bearing deposits, which helped improve net interest margin and provided funding stability despite overall flat deposit balances.
• Commercial real estate momentum: Loan growth this quarter was largely driven by commercial real estate activity, as construction loans converted to permanent loans. Management noted strong growth in segments such as multifamily, mixed-use, manufacturing, and retail.
• Efficiency gains: Operating expenses declined versus the prior quarter, benefiting from reductions in salaries, benefits, and professional services. The efficiency ratio improved to 54.4%, reflecting effective cost control.
• Asset quality remains stable: While nonperforming assets increased slightly, management emphasized these were isolated to a few credits and that asset quality metrics remain within an acceptable range. There were no significant concerns in any particular asset class or geography.
• Capital flexibility for growth: Strong retained earnings and capital ratios position S&T Bancorp to pursue both organic and inorganic growth, with a $50 million share repurchase authorization providing additional flexibility.

Drivers of Future Performance

S&T Bancorp’s forward outlook is anchored by mid-single-digit loan growth, a stable deposit mix, and management’s expectation for manageable margin compression despite continued rate cuts.

• Loan growth drivers: Management expects continued growth in commercial real estate lending, with construction commitments and healthy pipelines in place. While consumer lending remains steady, commercial and industrial (C&I) growth is targeted through new banker recruitment and market expansion.
• Margin management amid rate cuts: The company’s neutral interest rate risk position and proactive deposit pricing are expected to help sustain net interest margin as the Federal Reserve makes additional cuts. However, management acknowledged some risk of margin compression if competitive pressures increase, especially in certificates of deposit (CDs) and interest-bearing accounts.
• Expense discipline and investment: S&T Bancorp is committed to maintaining tight expense controls even as it invests in talent and technology. Management expects future banker additions to be offset by productivity improvements, including process streamlining and selective use of artificial intelligence for operational efficiency.

Catalysts in Upcoming Quarters

The StockStory team will be watching (1) the pace and composition of loan growth, especially in commercial real estate and C&I segments; (2) S&T Bancorp’s ability to sustain deposit mix and net interest margin in a competitive, rate-cut environment; and (3) the effectiveness of new banker hires and technological investments in driving productivity gains. Progress on regulatory changes and M&A opportunities could also influence growth trajectories.

S&T Bancorp currently trades at $36.74, up from $35.64 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

Now Could Be The Perfect Time To Invest In These Stocks

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.