KBRA Affirms Ratings for S&T Bancorp, Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Indiana, Pennsylvania-based S&T Bancorp, Inc. (NASDAQ: STBA) (“the company”). Additionally, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and the short-term deposit and debt ratings of K2 for its subsidiary, S&T Bank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by S&T Bancorp, Inc.’s core deposit franchise that represents a majority of its total funding (88% at 2Q25), respectable market share in its home state of PA, which spans generally less interest rate sensitive rural markets, and granular and favorable mix of NIB accounts (28% at 2Q25), which has resulted in lower than average funding costs (2.07% for 2Q25) and a deposit beta of 45%. The deposit base has supported its stable NIM throughout the Fed’s interest rate hiking/easing cycle. The deposit base is further balanced by ample access to secondary sources of liquidity (notably FHLB/FRB availability) accounting for 39% of total assets at 2Q25, matching uninsured deposits by over 2 times. STBA’s ratings are further strengthened by its strong earnings profile that has benefited from its asset sensitive balance sheet in the higher rate environment and “loaned up” balance sheet (LTD 100% at 2Q25), evidenced by an ROA that has been consistently above 1% (excluding 2020) and 20-50 bps above peer averages since 2022. Non-spread revenue also enhances the earnings profile with stable sources of noninterest income that are comprised of card and deposit fees and wealth management that have historically accounted for approximately 14% of operating revenue. The company's significantly improved credit profile has more recently supported low credit costs which have also supported the company’s earnings profile. The loan portfolio is well diversified with sufficient concentration limits established, relatively conservative LTVs, and is granular in nature, although it has experienced some inconsistent performance post COVID era, notably in 2023 and 2021. The more recent credit administration enhancements have supported improvement in asset quality as reflected by criticized and classified loans declining to 2.7% of total loans at 2Q25, down from 5.8% at 1Q23. KBRA expects the actions taken by the company to continue to generate more consistent credit performance going forward. STBA has managed its core capital ratios post-pandemic in a conservative manner with CET1 levels between 120 - 200 bps above KBRA rated peers, appropriate for the risk profile, in our view. Although KBRA expects the company to conservatively manage its capital levels going forward, we would note that the company may be opportunistic with an M&A transaction as the company approaches the $10 billion Durbin threshold.

Rating Sensitivities

A rating upgrade is not expected over the medium term. However, further geographic diversification along with increased, stable noninterest revenue, more consistent asset quality performance, and the maintenance of solid capital metrics, could lead to positive rating momentum over the longer term. A negative rating action is unlikely in the near term; though significant deterioration in asset quality performance weighing on earnings and materially lower core capital levels could pressure ratings.

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Methodologies