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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 June 30, 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 - 39,344,488 shares as of July 30, 2021



Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES



INDEX
S&T BANCORP, INC. AND SUBSIDIARIES
 
    Page No.    
2
3
4
6
7
38
56
58
58
58
59
59
60
60
60
61
1

Table of Contents

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


June 30, 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 $897,999 and $158,903 at June 30, 2021 and December 31, 2020
$ 985,278  $ 229,666 
Securities, at fair value 840,375  773,693 
Loans held for sale 7,648  18,528 
Portfolio loans, net of unearned income 7,007,351  7,225,860 
Allowance for credit losses on loans (109,636) (117,612)
Portfolio loans, net 6,897,715  7,108,248 
Bank owned life insurance 83,087  82,303 
Premises and equipment, net 54,173  55,614 
Federal Home Loan Bank and other restricted stock, at cost 10,106  13,030 
Goodwill 373,424  373,424 
Other intangible assets, net 7,771  8,675 
Other assets 236,255  304,716 
Total Assets $ 9,495,832  $ 8,967,897 
LIABILITIES
Deposits:
Noninterest-bearing demand $ 2,668,833  $ 2,261,994 
Interest-bearing demand 979,300  864,510 
Money market 2,047,254  1,937,063 
Savings 1,050,256  969,508 
Certificates of deposit 1,269,621  1,387,463 
Total Deposits 8,015,264  7,420,538 
Securities sold under repurchase agreements 68,587  65,163 
Short-term borrowings —  75,000 
Long-term borrowings 22,969  23,681 
Junior subordinated debt securities 64,113  64,083 
Other liabilities 136,166  164,721 
Total Liabilities 8,307,099  7,813,186 
SHAREHOLDERS’ EQUITY
Common stock ($2.50 par value)
Authorized—50,000,000 shares
Issued—41,449,444 shares at June 30, 2021 and December 31, 2020
Outstanding—39,345,719 shares at June 30, 2021 and 39,298,007 shares at December 31, 2020
103,623  103,623 
Additional paid-in capital 402,053  400,668 
Retained earnings 746,472  710,061 
Accumulated other comprehensive income 3,605  8,971 
Treasury stock — 2,103,725 shares at June 30, 2021 and 2,151,437 shares at December 31, 2020, at cost
(67,020) (68,612)
Total Shareholders’ Equity 1,188,733  1,154,711 
Total Liabilities and Shareholders’ Equity $ 9,495,832  $ 8,967,897 

See Notes to Consolidated Financial Statements
2

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, except per share data) 2021 2020 2021 2020
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 66,942  $ 75,498  $ 137,174  $ 157,549 
Investment Securities:
Taxable 3,793  3,791  7,356  8,074 
Tax-exempt 690  959  1,503  1,762 
Dividends 152  231  325  684 
Total Interest and Dividend Income 71,577  80,479  146,358  168,069 
INTEREST EXPENSE
Deposits 2,652  9,227  6,133  24,565 
Borrowings and junior subordinated debt securities 621  1,104  1,263  3,320 
Total Interest Expense 3,273  10,331  7,396  27,885 
NET INTEREST INCOME 68,304  70,148  138,962  140,184 
Provision for credit losses (2,561) (86,759) (5,699) (106,809)
Net Interest Income After Provision for Credit Losses 65,743  (16,611) 133,263  33,375 
NONINTEREST INCOME
Net gain on sale of securities 29  142  29  142 
Debit and credit card 4,744  3,612  8,906  7,093 
Service charges on deposit accounts 3,642  2,805  7,116  6,821 
Wealth management 3,167  2,586  6,111  4,949 
Mortgage banking 1,734  2,623  6,044  3,859 
Commercial loan swap income 299  945  393  3,429 
Other 1,809  2,511  4,062  1,334 
Total Noninterest Income 15,424  15,224  32,661  27,627 
NONINTEREST EXPENSE
Salaries and employee benefits 24,515  21,419  47,842  42,754 
Data processing and information technology 3,787  3,585  8,012  7,453 
Occupancy 3,434  3,437  7,261  7,202 
Furniture, equipment and software 2,402  3,006  5,042  5,525 
Other taxes 1,832  1,604  3,268  3,205 
Professional services and legal 1,637  1,932  3,168  2,980 
Marketing 996  979  2,318  2,090 
FDIC insurance 924  1,048  1,970  1,818 
Merger related expenses —  —  —  2,342 
Other 6,302  6,468  12,528  14,500 
Total Noninterest Expense 45,829  43,478  91,409  89,869 
Income (Loss) Before Taxes 35,338  (44,865) 74,515  (28,867)
Income tax expense (benefit) 6,971  (11,793) 14,247  (9,026)
Net Income (Loss) $ 28,367  $ (33,072) $ 60,268  $ (19,841)
Earnings per share—basic $ 0.73  $ (0.85) $ 1.54  $ (0.51)
Earnings per share—diluted $ 0.72  $ (0.85) $ 1.54  $ (0.51)
Dividends declared per share $ 0.28  $ 0.28  $ 0.56  $ 0.56 
Comprehensive Income (Loss) $ 30,911  $ (29,512) $ 54,902  $ 1,061 
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 June 30, 2020
(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 March 31, 2020 $ 103,623  $ 400,387  $ 740,726  $ 5,672  $ (74,157) $ 1,176,251 
Net loss for the three months ended June 30, 2020 —  —  (33,072) —  —  (33,072)
Other comprehensive income, net of tax —  —  —  3,560  —  3,560 
Cash dividends declared ($0.28 per share)
—  —  (10,961) —  —  (10,961)
Treasury stock issued for restricted stock awards of 143,744 shares, net of forfeitures of 5,709 shares
—  —  (4,453) —  4,422  (31)
Recognition of restricted stock compensation expense —  30  —  —  —  30 
Balance at June 30, 2020 $ 103,623  $ 400,417  $ 692,240  $ 9,232  $ (69,735) $ 1,135,777 
See Notes to Consolidated Financial Statements
For the three months ended June 30, 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 March 31, 2021 $ 103,623  $ 401,353  $ 731,718  $ 1,061  $ (69,477) $ 1,168,278 
Net income for the three months ended June 30, 2021 —  —  28,367  —  —  28,367 
Other comprehensive income, net of tax —  —  —  2,544  —  2,544 
Cash dividends declared ($0.28 per share)
—  —  (10,989) —  —  (10,989)
Treasury stock issued for restricted stock awards of 98,519 shares, net of forfeitures of 21,157
—  —  (2,624) —  2,457  (167)
Recognition of restricted stock compensation expense —  700  —  —  —  700 
Balance at June 30, 2021 $ 103,623  $ 402,053  $ 746,472  $ 3,605  $ (67,020) $ 1,188,733 
See Notes to Consolidated Financial Statements
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S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Six months ended June 30, 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 loss for the six months ended June 30, 2020 —  —  (19,841) —  —  (19,841)
Other comprehensive income, net of tax —  —  —  20,902  —  20,902 
Adoption of accounting standard - credit losses —  —  (22,590) —  —  (22,590)
Cash dividends declared ($0.56 per share)
—  —  (22,012) —  —  (22,012)
Treasury stock issued for restricted stock awards (147,054 shares, net of forfeitures of 32,448 shares)
—  —  (4,400) —  3,806  (594)
Repurchase of common stock (411,430 shares)
—  —  —  —  (12,559) (12,559)
Recognition of restricted stock compensation expense —  473  —  —  —  473 
Balance at June 30, 2020 $ 103,623  $ 400,417  $ 692,240  $ 9,232  $ (69,735) $ 1,135,777 
Six months ended June 30, 2021
(dollars in thousands, except share and per share data) Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
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 six months ended June 30, 2021 —  —  60,268  —  —  60,268 
Other comprehensive loss, net of tax —  —  —  (5,366) —  (5,366)
Cash dividends declared ($0.56 per share)
—  —  (21,963) —  —  (21,963)
Treasury stock issued for restricted stock awards (99,711 shares, net of forfeitures of 51,999 shares)
—  —  (1,894) —  1,592  (302)
Recognition of restricted stock compensation expense —  1,385  —  —  —  1,385 
Balance at June 30, 2021 $ 103,623  $ 402,053  $ 746,472  $ 3,605  $ (67,020) $ 1,188,733 
See Notes to Consolidated Financial Statements


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S&T BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(dollars in thousands) 2021 2020
Net Cash Provided by (Used in) Operating Activities $ 128,043  $ (31,568)
INVESTING ACTIVITIES
Purchases of securities (153,587) (80,292)
Proceeds from maturities, prepayments and calls of securities 72,951  81,156 
Proceeds from sales of securities 1,917  1,349 
Net proceeds from sales of Federal Home Loan Bank stock 2,924  7,826 
Net decrease (increase) in loans 201,545  (491,457)
Proceeds from sale of portfolio loans 3,438  — 
Purchases of premises and equipment (1,926) (2,862)
Proceeds from the sale of premises and equipment 74  — 
Net Cash Provided by (Used in) Investing Activities 127,336  (484,280)
FINANCING ACTIVITIES
Net increase in core deposits 712,568  902,933 
Net decrease in certificates of deposit (117,782) (71,007)
Net increase in securities sold under repurchase agreements 3,424  72,271 
Net decrease in short-term borrowings (75,000) (196,778)
Repayments on long-term borrowings (712) (2,864)
Treasury shares issued-net (302) (594)
Cash dividends paid to common shareholders (21,963) (22,012)
Repurchase of common stock —  (12,559)
Net Cash Provided by Financing Activities 500,233  669,390 
Net increase in cash and cash equivalents 755,612  153,542 
Cash and cash equivalents at beginning of period 229,666  197,823 
Cash and Cash Equivalents at End of Period $ 985,278  $ 351,365 
Supplemental Disclosures
Loans transferred to held for sale $ 2,798  $ — 
Interest paid $ 9,114  $ 29,721 
Income taxes paid, net of refunds $ 12,097  $ 210 
Transfers of loans to other real estate owned $ 90  $ 513 
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 financial statements.








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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 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 financial statements.
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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 and six months ended June 30, 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 June 30, Six months ended June 30,
(in thousands, except share and per share data) 2021 2020 2021 2020
Numerator for Earnings per Share—Basic:
Net income $ 28,367  $ (33,072) $ 60,268  $ (19,841)
Less: Income allocated to participating shares 141  —  283  — 
Net Income Allocated to Shareholders $ 28,226  $ (33,072) $ 59,985  $ (19,841)
Numerator for Earnings per Share—Diluted:
Net income $ 28,367  $ (33,072) $ 60,268  $ (19,841)
Net Income Available to Shareholders $ 28,367  $ (33,072) $ 60,268  $ (19,841)
Denominators for Earnings per Share:
Weighted Average Shares Outstanding—Basic 39,048,971  39,013,161  39,039,007  39,142,351 
Add: Potentially dilutive shares 90,590  —  93,583  — 
Denominator for Treasury Stock Method—Diluted 39,139,561  39,013,161  39,132,590  39,142,351 
Weighted Average Shares Outstanding—Basic 39,048,971  39,013,161  39,039,007  39,142,351 
Add: Average participating shares outstanding —  —  —  — 
Denominator for Two-Class Method—Diluted 39,048,971  39,013,161  39,039,007  39,142,351 
Earnings per share—basic $ 0.73  $ (0.85) $ 1.54  $ (0.51)
Earnings per share—diluted $ 0.72  $ (0.85) $ 1.54  $ (0.51)
Restricted stock considered anti-dilutive excluded from potentially dilutive shares 25  21,333  424  82,624 
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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 fair value of U.S. treasury securities are based on quoted market prices in active markets and are classified as Level 1. The market valuation sources for other 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 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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S&T BANCORP, INC. AND SUBSIDIARIES
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 Condensed 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 forward commitments related to 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 are carried at the lower of cost or market and 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 marked to fair value are classified as Level 2.
Loans Individually Evaluated
Loans that are individually evaluated to determine whether a specific allocation of ACL is needed are reported at the lower of amortized cost or 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 individually evaluated that are marked to 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 marked to 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 Condensed 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
Collateral receivable is cash that is made available to counterparties as collateral for our interest rate swaps. 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.
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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 June 30, 2021 and December 31, 2020.
June 30, 2021
(dollars in thousands) Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale debt securities:
U.S. Treasury securities $ 74,804  $ —  $ —  $ 74,804 
Obligations of U.S. government corporations and agencies —  81,624  —  81,624 
Collateralized mortgage obligations of U.S. government corporations and agencies —  201,350  —  201,350 
Residential mortgage-backed securities of U.S. government corporations and agencies —  63,859  —  63,859 
Commercial mortgage-backed securities of U.S. government corporations and agencies —  325,303  —  325,303 
Corporate obligations —  499  —  499 
Obligations of states and political subdivisions —  91,840  —  91,840 
Total Available-for-sale Debt Securities 74,804  764,475    839,279 
Marketable equity securities 1,015  81  —  1,096 
Total Securities 75,819  764,556    840,375 
Securities held in a deferred compensation plan 7,808  —  —  7,808 
Derivative financial assets:
Interest rate swaps —  49,078  —  49,078 
Interest rate lock commitments —  —  1,137  1,137 
Total Assets $ 83,627  $ 813,634  $ 1,137  $ 898,398 
LIABILITIES
Derivative financial liabilities:
Interest rate swaps $ —  $ 49,477  $ —  $ 49,477 
Forward sale contracts —  91  —  91 
Total Liabilities $   $ 49,568  $   $ 49,568 
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 10,282  760,111    770,393 
Marketable equity securities 3,228  72  —  3,300 
Total Securities 13,510  760,183    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 $ 20,304  $ 838,502  $ 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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NOTE 3. FAIR VALUE MEASUREMENTS - continued
Loans held for sale were transferred to Level 2 from Level 3 during the six months ended June 30 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 June 30, 2021 or December 31, 2020.
For Level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:
June 30, 2021 Valuation Technique Significant Unobservable Inputs Range
Weighted Average
(1) (2) (3)
(dollars in thousands)
Loans individually evaluated $ 60,778  Collateral method Appraisal adjustment —% - 32.00% 13.68%
Other real estate owned 1,088  Collateral method Costs to sell 4.00% - 7.00% 4.21%
Mortgage servicing rights 6,658  Discounted cash flow method Discount rate 9.21% - 12.54% 9.39%
Constant prepayment rates 8.38% - 15.10% 11.13%
Total Assets $ 68,524 

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 —% - 47.00% 16.90%
Other real estate owned 1,953  Collateral method Costs to sell 4.00% - 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 individually evaluated were weighted by loan amounts.
(2) Weighted averages for other real estate owned were weighted by OREO balances.
(3) Weighted averages for mortgage servicing 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 June 30, 2021 and December 31, 2020 are presented in the following tables:
Carrying
Value(1)
Fair Value Measurements at June 30, 2021
(dollars in thousands) Total Level 1 Level 2 Level 3
ASSETS
Cash and due from banks, including interest-bearing deposits $ 985,278  $ 985,278  $ 985,278  $ —  $ — 
Securities 840,375  840,375  75,819  764,556  — 
Loans held for sale 7,648  7,648  —  7,648  — 
Portfolio loans, net 6,897,715  6,808,655  —  —  6,808,655 
Bank owned life insurance 83,087  —  —  —  — 
Collateral receivable 45,703  45,703  45,703  —  — 
Securities held in a deferred compensation plan 7,808  7,808  7,808  —  — 
Mortgage servicing rights 6,658  6,658  —  —  6,658 
Interest rate swaps 49,078  49,078  —  49,078  — 
Interest rate lock commitments 1,137  1,137  —  —  1,137 
LIABILITIES
Deposits $ 8,015,264  $ 8,014,963  $ 6,745,643  $ 1,269,320  $ — 
Securities sold under repurchase agreements 68,587  68,587  68,587  —  — 
Short-term borrowings —  —  —  —  — 
Long-term borrowings 22,969  23,529  4,398  19,131  — 
Junior subordinated debt securities 64,112  64,112  64,112  —  — 
Interest rate swaps 49,477  49,477  —  49,477  — 
Forward sale contracts 91  91  —  91  — 
(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  13,510  760,183  — 
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  — 
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) June 30, 2021 December 31, 2020
Available-for-sale debt securities $ 839,279  $ 770,393 
Marketable equity securities 1,096  3,300 
Total Securities $ 840,375  $ 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:
  June 30, 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 $ 74,253  $ 551  $ —  $ 74,804  $ 9,980  $ 302  $ —  $ 10,282 
Obligations of U.S. government corporations and agencies 78,674  2,950  —  81,624  78,755  4,149  —  82,904 
Collateralized mortgage obligations of U.S. government corporations and agencies 197,458  4,762  (870) 201,350  202,975  6,410  (89) 209,296 
Residential mortgage-backed securities of U.S. government corporations and agencies 63,896  548  (585) 63,859  66,960  818  —  67,778 
Commercial mortgage-backed securities of U.S. government corporations and agencies 314,228  11,114  (39) 325,303  258,875  14,806  —  273,681 
Corporate obligations 500  —  (1) 499  2,021  (1) 2,025 
Obligations of states and political subdivisions 86,271  5,569  —  91,840  117,439  6,988  —  124,427 
Total Available-for-Sale Debt Securities (1)
$ 815,280  $ 25,494  $ (1,495) $ 839,279  $ 737,005  $ 33,478  $ (90) $ 770,393 
(1) Excludes interest receivable of $3.2 million at June 30, 2021 and $3.1 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:
June 30, 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 $ —  $ —  $ —  $ —  $ —  $ — 
Obligations of U.S. government corporations and agencies —  —  —  —  —  — 
Collateralized mortgage obligations of U.S. government corporations and agencies 5 67,822  (870) —  —  5 67,822  (870)
Residential mortgage-backed securities of U.S. government corporations and agencies 2 49,159  (585) —  —  2 49,159  (585)
Commercial mortgage-backed securities of U.S. government corporations and agencies 3 51,452  (39) —  —  3 51,452  (39)
Corporate bonds 1 500  (1) —  —  1 500  (1)
Obligations of states and political subdivisions —  —  —  —  —  — 
Total 11 $ 168,933  $ (1,495) $   $   11 $ 168,933  $ (1,495)
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 were 11 debt securities in an unrealized loss position at June 30, 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.


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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:
June 30, 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 $ 25,494  $ (1,495) $ 23,999  $ 33,478  $ (90) $ 33,388 
Income tax (expense) benefit (5,424) 318  (5,107) (7,128) 19  (7,109)
Net Unrealized Gains/(Losses), Net of Tax Included in Accumulated Other Comprehensive Income/(Loss) $ 20,070  $ (1,177) $ 18,892  $ 26,350  $ (71) $ 26,279 
The amortized cost and fair value of available-for-sale debt securities at June 30, 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.
June 30, 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 $ 35,066  $ 35,402 
Due after one year through five years 87,794  91,953 
Due after five years through ten years 95,316  97,577 
Due after ten years 21,022  23,336 
Available-for-Sale Debt Securities With Maturities 239,198  248,268 
Collateralized mortgage obligations of U.S. government corporations and agencies 197,458  201,350 
Residential mortgage-backed securities of U.S. government corporations and agencies 63,896  63,859 
Commercial mortgage-backed securities of U.S. government corporations and agencies 314,228  325,303 
Corporate Securities 500  499 
Total Available-for-Sale Debt Securities $ 815,280  $ 839,279 
Debt securities with carrying values of $380 million at June 30, 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 June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Marketable Equity Securities
Net market gains/(losses) recognized $ 28  $ 448  $ 143  $ (1,137)
Less: Net gains recognized for equity securities sold 142  29  142 
Unrealized Gains/(Losses) on Equity Securities Still Held $ 25  $ 306  $ 114  $ (1,279)
Total unrealized gains and losses on marketable equity securities recognized during the current period are included in other noninterest income on the Condensed 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 $16.5 million at June 30, 2021 and $16.0 million at December 31, 2020 and net of a discount related to purchase accounting fair value adjustments of $6.9 million at June 30, 2021 and $8.6 million at December 31, 2020. The following table presents loans as of the dates presented:
(dollars in thousands) June 30, 2021 December 31, 2020
Commercial
Commercial real estate $ 3,246,533  $ 3,244,974 
Commercial and industrial 1,774,358  1,954,453 
Commercial construction 478,153  474,280 
Total Commercial Loans 5,499,044  5,673,707 
Consumer
Consumer real estate 1,420,097  1,471,238 
Other consumer 88,210  80,915 
Total Consumer Loans 1,508,307  1,552,153 
Total Portfolio Loans 7,007,351  7,225,860 
Loans held for sale 7,648  18,528 
Total Loans (1)
$ 7,014,999  $ 7,244,388 
(1) Excludes interest receivable of $21.0 million at June 30, 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 $336.1 million of loans originated under the Paycheck Protection Program, or PPP, at June 30, 2021 compared to $465.0 million at December 31, 2020. 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 June 30, 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 $506.2 million of commercial real estate loans, $228.1 million of C&I loans, $10.3 million of commercial construction loans, $326.2 million of consumer real estate loans and $0.03 million of other consumer loans that have a commercial purpose at June 30, 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 78.5 percent of total portfolio loans at both June 30, 2021 and December 31, 2020. Within our commercial portfolio, the CRE and commercial construction portfolios combined comprised $3.7 billion, or 67.7 percent, of total commercial loans at June 30, 2021 and $3.7 billion, or 65.6 percent, of total commercial loans at December 31, 2020 and 53.2 percent of total portfolio loans at June 30, 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 5.4 percent of the combined portfolios and 2.9 percent of total portfolio loans at June 30, 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:
June 30, 2021 December 31, 2020
(dollars in thousands) Performing
TDRs
Nonperforming
TDRs
Total
TDRs
Performing
TDRs
Nonperforming
TDRs
Total
TDRs
Commercial real estate $ $ 6,415  $ 6,418  $ 14  $ 16,654  $ 16,668 
Commercial and industrial 3,579  11,183  14,763  7,090  9,885  16,975 
Commercial construction 3,222  —  3,222  3,267  —  3,267 
Business banking 1,439  1,508  2,947  1,503  430  1,933 
Consumer real estate 6,073  1,544  7,617  5,581  2,319  7,900 
Other consumer —  — 
Total $ 14,321  $ 20,650  $ 34,971  $ 17,460  $ 29,288  $ 46,748 
There were 4 TDRs for a total of $0.5 million that returned to accruing status during the three months ended June 30, 2021 compared to 4 TDRs for a total of $0.1 million for the three months ended June 30, 2020. There were 5 TDRs for a total of $0.5 million that returned to accruing status during the six months ended June 30, 2021 compared to 4 TDRs for a total of $0.1 million for the six months ended June 30, 2020.
The following tables present the restructured loans by portfolio segment and by type of concession for the periods presented:
Three Months Ended June 30, 2021
Number
of
Contracts
Type of Modification
Total
Post-Modification Outstanding Recorded Investment(2)
Total
Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity
Modify
Rate
Modify
Payments
Commercial real estate —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Commercial industrial —  —  —  —  —  —  —  — 
Commercial construction —  —  —  —  —  —  —  — 
Business banking —  —  1,130  —  —  1,130  1,130 
Consumer real estate 247  —  —  —  —  247  254 
Other consumer —  —  —  —  —  —  —  — 
Total 8  $ 247  $   $ 1,130  $   $   $ 1,377  $ 1,384 
(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.

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NOTE 5. LOANS AND LOANS HELD FOR SALE - continued
Three Months Ended June 30, 2020
Number
of
Contracts
Type of Modification
Total
Post-Modification Outstanding Recorded Investment(2)
Total
Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity
Modify
Rate
Modify
Payments
Commercial real estate —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Commercial industrial —  —  —  —  75  75  75 
Commercial construction —  —  701  —  —  701  701 
Business banking —  —  —  —  27  27  93 
Consumer real estate 350  —  150  —  —  500  500 
Other consumer —  —  —  —  —  —  —  — 
Total 11  $ 350  $   $ 851  $   $ 102  $ 1,303  $ 1,369 
(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.
Six Months Ended June 30, 2021
Number
of
Contracts
Type of Modification
Total
Post-Modification Outstanding Recorded Investment(2)
Total
Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity
Modify
Rate
Modify
Payments
Commercial real estate —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Commercial industrial —  —  796  5,433  —  6,229  6,304 
Commercial construction —  —  —  —  —  —  —  — 
Business banking —  80  1,130  —  —  1,210  1,210 
Consumer real estate 13  573  —  —  —  147  720  739 
Other consumer —  —  —  —  —  — 
Total 21  $ 573  $ 80  $ 1,926  $ 5,433  $ 147  $ 8,159  $ 8,254 
(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.

Six Months Ended June 30, 2020
Number
of
Contracts
Type of Modification
Total
Post-Modification Outstanding Recorded Investment(2)
Total
Pre-Modification Outstanding Recorded Investment(2)
(dollars in thousands)
Bankruptcy(1)
Forbearance Extend
Maturity
Modify
Rate
Modify
Payments
Commercial real estate $ —  $ —  $ 2,210  $ —  $ —  $ 2,210  $ 2,210 
Commercial industrial —  —  2,068  —  75  2,143  2,542 
Commercial construction —  —  2,572  —  —  2,572  2,592 
Business banking —  —  —  —  27  27  93 
Consumer real estate 13  723  —  177  —  —  900  912 
Other consumer —  —  —  —  —  —  —  — 
Total 20  $ 723  $ —  $ 7,027  $ —  $ 102  $ 7,852  $ 8,349 
(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.

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NOTE 5. LOANS AND LOANS HELD FOR SALE - continued
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 June 30, 2021. We had 42 commercial loans that were modified totaling $68.7 million at June 30, 2021 compared to 52 commercial loans that were modified totaling $195.6 million at December 31, 2020.
As of June 30, 2021, we had 14 commitments to lend an additional $0.7 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 and six months ended June 30, 2021. There was 1 TDR that defaulted during the three months ended June 30, 2020 for a total of $0.1 million and 11 TDRs that defaulted during the six months ended June 30, 2020 for a total of $21.1 million that were restructured within the last 12 months prior to defaulting.
The following table is a summary of nonperforming assets as of the dates presented:
Nonperforming Assets
(dollars in thousands) June 30, 2021 December 31, 2020
Nonperforming Assets
Nonaccrual loans $ 91,969  $ 117,485 
Nonaccrual TDRs 20,650  29,289 
Total Nonaccrual Loans 112,619  146,774 
OREO 1,145  2,155 
Total Nonperforming Assets $ 113,764  $ 148,929 
The decrease in nonaccrual loans of $34.2 million at June 30, 2021 compared to December 31, 2020 was primarily related to the payoff of three CRE relationships for a total of $14.4 million and a charge off of a $4.9 million CRE relationship and a $3.9 million C&I relationship.


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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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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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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:
June 30, 2021
Risk Rating
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Pass $ 179,504  $ 326,531  $ 457,287  $ 347,132  $ 229,164  $ 778,930  $ 40,398  —  $ 2,358,945 
Special mention —  448  29,581  8,310  38,927  112,654  —  —  189,920 
Substandard —  —  17,007  15,516  19,229  131,668  1,500  —  184,920 
Doubtful —  —  751  —  —  5,760  —  —  6,511 
Total commercial real estate 179,504  326,979  504,625  370,957  287,320  1,029,012  41,898    2,740,296 
Commercial and industrial
Pass 395,929  265,953  153,588  102,789  45,641  140,169  370,282  —  1,474,351 
Special mention 51  3,008  22,124  3,369  —  1,141  11,574  —  41,266 
Substandard 5,433  —  8,962  1,573  5,572  5,357  3,733  —  30,630 
Doubtful —  —  —  —  —  —  —  —  — 
Total commercial and industrial 401,413  268,962  184,674  107,731  51,213  146,667  385,588    1,546,247 
Commercial construction
Pass 61,289  126,858  182,394  48,374  1,352  5,131  19,761  —  445,159 
Special mention —  1,380  3,269  —  —  8,421  —  —  13,071 
Substandard —  2,138  4,058  —  500  2,945  —  —  9,642 
Doubtful                  
Total commercial construction 61,289  130,376  189,721  48,374  1,853  16,498  19,761    467,871 
Business banking
Pass 100,800  115,666  158,725  123,708  85,193  337,243  104,566  455  1,026,356 
Special mention 117  637  1,919  1,665  1,564  6,958  287  121  13,270 
Substandard —  72  1,694  3,364  1,376  23,139  954  651  31,249 
Doubtful                  
Total business banking 100,917  116,374  162,338  128,737  88,133  367,340  105,808  1,228  1,070,875 
Consumer real estate
Pass 43,351  111,065  98,684  49,815  45,224  241,295  467,802  22,670  1,079,907 
Special mention —  —  —  —  —  2,205  —  —  2,205 
Substandard —  58  185  1,595  1,404  6,963  356  1,205  11,766 
Doubtful                  
Total consumer real estate 43,351  111,123  98,869  51,411  46,628  250,463  468,158  23,875  1,093,878 
Other consumer
Pass 12,668  12,283  9,842  4,764  2,016  1,767  36,611  1,040  80,990 
Special mention —  —  —  —  —  —  —  —  — 
Substandard —  —  113  123  208  4,910  275  1,560  7,190 
Doubtful —  —  —  —  —  —  — 
Total other consumer 12,668  12,283  9,955  4,887  2,223  6,681  36,886  2,600  88,184 
Pass 793,541  958,356  1,060,518  676,582  408,589  1,504,535  1,039,420  24,166  6,465,707 
Special mention 168  5,474  56,894  13,343  40,492  131,379  11,861  121  259,732 
Substandard 5,433  2,268  32,019  22,172  28,289  174,983  6,818  3,415  275,397 
Doubtful —  —  751  —  —  5,764  —  —  6,514 
Total $ 799,142  $ 966,097  $ 1,150,182  $ 712,097  $ 477,370  $ 1,816,661  $ 1,058,098  $ 27,703  $ 7,007,351 

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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 June 30, 2021 and December 31, 2020:
June 30, 2021
(dollars in thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Revolving-Term Total
Commercial real estate
Performing $ 179,504  $ 326,979  $ 488,368  $ 368,211  $ 280,693  $ 974,576  $ 41,898  $ —  $ 2,660,229 
Nonperforming —  —  16,257  2,747  6,628  54,435  —  —  80,067 
Total commercial real estate 179,504  326,979  504,625  370,957  287,320  1,029,012  41,898    2,740,296 
Commercial and industrial
Performing 395,980  268,962  184,674  107,347  45,711  146,416  384,959  —  1,534,049 
Nonperforming 5,433  —  —  384  5,501  250  629  —  12,198 
Total commercial and industrial 401,413  268,962  184,674  107,731  51,213  146,667  385,588    1,546,247 
Commercial construction
Performing 61,289  130,376  189,721  48,374  1,853  16,113  19,761  —  467,486 
Nonperforming —  —  —  —  —  385  —  —  385 
Total commercial construction 61,289  130,376  189,721  48,374  1,853  16,498  19,761    467,871 
Business banking
Performing 100,917  116,374  162,077  127,306  87,342  358,870  105,753  1,170  1,059,810 
Nonperforming —  —  261  1,431  791  8,470  55  57  11,064 
Total business banking 100,917  116,374  162,338  128,737  88,133  367,340  105,808  1,228  1,070,875 
Consumer real estate
Performing 43,351  110,441  98,578  51,161  46,018  244,783  467,827  22,934  1,085,094 
Nonperforming —  682  291  249  610  5,680  331  940  8,783 
Total consumer real estate 43,351  111,123  98,869  51,411  46,628  250,463  468,158  23,875  1,093,878 
Other consumer
Performing 12,668  12,162  9,955  4,887  2,223  6,681  36,886  2,600  88,062 
Nonperforming —  121  —  —  —  —  —  —  121 
Total other consumer 12,668  12,283  9,955  4,887  2,223  6,681  36,886  2,600  88,184 
Performing 793,709  965,293  1,133,373  707,286  463,841  1,747,440  1,057,084  26,705  6,894,731 
Nonperforming 5,433  803  16,809  4,811  13,529  69,221  1,015  998  112,619 
Total $ 799,142  $ 966,097  $ 1,150,182  $ 712,097  $ 477,370  $ 1,816,661  $ 1,058,098  $ 27,703  $ 7,007,351 
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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:
June 30, 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 $ 2,648,221  $ 12,007  $ —  $ 80,067  $ 92,075  2,740,296 
Commercial and industrial 1,534,049  —  —  12,198  12,198  1,546,247 
Commercial construction 466,987  —  500  385  885  467,871 
Business banking 1,057,279  2,311  222  11,064  13,597  1,070,875 
Consumer real estate 1,083,947  640  507  8,783  9,930  1,093,878 
Other consumer 87,905  105  52  121  278  88,184 
Total $ 6,878,389  $ 15,063  $ 1,281  $ 112,619  $ 128,962  $ 7,007,351 
(1) We had 42 loans that were modified totaling $68.7 million under the CARES Act at June 30, 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 modifications, this delinquency table may not accurately reflect the credit risk associated with these loans.
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NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
December 31, 2020
(dollars in thousands) Current 30-59 Days
Past Due
60-89 Days
Past Due
Past Due 90+ Days Still Accruing (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:
June 30, 2021
June 30, 2021 For the three and six months ended
(dollars in thousands) Beginning of Period Nonaccrual End of Period Nonaccrual Nonaccrual With No Related Allowance
Interest Income Recognized on Nonaccrual(1)
Interest Income Recognized on Nonaccrual(1)
Commercial real estate $ 101,070  $ 80,067  $ 47,648  $ $ 66 
Commercial and industrial 16,985  12,198  11,183  72  115 
Commercial construction 384  385  —  —  — 
Business banking 17,122  11,064  1,508  139  275 
Consumer real estate 11,117  8,783  —  210  319 
Other consumer 96  121  —  — 
Total $ 146,774  $ 112,619  $ 60,340  $ 426  $ 776 
(1) Represents only cash payments received and applied to interest on nonaccrual loans.
.
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  —  — 
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:
June 30, 2021
Type of Collateral
(dollars in thousands) Real Estate Business
Assets
Investment/Cash Other
Commercial real estate $ 76,437  $ —  $ —  $ — 
Commercial and industrial 302  14,461  —  — 
Commercial construction 3,222  —  —  — 
Business banking 1,806  1,141  —  — 
Consumer real estate —  —  —  — 
Total $ 81,767  $ 15,602  $   $  
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 June 30, 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 $ 66,842  $ 14,663  $ 6,329  $ 15,680  $ 8,981  $ 2,606  $ 115,101 
Provision for credit losses on loans(1)
2,937  225  (426) (560) (410) 243  2,008 
Charge-offs (7,558) (473) —  (410) (76) (221) (8,737)
Recoveries 965  11  47  152  88  1,264 
Net (Charge-offs)/Recoveries (6,594) (462) 2  (363) 76  (132) (7,473)
Balance at End of Period $ 63,186  $ 14,426  $ 5,905  $ 14,756  $ 8,647  $ 2,717  $ 109,636 
(1) Excludes unfunded commitments

Three Months Ended June 30, 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 $ 42,611  $ 19,870  $ 6,606  $ 13,706  $ 11,200  $ 2,857  $ 96,850 
Impact of CECL adoption —  —  —  —  —  —  — 
Provision for credit losses on loans(1)
20,681  60,906  2,249  918  400  677  85,831 
Charge-offs (5,600) (61,616) —  (260) (37) (790) (68,303)
Recoveries 38  19  40  22  108  231 
Net (Charge-offs)/Recoveries (5,562) (61,612) 19  (220) (15) (682) (68,072)
Balance at End of Period $ 57,730  $ 19,164  $ 8,874  $ 14,404  $ 11,585  $ 2,852  $ 114,609 
(1) Excludes unfunded commitments
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NOTE 6. ALLOWANCE FOR CREDIT LOSSES – continued
Six Months Ended June 30, 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)
4,933  2,953  (1,337) (46) (1,254) 61  5,308 
Charge-offs $ (8,369) $ (4,774) $ —  $ (1,327) $ (347) $ (453) $ (15,270)
Recoveries 965  148  213  234  423  1,985 
Net (Charge-offs)/Recoveries (7,403) (4,627) 3  (1,115) (113) (30) (13,285)
Balance at End of Period $ 63,186  $ 14,426  $ 5,905  $ 14,756  $ 8,647  $ 2,717  $ 109,636 
(1) Excludes unfunded commitments
Six Months Ended June 30, 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)
28,345  67,104  4,329  2,126  829  1,529  104,262 
Charge-offs (6,042) (71,496) —  (721) (218) (1,272) (79,749)
Recoveries 40  22  21  101  112  224  520 
Net (Charge-offs)/Recoveries (6,002) (71,474) 21  (620) (106) (1,048) (79,229)
Balance at End of Period $ 57,730  $ 19,164  $ 8,874  $ 14,404  $ 11,585  $ 2,852  $ 114,609 
(1) Excludes unfunded commitments
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 Form 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 $84.2 million and $101.1 million to $2.6 million and $5.7 million for the three and six months ended June 30, 2021 compared to $86.8 million and $106.8 million for the same periods in 2020. The provision for credit losses includes $0.6 million and $0.4 million for the reserve for unfunded commitments for the three and six months ended June 30, 2021.
During the three months ended June 30, 2020, we recognized a charge-off of $58.7 million related to a customer fraud from a check kiting scheme. We continue to pursue all available resources of recovery to mitigate the loss. The customer also had a lending relationship of $15.1 million that had a $4.2 million charge-off during the three months ended June 30, 2020. We received a recovery of $0.9 million on the lending relationship during the three months ended June 30, 2021.
The significant decrease in the provision for credit losses during the three and six months ended June 30, 2021 was mainly due to the above mentioned customer fraud and an improved economic forecast in 2021 compared to 2020. Our economic forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at June 30, 2021 compared to the same periods in 2020.



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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. Our current collateral requirements do not have a material effect on our cash flow or liquidity position.
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 Condensed 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 Condensed Consolidated Statements of Comprehensive Income.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

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) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Interest Rate Swap Contracts - Commercial Loans
Fair value $ 49,078  $ 78,319  $ 49,477  $ 79,033 
Notional amount 1,003,946  983,638  1,003,946  983,638 
Collateral posted —  —  45,700  77,930 
Interest Rate Lock Commitments - Mortgage Loans
Fair value 1,137  2,900  —  — 
Notional amount 26,238  51,053  —  — 
Forward Sale Contracts - Mortgage Loans
Fair value —  —  91  385 
Notional amount $ —  $ —  $ 23,245  $ 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) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020
Derivatives not Designated as Hedging Instruments:
Gross amounts recognized $ 50,158  $ 82,655  $ 50,934  $ 82,626 
Gross amounts offset (1,080) (4,336) (1,457) (3,593)
Net Amounts Presented in the Consolidated Balance Sheets 49,078  78,319  49,477  79,033 
Gross amounts not offset(1)
—  —  (45,700) (77,930)
Net Amount $ 49,078  $ 78,319  $ 3,777  $ 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 June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Derivatives not Designated as Hedging Instruments
Interest rate swap contracts—commercial loans $ $ (62) $ 315  $ 52 
Interest rate lock commitments—mortgage loans (883) 186  (2,642) 2,792 
Forward sale contracts—mortgage loans 194  698  1,173  (595)
Total Derivatives (Loss)/Gain $ (684) $ 822  $ (1,154) $ 2,249 
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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) June 30, 2021 December 31, 2020
Commitments to extend credit $ 2,476,630  $ 2,185,752 
Standby letters of credit 86,532  89,095 
Total $ 2,563,162  $ 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 Condensed 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:
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Balance at beginning of period $ 4,303  $ 6,077  $ 4,467  $ 3,112 
Impact of adopting ASU 2016-13 at January 1, 2020 —  —  —  1,349 
Balance after adoption of ASU 2016-13 4,303  6,077  4,467  4,461 
Provision for credit losses 555  927  391  2,543 
Total $ 4,858  $ 7,004  $ 4,858  $ 7,004 
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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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

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 June 30, 2021 Three Months Ended June 30, 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 $ 324  $ (69) $ 255  $ 4,059  $ (864) $ 3,195 
Adjustment to funded status of employee benefit plans (1)
2,910  (621) 2,289  464  (99) 365 
Other Comprehensive Income $ 3,234  $ (690) $ 2,544  $ 4,523  $ (963) $ 3,560 
(1) Pension settlement accounting was recognized during the periods ended June 30, 2021 resulting in a charge of $0.2 million for the three months ended June 30, 2021 immediately recognizing a portion of unrecognized actuarial loss and a remeasurement of our pension obligation.
Six Months Ended June 30, 2021 Six Months Ended June 30, 2020
(dollars in thousands) Pre-Tax
Amount
Tax
(Expense)
Benefit
Net of Tax
Amount
Pre-Tax
Amount
Tax
(Expense)
Benefit
Net of Tax
Amount
Change in net unrealized gains/(losses) on available-for-sale debt securities $ (9,388) $ 2,003  $ (7,385) $ 25,623  $ (5,452) $ 20,171 
Adjustment to funded status of employee benefit plans (1)
2,567  (548) 2,019  929  (198) 731 
Other Comprehensive (Loss)/Income $ (6,821) $ 1,455  $ (5,366) $ 26,552  $ (5,650) $ 20,902 
(1) Pension settlement accounting was recognized during the periods ended June 30, 2021 resulting in a charge of $0.9 million for the six months ended June 30, 2021 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 projected 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 as of June 30, 2021 compared to 3.45 percent for the same period in 2020.
We remeasured our pension obligation and recognized a pension settlement charge of $0.2 million and $0.9 million for the three and six months ended June 30, 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 June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Components of Net Periodic Pension Cost
Interest cost on projected benefit obligation $ 797  $ 890  $ 1,500  $ 1,781 
Expected return on plan assets (645) (971) (1,361) (1,943)
Net amortization 298  385  546  769 
Settlement Charge 177  —  926  — 
Net Periodic Pension Expense $ 627  $ 304  $ 1,611  $ 607 
The components of net periodic pension expense are included in salaries and employee benefits on the Condensed 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 June 30, 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 and six months ended June 30, 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 and six month periods ended June 30, 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 June 30, 2021 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 $9.5 billion at June 30, 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 loan portfolios that have been significantly impacted by the pandemic, including our hotel portfolio. We did experience some improvement in our asset quality during the three and six months ended June 30, 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. Net interest income was favorably impacted by PPP loans which contributed $4.1 million and $9.9 million for the three and six months ended June 30, 2021 to interest income.

Earnings Summary
We recognized net income of $28.4 million, or $0.72 per diluted share and $60.3 million, or $1.54 per diluted share for the three and six months ended June 30, 2021 compared to a net loss of ($33.1) million, or ($0.85) per diluted share and ($19.8) million, or ($0.51) per diluted share for the same periods in 2020. The increase in net income for the three and six months ended June 30, 2021 was primarily due to significant decrease of $84.2 million and $101.1 million in our provision for credit losses compared to the same periods in 2020. The significant decrease in the provision for credit losses during the three and six months ended June 30, 2021 was mainly due to a customer fraud in 2020 that resulted in a $58.7 million charge-off as well as the impact of the COVID-19 pandemic.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net interest income decreased $1.8 million and $1.2 million to $68.3 million and $139.0 million for the three and six months ended June 30, 2021 compared to $70.1 million and $140.2 million in 2020. The decrease in net interest income was primarily due to lower short-term interest rates and a decrease in average loan balances of $537.6 million and $239.7 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Average interest-bearing deposits decreased $186.4 million and $174.6 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Our net interest margin on an FTE basis (non-GAAP) decreased to 3.16 percent and 3.31 percent for the three and six months ended June 30, 2021 compared to 3.31 percent and 3.42 percent for the same periods in 2020 primarily due to lower short-term interest rates and higher interest bearing deposits with banks. Net interest margin is reconciled to net interest income adjusted to an FTE basis in the "Net Interest Income" section of this MD&A.
The provision for credit losses, which includes a provision for losses on loans and on unfunded commitments, decreased $84.2 million and $101.1 million to $2.6 million and $5.7 million for the three and six months ended June 30, 2021 compared to $86.8 million and $106.8 million for the same periods in 2020. The significant decrease in the provision for credit losses during the three and six months ended June 30, 2021 was mainly due to a customer fraud in 2020 and an improved economic forecast in 2021 compared to 2020.
Noninterest income increased $0.2 million and $5.0 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Debit and credit card and service charges on deposit accounts increased in both the three and six months ended June 30, 2021 as customer activity has increased in the improving economic environment. Wealth management income increased in both periods due to higher assets under management from market appreciation and an increase in customer activity. Partially offsetting these increases was a decrease in commercial loan swap income due to lower activity as a result of the pandemic and interest rate environment.
Noninterest expense increased $2.4 million and $1.5 million to $45.8 million and $91.4 million for the three and six months ended June 30, 2021 compared to $43.5 million and $89.9 million for the same periods in 2020. The higher noninterest expense was mainly due to increases of $3.1 million and $5.1 million of salaries and employee benefits for the three and six months ended June 30, 2021. The increase for the six month period was offset by $2.3 million of merger-related expenses recognized in the six months ended June 30, 2020 compared to no merger-related expenses in 2021.
The provision for income taxes increased $18.8 million and $23.3 million to $7.0 million and $14.2 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. The increase in income tax expense was primarily due to the tax benefit from the net loss noted above during the same periods in 2020. Our effective tax rate was 19.7 percent and 19.1 percent for the three and six months ended June 30, 2021 compared to 26.3 percent and 31.3 percent for the same period in 2020. The change in our effective tax rate for the three and six months ended June 30, 2021 was primarily due to the increases in pretax income compared to pretax losses in 2020.
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, each 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 Condensed 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 and Six Months Ended June 30, 2021 Compared to Three and Six Months Ended June 30, 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 and Six Months Ended June 30, 2021 Compared to
Three and Six Months Ended June 30, 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 Condensed Consolidated Statements of Comprehensive Income to net interest income and rates on an FTE basis for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Total interest income $ 71,577  $ 80,479  $ 146,358  $ 168,069 
Total interest expense 3,273  10,331  7,396  27,885 
Net Interest Income per Condensed Consolidated Statements of Comprehensive Income 68,304  70,148  138,962  140,184 
Adjustment to FTE basis 585  847  1,249  1,697 
Net Interest Income on an FTE Basis (Non-GAAP) $ 68,889  $ 70,995  $ 140,211  $ 141,881 
Net interest margin 3.13  % 3.27  % 3.28  % 3.37  %
Adjustment to FTE basis 0.03  % 0.04  % 0.03  % 0.05  %
Net Interest Margin on an FTE Basis (Non-GAAP) 3.16  % 3.31  % 3.31  % 3.42  %
Income amounts are annualized for rate calculations.

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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 June 30, 2021 Three Months Ended June 30, 2020
(dollars in thousands) Average Balance Interest Rate Average Balance Interest Rate
ASSETS
Interest-bearing deposits with banks $ 785,465  $ 175  0.09  % $ 163,019  $ 33  0.08  %
Securities, at fair value(1)(2)
826,861  4,529  2.19  % 785,229  5,024  2.56  %
Loans held for sale 4,353  33  3.01  % 9,931  77  3.08  %
Commercial real estate 3,251,894  29,930  3.69  % 3,389,616  35,617  4.23  %
Commercial and industrial 1,890,538  18,363  3.90  % 2,200,148  19,733  3.61  %
Commercial construction 462,928  3,854  3.34  % 430,912  4,020  3.75  %
Total Commercial Loans 5,605,359  52,147  3.73  % 6,020,676  59,370  3.97  %
Residential mortgage 863,254  8,996  4.17  % 976,916  10,241  4.20  %
Home equity 535,933  4,682  3.50  % 543,770  4,993  3.69  %
Installment and other consumer 84,259  1,271  6.05  % 79,944  1,259  6.34  %
Consumer construction 13,264  211  6.39  % 12,758  145  4.58  %
Total Consumer Loans 1,496,710  15,160  4.06  % 1,613,388  16,638  4.14  %
Total Portfolio Loans 7,102,069  67,307  3.80  % 7,634,064  76,008  4.00  %
Total Loans(1)(3)
7,106,422  67,339  3.80  % 7,643,995  76,085  4.00  %
Federal Home Loan Bank and other restricted stock 10,529  119  4.51  % 19,709  184  3.75  %
Total Interest-earning Assets 8,729,277  72,162  3.31  % 8,611,952  81,326  3.80  %
Noninterest-earning assets 704,635  817,767 
Total Assets $ 9,433,911  $ 9,429,719 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand $ 998,134  $ 230  0.09  % $ 1,033,905  $ 610  0.24  %
Money market 2,037,976  894  0.18  % 2,076,483  2,578  0.50  %
Savings 1,044,899  70  0.03  % 887,357  162  0.07  %
Certificates of deposit 1,291,194  1,458  0.45  % 1,560,885  5,877  1.51  %
Total Interest-bearing Deposits 5,372,203  2,652  0.20  % 5,558,630  9,227  0.67  %
Securities sold under repurchase agreements 67,838  17  0.10  % 85,302  53  0.25  %
Short-term borrowings —  —  —  % 178,273  167  0.38  %
Long-term borrowings 23,113  116  2.01  % 49,774  314  2.53  %
Junior subordinated debt securities 64,103  488  3.06  % 64,044  570  3.58  %
Total Borrowings 155,054  621  1.61  % 377,393  1,104  1.18  %
Total Interest-bearing Liabilities 5,527,256  3,273  0.24  % 5,936,023  10,331  0.70  %
Noninterest-bearing liabilities 2,727,653  2,302,676 
Shareholders’ equity 1,179,002  1,191,020 
Total Liabilities and Shareholders’ Equity $ 9,433,911  $ 9,429,719 
Net Interest Income (1)(2)
$ 68,889  $ 70,995 
Net Interest Margin (1)(2)
3.16  % 3.31  %
(1) Tax-exempt interest 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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Six months ended June 30, 2021 Six months ended June 30, 2020
(dollars in thousands) Average Balance Interest Rate Average Balance Interest Rate
ASSETS
Interest-bearing deposits with banks $ 545,177  $ 240  0.09  % $ 131,332  $ 388  0.59  %
Securities, at fair value(1)(2)
804,613  9,095  2.26  % 786,043  10,020  2.55  %
Loans held for sale 5,351  78  2.90  % 5,899  94  3.19  %
Commercial real estate 3,252,763  60,066  3.72  % 3,399,150  75,710  4.48  %
Commercial and industrial 1,923,813  39,180  4.10  % 1,975,913  39,471  4.02  %
Commercial construction 474,037  7,887  3.36  % 408,638  8,515  4.19  %
Total Commercial Loans 5,650,613  107,134  3.82  % 5,783,701  123,696  4.30  %
Residential mortgage 880,246  18,412  4.20  % 983,891  20,569  4.19  %
Home equity 534,329  9,473  3.58  % 541,981  11,493  4.26  %
Installment and other consumer 82,095  2,518  6.19  % 79,812  2,648  6.67  %
Consumer construction 14,578  399  5.52  % 11,633  266  4.59  %
Total Consumer Loans 1,511,249  30,803  4.10  % 1,617,317  34,976  4.34  %
Total Portfolio Loans 7,161,862  137,936  3.88  % 7,401,018  158,672  4.31  %
Total Loans(1)(3)
7,167,213  138,014  3.88  % 7,406,917  158,766  4.31  %
Federal Home Loan Bank and other restricted stock 10,884  257  4.73  % 21,655  592  5.47  %
Total Interest-earning Assets 8,527,887  147,607  3.49  % 8,345,947  169,766  4.09  %
Noninterest-earning assets 730,117  752,576 
Total Assets $ 9,258,003  $ 9,098,523 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing demand $ 947,295  $ 452  0.10  % $ 987,968  $ 1,991  0.41  %
Money market 2,003,569  1,837  0.18  % 2,035,124  8,896  0.88  %
Savings 1,020,201  221  0.04  % 859,171  639  0.15  %
Certificates of deposit 1,317,751  3,623  0.55  % 1,581,104  13,039  1.66  %
Total Interest-bearing Deposits 5,288,816  6,133  0.23  % 5,463,367  24,565  0.90  %
Securities sold under repurchase agreements 66,254  42  0.13  % 58,046  96  0.33  %
Short-term borrowings 12,707  12  0.19  % 232,319  1,312  1.14  %
Long-term borrowings 23,291  232  2.01  % 50,809  639  2.53  %
Junior subordinated debt securities 64,095  977  3.07  % 64,120  1,273  3.99  %
Total Borrowings 166,348  1,262  1.53  % 405,294  3,320  1.65  %
Total Interest-bearing Liabilities 5,455,164  7,396  0.27  % 5,868,661  27,885  0.96  %
Noninterest-bearing liabilities 2,633,219  2,039,565 
Shareholders’ equity 1,169,620  1,190,297 
Total Liabilities and Shareholders’ Equity $ 9,258,003  $ 9,098,523 
Net Interest Income (1)(2)
$ 140,211  $ 141,881 
Net Interest Margin (1)(2)
3.31  % 3.42  %
(1) Tax-exempt interest 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.

Net interest income on an FTE basis (non-GAAP) decreased $2.1 million and $1.7 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Net interest income was favorably impacted by PPP loans which contributed $4.1 million and $9.9 million for the three and six months ended June 30, 2021 to interest income. The net interest margin on an FTE basis (non-GAAP) decreased 15 and 11 basis points for the three and six months ended June 30, 2021 compared to the same periods in 2020. PPP loans positively impacted the net interest margin on an FTE basis (non-GAAP) by 2 and 6 basis points for the three and six months ended June 30, 2021.
Interest income on an FTE basis (non-GAAP) decreased $9.2 million and $22.2 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. The decrease in interest income was primarily due to lower short-term interest rates and lower average loan balances compared to the same periods in 2020. Average loan balances decreased $537.6 million and $239.7 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Average
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PPP loans increased $8.3 million and $231.5 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. These increases were offset by lower loan activity related to the COVID-19 pandemic. The average rate earned on loans decreased 20 and 43 basis points for the three and six months ended June 30, 2021 compared to the same periods in 2020 primarily due to lower short-term interest rates. Average interest-bearing deposits with banks increased $622.4 million and $413.8 million for the three and six months ended June 30, 2021 compared to the same periods in 2020 due to PPP forgiveness, lower loan balances and a significant increase in average deposits as a result of customer PPP loans and stimulus payments along with customers' liquidity preferences. Overall, the FTE rate on interest-earning assets (non-GAAP) decreased 49 and 60 basis points for the three and six months ended June 30, 2021 compared to the same periods in 2020.
Interest expense decreased $7.1 and $20.5 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. The decreases were primarily due to lower short-term interest rates compared to the same periods in 2020. Average interest-bearing deposits decreased $186.4 million and $174.6 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. The average rate paid on interest-bearing deposits decreased 47 and 67 basis points compared to the same periods in 2020 primarily due to lower short-term interest rates. The interest-bearing deposits decreases are favorably offset by $473.8 million and $595.3 million increases in demand deposits for the three and six months ended June 30, 2021. We experienced demand deposit growth due to customer PPP loans and stimulus payments along with customers' liquidity preferences. Brokered deposits decreased $332.6 million and $319.8 million for the three and six months ended June 30, 2021 compared to the same periods in 2020 due to this funding source no longer being needed. Average total borrowings decreased $222.3 million and $238.9 million for the three and six months ended June 30, 2021 compared to the same periods in 2020 due to this funding source no longer being needed. Overall, the cost of interest-bearing liabilities decreased 46 and 69 basis points for the three and six months ended June 30, 2021 compared to the same periods 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 June 30, 2021 Compared to June 30, 2020
Six Months Ended June 30, 2021 Compared to June 30, 2020
(dollars in thousands)
Volume (4)
Rate (4)
Total
Volume (4)
Rate (4)
Total
Interest earned on:
Interest-bearing deposits with banks $ 126  $ 15  $ 141  $ 1,223  $ (1,371) $ (149)
Securities, at fair value(1)(2)
266  (761) (495) 237  (1,161) (925)
Loans held for sale (43) (1) (44) (9) (8) (16)
Commercial real estate (1,447) (4,240) (5,687) (3,261) (12,383) (15,643)
Commercial and industrial (2,777) 1,407  (1,370) (1,041) 750  (291)
Commercial construction 299  (465) (166) 1,363  (1,991) (628)
Total Commercial Loans (3,925) (3,298) (7,223) (2,938) (13,623) (16,562)
Residential mortgage (1,192) (54) (1,245) (2,167) 10  (2,157)
Home equity (72) (239) (311) (162) (1,858) (2,020)
Installment and other consumer 68  (57) 11  76  (205) (130)
Consumer construction 60  66  67  66  134 
Total Consumer Loans (1,190) (289) (1,478) (2,186) (1,987) (4,173)
Total Portfolio Loans (5,115) (3,586) (8,701) (5,125) (15,610) (20,735)
Total Loans (1)(3)
(5,158) (3,587) (8,745) (5,133) (15,618) (20,751)
Federal Home Loan Bank and other restricted stock (86) 20  (66) (294) (40) (334)
Change in Interest Earned on Interest-earning Assets $ (4,851) $ (4,313) $ (9,165) $ (3,968) $ (18,191) $ (22,159)
Interest paid on:
Interest-bearing demand $ (21) $ (358) $ (380) $ (82) $ (1,458) $ (1,540)
Money market (48) (1,636) (1,684) (138) (6,921) (7,059)
Savings 29  (122) (93) 120  (537) (418)
Certificates of deposit (1,016) (3,404) (4,420) (2,172) (7,244) (9,416)
Total Interest-bearing Deposits (1,056) (5,520) (6,576) (2,272) (16,160) (18,432)
Securities sold under repurchase agreements (11) (25) (36) 14  (68) (54)
Short-term borrowings (167) —  (167) (1,240) (60) (1,300)
Long-term borrowings (168) (30) (198) (346) (61) (407)
Junior subordinated debt securities (82) (82) —  (296) (296)
Total Borrowings (346) (137) (483) (1,573) (484) (2,057)
Change in Interest Paid on Interest-bearing Liabilities (1,401) (5,657) $ (7,058) (3,845) (16,644) (20,489)
Change in Net Interest Income $ (3,450) $ 1,344  $ (2,106) $ (123) $ (1,546) $ (1,670)
(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 $84.2 million and $101.1 million to $2.6 million and $5.7 million for the three and six months ended June 30, 2021 compared to $86.8 million and $106.8 million for the same periods in 2020. The provision for credit losses included $0.6 million and $0.4 million for the reserve for unfunded commitments for the three and six months ended June 30, 2021.
The significant decrease in the provision for credit losses during the three and six months ended June 30, 2021 was mainly due to the customer fraud in 2020 discussed below and an improved economic forecast in 2021 compared to 2020. Our economic forecast covers a period of two years and is driven primarily by national unemployment data. The forecasted national unemployment rate improved at June 30, 2021 compared to the same time in 2020.
For the three and six months ended June 30, 2021, we had net charge-offs of $7.4 million and $13.3 million compared to $68.1 million and $79.2 million for the same periods in 2020. The most significant charge-off for the three and six months
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ended June 30, 2021 was a $4.9 million charge-off related to a CRE relationship. Our policy is to obtain appraisals annually on loans individually assessed for impairment. The $4.9 million charge-off was a result of the receipt of the annual appraisal which evidenced a deterioration in the value of the collateral at June 30, 2021.
During the three months ended June 30, 2020, we recognized a charge-off of $58.7 million related to a customer fraud from a check kiting scheme. We continue to pursue all available resources of recovery to mitigate the loss. The customer also had a lending relationship of $15.1 million that had a $4.2 million charge-off during the three months ended June 30, 2020. We received a recovery of $0.9 million on the lending relationship during the three months ended June 30, 2021.
Nonperforming loans increased $22.5 million to $112.6 million at June 30, 2021 compared to $90.1 million at June 30, 2020. The increase in nonperforming loans primarily related to the addition of $48.7 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 increase was partially offset by the $4.9 million charge-off of the CRE relationship mentioned above and payoffs of three commercial relationships totaling approximately $12.6 million, all of which occurred during the three months ended June 30, 2021.

Noninterest Income
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Net gain on sale of securities $ 29  $ 142  $ (113) (79.6) $ 29  $ 142  $ (113) (79.6)
Debit and credit card 4,744  3,612  1,132  31.3  % 8,906  7,093  1,813  25.6  %
Mortgage banking 1,734  2,623  (889) (33.9) % 6,044  3,859  2,185  56.6  %
Service charges on deposit accounts 3,642  2,805  837  29.8  % 7,116  6,821  295  4.3  %
Wealth management 3,167  2,586  581  22.4  % 6,111  4,949  1,162  23.5  %
Commercial loan swap income 299  945  (646) (68.4) % 393  3,429  (3,036) (88.5) %
Other 1,809  2,511  (702) (28.0) % 4,062  1,334  2,728  204.5  %
Total Noninterest Income $ 15,424  $ 15,224  $ 200  1.3  % $ 32,661  $ 27,627  $ 5,034  18.2  %

Noninterest income increased $0.2 million and $5.0 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. Debit and credit card income increased $1.1 million and $1.8 million for the three and six months ended June 30, 2021 due to increased activity related to the improving economic environment. Service charges on deposit accounts increased $0.8 million and $0.3 million due to fee changes and the improving economic environment. Wealth management income increased $0.6 million and $1.2 million due to higher assets under management from market appreciation and an increase in customer activity. Mortgage banking decreased $0.9 million and increased $2.2 million for the three and six months ended June 30, 2021 due to changes in the valuation of the mortgage derivative and mortgage servicing rights compared to the same periods in 2020. Other income decreased $0.7 million for the three months ended June 30, 2021 and increased $2.7 million for the six months ended June 30, 2021 due 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 periods in 2020. Commercial loan swap income decreased $0.6 million and $3.0 million for the three and six months ended June 30, 2021 as activity was significant in the first half of 2020, but activity has declined due to the pandemic and the interest rate environment.
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Noninterest Expense
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Salaries and employee benefits(1)
$ 24,515  $ 21,419  $ 3,096  14.5  % $ 47,842  $ 42,754  $ 5,088  11.9  %
Data processing and information technology(1)
3,787  3,585  202  5.6  % 8,012  7,453  559  7.5  %
Occupancy(1)
3,434  3,437  (3) (0.1) % 7,261  7,202  59  0.8  %
Furniture, equipment and software(1)
2,402  3,006  (604) (20.1) % 5,042  5,525  (483) (8.7) %
Professional services and legal(1)
1,637  1,932  (295) (15.3) % 3,168  2,980  188  6.3  %
FDIC insurance 924  1,048  (124) (11.8) % 1,970  1,818  152  8.4  %
Marketing(1)
996  979  17  1.7  % 2,318  2,090  228  10.9  %
Other taxes 1,832  1,604  228  14.2  % 3,268  3,205  63  2.0  %
Merger related expenses —  —  —  —  % —  2,342  (2,342) (100.0) %
Other(1)
6,302  6,468  (166) (2.6) % 12,528  14,500  (1,972) (13.6) %
Total Noninterest Expense $ 45,829  $ 43,478  $ 2,351  5.4  % $ 91,409  $ 89,869  $ 1,540  1.7  %
(1) Excludes merger related expenses for 2020 amounts only

Noninterest expense increased $2.4 million to $45.8 million for the three months ended June 30, 2021 and increased $1.5 million to $91.4 million for the six months ended June 30, 2021 compared to the same periods in 2020. Salaries and employee benefits increased $3.1 million and $5.1 million for the three and six months ended June 30, 2021 due to higher deferred origination costs related to PPP loans in 2020, higher payroll incentives and restricted stock expense, a change in the valuation related to a deferred compensation plan, which has a corresponding offset in other noninterest income resulting in no impact to net income, and 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 decreased $0.3 million for the three months ended June 30, 2021 and increased $0.2 million for the six months ended June 30, 2021 mainly due to lower legal expense for both periods and higher consulting expense for the six-month period. Other noninterest expense decreased during the six months ended June 30, 2021 due to lower amortization related to our qualified affordable housing projects and core deposit intangible asset compared to the same period in 2020. Total merger related expenses of $2.3 million for the six months ended June 30, 2020 included $1.4 million of salaries and employee benefits, $0.4 million for data processing, $0.2 million for professional services and $0.3 million in various other expenses.
Provision for Income Taxes

The provision for income taxes increased $18.8 million and $23.3 million to $7.0 million and $14.2 million for the three and six months ended June 30, 2021 compared to the same periods in 2020. The increase in income tax expense was primarily due to the tax benefit from the net loss noted above during the same periods in 2020. Our effective tax rate was 19.7 percent and 19.1 percent for the three and six months ended June 30, 2021 compared to 26.3 percent and 31.3 percent for the same period in 2020. The change in our effective tax rate for the three and six months ended June 30, 2021 was primarily due to the increases in pretax income compared to pretax losses in 2020.
Financial Condition as of June 30, 2021
Total assets increased $527.9 million to $9.5 billion at June 30, 2021 compared to $9.0 billion at December 31, 2020. Cash and due from banks increased $755.6 million to $985.3 million at June 30, 2021 compared to December 31, 2020 due to PPP forgiveness and a significant increase in deposits as a result of government stimulus programs, a second round of PPP loans and our customers' liquidity preferences. Total portfolio loans decreased $218.5 million to $7.0 billion at June 30, 2021 compared to December 31, 2020. The commercial loan portfolio decreased $174.7 million compared to December 31, 2020. C&I loans decreased $180.1 million which mainly related to a net decline in PPP loans of $128.9 million since December 31, 2020. The consumer loan portfolio decreased $43.8 million with decreases in residential mortgage of $59.1 million and consumer construction of $4.5 million offset by increases in home equity of $12.5 million and other consumer of $7.3 million. Excluding the PPP loans, portfolio loans decreased $89.6 million compared to December 31, 2020 due to decreased activity related to the COVID-19 pandemic.
Securities increased $66.7 million to $840.4 million at June 30, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities. The bond portfolio had a net unrealized gain of $24.0 million at June 30, 2021 compared to $33.4 million at December 31, 2020 due to rising interest rates during the first six months of 2021.
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Our deposits increased $594.7 million with total deposits of $8.0 billion at June 30, 2021 compared to $7.4 billion at December 31, 2020. Customer deposits increased $658.0 million from December 31, 2020. The increase in customer deposits is primarily related to government stimulus programs, PPP and our customers' liquidity preferences. Total brokered deposits decreased $63.2 million from December 31, 2020 due to a reduced need for wholesale funding due to strong customer deposit growth.
Total borrowings decreased $72.3 million to $155.7 million at June 30, 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 $34.0 million to $1.2 billion at both June 30, 2021 and December 31, 2020. The increase was primarily due to net income of $60.3 million offset partially by dividends of $22.0 million and a decrease in other comprehensive income of $5.4 million. The $5.4 million decrease in other comprehensive income was due to a $7.4 million decrease in unrealized gains on our available-for-sale investment securities and a $2.0 million change in the funded status of our employee benefit plans, net of taxes.
Securities Activity
(dollars in thousands) June 30, 2021 December 31, 2020 $ Change
U.S. Treasury securities $ 74,804  $ 10,282  $ 64,522 
Obligations of U.S. government corporations and agencies 81,624  82,904  (1,280)
Collateralized mortgage obligations of U.S. government corporations and agencies 201,350  209,296  (7,946)
Residential mortgage-backed securities of U.S. government corporations and agencies 63,859  67,778  (3,919)
Commercial mortgage-backed securities of U.S. government corporations and agencies 325,303  273,681  51,622 
Corporate obligations 499  2,025  (1,526)
Obligations of states and political subdivisions 91,840  124,427  (32,587)
Available-for-Sale Debt Securities 839,279  770,393  68,886 
Marketable equity securities 1,096  3,300  (2,204)
Total Securities $ 840,375  $ 773,693  $ 66,682 
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 $66.7 million to $840.4 million at June 30, 2021 from $773.7 million at December 31, 2020. The increase in securities is primarily due to an increase in overall investing activities.
At June 30, 2021 our bond portfolio was in a net unrealized gain position of $24.0 million compared to a net unrealized gain position of $33.4 million at December 31, 2020. At June 30, 2021 total gross unrealized gains in the bond portfolio were $25.5 million offset by gross unrealized losses of $1.5 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 June 30, 2021.

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Loan Composition
June 30, 2021 December 31, 2020
(dollars in thousands) Amount % of Loans Amount % of Loans
Commercial
Commercial real estate $ 3,246,533  46.3  % $ 3,244,974  44.9  %
Commercial and industrial 1,774,358  25.4  % 1,954,453  27.0  %
Commercial construction 478,153  6.8  % 474,280  6.6  %
Total Commercial Loans 5,499,044  78.5  % 5,673,707  78.5  %
Consumer
Consumer real estate 1,420,097  20.2  % 1,471,238  20.4  %
Other consumer 88,210  1.3  % 80,915  1.1  %
Total Consumer Loans 1,508,307  21.5  % 1,552,153  21.5  %
Total Portfolio Loans 7,007,351  100.0  % 7,225,860  100.0  %
Loans held for sale 7,648  18,528 
Total Loans $ 7,014,999  $ 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. As of June 30, 2021, 71 percent of our total loans are variable rate loans and 29 percent are fixed rate loans. Total portfolio loans decreased $218.5 million to $7.0 billion at June 30, 2021 compared to December 31, 2020. Excluding the PPP loans, portfolio loans decreased $89.6 million compared to December 31, 2020 due to decreased activity related to the COVID-19 pandemic.
Commercial loans, including CRE, C&I and commercial construction, comprised 78.5 percent of total portfolio loans at June 30, 2021 and December 31, 2020 The commercial loan portfolio decreased $174.7 million at June 30, 2021 compared to December 31, 2020. C&I loans decreased $180.1 million at June 30, 2021 which mainly related to a net PPP decline of $128.9 million since December 31, 2020.
As of June 30, 2021, we had $336.1 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.
Consumer loans represent 21.5 percent of our total portfolio loans at June 30, 2021 and December 31, 2020. The consumer loan portfolio decreased $43.8 million at June 30, 2021 with decreases in residential mortgage of $59.1 million and consumer construction of $4.5 million offset by increases in home equity of $12.5 million and other consumer of $7.3 million.


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
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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.
The following table presents activity in the ACL for the periods presented:

Six Months Ended June 30, 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)
4,933  2,953  (1,337) (46) (1,254) 61  5,308 
Charge-offs (8,369) (4,774) —  (1,327) (347) (453) (15,270)
Recoveries 965  148  213  234  423  1,985 
Net (Charge-offs)/Recoveries (7,403) (4,627) 3  (1,115) (113) (30) (13,285)
Balance at End of Period $ 63,186  $ 14,426  $ 5,905  $ 14,756  $ 8,647  $ 2,717  $ 109,636 
(1) Excludes unfunded commitments
June 30, 2021 December 31, 2020
Ratio of net charge-offs to average loans outstanding 0.37  % * 0.61  %
Allowance for credit losses as a percentage of total portfolio loans 1.56  % 1.63  %
Allowance for loan losses as a percentage of total portfolio loans - excluding PPP loans 1.64  % 1.74  %
Allowance for credit losses to nonperforming loans 97  % 80  %
* Annualized
The ACL decreased $8.0 million to $109.6 million at June 30, 2021 compared to $117.6 million at December 31, 2020. Our total qualitative reserve decreased $5.1 million for the period ended June 30, 2021 compared to December 31, 2020 due to improved economic trends and forecast. Specific reserves on loans individually assessed decreased $7.0 million from December 31, 2020 primarily due to $6.9 million of charge-offs.
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The ACL as a percentage of total portfolio loans decreased 7 basis points to 1.56 percent at June 30, 2021 compared to 1.63 percent at December 31, 2020. The ACL excluding PPP loans as a percentage of total portfolio loans was 1.64 percent as of June 30, 2021 compared to 1.74 percent at December 31, 2020.
Net loan charge-offs were $7.4 million, or 0.43 percent of average loans and $13.3 million, or 0.37 percent of average loans for the three and six months ended June 30, 2021. The most significant charge-off for the three and six months ending June 30, 2021 was a $4.9 million charge-off related to a CRE relationship. Our policy is to obtain appraisals annually on loans individually assessed for impairment. The $4.9 million charge-off was a result of the receipt of the annual appraisal which evidenced a deterioration in the value of the collateral at June 30, 2021.
Substandard loans decreased $11.7 million to $275.4 million at June 30, 2021 compared to $287.1 million at December 31, 2020 and special mention loans decreased $10.2 million to $259.7 million at June 30, 2021 compared to $269.9 million at December 31, 2020. The decrease in substandard loans was primarily due to the payoffs of two CRE relationships of $5.3 million and $4.5 million and the above noted charge-off of a $4.9 million CRE relationship. The decrease in special mention loans was primarily due to the downgrade of a $11.9 million CRE relationship from special mention to substandard due to declining revenue that led to cash flow shortfalls.
Troubled debt restructurings, or TDRs, decreased $11.8 million to $34.9 million at June 30, 2021 compared to $46.7 million at December 31, 2020. The decrease in TDRs was primarily due to payoffs of $4.5 million and $3.7 million CRE relationships and a charge-off of a $4.9 million CRE relationship. Total TDRs of $34.9 million at June 30, 2021 included $14.3 million, or 41.0 percent, that were accruing and $20.6 million, or 59.0 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 Condensed Consolidated Statements of Comprehensive Income. The allowance for unfunded loan commitments was $4.9 million at June 30, 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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Nonperforming assets consist of nonaccrual loans, nonaccrual TDRs and OREO. The following table summarizes nonperforming assets for the dates presented:

(dollars in thousands) June 30, 2021 December 31, 2020 $ Change
Nonperforming Loans
Commercial real estate $ 73,652  $ 84,416  $ (10,764)
Commercial and industrial 1,015  7,100  (6,085)
Commercial construction 385  384 
Business banking 9,557  16,692  (7,135)
Consumer real estate 7,239  8,798  (1,559)
Other Consumer 121  96  25 
Total Nonperforming Loans 91,969  117,486  (25,517)
Nonperforming Troubled Debt Restructurings
Commercial real estate 6,415  16,654  (10,239)
Commercial and industrial 11,183  9,885  1,298 
Commercial construction —  —  — 
Business banking 1,508  430  1,078 
Consumer real estate 1,544  2,319  (775)
Other Consumer —  —  — 
Total Nonperforming Troubled Debt Restructurings 20,650  29,288  (8,638)
Total Nonperforming Loans 112,619  146,774  (34,155)
OREO 1,145  2,155  (1,010)
Total Nonperforming Assets $ 113,764  $ 148,929  $ (35,165)
Asset Quality Ratios:
Nonperforming loans as a percent of total portfolio loans 1.61  % 2.03  %
Nonperforming assets as a percent of total portfolio loans plus OREO 1.62  % 2.06  %

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 $34.2 million to $112.6 million at June 30, 2021 compared to $146.8 million at December 31, 2020. The significant decrease in nonperforming loans primarily related to the payoff of three CRE relationships totaling $14.4 million and charge- offs of a $4.9 million CRE relationship and a $3.9 million C&I relationship during the six months ended June 30, 2021.

Deposits
(dollars in thousands) June 30, 2021 December 31, 2020 $ Change
Customer Deposits
Noninterest-bearing demand $ 2,668,833  $ 2,261,994  $ 406,839 
Interest-bearing demand 979,300  864,510  114,790 
Money market 2,047,254  1,887,051  160,203 
Savings 1,050,256  969,508  80,748 
Certificates of deposit 1,264,621  1,369,239  (104,618)
Total Customer Deposits 8,010,264  7,352,302  657,962 
Brokered Deposits
Interest-bearing demand —  —  — 
Money market —  50,012  (50,012)
Certificates of deposit 5,000  18,224  (13,224)
Total Brokered Deposits 5,000  68,236  (63,236)
Total Deposits $ 8,015,264  $ 7,420,538  $ 594,726 

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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 June 30, 2021 increased $594.7 million, or 8.0 percent, from December 31, 2020. Total customer deposits increased $658.0 million from December 31, 2020. The increase in customer deposits is primarily related to government stimulus programs, PPP and our customers’ liquidity preferences. Total brokered deposits decreased $63.2 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) June 30, 2021 December 31, 2020 $ Change
Securities sold under repurchase agreements $ 68,587  $ 65,163  $ 3,424 
Short-term borrowings —  75,000  (75,000)
Long-term borrowings 22,969  23,681  (712)
Junior subordinated debt securities 64,112  64,083  29 
Total Borrowings $ 155,668  $ 227,927  $ (72,259)

Borrowings are an additional source of funding for us. Total borrowings decreased $72.3 million, or 31.7 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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Information pertaining to short-term borrowings is summarized in the tables below for the six months ended June 30, 2021 and for the twelve months ended December 31, 2020.
Securities Sold Under Repurchase Agreements
(dollars in thousands) June 30, 2021 December 31, 2020
Balance at the period end $ 68,587  $ 65,163 
Average balance during the period $ 66,254  $ 57,673 
Average interest rate during the period 0.13  % 0.29  %
Maximum month-end balance during the period $ 68,863  $ 92,159 
Average interest rate at the period end 0.10  % 0.25  %
Short-Term Borrowings
(dollars in thousands) June 30, 2021 December 31, 2020
Balance at the period end $ —  $ 75,000 
Average balance during the period $ 12,707  $ 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 six months ended June 30, 2021 and for the twelve months ended December 31, 2020.
Long-Term Borrowings
(dollars in thousands) June 30, 2021 December 31, 2020
Balance at the period end $ 22,969  $ 23,681 
Average balance during the period $ 23,291  $ 47,953 
Average interest rate during the period 2.01  % 2.50  %
Maximum month-end balance during the period $ 23,549  $ 50,635 
Average interest rate at the period end 1.98  % 2.03  %
Junior Subordinated Debt Securities
(dollars in thousands) June 30, 2021 December 31, 2020
Balance at the period end $ 64,112  $ 64,083 
Average balance during the period $ 64,095  $ 64,092 
Average interest rate during the period 3.07  % 3.57  %
Maximum month-end balance during the period $ 64,112  $ 64,848 
Average interest rate at the period end 2.92  % 3.01  %
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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 June 30, 2021, we had $1.4 billion in highly liquid assets, which consisted of $897.5 million in interest-bearing deposits with banks, $459.3 million in unpledged securities and $7.6 million in loans held for sale. This resulted in a highly liquid assets to total assets ratio of 14.4 percent at June 30, 2021. Also, at June 30, 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
June 30, 2021 December 31, 2020
Amount Ratio Amount Ratio
S&T Bancorp, Inc.
Tier 1 leverage 4.00  % 5.00  % $ 863,498  9.52  % $ 825,515  9.43 %
Common equity tier 1 to risk-weighted assets 4.50  % 6.50  % 834,498  11.98  % 796,515  11.33 %
Tier 1 capital to risk-weighted assets 6.00  % 8.00  % 863,498  12.40  % 825,515  11.74 %
Total capital to risk-weighted assets 8.00  % 10.00  % 975,029  14.00  % 944,686  13.44 %
S&T Bank
Tier 1 leverage 4.00  % 5.00  % $ 845,521  9.33  % $ 810,636  9.27 %
Common equity tier 1 to risk-weighted assets 4.50  % 6.50  % 845,521  12.16  % 810,636  11.55 %
Tier 1 capital to risk-weighted assets 6.00  % 8.00  % 845,521  12.16  % 810,636  11.55 %
Total capital to risk-weighted assets 8.00  % 10.00  % 951,203  13.67  % 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 June 30, 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.

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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.
June 30, 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 29.3  % 36.5  % 26.3  % 15.8 % 28.5 % 28.5 %
300 21.8  27.3  26.8  11.7 21.3 29.0
200 14.4  18.5  23.9  7.7 14.3 25.6
100 6.4  8.8  14.4  4.4 8.0 17.7
-100 (3.8) (7.5) (28.1) (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 June 30, 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 June 30, 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.
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
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



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 June 30, 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 June 30, 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 other than the risks described below.
Risks Related to Our Business Strategy
Our future performance will depend, in part, on the successful transition of our new CEO.
On October 2, 2020, we announced that Todd D. Brice will retire as Chief Executive Officer of S&T and S&T Bank, and as a member of the Boards of Directors of S&T and S&T Bank, effective March 31, 2021. On July 12, 2021 we announced that Christopher J. McComish will be appointed Chief Executive Officer (CEO) of S&T and S&T Bank, effective August 23, 2021 (the “Effective Date”) and will also be appointed to the Boards of Directors of S&T and S&T Bank on the Effective Date. From and following the Effective Date, David G. Antolik, who has served as Interim Chief Executive Officer since April 2021, will continue as President of S&T and S&T Bank and as a member of the Boards of Directors of S&T and S&T Bank. Our future performance will depend, in part, on the successful transition of our new CEO. This transition may be disruptive to our business, and if we are unable to execute an orderly transition and successfully integrate our new CEO into our management team, our revenue, results of operations, and financial condition may be adversely affected. Further, if our new CEO formulates different or changed views, the future strategy and plans of S&T may differ materially from those of the past.
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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 second 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 
04/01/2021 - 04/30/2021 —  $—  —  37,441,683 
05/01/2021 - 05/31/2021 —  —  —  37,441,683 
06/01/2021 - 06/30/2021 —  —  —  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 June 30, 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 repurchases from cash on hand and internally generated funds. 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.
3.1
Amended and Restated Articles of Incorporation of S&T Bancorp, Inc. Filed herewith
S&T Bancorp, Inc. 2021 Incentive Plan.* Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on May 20, 2021, and incorporated herein by reference.
Severance and General Release Agreement, by and between Ernest J. Draganza and S&T Bancorp, Inc.* Filed as Exhibit 10.1 to S&T Bancorp, Inc. Current Report on Form 8-K filed on June 3, 2021, and incorporated herein by reference.
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)
August 4, 2021 /s Mark Kochvar
Mark Kochvar
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Signatory)
61
AMENDED AND RESTATED ARTICLES OF INCORPORATION S&T Bancorp, Inc. (As Amended and Restated through July 30, 2021) 1. The name of the corporation is S&T Bancorp, Inc. 2. The location of the corporation’s registered office in the Commonwealth of Pennsylvania is 800 Philadelphia Street, Indiana, Pennsylvania, 15701. 3. The term of the corporation’s existence shall be perpetual. 4. The purpose or purposes for which the corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania are to have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. The Corporation is incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania (Act of May 5, 1933, P.L. 364 as amended). 5. Total Number of Authorized Shares. The Corporation shall be authorized to issue 50,000,000 shares of common stock, $2.50 par value per share (“Common Stock”), and 10,000,000 shares of preferred stock, without par value (“Preferred Stock). 6. Issuance and Designations of Shares of Preferred Stock. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by law and the provisions of these Articles of Incorporation, to provide for the issuance of shares of Preferred Stock in series, and by filing a statement with the Pennsylvania Department of State pursuant to the applicable law of the Commonwealth of Pennsylvania, to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;


 
-2- (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; and (h) Any other relative rights, preferences and limitations of that series. Dividends on Preferred Stock. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the common shares with respect to the same dividend period. Liquidation Distributions to Holders of Preferred Stock. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto. 7. Cumulative Voting Rights. Cumulative voting rights shall not exist with respect to the election of directors. 8. Opposition of Tender (or other offer) (a) The Board of Directors may, if it deems advisable, oppose a tender, or other offer for the corporation's securities, whether the offer is in cash or in securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but it is not legally obligated to, consider any pertinent issues; by way of illustration, but not of limitation, the Board of Directors may, but shall not be legally obligated to, consider any and all of the following: (1) Whether the offer price is acceptable based on the historical and present operating results or financial condition of the corporation. (2) Whether a more favorable price could be obtained for the corporation's securities in the future. (3) The impact which an acquisition of the corporation would have on its employees, depositors and customers of the corporation and its subsidiaries in the community which they serve.


 
-3- (4) The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the corporation and its subsidiaries and the future value of the corporation's stock. (5) The value of the securities, if any, which the offeror is offering in exchange for the corporation's securities, based on an analysis of the worth of the corporation as compared to the corporation or other entity whose securities are being offered. (6) Any antitrust or other legal and regulatory issues that are raised by the offer. (b) If the Board of Directors determines that an offer should he rejected, it may take any lawful action to accomplish its purpose including, but not limited to, any and all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity. 9. Classification of Directors. All directors elected prior to or at the Corporation's 2008 Annual Meeting were elected for three year terms, expiring at the third annual meeting following their election. All directors elected at or after the Corporation's 2009 Annual Meeting shall be elected at each annual meeting of stockholders for a term expiring at the next annual meeting of stockholders following their election. Unless they are elected to fill vacancies, the directors shall be elected to hold office until the next annual meeting of shareholders after their election and until their successors shall have been elected and qualified. 10. Preemptive Rights. No holder of shares of any class or any series of any class shall have any preemptive right to subscribe for, purchase or receive any shares of the corporation, whether now or hereafter authorized, or any obligations or other securities convertible into or carrying options to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities, issued or sold by the corporation for cash or any other form of consideration, and any such shares, securities or rights may be issued or disposed of by the Board of Directors to such persons and on such terms as the Board in its discretion shall deem advisable. 11. Indebtedness. The corporation shall have authority to borrow money and the Board of Directors, without the approval of the shareholders and acting within their sole discretion, shall have the authority to issue debt instruments of the corporation upon such terms and conditions and with such limitation as the Board of Directors deems advisable. The authority of the Board of Directors shall include, but not be limited to, the power to issue convertible debentures. 12. Shareholder Action. No merger, consolidation, liquidation or dissolution of the Corporation nor any action that would result in the sale or other disposition of all or substantially all of the assets of the Corporation shall be valid unless first approved by the affirmative vote of the holders of at least sixty-six and 2/3 percent (66-2/3%) of the outstanding shares of Common Stock. This Article 12 may not be amended unless first approved by the affirmative vote of the holders of at least sixty-six and 2/3 percent (66-2/3%) of the outstanding shares of Common Stock.


 

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: August 4, 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: August 4, 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 June 30, 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: August 4, 2021
 
/s/ David Antolik   /s/ Mark Kochvar
David Antolik, President and Interim Chief Executive Officer   Mark Kochvar, Chief Financial Officer (Principal Financial Officer)