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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________
FORM 10-Q
______________________________________ 
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to                
Commission file number 0-12508
______________________________________ 
S&T BANCORP INC.
(Exact name of registrant as specified in its charter)
______________________________________ 
Pennsylvania
  25-1434426
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)
800 Philadelphia Street Indiana PA   15701
(Address of principal executive offices)   (zip code)
800-325-2265
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $2.50 par value STBA The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐ 
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Common Stock, $2.50 Par Value - 39,360,750 shares as of April 30, 2021


Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES



INDEX
S&T BANCORP, INC. AND SUBSIDIARIES
 
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S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)


March 31, 2021 December 31, 2020
( in thousands, except share and per share data) (Unaudited) (Audited)
ASSETS
Cash and due from banks, including interest-bearing deposits of $601,134 and $158,903 at March 31, 2021 and December 31, 2020
$ 671,429  $ 229,666 
Securities, at fair value 817,299  773,693 
Loans held for sale 12,794  18,528 
Portfolio loans, net of unearned income 7,183,168  7,225,860 
Allowance for credit losses on loans (115,101) (117,612)
Portfolio loans, net 7,068,067  7,108,248 
Bank owned life insurance 82,677  82,303 
Premises and equipment, net 54,720  55,614 
Federal Home Loan Bank and other restricted stock, at cost 12,199  13,030 
Goodwill 373,424  373,424 
Other intangible assets, net 8,211  8,675 
Other assets 228,159  304,716 
Total Assets $ 9,328,979  $ 8,967,897 
LIABILITIES
Deposits:
Noninterest-bearing demand $ 2,539,594  $ 2,261,994 
Interest-bearing demand 976,225  864,510 
Money market 2,002,857  1,937,063 
Savings 1,036,927  969,508 
Certificates of deposit 1,320,425  1,387,463 
Total Deposits 7,876,028  7,420,538 
Securities sold under repurchase agreements 67,417  65,163 
Short-term borrowings —  75,000 
Long-term borrowings 23,282  23,681 
Junior subordinated debt securities 64,097  64,083 
Other liabilities 129,877  164,721 
Total Liabilities 8,160,701  7,813,186 
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value)
Authorized—50,000,000 shares
Issued—41,449,444 shares at March 31, 2021 and December 31, 2020
Outstanding—39,268,359 shares at March 31, 2021 and 39,298,007 shares at December 31, 2020
103,623  103,623 
Additional paid-in capital 401,353  400,668 
Retained earnings 731,718  710,061 
Accumulated other comprehensive income 1,061  8,971 
Treasury stock — 2,181,085 shares at March 31, 2021 and 2,151,437 shares at December 31, 2020, at cost
(69,477) (68,612)
Total Shareholders’ Equity 1,168,278  1,154,711 
Total Liabilities and Shareholders’ Equity $ 9,328,979  $ 8,967,897 

See Notes to Consolidated Financial Statements
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S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
  Three months ended March 31,
(dollars in thousands, except per share data) 2021 2020
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 70,232  $ 82,051 
Investment Securities:
Taxable 3,563  4,215 
Tax-exempt 813  870 
Dividends 173  453 
Total Interest and Dividend Income 74,781  87,589 
INTEREST EXPENSE
Deposits 3,481  15,338 
Borrowings and junior subordinated debt securities 641  2,215 
Total Interest Expense 4,122  17,553 
NET INTEREST INCOME 70,659  70,036 
Provision for credit losses 3,137  20,050 
Net Interest Income After Provision for Credit Losses 67,522  49,986 
NONINTEREST INCOME
Net gain on sale of securities —  — 
Mortgage banking 4,310  1,236 
Debit and credit card 4,162  3,482 
Service charges on deposit accounts 3,474  4,008 
Wealth management 2,944  2,362 
Commercial loan swap income 95  2,484 
Other 2,252  (1,169)
Total Noninterest Income 17,236  12,403 
NONINTEREST EXPENSE
Salaries and employee benefits 23,327  21,335 
Data processing and information technology 4,225  3,868 
Occupancy 3,827  3,765 
Furniture, equipment and software 2,640  2,519 
Professional services and legal 1,531  1,048 
Other Taxes 1,436  1,600 
Marketing 1,322  1,111 
FDIC Insurance 1,046  770 
Merger related expenses —  2,342 
Other 6,226  8,033 
Total Noninterest Expense 45,580  46,391 
Income Before Taxes 39,178  15,998 
Income tax expense 7,276  2,767 
Net Income $ 31,902  $ 13,231 
Earnings per share—basic $ 0.81  $ 0.34 
Earnings per share—diluted $ 0.81  $ 0.34 
Dividends declared per share $ 0.28  $ 0.28 
Comprehensive Income $ 23,992  $ 30,573 
See Notes to Consolidated Financial Statements

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S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)


For the three months ended March 31, 2020
(dollars in thousands, except share and per share data) Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Accumulated
Other
Comprehensive (Loss) Income 		Treasury
Stock 		Total
Balance at January 1, 2020 $ 103,623  $ 399,944  $ 761,083  $ (11,670) $ (60,982) $ 1,191,998 
Net income for the three months ended March 31, 2020 —  —  13,231  —  —  13,231 
Other comprehensive income, net of tax —  —  —  17,342  —  17,342 
Adoption of accounting standard - credit losses —  —  (22,590) —  —  (22,590)
Cash dividends declared ($0.28 per share)
—  —  (11,051) —  —  (11,051)
Forfeitures of restricted stock, net of issuances (26,739 shares, net of issuance of 3,290 shares)
—  —  53  —  (616) (563)
Repurchase of common stock (411,430 shares)
—  —  —  —  (12,559) (12,559)
Recognition of restricted stock compensation expense —  443  —  —  —  443 
Balance at March 31, 2020 $ 103,623  $ 400,387  $ 740,726  $ 5,672  $ (74,157) $ 1,176,251 
See Notes to Consolidated Financial Statements
For the three months ended March 31, 2021
(dollars in thousands, except share and per share data) Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Accumulated
Other
Comprehensive Income 		Treasury
Stock 		Total
Balance at January 1, 2021 $ 103,623  $ 400,668  $ 710,061  $ 8,971  $ (68,612) $ 1,154,711 
Net income for the three months ended March 31, 2021 —  —  31,902  —  —  31,902 
Other comprehensive loss, net of tax —  —  —  (7,910) —  (7,910)
Cash dividends declared ($0.28 per share)
—  —  (10,975) —  —  (10,975)
Forfeitures of restricted stock, net of issuances (30,840 shares, net of issuance of 1,192 shares)
—  —  730  —  (865) (135)
Recognition of restricted stock compensation expense —  685  —  —  —  685 
Balance at March 31, 2021 $ 103,623  $ 401,353  $ 731,718  $ 1,061  $ (69,477) $ 1,168,278 
See Notes to Consolidated Financial Statements
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S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
(dollars in thousands) 2021 2020
Net Cash Provided by (Used in) Operating Activities $ 90,145  $ (59,961)
INVESTING ACTIVITIES
Purchases of securities (89,038) (30,292)
Proceeds from maturities, prepayments and calls of securities 34,715  33,869 
Net proceeds from sales (purchases of) of Federal Home Loan Bank stock 831  (5,277)
Net decrease (increase) in loans 33,937  (122,507)
Proceeds from sale of loans not originated for resale 640  — 
Purchases of premises and equipment (811) (1,429)
Proceeds from the sale of premises and equipment 74  — 
Net Cash Used in Investing Activities (19,652) (125,636)
FINANCING ACTIVITIES
Net increase in core deposits 522,528  28,684 
Net decrease in certificates of deposit (67,003) (7,042)
Net increase in securities sold under repurchase agreements 2,254  49,756 
Net decrease (increase) in short-term borrowings (75,000) 128,921 
Repayments on long-term borrowings (399) (688)
Treasury shares issued-net (135) (563)
Cash dividends paid to common shareholders (10,975) (11,051)
Repurchase of common stock —  (12,559)
Net Cash Provided by Financing Activities 371,270  175,458 
Net increase (decrease) in cash and cash equivalents 441,763  (10,139)
Cash and cash equivalents at beginning of period 229,666  197,823 
Cash and Cash Equivalents at End of Period $ 671,429  $ 187,684 
Supplemental Disclosures
Loans transferred to held for sale $ 2,798  $ — 
Leased right-of-use operating assets and lease liabilities $ —  $ 91 
Interest paid $ 5,368  $ 17,795 
Income taxes paid, net of refunds $ 197  $ 210 
Transfers of loans to other real estate owned $ 77  $ 110 
See Notes to Consolidated Financial Statements
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION
Principles of Consolidation
The interim Consolidated Financial Statements include the accounts of S&T Bancorp, Inc., or S&T, and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments of 20 percent to 50 percent of the outstanding common stock of investees are accounted for using the equity method of accounting.
Basis of Presentation
The accompanying unaudited interim Consolidated Financial Statements of S&T have been prepared in accordance with generally accepted accounting principles, or GAAP, in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission, or SEC, on March 1, 2021. In the opinion of management, the accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position and the results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period.
On June 5, 2019 we entered into an agreement to acquire DNB Financial Corporation, or DNB, and the transaction was completed on November 30, 2019. Refer to Note 2, Business Combinations in our Annual Report on Form 10-K for the year ended December 31, 2020 for further details on the merger.
Reclassification
Amounts in prior period financial statements and footnotes are reclassified whenever necessary to conform to the current period presentation. Reclassifications had no effect on our results of operations or financial condition.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Recently Adopted Accounting Standards Updates, or ASU or Update
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions and improve the consistent application of GAAP by clarifying and amending other existing guidance. We adopted this ASU on January 1, 2021. The amendments in this ASU did not impact our Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.







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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 1. BASIS OF PRESENTATION - continued



Accounting Standards Issued But Not Yet Adopted
Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. Modified contracts that meet certain scope guidance are eligible for relief from the modification accounting requirements in GAAP. The optional guidance generally allows for the modified contract to be accounted for as a continuation of the existing contract and does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. We are evaluating the impact of this ASU and we do not expect the amendments in this ASU to materially impact our Consolidated Balance Sheets or Consolidated Statements of Comprehensive Income.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 2. EARNINGS PER SHARE
Diluted earnings per share is calculated using both the two-class and the treasury stock methods with the more dilutive method used to determine diluted earnings per share. For the three months ended March 31, 2021 and 2020, diluted EPS was reported using the two-class method. The following table reconciles the numerators and denominators of basic and diluted earnings per share calculations for the periods presented.
Three months ended March 31,
(in thousands, except share and per share data) 2021 2020
Numerator for Earnings per Share—Basic:
Net income $ 31,902  $ 13,231 
Less: Income allocated to participating shares 141  29 
Net Income Allocated to Shareholders $ 31,761  $ 13,202 
Numerator for Earnings per Share—Diluted:
Net income $ 31,902  $ 13,231 
Net Income Available to Shareholders $ 31,902  $ 13,231 
Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic 39,021,208  39,271,540 
Add: Potentially dilutive shares 99,922  108,116 
Denominator for Treasury Stock Method—Diluted 39,121,130  39,379,656 
Weighted Average Shares Outstanding—Basic 39,021,208  39,271,540 
Add: Average participating shares outstanding —  54,398 
Denominator for Two-Class Method—Diluted 39,021,208  39,325,938 
Earnings per share—basic $ 0.81  $ 0.34 
Earnings per share—diluted $ 0.81  $ 0.34 
Restricted stock considered anti-dilutive excluded from potentially dilutive shares 165  41 
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued




NOTE 3. FAIR VALUE MEASUREMENTS
We use fair value measurements when recording and disclosing certain financial assets and liabilities. Debt securities, equity securities and derivative financial instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as loans held for sale, individually assessed loans, other real estate owned, or OREO, and other repossessed assets, mortgage servicing rights, or MSRs, and certain other assets.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. In determining fair value, we use various valuation approaches, including market, income and cost approaches. The fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data that we have obtained from independent sources. Unobservable inputs reflect our estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.
The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1: valuation is based upon unadjusted quoted market prices for identical instruments traded in active markets.
Level 2: valuation is based upon quoted market prices for similar instruments traded in active markets, quoted market prices for identical or similar instruments traded in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by market data.
Level 3: valuation is derived from other valuation methodologies, including discounted cash flow models and similar techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in determining fair value.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our policy is to recognize transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.
The following are descriptions of the valuation methodologies that we use for financial instruments recorded at fair value on either a recurring or nonrecurring basis.
Recurring Basis
Available-for-Sale Debt Securities
We obtain fair values for debt securities from a third-party pricing service which utilizes several sources for valuing fixed-income securities. We validate prices received from our pricing service through comparison to a secondary pricing service and broker quotes. We review the methodologies of the pricing services which provide us with a sufficient understanding of the valuation models, assumptions, inputs and pricing to reasonably measure the fair value of our debt securities. The market valuation sources for debt securities include observable inputs rather than significant unobservable inputs and are classified as Level 2. The service provider utilizes pricing models that vary by asset class and include available trade, bid and other market information. Generally, the methodologies include broker quotes, proprietary models, vast descriptive terms and conditions databases and extensive quality control programs.

Equity Securities
Marketable equity securities that have an active, quotable market are classified as Level 1. Marketable equity securities that are quotable, but are thinly traded or inactive, are classified as Level 2. Marketable equity securities that are not readily traded and do not have a quotable market are classified as Level 3.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued
Securities Held in a Deferred Compensation Plan
We use quoted market prices to determine the fair value of our equity security assets. These securities are reported at fair value with the gains and losses included in noninterest income in our Consolidated Statements of Comprehensive Income. These assets are held in a deferred compensation plan and are invested in readily quoted mutual funds. Accordingly, these assets are classified as Level 1. Deferred compensation plan assets are reported in other assets in the Consolidated Balance Sheets.
Derivative Financial Instruments
We use derivative instruments, including interest rate swaps for commercial loans with our customers, interest rate lock commitments and the sale of mortgage loans in the secondary market. We calculate the fair value for derivatives using accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Each valuation considers the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and implied volatilities. Accordingly, derivatives are classified as Level 2. We incorporate credit valuation adjustments into the valuation models to appropriately reflect both our own nonperformance risk and the respective counterparties’ nonperformance risk in calculating fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements and collateral postings.
Nonrecurring Basis
Loans Held for Sale
Loans held for sale consist of 1-4 family residential loans originated for sale in the secondary market and, from time to time, certain loans are transferred from the loan portfolio to loans held for sale, all of which are carried at the lower of cost or fair value. The fair value of 1-4 family residential loans is based on the principal or most advantageous market currently offered for similar loans using observable market data. The fair value of the loans transferred from the loan portfolio is based on the amounts offered for these loans in currently pending sales transactions. Loans held for sale carried at fair value are classified as Level 3.
Loans Individually Evaluated
Loans that are individually evaluated to determine whether a specific allocation of ACL is needed are reported at fair value. Fair value is determined using the following methods: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral less estimated selling costs when the loan is collateral dependent and we expect to liquidate the collateral. However, if repayment is expected to come from the operation of the collateral, rather than liquidation, then we do not consider estimated selling costs in determining the fair value of the collateral. Collateral values are generally based upon appraisals by approved, independent state certified appraisers. Appraisals may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or our knowledge of the borrower and the borrower’s business. Loans carried at fair value are classified as Level 3.
OREO and Other Repossessed Assets
OREO and other repossessed assets obtained in partial or total satisfaction of a loan are recorded at the lower of recorded investment in the loan or fair value less cost to sell. Subsequent to foreclosure, these assets are carried at the lower of the amount recorded at acquisition date or fair value less cost to sell. Accordingly, it may be necessary to record nonrecurring fair value adjustments. Fair value, when recorded, is generally based upon appraisals by approved, independent state certified appraisers. Appraisals on OREO may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or other information available to us. OREO and other repossessed assets carried at fair value are classified as Level 3. OREO and other repossessed assets are reported in other assets in the Consolidated Balance Sheets.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued
Mortgage Servicing Rights
MSRs are reported pursuant to the amortization method and evaluated for impairment quarterly by comparing the carrying to the fair value of the MSRs. Fair value of MSRs is determined by calculating the present value of estimated future net servicing cash flows, considering expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. The expected rate of mortgage loan prepayments is the most significant factor driving the value of MSRs. MSRs are considered impaired if the carrying value exceeds fair value. Since the valuation model includes significant unobservable inputs as listed above, MSRs are classified as Level 3. MSRs are reported in other assets in the Consolidated Balance Sheets and are amortized into mortgage banking income in the Consolidated Statements of Comprehensive Income.
Financial Instruments
In addition to financial instruments recorded at fair value in our financial statements, fair value accounting guidance requires disclosure of the fair value of all of an entity’s assets and liabilities that are considered financial instruments. The majority of our assets and liabilities are considered financial instruments. Many of these instruments lack an available trading market as characterized by a willing buyer and a willing seller engaged in an exchange transaction. Also, it is our general practice and intent to hold our financial instruments to maturity and to not engage in trading or sales activities with respect to such financial instruments. For fair value disclosure purposes, we substantially utilize the fair value measurement criteria as required and explained above. In cases where quoted fair values are not available, we use present value methods to determine the fair value of our financial instruments.
Cash and Cash Equivalents
The carrying amounts reported in the Consolidated Balance Sheets for cash and due from banks, including interest-bearing deposits, approximate fair value.
Loans
Our methodology to fair value loans includes an exit price notion. The fair value of variable rate loans that may reprice frequently at short-term market rates is based on carrying values adjusted for liquidity and credit risk. The fair value of variable rate loans that reprice at intervals of one year or longer, such as adjustable rate mortgage products, is estimated using discounted cash flow analyses that utilize interest rates currently being offered for similar loans and adjusted for liquidity and credit risk. The fair value of fixed rate loans is estimated using a discounted cash flow analysis that utilizes interest rates currently being offered for similar loans adjusted for liquidity and credit risk.
Bank Owned Life Insurance
Fair value approximates net cash surrender value of bank owned life insurance, or BOLI.
Federal Home Loan Bank, or FHLB, and Other Restricted Stock
It is not practical to determine the fair value of our FHLB and other restricted stock due to the restrictions placed on the transferability of these stocks; it is presented at carrying value.
Collateral Receivable
The carrying amount included in other assets on our Consolidated Balance Sheets approximates fair value.
Deposits
The fair values disclosed for deposits without defined maturities (e.g., noninterest and interest-bearing demand, money market and savings accounts) are by definition equal to the amounts payable on demand. The carrying amounts for variable rate, fixed-term time deposits approximate their fair values. Estimated fair values for fixed rate and other time deposits are based on discounted cash flow analysis using interest rates currently offered for time deposits with similar terms. The carrying amount of accrued interest approximates fair value.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued
Short-Term Borrowings
The carrying amounts of securities sold under repurchase agreements, or REPOs, and other short-term borrowings approximate their fair values.
Long-Term Borrowings
The fair values disclosed for fixed rate long-term borrowings are determined by discounting their contractual cash flows using current interest rates for long-term borrowings of similar remaining maturities. The carrying amounts of variable rate long-term borrowings approximate their fair values.
Junior Subordinated Debt Securities
The interest rate on the variable rate junior subordinated debt securities is reset quarterly; therefore, the carrying values approximate their fair values.
Loan Commitments and Standby Letters of Credit
Off-balance sheet financial instruments consist of commitments to extend credit and letters of credit. Except for interest rate lock commitments, estimates of the fair value of these off-balance sheet items are not made because of the short-term nature of these arrangements and the credit standing of the counterparties.
Other
Estimates of fair value are not made for items that are not defined as financial instruments, including such items as our core deposit intangibles and the value of our trust operations.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables present our assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at March 31, 2021 and December 31, 2020.
March 31, 2021
(dollars in thousands) Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities $ —  $ 63,268  $ —  $ 63,268 
Obligations of U.S. government corporations and agencies —  82,028  —  82,028 
Collateralized mortgage obligations of U.S. government corporations and agencies —  217,916  —  217,916 
Residential mortgage-backed securities of U.S. government corporations and agencies —  63,911  —  63,911 
Commercial mortgage-backed securities of U.S. government corporations and agencies —  277,253  —  277,253 
Corporate obligations —  2,002  —  2,002 
Obligations of states and political subdivisions —  107,505  —  107,505 
Total Available-for-sale Debt Securities —  813,883  —  813,883 
Marketable equity securities 3,328  88  —  3,416 
Total Securities 3,328  813,971  —  817,299 
Securities held in a deferred compensation plan 7,178  —  —  7,178 
Derivative financial assets:
Interest rate swaps —  40,415  —  40,415 
Interest rate lock commitments —  —  1,509  1,509 
Forward sale contracts —  —  226  226 
Total Assets $ 10,506  $ 854,386  $ 1,735  $ 866,627 
LIABILITIES
Derivative financial liabilities:
Interest rate swaps $ —  $ 40,818  $ —  $ 40,818 
Total Liabilities $ —  $ 40,818  $ —  $ 40,818 
December 31, 2020
(dollars in thousands) Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities $ —  $ 10,282  $ —  $ 10,282 
Obligations of U.S. government corporations and agencies —  82,904  —  82,904 
Collateralized mortgage obligations of U.S. government corporations and agencies —  209,296  —  209,296 
Residential mortgage-backed securities of U.S. government corporations and agencies —  67,778  —  67,778 
Commercial mortgage-backed securities of U.S. government corporations and agencies —  273,681  —  273,681 
Corporate obligations —  2,025  —  2,025 
Obligations of states and political subdivisions —  124,427  —  124,427 
Total Available-for-sale Debt Securities —  770,393  —  770,393 
Marketable equity securities 3,228  72  —  3,300 
Total Securities 3,228  770,465  —  773,693 
Securities held in a deferred compensation plan 6,794  —  —  6,794 
Derivative financial assets:
Interest rate swaps —  78,319  —  78,319 
Interest rate lock commitments —  —  2,900  2,900 
Total Assets $ 10,022  $ 848,784  $ 2,900  $ 861,706 
LIABILITIES
Derivative financial liabilities:
Interest rate swaps $ —  $ 79,033  $ —  $ 79,033 
Forward sale contracts —  385  —  385 
Total Liabilities $ —  $ 79,418  $ —  $ 79,418 
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 3. FAIR VALUE MEASUREMENTS - continued
There were no transfers between Level 1, Level 2 and Level 3 for the three months ended March 31, 2021. Interest rate lock commitments to borrowers were transferred from Level 2 to Level 3 during the year ended December 31, 2020 due to pull-through factors being a significant unobservable input.
Assets Recorded at Fair Value on a Nonrecurring Basis
We may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. Nonrecurring assets are recorded at the lower of cost or fair value in our financial statements. There were no liabilities measured at fair value on a nonrecurring basis at either March 31, 2021 or December 31, 2020.
For Level 3 assets measured at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:
March 31, 2021 Valuation Technique Significant Unobservable Inputs Range
Weighted Average
(1) (2) (3)
(dollars in thousands)
Loans individually evaluated $ 78,186  Collateral method Appraisal adjustment 0% - 47% 16.91%
Other real estate owned 1,563  Collateral method Costs to sell 4% - 7.00% 5.06%
Mortgage servicing rights 6,590  Discounted cash flow method Discount rate 9.02% - 13.77% 9.40%
Constant prepayment rates 9.24% - 12.54% 11.08%
Loans held for sale 2,798  Contractual agreement None NA NA
Total Assets $ 89,137 
December 31, 2020 Valuation Technique Significant Unobservable Inputs Range
Weighted Average
(1) (2) (3)
(dollars in thousands)
Loans individually evaluated $ 67,402  Collateral method Appraisal adjustment 0% - 47% 16.90%
Other real estate owned 1,953  Collateral method Costs to sell 4% - 7.00% 4.92%
Mortgage servicing rights 4,976  Discounted cash flow method Discount rate 9.24% - 12.55% 9.42%
Constant prepayment rates 8.82% - 14.58% 13.37%
Loans held for sale 586  Contractual agreement None NA NA
Total Assets $ 74,917 
NA - not applicable
(1) Weighted averages for loans held for investment were weighted by loan amounts.
(2) Weighted averages for other real estate owned were weighted by OREO balances.
(3) Weighted averages for mortgage services rights discount rate and prepayment rates are based on note rate tranches and voluntary constant prepayment rates.









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NOTE 3. FAIR VALUE MEASUREMENTS - continued
The carrying values and fair values of our financial instruments at March 31, 2021 and December 31, 2020 are presented in the following tables:
Carrying
Value(1)
Fair Value Measurements at March 31, 2021
(dollars in thousands) Total Level 1 Level 2 Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits $ 671,429  $ 671,429  $ 671,429  $ —  $ — 
Securities 817,299  817,299  —  817,299  — 
Loans held for sale 12,794  12,794  —  —  12,794 
Portfolio loans, net 7,068,067  6,976,120  —  —  6,976,120 
Bank owned life insurance 82,677  82,677  —  82,677  — 
FHLB and other restricted stock 12,199  12,199  —  —  12,199 
Collateral receivable 43,343  43,343  43,343  —  — 
Securities held in a deferred compensation plan 7,178  7,178  7,178  —  — 
Mortgage servicing rights 6,590  6,590  —  —  6,590 
Interest rate swaps 40,415  40,415  —  40,415  — 
Interest rate lock commitments 1,509  1,509  —  —  1,509 
Forward sale contracts 226  226  —  —  226 
LIABILITIES
Deposits $ 7,876,028  $ 7,876,232  $ 6,555,603  $ 1,320,629  $ — 
Securities sold under repurchase agreements 67,417  67,417  67,417  —  — 
Short-term borrowings —  —  —  —  — 
Long-term borrowings 23,282  23,903  4,447  19,456  — 
Junior subordinated debt securities 64,097  64,097  64,097  —  — 
Interest rate swaps 40,818  40,818  —  40,818  — 
(1) As reported in the Consolidated Balance Sheets
Carrying
Value(1)
Fair Value Measurements at December 31, 2020
(dollars in thousands) Total Level 1 Level 2 Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits $ 229,666  $ 229,666  $ 229,666  $ —  $ — 
Securities 773,693  773,693  3,228  770,465  — 
Loans held for sale 18,528  18,528  —  —  18,528 
Portfolio loans, net 7,108,248  7,028,446  —  —  7,028,446 
Bank owned life insurance 82,303  82,303  —  82,303  — 
FHLB and other restricted stock 13,030  13,030  —  —  13,030 
Collateral receivable 77,936  77,936  77,936  —  — 
Securities held in a deferred compensation plan 6,794  6,794  6,794  —  — 
Mortgage servicing rights 4,976  4,976  —  —  4,976 
Interest rate swaps 78,319  78,319  —  78,319  — 
Interest rate lock commitments 2,900  2,900  —  —  2,900 
LIABILITIES
Deposits $ 7,420,538  $ 7,422,894  $ 6,033,075  $ 1,389,819  $ — 
Securities sold under repurchase agreements 65,163  65,163  65,163  —  — 
Short-term borrowings 75,000  75,000  75,000  —  — 
Long-term borrowings 23,681  24,545  4,494  20,051  — 
Junior subordinated debt securities 64,083  64,083  64,083  —  — 
Interest rate swaps 79,033  79,033  —  79,033  — 
Forward sale contracts 385  385  —  385  — 
(1) As reported in the Consolidated Balance Sheets
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NOTE 4. SECURITIES

The following table presents the fair values of our securities portfolio at the dates presented:
(dollars in thousands) March 31, 2021 December 31, 2020
Available-for-sale debt securities $ 813,883  $ 770,393 
Marketable equity securities 3,416  3,300 
Total Securities $ 817,299  $ 773,693 
Available-for-Sale Debt Securities
The following tables present the amortized cost and fair value of available-for-sale debt securities as of the dates presented:
  March 31, 2021 December 31, 2020
(dollars in thousands) Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value 		Amortized
Cost 		Gross Unrealized Gains Gross
Unrealized
Losses 		Fair
Value
U.S. Treasury securities $ 63,361  $ 259  $ (352) $ 63,268  $ 9,980  $ 302  $ —  $ 10,282 
Obligations of U.S. government corporations and agencies 78,715  3,313  —  82,028  78,755  4,149  —  82,904 
Collateralized mortgage obligations of U.S. government corporations and agencies 213,394  5,716  (1,194) 217,916  202,975  6,410  (89) 209,296 
Residential mortgage-backed securities of U.S. government corporations and agencies 64,496  632  (1,217) 63,911  66,960  818  —  67,778 
Commercial mortgage-backed securities of U.S. government corporations and agencies 266,292  11,085  (124) 277,253  258,875  14,806  —  273,681 
Corporate obligations 2,001  2  (1) 2,002  2,021  5  (1) 2,025 
Obligations of states and political subdivisions 101,949  5,556  —  107,505  117,439  6,988  —  124,427 
Total Available-for-Sale Debt Securities (1)
$ 790,208  $ 26,563  $ (2,888) $ 813,883  $ 737,005  $ 33,478  $ (90) $ 770,393 
(1) Excludes interest receivable of $3.2 million at March 31, 2021and $3.4 million at December 31, 2020. Interest receivable is included in other assets in the consolidated balance sheets.

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NOTE 4. SECURITIES – continued
The following tables present the fair value and the age of gross unrealized losses on available-for-sale debt securities by investment category as of the dates presented:
March 31, 2021
Less Than 12 Months 12 Months or More Total
(dollars in thousands) Number of Securities Fair Value Unrealized
Losses 		Number of Securities Fair Value Unrealized
Losses 		Number of Securities Fair Value Unrealized
Losses
U.S. Treasury securities 5 $ 53,026  $ (352) — $ —  $ —  5 $ 53,026  $ (352)
Obligations of U.S. government corporations and agencies — —  —  — —  —  — —  — 
Collateralized mortgage obligations of U.S. government corporations and agencies 1 10,785  (124) — —  —  1 10,785  (124)
Residential mortgage-backed securities of U.S. government corporations and agencies 2 49,860  (1,217) — —  —  2 49,860  (1,217)
Commercial mortgage-backed securities of U.S. government corporations and agencies 5 68,629  (1,194) — —  —  5 68,629  (1,194)
Corporate bonds 1 499  (1) — —  —  1 499  (1)
Obligations of states and political subdivisions — —  —  — —  —  — —  — 
Total 14 $ 182,799  $ (2,888) — $ —  $ —  14 $ 182,799  $ (2,888)
December 31, 2020
Less Than 12 Months 12 Months or More Total
(dollars in thousands) Number of Securities Fair Value Unrealized
Losses 		Number of Securities Fair Value Unrealized
Losses 		Number of Securities Fair Value Unrealized
Losses
U.S. Treasury securities — $ —  $ —  — $ —  $ —  — $ —  $ — 
Obligations of U.S. government corporations and agencies — —  —  — —  —  — —  — 
Collateralized mortgage obligations of U.S. government corporations and agencies 2 35,697  (89) — —  —  2 35,697  (89)
Residential mortgage-backed securities of U.S. government corporations and agencies — —  —  — —  —  — —  — 
Commercial mortgage-backed securities of U.S. government corporations and agencies — —  —  — —  —  — —  — 
Corporate bonds 1 499  (1) — —  —  1 499  (1)
Obligations of states and political subdivisions — —  —  — —  —  — —  — 
Total 3 $ 36,196  $ (90) — $ —  $ —  3 $ 36,196  $ (90)
We evaluate securities with unrealized losses quarterly to determine if the decline in fair value has resulted from credit losses or other factors. There was 14 debt securities in an unrealized loss position at March 31, 2021 and 3 debt securities in an unrealized loss position at December 31, 2020. We do not intend to sell and it is more likely than not that we will not be required to sell the securities in an unrealized loss position before recovery of their amortized cost. The unrealized losses on the debt securities were attributable to changes in interest rates and not related to the credit quality of the issuers. All debt securities were determined to be investment grade and paying principal and interest according to the contractual terms of the security. We did not record an ACL related to the securities portfolio at March 31, 2021 and December 31, 2020.


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NOTE 4. SECURITIES – continued
The following table presents net unrealized gains and losses, net of tax, on available-for-sale debt securities included in accumulated other comprehensive income/(loss), for the periods presented:
March 31, 2021 December 31, 2020
(dollars in thousands) Gross Unrealized Gains Gross Unrealized Losses Net Unrealized Gains/(Losses) Gross Unrealized Gains Gross Unrealized Losses Net Unrealized Gains/(Losses)
Total unrealized gains/(losses) on available-for-sale debt securities $ 26,563  $ (2,888) $ 23,675  $ 33,478  $ (90) $ 33,388 
Income tax (expense) benefit (5,668) 615  (5,053) (7,128) 19  (7,109)
Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss) $ 20,895  $ (2,273) $ 18,622  $ 26,350  $ (71) $ 26,279 
The amortized cost and fair value of available-for-sale debt securities at March 31, 2021 by contractual maturity are included in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
March 31, 2021
(dollars in thousands) Amortized
Cost 		Fair Value
Obligations of the U.S. Treasury, U.S. government corporations and agencies, and obligations of states and political subdivisions
Due in one year or less $ 40,399  $ 40,813 
Due after one year through five years 92,940  97,643 
Due after five years through ten years 89,580  91,236 
Due after ten years 21,106  23,109 
Available-for-Sale Debt Securities With Maturities 244,025  252,801 
Collateralized mortgage obligations of U.S. government corporations and agencies 213,394  217,916 
Residential mortgage-backed securities of U.S. government corporations and agencies 64,496  63,911 
Commercial mortgage-backed securities of U.S. government corporations and agencies 266,292  277,253 
Corporate Securities 2,001  2,002 
Total Available-for-Sale Debt Securities $ 790,208  $ 813,883 
Debt securities with carrying values of $320 million at March 31, 2021 and $308 million at December 31, 2020 were pledged for various regulatory and legal requirements.
Marketable Equity Securities
The following table presents realized and unrealized net gains and losses for our marketable equity securities for the periods presented:
Three Months Ended March 31,
(dollars in thousands) 2021 2020
Marketable Equity Securities
Net market gains/(losses) recognized $ 116  $ (1,585)
Less: Net gains recognized for equity securities sold —  — 
Unrealized (Losses)/Gains on Equity Securities Still Held $ 116  $ (1,585)
Total unrealized gains and losses on marketable equity securities recognized during the current period are included in other noninterest income on the Consolidated Statements of Comprehensive Income.
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NOTE 5. LOANS AND LOANS HELD FOR SALE

Loans are presented net of unearned income of $14.0 million at March 31, 2021 and $16.0 million at December 31, 2020 and net of a discount related to purchase accounting fair value adjustments of $7.5 million at March 31, 2021 and $8.6 million at December 31, 2020. The following table presents loans as of the dates presented:
(dollars in thousands) March 31, 2021 December 31, 2020
Commercial
Commercial real estate $ 3,284,555  $ 3,244,974 
Commercial and industrial 1,931,711  1,954,453 
Commercial construction 460,417  474,280 
Total Commercial Loans 5,676,683  5,673,707 
Consumer
Consumer real estate 1,425,839  1,471,238 
Other consumer 80,646  80,915 
Total Consumer Loans 1,506,485  1,552,153 
Total Portfolio Loans 7,183,168  7,225,860 
Loans held for sale 12,794  18,528 
Total Loans (1)
$ 7,195,962  $ 7,244,388 
(1) Excludes interest receivable of $23.4 million at March 31, 2021 and $24.7 million at December 31, 2020. Interest receivable is included in other assets in the consolidated balance sheets.

Commercial and industrial loans, or C&I, included $499.1 million of loans originated under the Paycheck Protection Program, or PPP, at March 31, 2021. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security, or CARES Act was signed into law. The CARES Act included the PPP, a program designed to aid small and medium sized businesses through federally guaranteed loans distributed through banks. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. The loans are 100 percent guaranteed by the Small Business Administration, or SBA. These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA, on or after June 5, 2020. Payments are deferred for at least six months of the loan. The SBA pays us a processing fee ranging from 1 percent to 5 percent based on the size of the loan. Interest is accrued as earned and loan origination fees and direct costs are deferred and accreted or amortized into interest income over the life of the loan using the level yield method. When a PPP loan is paid off or forgiven by the SBA, the remaining unaccreted or unamortized net origination fees or costs will be immediately recognized into income.
At March 31, 2021, our business banking segment was $1.1 billion compared to $1.2 billion at December 31, 2020. Business banking consists of commercial loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. Business banking consisted of $504.2 million of commercial real estate loans, $232.1 million of C&I loans, $11.0 million of commercial construction loans, $321.8 million of consumer real estate loans that have a commercial purpose at March 31, 2021. At December 31, 2020 business banking consisted of $453.0 million of commercial real estate loans, $394.9 million of C&I loans, $8.2 million of commercial construction loans and $303.9 million of consumer real estate loans that have a commercial purpose. During the first quarter of 2021, $90.2 million of commercial loans and $23.2 million of consumer loans were reclassified into the business banking segment.
We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry and actively managing concentrations. When concentrations exist in certain segments, we mitigate this risk by reviewing the relevant economic indicators and internal risk rating trends and through stress testing of the loans in these segments. Total commercial loans represented 79.0 percent of total portfolio loans at March 31, 2021 and 78.5 percent at December 31, 2020. Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 66.0 percent, of total commercial loans at March 31, 2021 and $3.7 billion, or 65.6 percent, of total commercial loans at December 31, 2020 and 52.1 percent of total portfolio loans at March 31, 2021 and 51.5 percent at December 31, 2020.
We lend primarily in Pennsylvania and the contiguous states of Ohio, New York, West Virginia and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in this geography, resulting in a concentration. We believe our knowledge and familiarity with customers and conditions locally outweighs this geographic
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NOTE 5. LOANS AND LOANS HELD FOR SALE - continued
concentration risk. The conditions of the local and regional economies are monitored closely through publicly available data and information supplied by our customers. We also use subscription services for additional geographic and industry specific information. Our CRE and commercial construction portfolios have exposure outside of this geography of 5.7 percent of the combined portfolios and 3.0 percent of total portfolio loans at March 31, 2021. This compares to 5.9 percent of the combined portfolios and 3.0 percent of total portfolio loans at December 31, 2020.
We individually evaluate all substandard and nonaccrual commercial loans that have experienced a forbearance or change in terms agreement, and all substandard consumer and residential mortgage loans that entered into an agreement to modify their existing loan, to determine if they should be designated as troubled debt restructurings, or TDRs.
All TDRs will be reported as such for the remaining life of the loan, unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is fully expected that the remaining principal and interest will be collected according to the restructured agreement. TDRs can be returned to accruing status if the ultimate collectability of all contractual amounts due, according to the restructured agreement, is not in doubt and there is a period of a minimum of six months of satisfactory payment performance by the borrower either immediately before or after the restructuring.
The following tables summarize restructured loans as of the dates presented:
March 31, 2021
(dollars in thousands) Performing
TDRs 		Nonperforming
TDRs 		Total
TDRs
Commercial real estate $ 9  $ 15,754  $ 15,762 
Commercial and industrial 7,576  11,425  19,001 
Commercial construction 3,245  —  3,245 
Business banking 1,471  397  1,868 
Consumer real estate 5,611  2,407  8,018 
Other consumer 5  —  5 
Total $ 17,916  $ 29,983  $ 47,899 
December 31, 2020
(dollars in thousands) Performing
TDRs 		Nonperforming
TDRs 		Total
TDRs
Commercial real estate $ 14  $ 16,654  $ 16,668 
Commercial and industrial 7,090  9,885  16,975 
Commercial construction 3,267  —  3,267 
Business banking 1,503  430  1,933 
Consumer real estate 5,581  2,319  7,900 
Other consumer 5  —  5 
Total $ 17,460  $ 29,288  $ 46,748 

There were no TDR's that returned to accruing status during the three months ended March 31, 2021 and March 31, 2020.
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NOTE 5. LOANS AND LOANS HELD FOR SALE - continued

The following tables present the restructured loans by portfolio segment and by type of concession for the periods presented:
Three Months Ended March 31, 2021
Number
of
Contracts 		Type of Modification
Total
Pre-Modification Outstanding Recorded Investment(2)
Total
Post-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity 		Modify
Rate 		Modify
Payments
Commercial real estate —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Commercial industrial 2  —  —  821  —  5,475  6,304  6,296 
Commercial construction —  —  —  —  —  —  —  — 
Business banking —  —  —  —  —  —  —  — 
Consumer real estate 11  340  80  —  —  148  609  568 
Other consumer 1  1  —  —  —  —  1  1 
Total(2)
14  $ 341  $ 80  $ 821  $ —  $ 5,623  $ 6,914  $ 6,865 
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.
(2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.

Three Months Ended March 31, 2020
Number
of
Contracts 		Type of Modification
Total
Pre-Modification Outstanding Recorded Investment(2)
Total
Post-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity 		Modify
Rate 		Modify
Payments
Commercial real estate —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Commercial industrial —  —  —  —  —  —  —  — 
Commercial construction 1  —  —  1,891  —  —  1,891  1,806 
Business banking —  —  —  —  —  —  —  — 
Consumer real estate 5  78  —  —  —  27  105  91 
Other consumer —  —  —  —  —  —  —  — 
Total(2)
6  $ 78  $ —  $ 1,891  $ —  $ 27  $ 1,996  $ 1,897 
(1) Bankruptcy is consumer bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.
(2) Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.
In response to the coronavirus, or COVID-19, pandemic and its economic impact on our customers, we implemented a short-term modification program that complies with the CARES Act to provide temporary payment relief to those borrowers directly impacted by the pandemic who were not more than 30 days past due as of December 31, 2019. This program allows for a deferral of payments for 90 days and up to a maximum of 180 days for our commercial customers. The customer remains responsible for deferred payments along with any additional interest accrued during the deferral period. Under the applicable guidance, none of these loans were considered restructured as of March 31, 2021. We had 40 commercial loans that were modified totaling $61.8 million at March 31, 2021 compared to 52 commercial loans that were modified totaling $195.6 million at December 31, 2020.
As of March 31, 2021, we had 20 commitments to lend an additional $0.8 million on TDRs. Defaulted TDRs are defined as loans having a payment default of 90 days or more after the restructuring takes place. There were no TDRs that defaulted during the three months ended March 31, 2021. There were 11 TDRs that defaulted during the three months ended March 31, 2020 totaling $21.1 million that were restructured within the last 12 months prior to defaulting.

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NOTE 5. LOANS AND LOANS HELD FOR SALE - continued
The following table is a summary of nonperforming assets as of the dates presented:
Nonperforming Assets
(dollars in thousands) March 31, 2021 December 31, 2020
Nonperforming Assets
Nonaccrual loans $ 102,430  $ 117,485 
Nonaccrual TDRs 29,983  29,289 
Total Nonaccrual Loans(1)
132,413  146,774 
OREO 1,620  2,155 
Total Nonperforming Assets $ 134,033  $ 148,929 
(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

The decrease in nonperforming loans of $11.6 million at March 31, 2021 compared to December 31, 2020 was primarily related to the payoff of a $4.6 million commercial real estate relationship and a $3.9 million charge off of an $11.1 million C&I relationship that was previously held in specific reserve.


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NOTE 6. ALLOWANCE FOR CREDIT LOSSES
We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) Commercial Real Estate, or CRE, 2) Commercial and Industrial, or C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.
The following are key risks within each portfolio segment:
CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.
C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.
Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction/development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.
Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and business.
Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.
Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.
Management monitors various credit quality indicators for the commercial, business banking and consumer loan portfolios, including changes in risk ratings, nonperforming status and delinquency on a monthly basis.
We monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.
Our risk ratings are consistent with regulatory guidance and are as follows:
Pass—The loan is currently performing and is of high quality.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date.
Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.
Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
The following tables presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of the dates presented:
March 31, 2021
Risk Rating
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Pass $ 96,988  $ 319,206  $ 444,668  $ 376,347  $ 258,362  $ 850,342  $ 44,872  —  $ 2,390,785 
Special mention —  450  35,420  8,342  22,541  113,614  —  —  180,367 
Substandard —  —  17,259  15,772  19,894  146,624  1,482  —  201,030 
Doubtful —  —  645  —  —  7,499  —  —  8,144 
Total commercial real estate 96,988  319,656  497,992  400,461  300,796  1,118,080  46,354  —  2,780,327 
Commercial and industrial
Pass 252,427  478,363  168,546  110,278  55,096  179,887  361,828  —  1,606,425 
Special mention —  3,090  28,623  3,562  180  1,289  17,718  —  54,461 
Substandard 5,476  —  6,165  4,415  5,778  12,715  4,153  —  38,701 
Doubtful —  —  —  —  —  —  —  —  — 
Total commercial and industrial 257,902  481,453  203,334  118,255  61,054  193,891  383,699  —  1,699,588 
Commercial construction
Pass 24,730  127,643  195,245  53,248  2,059  10,856  13,232  —  427,012 
Special mention —  3,490  2,862  —  —  8,478  —  —  14,830 
Substandard —  —  4,148  —  501  2,967  —  —  7,616 
Doubtful —  —  —  —  —  —  —  —  — 
Total commercial construction 24,730  131,133  202,255  53,248  2,560  22,301  13,232  —  449,459 
Business banking
Pass 34,568  121,017  167,764  134,358  89,027  362,534  110,572  265  1,020,105 
Special mention —  502  1,972  1,379  1,621  7,759  287  122  13,642 
Substandard —  72  1,267  3,777  2,990  25,409  1,141  674  35,330 
Doubtful —  —  —  —  —  —  —  —  — 
Total business banking 34,568  121,591  171,003  139,513  93,638  395,703  112,001  1,061  1,069,078 
Consumer real estate
Pass 20,000  116,640  110,942  58,166  55,435  267,411  436,449  23,550  1,088,594 
Special mention —  —  —  —  —  2,246  —  —  2,246 
Substandard —  —  186  2,089  1,506  7,896  503  1,080  13,260 
Doubtful —  —  —  —  —  —  —  —  — 
Total consumer real estate 20,000  116,640  111,128  60,255  56,942  277,553  436,952  24,630  1,104,099 
Other consumer
Pass 872  14,119  11,576  5,723  2,673  2,283  35,151  955  73,354 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  —  109  125  104  4,968  374  1,579  7,260 
Doubtful —  —  —  —  —  4  —  —  4 
Total other consumer 872  14,119  11,686  5,848  2,778  7,255  35,525  2,534  80,618 
Pass 429,585  1,176,989  1,098,741  738,120  462,653  1,673,313  1,002,104  24,770  6,606,275 
Special mention —  7,532  68,876  13,283  24,342  133,387  18,005  122  265,547 
Substandard 5,476  72  29,134  26,177  30,773  200,579  7,653  3,332  303,198 
Doubtful —  —  645  —  —  7,503  —  —  8,148 
Total $ 435,060  $ 1,184,593  $ 1,197,397  $ 777,580  $ 517,769  $ 2,014,783  $ 1,027,762  $ 28,225  $ 7,183,168 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
December 31, 2020
Risk Rating
(dollars in thousands) 2020 2019 2018 2017 2016 2015 and Prior Revolving Revolving-Term Total
Commercial real estate
Pass $ 334,086  $ 422,800  $ 394,963  $ 277,724  $ 307,321  $ 615,217  $ 46,330  $ —  $ 2,398,441 
Special mention —  35,499  10,200  22,502  55,174  75,022  —  —  198,397 
Substandard —  17,259  12,781  19,914  50,700  83,792  1,500  —  185,946 
Doubtful —  645  —  —  1,989  6,529  —  —  9,163 
Total commercial real estate 334,086  476,203  417,944  320,140  415,184  780,560  47,830  —  2,791,947 
Commercial and industrial
Pass 454,131  199,453  140,049  68,607  27,645  206,782  383,082  —  1,479,749 
Special mention 3,697  8,211  2,628  697  768  1,046  23,527  —  40,574 
Substandard —  7,793  2,613  8,544  75  13,781  2,022  —  34,828 
Doubtful —  —  —  4,401  —  —  —  —  4,401 
Total commercial and industrial 457,828  215,457  145,290  82,249  28,488  221,609  408,631  —  1,559,552 
Commercial construction
Pass 131,235  224,794  59,649  2,420  6,346  4,555  12,778  —  441,777 
Special mention 1,578  2,533  3,886  —  —  8,593  —  —  16,590 
Substandard —  3,580  —  501  —  3,629  —  —  7,710 
Doubtful —  —  —  —  —  —  —  —  — 
Total commercial construction 132,813  230,907  63,535  2,921  6,346  16,777  12,778  —  466,077 
Business banking
Pass 296,254  154,335  123,207  86,552  77,238  266,042  103,571  291  1,107,490 
Special mention —  1,060  1,147  1,602  1,084  6,866  637  123  12,519 
Substandard 103  1,078  3,896  3,209  3,880  25,871  1,341  680  40,058 
Doubtful —  —  —  —  —  —  —  —  — 
Total business banking 296,357  156,473  128,250  91,363  82,202  298,779  105,549  1,094  1,160,067 
Consumer real estate
Pass 120,736  122,171  67,700  63,653  73,805  243,939  438,888  22,667  1,153,559 
Special mention —  —  1,489  —  —  150  132  —  1,771 
Substandard —  373  742  1,480  2,449  6,958  —  —  12,002 
Doubtful —  —  —  —  —  —  —  —  — 
Total consumer real estate 120,736  122,544  69,931  65,133  76,254  251,047  439,020  22,667  1,167,332 
Other consumer
Pass 18,849  13,162  6,784  3,395  2,082  687  26,647  2,767  74,373 
Special mention —  —  —  —  —  —  —  —  — 
Substandard 15  —  —  —  —  3,367  744  2,386  6,512 
Doubtful —  —  —  —  —  —  —  —  — 
Total other consumer 18,864  13,162  6,784  3,395  2,082  4,054  27,391  5,153  80,885 
Pass 1,355,291  1,136,715  792,352  502,350  494,436  1,337,221  1,011,297  25,726  6,655,389 
Special Mention 5,274  47,302  19,350  24,802  57,026  91,677  24,296  123  269,851 
Substandard 118  30,083  20,032  33,648  57,105  137,398  5,607  3,066  287,056 
Doubtful —  645  —  4,401  1,989  6,529  —  —  13,564 
Total $ 1,360,684  $ 1,214,746  $ 831,734  $ 565,201  $ 610,556  $ 1,572,826  $ 1,041,199  $ 28,914  $ 7,225,860 
We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
The following tables presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of March 31, 2021 and December 31, 2020:
March 31, 2021
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Performing $ 96,988  $ 319,656  $ 481,588  $ 400,461  $ 294,122  $ 1,046,085  $ 46,354  $ —  $ 2,685,253 
Nonperforming —  —  16,404  —  6,674  71,995  —  —  95,074 
Total commercial real estate 96,988  319,656  497,992  400,461  300,796  1,118,080  46,354  —  2,780,327 
Commercial and industrial
Performing 252,427  481,453  203,334  117,623  55,366  193,614  383,355  —  1,687,172 
Nonperforming(1)
5,476  —  —  631  5,689  276  344  —  12,416 
Total commercial and industrial 257,902  481,453  203,334  118,255  61,054  193,891  383,699  —  1,699,588 
Commercial construction
Performing 24,730  131,133  202,255  53,248  2,560  21,917  13,232  —  449,074 
Nonperforming —  —  —  —  —  384  —  —  384 
Total commercial construction 24,730  131,133  202,255  53,248  2,560  22,301  13,232  —  449,459 
Business Banking
Performing 34,568  121,591  170,640  137,748  92,837  384,332  111,932  1,004  1,054,651 
Nonperforming —  —  362  1,765  801  11,371  69  57  14,426 
Total business banking 34,568  121,591  171,003  139,513  93,638  395,703  112,001  1,061  1,069,078 
Consumer real estate
Performing 20,000  116,640  110,249  59,931  56,397  272,547  436,628  23,759  1,096,150 
Nonperforming —  —  880  324  545  5,006  324  871  7,949 
Total consumer real estate 20,000  116,640  111,128  60,255  56,942  277,553  436,952  24,630  1,104,099 
Other consumer
Performing 872  14,119  11,485  5,848  2,697  5,689  35,346  2,397  78,455 
Nonperforming —  —  201  —  81  1,566  179  137  2,163 
Total other consumer 872  14,119  11,686  5,848  2,778  7,255  35,525  2,534  80,618 
Performing 429,585  1,184,593  1,179,550  774,859  503,978  1,924,183  1,026,847  27,160  7,050,755 
Nonperforming 5,476  —  17,847  2,720  13,790  90,599  915  1,065  132,413 
Total $ 435,060  $ 1,184,593  $ 1,197,397  $ 777,580  $ 517,769  $ 2,014,783  $ 1,027,762  $ 28,225  $ 7,183,168 
(1) In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
December 31, 2020
(dollars in thousands) 2020 2019 2018 2017 2016 2015 and Prior Revolving Revolving-Term Total
Commercial real estate
Performing $ 334,086  $ 459,799  $ 417,944  $ 313,465  $ 394,972  $ 722,782  $ 47,830  $ —  $ 2,690,879 
Nonperforming —  16,404  —  6,675  20,212  57,778  —  —  101,070 
Total commercial real estate 334,086  476,203  417,944  320,140  415,184  780,560  47,830  —  2,791,947 
Commercial and industrial
Performing 457,828  214,144  143,706  69,411  28,426  220,701  408,350  —  1,542,566 
Nonperforming —  1,313  1,584  12,838  62  908  281  —  16,985 
Total commercial and industrial 457,828  215,457  145,290  82,249  28,488  221,609  408,631  —  1,559,552 
Commercial construction
Performing 132,813  230,907  63,535  2,921  6,346  16,393  12,778  —  465,692 
Nonperforming —  —  —  —  —  384  —  —  384 
Total commercial construction 132,813  230,907  63,535  2,921  6,346  16,777  12,778  —  466,077 
Business Banking
Performing 296,327  156,164  126,432  90,414  80,106  286,970  105,494  1,037  1,142,944 
Nonperforming 30  309  1,818  949  2,096  11,809  55  57  17,123 
Total business banking 296,357  156,473  128,250  91,363  82,202  298,779  105,549  1,094  1,160,067 
Consumer real estate
Performing 120,736  122,315  69,225  63,647  74,690  245,331  438,702  21,572  1,156,216 
Nonperforming —  229  706  1,486  1,564  5,716  318  1,096  11,116 
Total consumer real estate 120,736  122,544  69,931  65,133  76,254  251,047  439,020  22,667  1,167,332 
Other consumer
Performing 18,864  13,162  6,784  3,395  2,082  3,958  27,391  5,153  80,789 
Nonperforming —  —  —  —  —  96  —  —  96 
Total other consumer 18,864  13,162  6,784  3,395  2,082  4,054  27,391  5,153  80,885 
Performing 1,360,654  1,196,491  827,625  543,253  586,622  1,496,135  1,040,544  27,762  7,079,086 
Nonperforming 30  18,254  4,108  21,948  23,934  76,691  654  1,153  146,774 
Total $ 1,360,684  $ 1,214,746  $ 831,734  $ 565,201  $ 610,556  $ 1,572,826  $ 1,041,199  $ 28,914  $ 7,225,860 
The following tables present the age analysis of past due loans segregated by class of loans as of the dates presented:
March 31, 2021
(dollars in thousands) Current 30-59 Days
Past Due 		60-89 Days
Past Due 		Non - performing Total Past
Due Loans 		Total Loans
Commercial real estate $ 2,685,253  $ —  $ —  $ 95,074  $ 95,074  $ 2,780,327 
Commercial and industrial(1)
1,687,172  —  —  12,416  12,416  1,699,588 
Commercial construction 449,074  —  —  384  384  449,459 
Business banking 1,053,430  1,191  30  14,426  15,647  1,069,078 
Consumer real estate 1,094,601  1,444  104  7,949  9,498  1,104,099 
Other consumer 78,314  102  39  2,163  2,304  80,618 
Total(2)
$ 7,047,844  $ 2,737  $ 174  $ 132,413  $ 135,324  $ 7,183,168 
(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.
(2) We had 40 loans that were modified totaling $61.8 million under the CARES Act at March 31, 2021. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modification program, this delinquency table may not accurately reflect the credit risk associated with these loans.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
December 31, 2020
(dollars in thousands) Current 30-59 Days
Past Due 		60-89 Days
Past Due
90 Days Past Due (2)
Non - performing Total Past
Due Loans 		Total Loans
Commercial real estate $ 2,690,877  $ —  $ —  $ —  $ 101,070  $ 101,070  $ 2,791,947 
Commercial and industrial 1,542,567  —  —  —  16,985  16,985  1,559,552 
Commercial construction 462,094  19  3,580  —  384  3,983  466,077 
Business banking 1,140,581  1,614  379  371  17,122  19,486  1,160,067 
Consumer real estate 1,153,028  1,087  1,968  132  11,117  14,304  1,167,332 
Other consumer 80,583  168  37  —  96  302  80,885 
Total(1)
$ 7,069,730  $ 2,888  $ 5,965  $ 503  $ 146,774  $ 156,130  $ 7,225,860 
(1) We had 52 loans that were modified totaling $195.6 million under the CARES Act at December 31, 2020. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modification program, this delinquency table may not accurately reflect the credit risk associated with these loans.
(2) Represents acquired loans that were recorded at fair value at the acquisition date and remain performing at December 31, 2020.
The following table presents loans on nonaccrual status by class of loan:
March 31, 2021
March 31, 2021 For the three months ended
(dollars in thousands) Beginning of Period Nonaccrual End of Period Nonaccrual Nonaccrual With No Related Allowance Past Due 90+ Days Still Accruing
Interest Income Recognized on Nonaccrual(1)
Commercial real estate $ 101,070  $ 95,074  $ 52,460  $ —  $ 61 
Commercial and industrial(2)
16,985  12,416  11,425  —  43 
Commercial construction 384  384  —  —  — 
Business banking 17,122  14,426  397  —  137 
Consumer real estate 11,117  7,949  345  —  110 
Other consumer 96  2,163  —  —  1 
Total $ 146,774  $ 132,413  $ 64,628  $—  $ 352 
(1) Represents only cash payments received and applied to interest on nonaccrual loans.
(2)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.
December 31, 2020
December 31, 2020 For the twelve months ended
(dollars in thousands) Beginning of Period Nonaccrual End of Period Nonaccrual Nonaccrual With No Related Allowance Past Due 90+ Days Still Accruing
Interest Income Recognized on Nonaccrual(1)
Commercial real estate $ 25,356  $ 101,070  $ 60,401  $ —  $ 22 
Commercial and industrial 10,911  16,985  6,436  —  101 
Commercial construction 737  384  285  —  — 
Business banking 9,863  17,122  3,890  371  275 
Consumer real estate 6,063  11,117  398  132  423 
Other consumer 1,127  96  —  —  4 
Total $ 54,057  $ 146,774  $ 71,410  $ 503  $ 826 
(1) Represents only cash payments received and applied to interest on nonaccrual loans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
The following tables present collateral-dependent loans by class of loan as of the dates presented:
March 31, 2021
Type of Collateral
(dollars in thousands) Real Estate Business
Assets 		Investment/Cash Other
Commercial real estate $ 86,683  $ —  $ 5,350  $ — 
Commercial and industrial 335  11,968  —  — 
Commercial construction 3,245  —  —  — 
Business banking 1,856  12  —  — 
Consumer real estate 345  —  —  — 
Total $ 92,464  $ 11,980  $ 5,350  $ — 
December 31, 2020
Type of Collateral
(dollars in thousands) Real Estate Business
Assets 		Investment/Cash Other
Commercial real estate $ 100,450  $ —  $ —  $ — 
Commercial and industrial 1,040  15,080  —  — 
Commercial construction 3,552  —  —  — 
Business banking 3,085  1,619  —  689 
Consumer real estate 398  —  —  — 
Total $ 108,525  $ 16,699  $ —  $ 689 
The following tables present activity in the ACL for the periods presented:
Three Months Ended March 31, 2021
(dollars in thousands) Commercial
Real Estate 		Commercial and
Industrial 		Commercial
Construction 		Business Banking Consumer
Real Estate 		Other
Consumer 		Total
Loans
Allowance for credit losses on loans:
Balance at beginning of period $ 65,656  $ 16,100  $ 7,239  $ 15,917  $ 10,014  $ 2,686  $ 117,612 
Provision for credit losses on loans(1)
1,996  2,728  (911) 514  (844) (182) 3,301 
Charge-offs (810) (4,302) —  (917) (271) (232) (6,532)
Recoveries —  137  1  166  82  334  720 
Net (Charge-offs)/Recoveries (810) (4,165) 1  (751) (189) 102  (5,812)
Balance at End of Period $ 66,842  $ 14,663  $ 6,329  $ 15,680  $ 8,981  $ 2,606  $ 115,101 
(1) Excludes unfunded commitments

Three Months Ended March 31, 2020
(dollars in thousands) Commercial
Real Estate 		Commercial and
Industrial 		Commercial
Construction 		Business Banking Consumer
Real Estate 		Other
Consumer 		Total
Loans
Allowance for credit losses on loans:
Balance at beginning of period $ 30,577  $ 15,681  $ 7,900  $ —  $ 6,337  $ 1,729  $ 62,224 
Impact of CECL adoption 4,810  7,853  (3,376) 12,898  4,525  642  27,352 
Provision for credit losses on loans(1)
7,639  6,196  2,309  1,194  472  620  18,430 
Charge-offs (442) (9,879) (229) (460) (172) (248) (11,430)
Recoveries 27  19  2  74  38  114  274 
Net (Charge-offs)/Recoveries (415) (9,860) (227) (386) (134) (134) (11,156)
Balance at End of Period $ 42,611  $ 19,870  $ 6,606  $ 13,706  $ 11,200  $ 2,857  $ 96,850 
(1) Excludes unfunded commitments

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S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
The adoption of ASU 2016-13 resulted in an increase to our ACL of $27.4 million on January 1, 2020. The increase included $8.2 million for S&T legacy loans and $9.3 million for acquired loans from the DNB merger. We also recorded a day one adjustment of $9.9 million primarily related to a C&I relationship that was charged off in the first quarter of 2020. We obtained information on the relationship subsequent to filing our December 31, 2019 10-K, but before the end of the first quarter of 2020. The updated information supported a loss existed at January 1, 2020.
The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date. The provision for credit losses decreased $16.9 million to $3.1 million for the three months ended
March 31, 2021 compared to $20.0 million for the same period in 2020. The decrease in the provision for credit losses of $16.9 million was primarily due to a significant increase in provision needed during the three months ended March 31, 2020 due to the negative impact of the COVID-19 pandemic and our adoption of CECL on January 1, 2020. The provision for credit losses for the three months ended March 31, 2020 included $14.3 million related to the economic forecast and other qualitative reserves established for the uncertainty of the pandemic. Our total qualitative reserve decreased $2.7 million for the three months ended March 31, 2021 compared to the same period in 2020 mainly due to a decrease of $3.1 million for the economic forecast. Our economic forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at March 31, 2021 compared to the same time in 2020.
Net loan charge-offs were $5.8 million, or 0.33 percent annualized as a percentage of average loans at March 31, 2021 compared to $11.2 million, or 0.63 percent of average loans during the same period in 2020. Nonperforming loans increased $61.4 million to $135.2 million at March 31, 2021 compared to $73.8 million at March 31, 2020. The significant increase in nonperforming loans primarily related to the addition of $53.6 million of hotel loans which moved to nonperforming during the fourth quarter of 2020 as a result of continued deterioration due to the pandemic.
The C&I portfolio included $499.1 million of loans originated under the PPP at March 31, 2021. The loans are 100 percent guaranteed by the SBA, therefore, we have not assigned any ACL to these loans at March 31, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued


NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Swaps
In accordance with applicable accounting guidance for derivatives and hedging, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value. Interest rate swaps are contracts in which a series of interest rate flows (fixed and variable) are exchanged over a prescribed period. The notional amounts on which the interest payments are based are not exchanged. These derivative positions relate to transactions in which we enter into an interest rate swap with a commercial customer while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed rate. At the same time, we agree to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate loan with us receiving a variable rate. These agreements could have floors or caps on the contracted interest rates.
Pursuant to our agreements with various financial institutions, we may receive collateral or may be required to post collateral based upon mark-to-market positions. Beyond unsecured threshold levels, collateral in the form of cash or securities may be made available to counterparties of interest rate swap transactions. Based upon our current positions and related future collateral requirements relating to them, we believe any effect on our cash flow or liquidity position to be immaterial.
Derivatives contain an element of credit risk, the possibility that we will incur a loss because a counterparty, which may be a financial institution or a customer, fails to meet its contractual obligations. All derivative contracts with financial institutions may be executed only with counterparties approved by our Asset and Liability Committee, or ALCO, and derivatives with customers may only be executed with customers within credit exposure limits approved by our Senior Loan Committee. Interest rate swaps are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives are recorded in current earnings and included in other noninterest income in the Consolidated Statements of Comprehensive Income.
Interest Rate Lock Commitments and Forward Sale Contracts
In the normal course of business, we sell originated mortgage loans into the secondary mortgage loan market. We also offer interest rate lock commitments to potential borrowers. The commitments are generally for a period of 60 days and guarantee a specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower to close on the loan. Accordingly, some commitments expire prior to becoming loans. We may encounter pricing risks if interest rates increase significantly before the loan can be closed and sold. We may utilize forward sale contracts in order to mitigate this pricing risk. Whenever a customer desires these products, a mortgage originator quotes a secondary market rate guaranteed for that day by the investor. The rate lock is executed between the mortgagee and us and in turn a forward sale contract may be executed between us and the investor. Both the rate lock commitment and the corresponding forward sale contract for each customer are considered derivatives but are not accounted for using hedge accounting. As such, changes in the estimated fair value of the derivatives during the commitment period are recorded in current earnings and included in mortgage banking in the Consolidated Statements of Comprehensive Income.
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NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES – continued
    The following table indicates the amounts representing the value of derivative assets and derivative liabilities as of the dates presented:
Derivatives
(included in Other Assets) 		Derivatives
(included in Other Liabilities)
(dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value $ 40,415  $ 78,319  $ 40,818  $ 79,033 
Notional amount 983,243  983,638  983,243  983,638 
Collateral posted —  —  43,340  77,930 
Interest Rate Lock Commitments - Mortgage Loans
Fair value 1,509  2,900  —  — 
Notional amount 44,519  51,053  —  — 
Forward Sale Contracts - Mortgage Loans
Fair value 226  —  —  385 
Notional amount $ 36,835  $ —  $ —  $ 47,062 
Presenting offsetting derivatives that are subject to legally enforceable netting arrangements with the same party is permitted. For example, we may have a derivative asset and a derivative liability with the same counterparty to a swap transaction and we are permitted to offset the asset position and the liability position resulting in a net presentation.
The following table indicates the gross amounts of commercial loan swap derivative assets and derivative liabilities, the amounts offset and the carrying values in the Consolidated Balance Sheets as of the dates presented:
Derivatives
(included in Other Assets) 		Derivatives
(included in Other Liabilities)
(dollars in thousands) March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Gross amounts recognized $ 44,022  $ 82,655  $ 43,865  $ 82,626 
Gross amounts offset (3,607) (4,336) (3,047) (3,593)
Net Amounts Presented in the Consolidated Balance Sheets 40,415  78,319  40,818  79,033 
Gross amounts not offset(1)
—  —  (43,340) (77,930)
Net Amount $ 40,415  $ 78,319  $ (2,522) $ 1,103 
(1) Amounts represent collateral posted for the periods presented.
The following table indicates the gain or loss recognized in income on derivatives for the periods presented:
Three Months Ended March 31,
(dollars in thousands) 2021 2020
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans $ 310  $ 114 
Interest rate lock commitments—mortgage loans (1,759) 2,606 
Forward sale contracts—mortgage loans 979  (1,293)
Total Derivatives (Loss)/Gain $ (470) $ 1,427 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

NOTE 8. COMMITMENTS AND CONTINGENCIES
Commitments
In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. Our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers. Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.
The following table sets forth our commitments and letters of credit as of the dates presented:
(dollars in thousands) March 31, 2021 December 31, 2020
Commitments to extend credit $ 2,261,223  $ 2,185,752 
Standby letters of credit 88,418  89,095 
Total $ 2,349,641  $ 2,274,847 
Allowance for Credit Losses on Unfunded Loan Commitments
We maintain an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Consolidated Statements of Comprehensive Income. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.
The following table presents activity in the allowance for credit losses on unfunded loan commitments as of the dates presented:
(dollars in thousands) Three Months Ended March 31, 2021 Three Months Ended March 31, 2020
Balance at beginning of period $ 4,467  $ 3,112 
Impact of adopting ASU 2016-13 at January 1, 2020 —  1,349 
Balance after adoption of ASU 2016-13 4,467  4,461 
(Recovery) provision for credit losses (164) 1,616 
Total $ 4,303  $ 6,077 
The decrease in allowance for credit losses on unfunded loan commitments for the three months ended March 31, 2021 was due to a decrease in the loss rates for the construction portfolio.
Litigation
In the normal course of business, we are subject to various legal and administrative proceedings and claims. While any type of litigation contains a level of uncertainty, we believe that the outcome of such proceedings or claims pending will not have a material adverse effect on our consolidated financial position or results of operations.
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NOTE 9. OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the change in components of other comprehensive income (loss) for the periods presented, net of tax effects.
Three Months Ended March 31, 2021 Three Months Ended March 31, 2020
(dollars in thousands) Pre-Tax
Amount 		Tax
(Expense)
Benefit 		Net of Tax
Amount 		Pre-Tax
Amount 		Tax Benefit (Expense) Net of Tax
Amount
Change in net unrealized gains/(losses) on debt securities available-for-sale $ (9,712) $ 2,072  $ (7,640) $ 21,568  $ (4,592) $ 16,976 
Adjustment to funded status of employee benefit plans (1)
(343) 73  (270) 465  (99) 366 
Other Comprehensive (Loss) Income $ (10,055) $ 2,145  $ (7,910) $ 22,033  $ (4,691) $ 17,342 
(1) Pension settlement accounting was triggered during the three months ended March 31, 2021 resulting in a charge of $0.7 million immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued


NOTE 10. EMPLOYEE BENEFITS

Our qualified and nonqualified defined benefit plans were amended to freeze benefit accruals for all persons entitled to benefits under the plans in 2016. We will continue recording pension expense related to these plans, primarily representing interest costs on the accumulated benefit obligation and amortization of actuarial losses accumulated in the plans, as well as income from expected investment returns on pension assets. Since the plans have been frozen, no service costs are included in net periodic pension expense.
The investment policy for S&T's defined benefit plan is 90 percent fixed income and 10 percent equity and cash. The expected long-term rate of return on plan assets is 2.42 percent compared to 3.45 percent in prior periods.
We remeasured our pension obligation and recognized a pension settlement charge of $0.7 million for the three months ended March 31, 2021. A settlement charge is incurred when the aggregate amount of lump-sum distributions during the year is greater than the sum of the interest cost component of the annual net periodic pension cost.
The following table summarizes the components of net periodic pension cost for the periods presented:
Three Months Ended March 31,
(dollars in thousands) 2021 2020
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation $ 703  $ 891 
Expected return on plan assets (716) (972)
Net amortization 248  384 
Settlement Charge 749  — 
Net Periodic Pension Expense $ 984  $ 303 
The components of net periodic pension expense are included in salaries and employee benefits on the Consolidated Statements of Comprehensive Income.


NOTE 11. SHARE REPURCHASE PLAN

On March 15, 2021, our Board of Directors authorized an extension of its $50 million share repurchase plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase plan through March 31, 2022. The plan permits S&T to repurchase from time to time up to the previously authorized $50 million in aggregate value of shares of S&T's common stock, with $37.4 million of capacity remaining at March 31, 2021, through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions, the trading price of common stock, legal and contractual requirements, applicable securities laws and S&T's financial performance. The repurchase plan does not obligate us to repurchase any particular number of shares. We expect to fund any repurchases from cash on hand and internally generated funds. Any share repurchases will not begin until permissible under applicable laws. During the three months ended March 31, 2021, we had no repurchases. Repurchase activity was suspended in March of 2020 due to the impact of the COVID-19 pandemic. During the year ended December 31, 2020, we repurchased 411,430 common shares at a total cost of $12.6 million, or an average of $30.52 per share.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, represents an overview of our consolidated results of operations and financial condition and highlights material changes in our financial condition and results of operations at and for the three month periods ended March 31, 2021 and 2020. Our MD&A should be read in conjunction with our Consolidated Financial Statements and Notes. The results of operations reported in the accompanying Consolidated Financial Statements are not necessarily indicative of results to be expected in future periods.
Important Note Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains or incorporates statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting S&T and its future business and operations. Forward-looking statements are typically identified by words or phrases such as “will likely result”, “expect”, “anticipate”, “estimate”, “forecast”, “project”, “intend”, “ believe”, “assume”, “strategy”, “trend”, “plan”, “outlook”, “outcome”, “continue”, “remain”, “potential”, “opportunity”, “comfortable”, “current”, “position”, “maintain”, “sustain”, “seek”, “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses; cyber-security concerns; rapid technological developments and changes; operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our reputational risks; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; the transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those requirements; unanticipated changes in our liquidity position; changes in accounting policies, practices, or guidance, for example, our adoption of CECL; legislation affecting the financial services industry as a whole, and S&T, in particular; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions, including DNB, cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party provider; our ability to attract and retain talented executives and employees; our ability to successfully manage our CEO transition; general economic or business conditions, including the strength of regional economic conditions in our market area; the duration and severity of the coronavirus (“COVID-19”) pandemic, both in our principal area of operations and nationally, including the ultimate impact of the pandemic on the economy generally and on our operations; our participation in the Paycheck Protection Program; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.
Many of these factors, as well as other factors, are described in our Annual Report on Form 10-K for the year ended December 31, 2020, including Part I, Item 1A-"Risk Factors" and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
Our critical accounting policies involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2021 have remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, 2020 under Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Overview
We are a bank holding company that is headquartered in Indiana, Pennsylvania with assets of $9.3 billion at March 31, 2021. We operate in five markets including Western Pennsylvania, Eastern Pennsylvania, Northeast Ohio, Central Ohio and Upstate New York. We provide a full range of financial services with retail and commercial banking products, cash management services, trust and brokerage services. Our common stock trades on the NASDAQ Global Select Market under the symbol “STBA”.
We earn revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers. We incur expenses for the cost of deposits and other funding sources, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, occupancy and tax expense.
Our mission is to become the financial services provider of choice within the markets that we serve which will enable us to be a high performing regional community bank. We strive to do this by delivering exceptional service and value. Our strategic plan follows a disciplined approach focused on organic growth, which includes both growth within our current footprint and through market expansion. We employ a geographic market-based growth platform in order to drive organic growth. We acknowledge that each of our five markets are in different stages of development and that our market-based strategy will allow us to customize our approach to each market given its developmental stage and unique characteristics. We also actively evaluate acquisition opportunities that align with our strategic objectives as another source of growth. Our strategic plan includes a collaborative model that combines expertise from all areas of our business and focuses on satisfying each customer’s individual financial objectives. We continuously work to maintain and improve the efficiency of our different lines of business.

COVID-19 Update

The extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which remain highly uncertain and unpredictable. The pandemic has had, and we expect that it will continue to have, negative impacts on S&T’s commercial and consumer loan customers and the economy as a whole. The severity and length of the pandemic’s impact on S&T and the U.S. and global economies continue to be unknown.
As we navigate through the uncertainty resulting from the pandemic, our first priority remains the safety of both our employees and customers. Our financial performance continues to be negatively impacted in many ways due to the pandemic. We are closely monitoring our asset quality with a focus on the portfolios that have been significantly impacted by the pandemic, including our hotel portfolio. We did experience improvement in our asset quality during the three months ended March 31, 2021, but remain cautious given the current environment. Our balance sheet is asset sensitive resulting in our net interest income and net interest margin, or NIM, being negatively impacted in this low interest rate environment. Our net interest income is also being impacted by declining loan balances as new loan originations have decreased in the current environment. Partially offsetting this impact was the Paycheck Protection Program, or PPP. During the first quarter of 2021, PPP forgiveness was $156.5 million and we had an average balance of PPP loans of $454.8 million which positively impacted net interest income by $5.8 million.

Earnings Summary
We recognized record net income of $31.9 million, or $0.81 per diluted share for the three months ended March 31, 2021 compared to $13.2 million, or $0.34 per diluted share in the same period of 2020. The increase in net income for the three months ended March 31, 2021 of $18.7 million was primarily due to a decrease of $16.9 million in our provision for credit losses primarily related to the $16.3 million increase in our ACL in response to the COVID-19 pandemic in the prior year. Also impacting the increase was a $4.8 million increase in noninterest income and a decrease in noninterest expense of $0.8 million offset by an increase in income tax expense of $4.5 million.
Net interest income increased $0.7 million to $70.7 million for the three months ended March 31, 2021 compared to $70.0 million for the same period in 2020. Average interest-earning assets increased $244.3 million to $8.3 billion and average interest-bearing liabilities decreased $419.0 million to $5.4 billion during the three months ended March 31, 2021 compared to the same periods in 2020. Average interest-bearing deposits with banks increased $202.6 million for the three months ended
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March 31, 2021 compared to March 31, 2020 due to a significant increase in deposits as a result of government stimulus programs, the PPP and our customers' liquidity preferences. Average loan balances increased $58.8 million for the three months ended March 31, 2021 compared to the same period in 2020 due to PPP loans. The decrease in average interest-bearing liabilities compared to the same period in 2020 was due to decreases in average borrowings of $255.4 million and $163.6 million in average interest-bearing deposits for the three months ended March 31, 2021 compared to the same period in 2020. Net interest margin, on a fully taxable-equivalent, or FTE, basis (non-GAAP), decreased 6 basis points to 3.47 percent for the three months ended March 31, 2021 compared to 3.53 percent for the same period in 2020 due to the decline in short-term interest rates during 2021. PPP loans positively impacted the net interest margin on an FTE basis by 10 basis points for the three months ended March 31, 2021. Net interest margin is reconciled to net interest income adjusted to an FTE basis below in the "Net Interest Income" section of this MD&A.
The provision for credit losses, which includes a provision for losses on unfunded commitments, decreased $16.9 million to $3.1 million for the three months ended March 31, 2021 compared to $20.0 million in the same period in 2020. The significant decrease in the provision for credit losses during the three months ended March 31, 2021 was mainly due to the $16.3 million increase in our ACL in response to the pandemic in the prior year. For the three months ended March 31, 2021, we had net charge-offs of $5.8 million compared to net charge-offs of $11.2 million for the same period in 2020. Annualized net loan charge-offs to average loans was 0.33 percent for the three months ended March 31, 2021compared to 0.63 percent for the same period in 2020.
Noninterest income increased $4.8 million to $17.2 million for the three months ended March 31, 2021 compared to $12.4 million for the same period in 2020. The increase in noninterest income primarily related to an increase of $3.1 million in mortgage banking fees due to higher gains on loans sold and an increase in the mortgage servicing rights valuation compared to the same periods in 2020. Also impacting the increase was higher other income of $3.4 million for the three months ended March 31, 2021 related to changes in the valuation of our deferred compensation plan and equity securities portfolio compared to the same period in 2020. Offsetting this increase was a decline in commercial loan swap income of $2.4 million due to the change in the rate environment impacting customer activity compared to the same period in 2020.
Noninterest expense decreased $0.8 million to $45.6 million for the three months ended March 31, 2021 compared to $46.4 million for the same period in 2020. The decrease was mainly due to $2.3 million of merger-related expenses recognized in the three months ended March 31, 2020 compared to no merger-related expenses in 2021. This decrease was offset by increases of $2.0 million in salaries and employee benefits and $0.5 million in professional services and legal expenses for the three months ended March 31, 2021.
The provision for income taxes increased $4.5 million to $7.3 million for the three months ended March 31, 2021 compared to the same period in 2020. The increase in income tax expense was primarily due to the $23.2 million increase in pretax income for the three months ended March 31, 2021 compared to the same period in 2020. Our effective tax rate was 18.6 percent for the three months ended March 31, 2021 compared to 17.3 percent for the same period in 2020. The change in our effective tax rate for the three months ended March 31, 2021 was primarily due to the increase in pretax income.
Explanation of Use of Non-GAAP Financial Measures
In addition to the results of operations presented in accordance with generally accepted accounting principles, or GAAP, in the United States, management uses, and this quarterly report references, net interest income and net interest margin on a fully taxable equivalent, or FTE, basis, which are non-GAAP financial measures. Management believes net interest income and net interest margin on an FTE basis provide information useful to investors in understanding our underlying business, operational performance and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although management believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies.
We believe the presentation of net interest income and net interest margin on an FTE basis ensures the comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (GAAP) per the Consolidated Statements of Comprehensive Income is reconciled to net interest income adjusted on an FTE basis and net interest margin adjusted on an FTE basis in the "Results of Operations - Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020 - Net Interest Income" section of this MD&A.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 2021 Compared to
Three Months Ended March 31, 2020
Net Interest Income
Our principal source of revenue is net interest income. Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by changes in the average balance of interest-earning assets and interest-bearing liabilities and changes in interest rates and spreads. The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee, or ALCO, in order to mitigate interest rate and liquidity risks of the balance sheet. A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what we believe is an acceptable level of net interest income.
The interest income on interest-earning assets and the net interest margin are presented on an FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and securities using the federal statutory tax rate of 21 percent for each period and the dividend-received deduction for equity securities. We believe this to be the preferred industry measurement of net interest income that provides a relevant comparison between taxable and non-taxable sources of interest income.
The following table reconciles interest income per the Consolidated Statements of Comprehensive Income to net interest income and rates on an FTE basis for the periods presented:
Three Months Ended March 31,
(dollars in thousands) 2021 2020
Total interest income $ 74,781  $ 87,589 
Total interest expense 4,122  17,553 
Net Interest Income per Consolidated Statements of Comprehensive Income 70,659  70,036 
Adjustment to FTE basis 663  849 
Net Interest Income on an FTE Basis (Non-GAAP) $ 71,322  $ 70,885 
Net interest margin 3.44  % 3.48  %
Adjustment to FTE basis 0.03  % 0.05  %
Net Interest Margin on an FTE Basis (Non-GAAP) 3.47  % 3.53  %
Income amounts are annualized for rate calculations.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Average Balance Sheet and Net Interest Income Analysis (FTE)

The following tables provide information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the periods presented:
 
Three Months Ended March 31, 2021 Three Months Ended March 31, 2020
(dollars in thousands) Average Balance Interest Rate Average Balance Interest Rate
ASSETS
Interest-bearing deposits with banks $ 302,219  $ 65  0.09 % $ 99,646  $ 355  1.42  %
Securities, at fair value(1)(2)
782,118  4,566  2.34 % 786,858  4,995  2.54  %
Loans held for sale 6,360  45  2.83 % 1,867  18  3.76  %
Commercial real estate 3,253,641  30,136  3.76 % 3,408,684  40,093  4.73  %
Commercial and industrial 1,957,459  20,817  4.31 % 1,751,678  19,738  4.53  %
Commercial construction 485,269  4,034  3.37 % 386,363  4,495  4.68  %
Total Commercial Loans 5,696,369  54,987  3.91 % 5,546,725  64,326  4.66  %
Residential mortgage 897,427  9,416  4.22 % 990,866  10,328  4.18  %
Home equity 532,708  4,791  3.65 % 540,193  6,501  4.84  %
Installment and other consumer 79,907  1,247  6.33 % 79,680  1,388  7.01  %
Consumer construction 15,908  188  4.79 % 10,508  120  4.61  %
Total Consumer Loans 1,525,950  15,642  4.14 % 1,621,247  18,337  4.54  %
Total Portfolio Loans 7,222,319  70,630  3.96 % 7,167,972  82,663  4.64  %
Total Loans(1)(3)
7,228,679  70,675  3.96 % 7,169,839  82,681  4.64  %
Federal Home Loan Bank and other restricted stock 11,242  139  4.94 % 23,601  407  6.90  %
Total Interest-earning Assets 8,324,259  75,445  3.67 % 8,079,944  88,438  4.40  %
Noninterest-earning assets 756,273  687,382 
Total Assets $ 9,080,532  $ 8,767,326 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand $ 895,891  $ 222  0.10 % $ 942,030  $ 1,382  0.59  %
Money market 1,968,779  943  0.19 % 1,993,764  6,318  1.27  %
Savings 995,228  152  0.06 % 830,985  477  0.23  %
Certificates of deposit 1,344,604  2,165  0.65 % 1,601,324  7,161  1.80  %
Total Interest-bearing Deposits 5,204,503  3,481  0.27 % 5,368,103  15,338  1.15  %
Securities sold under repurchase agreements 64,653  25  0.15 % 30,790  42  0.56  %
Short-term borrowings 25,556  12  0.19 % 286,365  1,145  1.61  %
Long-term borrowings 23,471  116  2.00 % 51,845  325  2.52  %
Junior subordinated debt securities 64,088  488  3.09 % 64,195  703  4.40  %
Total Borrowings 177,768  641  1.46 % 433,195  2,215  2.06  %
Total Interest-bearing Liabilities 5,382,271  4,123  0.31 % 5,801,298  17,553  1.22  %
Noninterest-bearing liabilities 2,538,149  1,776,453 
Shareholders’ equity 1,160,113  1,189,575 
Total Liabilities and Shareholders’ Equity $ 9,080,532  $ 8,767,326 
Net Interest Income (1)(2)
$ 71,322  $ 70,885 
Net Interest Margin (1)(2)
3.47 % 3.53  %
(1) Tax-exempt income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent for 2021 and 2020.
(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.
(3) Nonaccruing loans are included in the daily average loan amounts outstanding.
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Net interest income on an FTE basis (non-GAAP) increased $0.4 million for the three months ended March 31, 2021 compared to the same period in 2020. Net interest income was favorably impacted by Paycheck Protection Program, or PPP loans which increased interest income by $5.8 million for the three months ended March 31, 2021 compared to the same period in 2020. The net interest margin on an FTE basis (non-GAAP) decreased 6 basis points for the three months ended March 31, 2021 compared to the same period in 2020. PPP loans positively impacted the net interest margin on an FTE basis by 10 basis points for the three months ended March 31, 2021.
Interest income on an FTE basis (non-GAAP) decreased $13.0 million, or 14.7 percent, for the three months ended March 31, 2021 compared to the same period in 2020. The decrease in interest income was primarily due to lower short-term interest rates compared to the same period in 2020. Average loan balances increased $58.8 million compared to the same period in 2020. PPP loans contributed $454.8 million to the average increase in loans which was offset by lower loan activity related to the COVID-19 pandemic. The average rate earned on loans decreased 68 basis points compared to the same period in 2020 primarily due to lower short-term interest rates. Average interest-bearing deposits with banks increased $202.6 million and the average rate decreased 133 basis points compared to the same period in 2020. Higher average interest-bearing deposits with banks was due to a significant increase in deposits as a result of government stimulus programs, PPP and our customers' liquidity preferences. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 73 basis points compared to the same period in 2020.
Interest expense decreased $13.4 million for the three months ended March 31, 2021 compared to the same period in 2020. The decrease was primarily due to lower short-term interest rates compared to the same period in 2020. Average interest-bearing deposits decreased $163.6 million for the three months ended March 31, 2021 compared to the same period in 2020. The average rate paid decreased 88 basis points compared to the same period in 2020 primarily due to lower short-term interest rates. The interest-bearing deposits decrease is favorably offset by a $715.6 million increase in demand deposits. We experienced demand deposit growth due to customer PPP loans and stimulus payments along with customers' liquidity preferences. Brokered deposits decreased $306.9 million compared to the same period in 2020 due to excess liquidity. Average total borrowings decreased $255.4 million and the average rate paid decreased 60 basis points compared to the same period in 2020. Borrowings decreased compared to the same period in 2020 due to excess liquidity. Overall, the cost of interest-bearing liabilities decreased 91 basis points for the three months ended March 31, 2021 compared to the same period in 2020.




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The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates:
Three Months Ended March 31, 2021 Compared to March 31, 2020
(dollars in thousands)
Volume (4)
Rate (4)
Total
Interest earned on:
Interest-bearing deposits with banks $ 722  $ (1,012) $ (290)
Securities, at fair value(1)(2)
(30) (400) (430)
Loans held for sale 42  (15) 27 
Commercial real estate (1,824) (8,133) (9,957)
Commercial and industrial 2,319  (1,239) 1,079 
Commercial construction 1,151  (1,612) (461)
Total Commercial Loans 1,646  (10,984) (9,339)
Residential mortgage (974) 62  (912)
Home equity (90) (1,619) (1,709)
Installment and other consumer 4  (145) (141)
Consumer construction 62  6  67 
Total Consumer Loans (998) (1,697) (2,695)
Total Portfolio Loans 648  (12,681) (12,033)
Total Loans (1)(3)
690  (12,696) (12,006)
Federal Home Loan Bank and other restricted stock (213) (55) (268)
Change in Interest Earned on Interest-earning Assets $ 1,168  $ (14,162) $ (12,994)
Interest paid on:
Interest-bearing demand $ (68) $ (1,092) $ (1,160)
Money market (79) (5,296) (5,375)
Savings 94  (419) (325)
Certificates of deposit (1,148) (3,848) (4,996)
Total Interest-bearing Deposits (1,201) (10,656) (11,856)
Securities sold under repurchase agreements 47  (65) (18)
Short-term borrowings (1,042) (90) (1,133)
Long-term borrowings (178) (31) (209)
Junior subordinated debt securities (1) (214) (215)
Total Borrowings (1,174) (400) (1,574)
Change in Interest Paid on Interest-bearing Liabilities $ (2,375) $ (11,056) $ (13,431)
Change in Net Interest Income $ 3,543  $ (3,107) $ 437 
(1) Tax-exempt income is on an FTE basis (non-GAAP) using the statutory federal corporate income tax rate of 21 percent for 2021 and 2020.
(2) Taxable investment income is adjusted for the dividend-received deduction for equity securities.
(3) Nonaccruing loans are included in the daily average loan amounts outstanding.
(4) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Provision for Credit Losses

The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date. The provision for credit losses decreased $16.9 million to $3.1 million for the three months ended
March 31, 2021 compared to $20.0 million for the same period in 2020.
The decrease in the provision for credit losses of $16.9 million was primarily due to a significant increase in provision needed during the three months ended March 31, 2020 due to the negative impact of the COVID-19 pandemic and our adoption of CECL on January 1, 2020. The provision for credit losses for the three months ended March 31, 2020 included $14.3 million related to the economic forecast and other qualitative reserves established for the uncertainty of the pandemic. Our total qualitative reserve decreased $2.7 million for the three months ended March 31, 2021 compared to the same period in 2020 mainly due to a decrease of $3.1 million for the economic forecast. Our economic forecast covers a period of two years and is
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driven primarily by national unemployment data. The forecasted national unemployment rate improved at March 31, 2021 compared to the same time in 2020.
Net loan charge-offs were $5.8 million, or 0.33 percent annualized as a percentage of average loans at March 31, 2021 compared to $11.2 million, or 0.63 percent of average loans during the same period in 2020. Nonperforming loans increased $61.4 million to $135.2 million at March 31, 2021 compared to $73.8 million at March 31, 2020. The significant increase in nonperforming loans primarily related to the addition of $53.6 million of hotel loans which moved to nonperforming during the fourth quarter of 2020 as a result of continued deterioration due to the pandemic.

Noninterest Income
Three Months Ended March 31,
(dollars in thousands) 2021 2020 $ Change % Change
Net gain on sale of securities $ —  $ —  $ —  — 
Mortgage banking 4,310  1,236  3,074  248.7  %
Debit and credit card 4,162  3,482  680  19.5  %
Service charges on deposit accounts 3,474  4,008  (534) (13.3) %
Wealth management 2,944  2,362  582  24.6  %
Commercial loan swap income 95  2,484  (2,389) (96.2) %
Other 2,252  (1,169) 3,421  (292.6) %
Total Noninterest Income $ 17,236  $ 12,403  $ 4,833  39.0  %

Noninterest income increased $4.8 million to $17.2 million for the three months ended March 31, 2021 compared to the same period in 2020. The increase in noninterest income primarily related to an increase of $3.1 million in mortgage banking fees due to higher gains on loans sold and an increase in the mortgage servicing rights valuation compared to the same periods in 2020.Wealth management income increased $0.6 million due to higher assets under management from market appreciation and an increase in customer activity. Debit and credit card income increased $0.7 million due to increased activity and the improving economic environment. Other income increased $3.4 million related to changes in the valuation of our deferred compensation plan, which has a corresponding offset in salaries and employee benefits expense resulting in no impact to net income, and the change in value in the equity securities portfolio compared to the same period in 2020. Offsetting these increases was a $2.4 million decrease in commercial loan swap income. Commercial loan swap activity was significant in first quarter of 2020, but activity has declined due to the pandemic. Service charges on deposit accounts decreased $0.5 million also due to reduced activity related to the pandemic.
Noninterest Expense
Three Months Ended March 31,
(dollars in thousands) 2021 2020 $ Change % Change
Salaries and employee benefits (1)
$ 23,327  $ 21,335  $ 1,992  9.3  %
Data processing and information technology (1)
4,225  3,868  357  9.2  %
Occupancy (1)
3,827  3,765  62  1.6  %
Furniture, equipment and software (1)
2,640  2,519  121  4.8  %
Professional services and legal (1)
1,531  1,048  483  46.1  %
Other taxes 1,436  1,600  (164) (10.3) %
Marketing (1)
1,322  1,111  211  19.0  %
FDIC insurance 1,046  770  276  35.8  %
Merger related expenses —  2,342  (2,342) (100.0) %
Other (1)
6,226  8,033  (1,807) (22.5) %
Total Noninterest Expense $ 45,580  $ 46,391  $ (810) (1.7) %
(1)Excludes Merger related expenses for 2020 amounts only.

Noninterest expense decreased $0.8 million to $45.6 million for the three months ended March 31, 2021 compared to the same period in 2020 mainly due to merger related expenses in 2020. Total merger related expenses of $2.3 million for the three months ended March 31, 2020 included $1.4 million of salaries and employee benefits, $0.4 million for data processing, $0.2
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million for professional services and $0.3 million in various other expenses. Other noninterest expense decreased due to historic tax credits for $1.1million in the three months ended March 31, 2020 and lower travel, lodging and training expenses resulting from the pandemic during the three months ended March 31, 2021 compared to the same period in 2020. Partially offsetting these decreases was a $2.0 million increase in salaries and employee benefits mainly due to a change in the valuation related to a deferred compensation plan of $1.6 million, which has a corresponding offset in other noninterest income resulting in no impact to net income, higher pension expense due to an increase in retirees electing lump-sum distributions causing settlement accounting and higher medical expenses. Professional services and legal expenses increased $0.5 million mainly due to higher consulting and legal expense.
Provision for Income Taxes

The provision for income taxes increased $4.5 million to $7.3 million for the three months ended March 31, 2021 compared to $2.8 million in the same period in 2020 as a result of the increase in pretax income of $23.2 million. Our effective tax rate was 18.6 percent for the three months ended March 31, 2021 compared to 17.3 percent for the same period in 2020. The change in our effective tax rate for the three months ended March 31, 2021 was primarily due to the increase in pretax income.
Financial Condition as of March 31, 2021
Total assets increased $361.1 million to $9.3 billion at March 31, 2021 compared to $9.0 billion at December 31, 2020. Cash and due from banks increased $441.8 million to $671.4 million at March 31, 2021 compared to December 31, 2020 due to a significant increase in deposits as a result of government stimulus programs, PPP and our customers' liquidity preferences. Total portfolio loans decreased $42.7 million to $7.2 billion at March 31, 2021 compared to December 31, 2020. The decrease in portfolio loans primarily related to a decrease in the consumer loan portfolio of $45.7 million, with decreases in residential mortgage of $37.2 million, home equity of $4.8 million, consumer construction of $3.4 million and other consumer of $0.3 million. The commercial loan portfolio increased $3.0 million with increases of $39.6 million in CRE offset by decreases of $22.7 million in C&I and $13.9 million in commercial construction. Excluding the PPP loans, portfolio loans decreased $76.9 million compared to December 31, 2020 due to decreased activity related to the COVID-19 pandemic.
Securities increased $43.6 million to $817.3 million at March 31, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities due to excess liquidity. The bond portfolio had a net unrealized gain of $23.7 million at March 31, 2021 compared to $33.4 million at December 31, 2020 due to rising interest rates during the first quarter of 2021.
Our deposits increased $455.5 million with total deposits of $7.9 billion at March 31, 2021 compared to $7.4 billion at December 31, 2020. Customer deposits increased $508.8 million from December 31, 2020. The increase in customer deposits is primarily related to stimulus programs, PPP and our customers' liquidity preferences. Total brokered deposits decreased $53.3 million from December 31, 2020 due to a reduced need for wholesale funding due to strong customer deposit growth. Brokered deposits are an additional source of funds utilized by ALCO as a way to diversify funding sources, as well as manage our funding costs and structure.
Total borrowings decreased $73.1 million to $154.8 million at March 31, 2021 compared to $227.9 million at December 31, 2020 due to increased customer deposits. The decrease in borrowings primarily related to a decline in short-term borrowings of $75.0 million compared to December 31, 2020.
Total shareholders’ equity increased by $13.6 million to $1,168.3 million at March 31, 2021 compared to $1,154.7 million at December 31, 2020. The increase was primarily due to net income of $31.9 million offset partially by dividends of
$11.0 million and a decrease in other comprehensive income of $7.9 million. The $7.9 million decrease in other comprehensive income was due to a $7.6 million decrease in unrealized gains on our available-for-sale investment securities and a $0.3 million change in the funded status of our employee benefit plans, net of taxes.
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Securities Activity
(dollars in thousands) March 31, 2021 December 31, 2020 $ Change
U.S. Treasury securities $ 63,268  $ 10,282  $ 52,986 
Obligations of U.S. government corporations and agencies 82,028  82,904  (876)
Collateralized mortgage obligations of U.S. government corporations and agencies 217,916  209,296  8,620 
Residential mortgage-backed securities of U.S. government corporations and agencies 63,911  67,778  (3,867)
Commercial mortgage-backed securities of U.S. government corporations and agencies 277,253  273,681  3,572 
Corporate obligations 2,002  2,025  (23)
Obligations of states and political subdivisions 107,505  124,427  (16,922)
Available-for-Sale Debt Securities 813,883  770,393  43,490 
Marketable equity securities 3,416  3,300  116 
Total Securities $ 817,299  $ 773,693  $ 43,606 
We invest in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of ALCO to reposition the balance sheet for interest rate risk purposes. Securities are subject to market risks that could negatively affect the level of liquidity available to us. Security purchases are subject to an investment policy approved annually by our Board of Directors and administered through ALCO and our treasury function. Securities increased $43.6 million to $817.3 million at March 31, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities due to excess liquidity.
At March 31, 2021 our bond portfolio was in a net unrealized gain position of $23.7 million compared to a net unrealized gain position of $33.4 million at December 31, 2020. At March 31, 2021 total gross unrealized gains in the bond portfolio were $26.6 million offset by gross unrealized losses of $2.9 million compared to December 31, 2020, when total gross unrealized gains were $33.5 million offset by gross unrealized losses of $0.1 million. The decrease in the net unrealized gain position was primarily due to an increase in interest rates from December 31, 2020 to March 31, 2021. Management evaluates the securities portfolio to determine if an ACL is needed each quarter. We did not record an ACL related to the securities portfolio at March 31, 2021.

Loan Composition
March 31, 2021 December 31, 2020
(dollars in thousands) Amount % of Loans Amount % of Loans
Commercial
Commercial real estate $ 3,284,555  45.7  % $ 3,244,974  44.9  %
Commercial and industrial 1,931,711  26.9  % 1,954,453  27.0  %
Commercial construction 460,417  6.4  % 474,280  6.6  %
Total Commercial Loans 5,676,683  79.0  % 5,673,707  78.5  %
Consumer
Consumer real estate 1,425,839  19.8  % 1,471,238  20.4  %
Other consumer 80,646  1.1  % 80,915  1.1  %
Total Consumer Loans 1,506,485  21.0  % 1,552,153  21.5  %
Total Portfolio Loans 7,183,168  100.0  % 7,225,860  100.0  %
Loans held for sale 12,794  18,528 
Total Loans $ 7,195,962  $ 7,244,388 
The loan portfolio represents the most significant source of interest income for us. The risk that borrowers will be unable to pay such obligations is inherent in the loan portfolio. Other conditions such as downturns in the borrower’s industry or the overall economic climate can significantly impact the borrower’s ability to pay.
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Total portfolio loans decreased $42.7 million to $7.2 billion at March 31, 2021 compared to December 31, 2020. The decrease in portfolio loans is primarily related to a decline in the consumer loan portfolio of $45.7 million compared to December 31, 2020 with decreases of $45.4 million in consumer real estate and $0.3 million in other consumer. Consumer loans represent 21.0 percent of our total portfolio loans at March 31, 2021 and 21.5 percent at December 31, 2020.
Commercial loans, including CRE, C&I and commercial construction, comprised 79.0 percent of total portfolio loans at March 31, 2021 and 78.5 percent at December 31, 2020. The increase of $3.0 million in commercial loans related to $39.6 million of growth in CRE, offset by decreases of $22.7 million in C&I, and $13.9 million in commercial construction compared to December 31, 2020.
As of March 31, 2021, we had $499.1 million of PPP loans included in C&I. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted expenses in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00 percent and a term of two years, or five years for loans approved by the SBA on or after June 5, 2020. Payments are deferred for the first six months of the loan. The loans are 100 percent guaranteed by the SBA. The SBA pays us a processing fee ranging from 1 percent to 5 percent based on the size of the loan.

Allowance for Credit Losses
We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) Commercial Real Estate, or CRE, 2) Commercial and Industrial, or C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.
The following are key risks within each portfolio segment:
CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and healthcare. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.
C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.
Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction/development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.
Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and business.
Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.
Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines. The primary source of repayment for these loans
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is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.
The following table presents activity in the ACL for the periods presented:
Three Months Ended March 31, 2021
(dollars in thousands) Commercial
Real Estate 		Commercial and
Industrial 		Commercial
Construction 		Business Banking Consumer
Real Estate 		Other
Consumer 		Total
Loans
Allowance for credit losses on loans:
Balance at beginning of period $ 65,656  $ 16,100  $ 7,239  $ 15,917  $ 10,014  $ 2,686  $ 117,612 
Provision for credit losses on loans(1)
1,996  2,728  (911) 514  (844) (182) 3,301 
Charge-offs (810) (4,302) —  (917) (271) (232) (6,532)
Recoveries —  137  1  166  82  334  720 
Net (Charge-offs)/Recoveries (810) (4,165) 1  (751) (189) 102  (5,812)
Balance at End of Period $ 66,842  $ 14,663  $ 6,329  $ 15,680  $ 8,981  $ 2,606  $ 115,101 
(1) Excludes provision on unfunded commitments
March 31, 2021 December 31, 2020
Ratio of net charge-offs to average loans outstanding 0.33  % * 0.61  %
Allowance for credit losses as a percentage of total portfolio loans 1.60  % 1.63  %
Allowance for loan losses as a percentage of total portfolio loans - excluding PPP loans 1.72  % 1.74  %
Allowance for credit losses to nonperforming loans 85  % 80  %
* Annualized
The ACL decreased $2.5 million to $115.1 million at March 31, 2021 compared to $117.6 million at December 31, 2020. The decrease in ACL was mainly due to a reduction in specific reserves on loans individually assessed and lower qualitative reserve due to an improved economic forecast. Specific reserves on loans individually assessed decreased $5.4 million from December 31, 2020 primarily due to a charge-off on a C&I relationship that was previously held in specific reserve. The qualitative reserve decreased $1.8 million from the prior quarter primarily due to a $2.5 million reduction in the economic forecast component which was the result of an improved national unemployment forecast. The ACL as a percentage of total portfolio loans decreased 3 basis points to 1.60 percent at March 31, 2021 compared to 1.63 percent at December 31, 2020. The ACL excluding PPP loans as a percentage of total portfolio loans was 1.72 percent as of March 31, 2021 compared to 1.74 percent at December 31, 2020.
Net loan charge-offs were $5.8 million, or 0.33 percent annualized as a percentage of average loans for the three months ended March 31, 2021. The most significant charge-off was a $3.9 million C&I relationship which was previously held in specific reserve. The relationship was restructured during the first quarter of 2021 and charged down to the fair value of the collateral.
Substandard loans increased $16.1 million to $303.2 million at March 31, 2021 compared to $287.1 million at December 31, 2020 and special mention loans decreased $4.4 million to $265.5 million at March 31, 2021 compared to $269.9 million at December 31, 2020. The increase in commercial substandard and corresponding decrease in special mention loans was primarily due to the downgrade of a $12.1 million CRE relationship from special mention to substandard due to declining revenue that led to cash flow shortfalls. The relationship matured during the first quarter and received a short term COVID deferral as the borrower and bank work towards a long term solution.
Troubled debt restructurings, or TDRs increased $1.2 million to $47.9 million at March 31, 2021 compared to $46.7 million at December 31, 2020. Total TDRs of $47.9 million at March 31, 2021 included $17.9 million, or 37.4 percent, that were accruing and $30.0 million, or 62.6 percent, that were not accruing.
Our allowance for credit losses on unfunded commercial lending commitments and letters of credit provide for the risk of expected loss in these arrangements. The allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Consolidated Statements of Comprehensive Income. The allowance for unfunded loan commitments was $4.3 million at March 31, 2021 compared to $4.5 million at December 31, 2020. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nonperforming assets consist of nonaccrual loans, nonaccrual TDRs and OREO. The following table summarizes nonperforming assets for the dates presented:

(dollars in thousands) March 31, 2021 December 31, 2020 $ Change
Nonperforming Loans
Commercial real estate $ 79,321  $ 84,416  $ (5,095)
Commercial and industrial(1)
991  7,100  (6,109)
Commercial construction 384  384  — 
Business banking 14,029  16,692  (2,663)
Consumer real estate 5,542  8,798  (3,256)
Other Consumer 2,163  96  2,067 
Total Nonperforming Loans 102,430  117,486  (15,056)
Nonperforming Troubled Debt Restructurings
Commercial real estate 15,754  16,654  (900)
Commercial and industrial 11,425  9,885  1,540 
Commercial construction —  —  — 
Business banking 397  430  (33)
Consumer real estate 2,407  2,319  88 
Other Consumer —  —  — 
Total Nonperforming Troubled Debt Restructurings 29,983  29,288  695 
Total Nonperforming Loans 132,413  146,774  (14,361)
OREO 1,620  2,155  (535)
Total Nonperforming Assets $ 134,033  $ 148,929  $ (14,896)
Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans 1.88  % 2.03  %
Nonperforming assets as a percent of total portfolio loans plus OREO 1.90  % 2.06  %
(1)In addition to nonperforming loans of $132.4 million, we have a $2.8 million commercial and industrial held for sale loan that is nonperforming resulting in total nonperforming loans of $135.2 million.

Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or generally when interest or principal payments are 90 days or more past the contractual due date. Nonperforming loans decreased $11.6 million to $135.2 million at March 31, 2021 compared to $146.8 million at December 31, 2020. The significant decrease in nonperforming loans primarily related to the payoff of a $4.6 million CRE relationship and charge-off of a $3.9 million C&I relationship which were previously held in specific reserve.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Deposits
(dollars in thousands) March 31, 2021 December 31, 2020 $ Change
Customer Deposits
Noninterest-bearing demand $ 2,539,594  $ 2,261,994  $ 277,600 
Interest-bearing demand 976,225  864,510  111,715 
Money market 1,997,856  1,887,051  110,805 
Savings 1,036,927  969,508  67,419 
Certificates of deposit 1,310,473  1,369,239  (58,766)
Total Customer Deposits 7,861,075  7,352,302  508,773 
Brokered Deposits
Interest-bearing demand —  —  — 
Money market 5,001  50,012  (45,011)
Certificates of deposit 9,952  18,224  (8,272)
Total Brokered Deposits 14,953  68,236  (53,283)
Total Deposits $ 7,876,028  $ 7,420,538  $ 455,490 
Deposits are our primary source of funds. We believe that our deposit base is stable and that we have the ability to attract new deposits. Total deposits at March 31, 2021 increased $455.5 million, or 6.1 percent, from December 31, 2020. Total customer deposits increased $508.8 million from December 31, 2020. The increase in customer deposits is primarily related to government stimulus programs, PPP and our customer’s liquidity preferences. Total brokered deposits decreased $53.3 million from December 31, 2020 due to a reduced need for this funding given the customer deposit growth. Brokered deposits are an additional source of funds utilized by ALCO as a way to diversify funding sources, as well as manage our funding costs and structure.
Borrowings
(dollars in thousands) March 31, 2021 December 31, 2020 $ Change
Securities sold under repurchase agreements $ 67,417  $ 65,163  $ 2,254 
Short-term borrowings —  75,000  (75,000)
Long-term borrowings 23,282  23,681  (399)
Junior subordinated debt securities 64,097  64,083  14 
Total Borrowings $ 154,796  $ 227,927  $ (73,131)
Borrowings are an additional source of funding for us. Total borrowings decreased $73.1 million, or 32.1 percent, compared to December 31, 2020 due to increased customer deposits. Total short-term borrowings decreased $75.0 million, compared to December 31, 2020.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information pertaining to short-term borrowings is summarized in the tables below for the three months ended March 31, 2021 and for the twelve months ended December 31, 2020.
Securities Sold Under Repurchase Agreements
(dollars in thousands) March 31, 2021 December 31, 2020
Balance at the period end $ 67,417  $ 65,163 
Average balance during the period $ 64,653  $ 57,673 
Average interest rate during the period 0.15 % 0.29  %
Maximum month-end balance during the period $ 67,417  $ 92,159 
Average interest rate at the period end 0.10 % 0.25  %
Short-Term Borrowings
(dollars in thousands) March 31, 2021 December 31, 2020
Balance at the period end $ —  $ 75,000 
Average balance during the period $ 25,556  $ 155,753 
Average interest rate during the period 0.19 % 0.92  %
Maximum month-end balance during the period $ 25,000  $ 410,240 
Average interest rate at the period end - % 0.19  %
Information pertaining to long-term borrowings is summarized in the tables below for the three months ended March 31, 2021 and for the twelve months ended December 31, 2020.
Long-Term Borrowings
(dollars in thousands) March 31, 2021 December 31, 2020
Balance at the period end $ 23,282  $ 23,681 
Average balance during the period $ 23,471  $ 47,953 
Average interest rate during the period 2.00 % —  %
Maximum month-end balance during the period $ 23,549  $ 50,635 
Average interest rate at the period end 2.00 % 2.03  %
Junior Subordinated Debt Securities
(dollars in thousands) March 31, 2021 December 31, 2020
Balance at the period end $ 64,097  $ 64,083 
Average balance during the period $ 64,088  $ 64,092 
Average interest rate during the period 3.09 % 3.57  %
Maximum month-end balance during the period $ 64,097  $ 64,848 
Average interest rate at the period end 2.97 % 3.01  %
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. This includes the ability to satisfy the financial needs of depositors who want to withdraw funds or of borrowers needing to access funds to meet their credit needs. In order to manage liquidity risk, our Board of Directors has delegated authority to ALCO for the formulation, implementation, and oversight of liquidity risk management for S&T. The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events. The ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and having a detailed contingency funding plan. The ALCO policy guidelines define graduated risk tolerance levels. If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position.
Our primary funding and liquidity source is a stable customer deposit base. We believe S&T has the ability to retain existing and attract new deposits, mitigating any funding dependency on other more volatile sources. Refer to the "Financial Condition-Deposits" section of this MD&A, for additional discussion on deposits. Although deposits are the primary source of funds, we have identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified. Additional funding sources accessible to S&T include borrowing availability at the Federal Home Loan Bank, or FHLB, of Pittsburgh, federal funds lines with other financial institutions, the brokered deposit market and borrowing availability through the Federal Reserve Borrower-In-Custody program.
An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets. Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate, and high. At March 31, 2021, we had $1.1 billion in highly liquid assets, which consisted of $601.0 million in interest-bearing deposits with banks, $494.1 million in unpledged securities and $12.8 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of 11.9 percent at March 31, 2021. Also, at March 31, 2021, we had remaining borrowing availability of $2.5 billion with the FHLB of Pittsburgh. Refer to the "Financial Condition- Borrowings" section of this MD&A for more details.
The following table summarizes capital amounts and ratios for S&T and S&T Bank for the dates presented:
(dollars in thousands) Adequately
Capitalized 		Well-
Capitalized 		March 31, 2021 December 31, 2020
Amount Ratio Amount Ratio
S&T Bancorp, Inc.
Tier 1 leverage 4.00  % 5.00  % $ 846,536  9.71 % $ 825,515  9.43 %
Common equity tier 1 to risk-weighted assets 4.50  % 6.50  % 817,536  11.84 % 796,515  11.33 %
Tier 1 capital to risk-weighted assets 6.00  % 8.00  % 846,536  12.26 % 825,515  11.74 %
Total capital to risk-weighted assets 8.00  % 10.00  % 961,751  13.93 % 944,686  13.44 %
S&T Bank
Tier 1 leverage 4.00  % 5.00  % $ 830,633  9.54 % $ 810,636  9.27 %
Common equity tier 1 to risk-weighted assets 4.50  % 6.50  % 830,633  12.04 % 810,636  11.55 %
Tier 1 capital to risk-weighted assets 6.00  % 8.00  % 830,633  12.04 % 810,636  11.55 %
Total capital to risk-weighted assets 8.00  % 10.00  % 939,998  13.63 % 922,007  13.14 %
On March 27, 2020, the regulators issued interim final rule, or IFR, “Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity due to the COVID-19 pandemic. The IFR provides financial institutions that adopted CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five year transition”). We adopted CECL effective January 1, 2020 and elected to implement the five year transition.
We have filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended, with the SEC, which allows for the issuance of a variety of securities including debt and capital securities, preferred and common stock and warrants. We may use the proceeds from the sale of securities for general corporate purposes, which could include investments at the holding company level, investing in, or extending credit to subsidiaries, possible acquisitions and stock repurchases. As of March 31, 2021, we had not issued any securities pursuant to this shelf registration statement.
S&T is monitoring and will continue to monitor the impact of the pandemic and has taken and will continue to take steps to mitigate the potential risks and impact on our liquidity and capital resources. Due to the economic uncertainty, we are taking a prudent approach to capital management and have established access to the Federal Reserve’s PPP Lending Facility.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market risk is defined as the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity prices can adversely affect a financial institution’s earnings or capital. For most financial institutions, including S&T, market risk primarily reflects exposures to changes in interest rates. Interest rate fluctuations affect earnings by changing net interest income and other interest-sensitive income and expense levels. Interest rate changes also affect capital by changing the net present value of a bank’s future cash flows, and the cash flows themselves, as rates change. Accepting this risk is a normal part of banking and can be an important source of profitability and enhancing shareholder value. However, excessive interest rate risk can threaten a bank’s earnings, capital, liquidity and solvency. Our sensitivity to changes in interest rate movements is continually monitored by the Asset and Liability Committee, or ALCO. The ALCO monitors and manages market risk through rate shock analyses, economic value of equity, or EVE, analyses and by performing stress tests and simulations to mitigate earnings and market value fluctuations due to changes in interest rates.
Rate shock analyses results are compared to a base case to provide an estimate of the impact that market rate changes may have on 12 and 24 months of pretax net interest income. The base case and rate shock analyses are performed on a static balance sheet. A static balance sheet is a no growth balance sheet in which all maturing and/or repricing cash flows are reinvested in the same product at the existing product spread. Rate shock analyses assume an immediate parallel shift in market interest rates and also include management assumptions regarding the impact of interest rate changes on non-maturity deposit products (noninterest-bearing demand, interest-bearing demand, money market and savings) and changes in the prepayment behavior of loans and securities with optionality. S&T policy guidelines limit the change in pretax net interest income over 12 and 24 month horizons using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in pretax net interest income by graduated risk tolerance levels of minimal, moderate and high. We have temporarily suspended the analyses on downward rate shocks of 200 basis points or more because they do not provide meaningful insight into our interest rate risk position.
In order to monitor interest rate risk beyond the 24 month time horizon of rate shocks on pretax net interest income, we also perform EVE analyses. EVE represents the present value of all asset cash flows minus the present value of all liability cash flows. EVE change results are compared to a base case to determine the impact that market rate changes may have on our EVE. As with rate shock analyses on pretax net interest income, EVE analyses incorporate management assumptions regarding prepayment behavior of fixed rate loans and securities with optionality and the behavior and value of non-maturity deposit products. S&T policy guidelines limit the change in EVE using rate shocks in increments of +/- 100 basis points. Policy guidelines define the percentage change in EVE by graduated risk tolerance levels of minimal, moderate and high. We have also temporarily suspended the downward rate shocks of 200 basis points or more for EVE.
The table below reflects the rate shock analyses results for the 1-12 and 13-24 month periods of pretax net interest income and EVE.

March 31, 2021 December 31, 2020
1 - 12 Months 13 - 24 Months % Change in EVE 1 - 12 Months 13 - 24 Months % Change in EVE
Change in Interest Rate (basis points) % Change in Pretax
 Net Interest Income 		% Change in
 Pretax
Net Interest Income 		% Change in Pretax
 Net Interest Income 		% Change in Pretax
Net Interest Income
400 24.1 % 33.6 % 18.2 % 15.8 % 28.5 % 28.5 %
300 17.9 % 25.1 % 19.8 % 11.7 % 21.3 % 29.0 %
200 11.9 % 17.1 % 18.5 % 7.7 % 14.3 % 25.6 %
100 5.4 % 8.2 % 11.6 % 4.4 % 8.0 % 17.7 %
(100) (3.7) % (7.6) % (23.9) % (2.8) % (5.7) % (28.2) %
The results from the rate shock analyses on net interest income are consistent with having an asset sensitive balance sheet. Having an asset sensitive balance sheet means more assets than liabilities will reprice during the measured time frames. The implications of an asset sensitive balance sheet will differ depending upon the change in market interest rates. For example, with an asset sensitive balance sheet in a declining interest rate environment, more assets than liabilities will decrease in rate. This situation could result in a decrease in net interest income and operating income. Conversely, with an asset sensitive balance sheet in a rising interest rate environment, more assets than liabilities will increase in rate. This situation could result in an increase in net interest income and operating income.
Our rate shock analyses show an improvement in the percentage change in pretax net interest income in the rates up scenarios and a decline in the rates down scenarios when comparing March 31, 2021 to December 31, 2020. We have become more asset sensitive due to our increased balances at the Federal Reserve. Our EVE analyses show a decline in the percentage change in EVE in the rates up scenarios and an improvement in the rates down scenario when comparing March 31, 2021 to December 31, 2020. The EVE decline is due to the impact of a steepened yield curve on the value of non-maturity deposits.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



In addition to rate shocks and EVE analyses, we perform a market risk stress test at least annually. The market risk stress test includes sensitivity analyses and simulations. Sensitivity analyses are performed to help us identify which model assumptions cause the greatest impact on pretax net interest income. Sensitivity analyses may include changing prepayment behavior of loans and securities with optionality and the impact of interest rate changes on non-maturity deposit products. Simulation analyses may include the potential impact of rate changes other than the policy guidelines, yield curve shape changes, significant balance mix changes and various growth scenarios.

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Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of S&T’s Interim Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO (its principal executive officer and principal financial officer, respectively), management has evaluated the effectiveness of the design and operation of S&T’s disclosure controls and procedures as of March 31, 2021. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission, or the SEC, and that such information is accumulated and communicated to S&T’s management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Based on and as of the date of such evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were effective in all material respects, as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2021, there were no changes made to S&T’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, S&T’s internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
There have been no material changes to the risk factors that we have previously disclosed in Part I, Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities
The following table is a summary of our purchases of common stock during the first quarter of 2021:
Period Total number of shares purchased Average price paid per share
Total number of shares purchased as part of publicly announced plan(1)
Approximate dollar value of shares that may yet be purchased under the plan
$37,441,683 
01/01/2021 - 01/31/2021 —  $—  —  37,441,683 
02/01/2021 - 02/28/2021 —  —  —  37,441,683 
03/01/2021 - 03/31/2021 —  —  —  37,441,683 
Total —  $—  —  $37,441,683 
(1) On March 15, 2021, our Board of Directors authorized an extension of the $50 million share repurchase plan, which was set to expire March 31, 2021. This authorization extended the expiration date of the repurchase plan through March 31, 2022. The plan permits S&T to repurchase from time to time up to the previously authorized $50 million in aggregate value of shares of S&T's common stock, with $37.4 million of capacity remaining at March 31, 2021, through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of S&T and will depend on a variety of factors, including general market conditions, the trading price of common stock, legal and contractual requirements, applicable securities laws and S&T's financial performance. The repurchase plan does not obligate us to repurchase any particular number of shares. We expect to fund any repurchases from cash on hand and internally generated funds. Any share repurchases will not occur unless permissible under applicable laws.

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Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits
2.1
Agreement and Plan of Merger, dated June 5, 2019, by and between DNB Financial Corporation and S&T Bancorp, Inc. Filed as Exhibit 2.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 5, 2019, and incorporated herein by reference.
Confidentiality, Trade Secrets, Non-Solicitation and Severance Agreement, October 21, 2020, by and between George Basara and S&T Bancorp, Inc.* Filed herewith
Severance Agreement dated April 20, 2015 by and between George Basara and S&T Bancorp, Inc.* Filed herewith
Rule 13a-14(a) Certification of the Chief Executive Officer. Filed herewith
Rule 13a-14(a) Certification of the Chief Financial Officer. Filed herewith
32
Rule 13a-14(b) Certification of the Chief Executive Officer and Chief Financial Officer. Filed herewith
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)
* Management Contract or Compensatory Plan or Arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
S&T Bancorp, Inc.
(Registrant)
May 5, 2021 /s Mark Kochvar
Mark Kochvar
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Signatory)
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Exhibit 31.1
CERTIFICATION
I, David Antolik, certify that:

1.I have reviewed this quarterly report on Form 10-Q of S&T Bancorp, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2021
 
/s/ David Antolik
David Antolik, President and Interim Chief Executive Officer


Exhibit 31.2
CERTIFICATION
I, Mark Kochvar, certify that:

1.I have reviewed this quarterly report on Form 10-Q of S&T Bancorp, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 5, 2021
 
/s/ Mark Kochvar
Mark Kochvar, Chief Financial Officer (Principal Financial Officer)


Exhibit 32
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
SARBANES-OXLEY ACT SECTION 906
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the S&T Bancorp, Inc. (the “Company”) Quarterly Report on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Antolik, President and Interim Chief Executive Officer of the Company, and I, Mark Kochvar, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and period covered by the Report.
This certificate is being made for the exclusive purpose of compliance by the Chief Executive Officer and Chief Financial Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.
Date: May 5, 2021
 
/s/ David Antolik   /s/ Mark Kochvar
David Antolik, President and Interim Chief Executive Officer   Mark Kochvar, Chief Financial Officer (Principal Financial Officer)