DA Davidson has maintained a Neutral rating on shares of S&T Bancorp Inc. (NASDAQ: STBA), with a steady price target of $41.00.
The firm's analysis highlighted a net interest margin (NIM) contraction of 6 basis points quarter-over-quarter to 3.82%, a slight decline in loans due to payoffs, and a loan loss provision (LLP) release that contributed to an earnings per share (EPS) beat.
Despite these factors, pre-provision net revenue (PPNR) did not meet expectations due to weaker net interest income (NII) and higher operating expenses, even though improved fee income provided some balance.
S&T Bancorp's core deposit growth has enabled the payoff of wholesale funding, and alongside a restructuring of securities, is projected to sustain an elevated NIM into 2025. However, near-term pressure is anticipated for this asset-sensitive financial institution. DA Davidson's expectations for 2025 remain unchanged, forecasting returns above peers with a PPNR return on assets (ROA) of 1.74%.
In other recent news, S&T Bancorp reported a slight decrease in its third-quarter net income, standing at $33 million. The bank's earnings were buoyed by growth in net interest income and customer deposits, despite facing challenges in loan balances and net interest margin. S&T Bancorp's outlook anticipates low-to-mid single-digit loan growth for Q4 2024 and 2025, and projects crossing the $10 billion asset threshold in 2025.
However, the bank's net interest margin decreased to 3.82%, and loan balances fell by nearly $25 million. Despite these challenges, customer deposits grew by over $100 million, indicating over 5% annualized growth. The company also reported an improved asset quality with a decline in allowance for credit losses.
With a focus on growth in southern Pennsylvania, Northeast and Central Ohio, parts of Maryland, and Northern Virginia, S&T Bancorp remains optimistic about future growth prospects.
InvestingPro Insights
S&T Bancorp Inc. (NASDAQ:STBA) presents a mixed financial picture that aligns with DA Davidson's Neutral rating. According to InvestingPro data, the company's P/E ratio stands at 11.7, suggesting a relatively low valuation compared to earnings. This could be seen as attractive, especially considering the bank's dividend history. InvestingPro Tips highlight that S&T Bancorp has maintained dividend payments for 36 consecutive years and has raised its dividend for 11 consecutive years, demonstrating a strong commitment to shareholder returns.
The company's current dividend yield of 3.19% and a dividend growth rate of 3.12% over the last twelve months further support the bank's appeal to income-focused investors. This consistent dividend performance aligns with the bank's stable financial position mentioned in the article.
However, investors should note that 3 analysts have revised their earnings downwards for the upcoming period, which could explain DA Davidson's cautious stance. The bank's revenue growth of just 0.19% over the last twelve months also suggests challenges in expanding its business, potentially impacting future earnings.
For readers interested in a more comprehensive analysis, InvestingPro offers 10 additional tips for S&T Bancorp, providing a deeper understanding of the company's financial health and market position.
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