KBRA Affirms Ratings for S&T Bancorp, Inc.

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

Key Credit Considerations

The ratings are supported by S&T Bancorp, Inc.’s granular core deposit franchise that represents the majority of its total funding base (90% at 2Q26). STBA maintains a meaningful deposit market share throughout its legacy operating footprint, which generally spans less rate sensitive rural markets across parts of PA, alongside a favorable mix of NIB accounts (27% at 2Q26), which has supported relatively lower funding costs (1.82% for 2Q26). The company’s low-cost funding base, coupled with a more loaned-up balance sheet (average loans were 87% of average earning assets at 2Q26), has consistently supported an above-peer NIM and solid earnings performance, with ROA tracking around 15–50 bps above peer averages since 2022. STBA generates slightly below-peer noninterest income, though its fee revenues are derived from various durable sources, including investment and trust services, interchange revenue, and account service charges, and have historically represented ~14% of operating revenues. Management expects the company to cross the $10 billion asset threshold in the near term, with an anticipated ~$6 million annual revenue impact from the Durbin Amendment. Nonetheless, KBRA expects STBA’s earnings profile to remain solid, supported by a relatively stable margin, and improved operating efficiencies.

STBA has managed its core capital ratios conservatively in the post-pandemic period, with CET1 ratio levels generally tracking 120–200 bps above KBRA-rated peers. The company’s capital position provides meaningful optionality as assets approach the $10 billion threshold, including the capacity to support organic loan growth, and pursue potential M&A opportunities. STBA has also reported consistent credit performance in recent years, with the NCO ratio remaining below 0.2% since 2022, following efforts to enhance its risk management framework, including changes in executive leadership beginning in 2021. The loan portfolio remains well diversified, supported by prudent concentration limits and relatively conservative LTVs. More recent enhancements to credit administration have contributed to improved asset quality, as reflected by criticized and classified loans declining to 3.0% of total loans at 2Q26 from 5.8% at 1Q23. KBRA expects these enhancements to support consistent credit performance over time.

Rating Sensitivities

The Stable Outlook reflects KBRA's view that a change to the ratings in not expected over the medium term. However, further geographic diversification along with increased, stable noninterest income, more consistent asset quality performance, and the maintenance of solid capital metrics could lead to positive rating momentum over the longer term. Conversely, significant deterioration in asset quality performance weighing on earnings and materially lower core capital levels could pressure ratings.

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