Exclusive Interview With The President, CEO And CFO: S And T Bancorp, Inc. (STBA) - Todd D. Brice And Mark Kochvar
January 9, 2012 - The Wall Street Transcript has just published Northeast and Mid-Atlantic Banks Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Todd D. Brice has been President and Chief Executive Officer at S&T Bancorp, Inc., and S&T Bank since 2008. He has been a Director of S&T since 2005. Mr. Brice was formerly President and Chief Operating Officer of S&T and S&T Bank from 2004 to 2008, and Executive Vice President of Commercial Lending at S&T and S&T Bank from 2002 to 2004.
Mark Kochvar has served as Senior Executive Vice President and Chief Financial Officer at S&T Bancorp, Inc., since February 2010. He also has been Executive Vice President, Treasury and Investments, since January 2008. Mr. Kochvar was Senior Vice President, Treasury and Investments, from January 2001 to December 2007.
TWST: Would you begin with a brief historical sketch of the company and a picture of its operations at the present time?
Mr. Brice: We were founded in 1902, headquartered in Indiana, Pa., which is located about 50 miles east of Pittsburgh in Indiana County. Today, we have assets of about $4.1 billion, and 49 branches throughout a 10-county footprint. We've grown over the years, both organically and through acquisitions. When I started with the company in 1984, we probably had 12 branches and $300 million in assets. We've gone into communities and bought up, for the most part, the local, high-performing hometown banks, and we now use our balance sheet to be able to provide services to a wider range of clients than a small $100 million to $200 million bank could typically do. We have another deal that we're going to hopefully close on in January or early February for Mainline Bank.
It is an eight-branch institution, $240 million in assets, located in Ebensburg, Pa., which is in Cambria County to our east. The 10 counties that we're in are predominantly in western Pennsylvania. We had an insurance operation in Cambria County but no branches, so this will give us a nice retail presence over in that market. We're excited about that. We can service a wide array of customers, up to maybe $100 million in sales on the commercial side, and we have a full array of products and services on both the commercial and retail sides. I think what we bring to the table is that high-touch, hometown feel to our organization, plus everything our size allows us to do. We also have a wealth management division that will do about $7 million or so in revenues this year. They manage about $1.5 billion in assets. We also have an insurance division that will do north of $5 million in revenues this year. We bought that in 2002. Really, it's a full suite of financial service products that we can offer our client base.
TWST: What's the competitive landscape for S And T, and what are some of the company's competitive advantages?
Mr. Brice: It's highly competitive. Indiana is a town of about 40,000 people when you include the surrounding township, but we have four financial institutions headquartered here. We're not the biggest. FCF is about a block down the street, and they are about $6 billion in assets. Indiana First, an S And L, is about $400 million in assets. You have Marion Center Bank, another community bank, about $250 million or so in assets. And then you have a 15,000-student university, and a 1,000-employee independent hospital that is on very solid financial footing. So that's the region that we are in. But we also get into the Pittsburgh markets and we run up against the PNCs and the First Niagaras, right down to a bunch of little S And Ls. FNB is certainly a strong regional competitor. In our Blair County market, we run into M And T a little bit, too. And then there is a host of small community banks. It runs the gamut. It's very competitive.
Mr. Kochvar: And we're also competing now against the nonbank players: wealth management, insurance and even deposit gathering, and some out-of-market players and Internet companies.
TWST: In a recent presentation, you have a slide showing S And T's ROA over the past five years, largely well ahead of peers and Pennsylvania banks. Would you share with us some of the keys to your outperformance in that area?
Mr. Brice: I think it's really two factors. One, we've historically been a very efficient organization, and if you factor in where we've been relative to peers again, our expense structure is maybe a little bit lower. And then also, we've typically had a higher level of earning assets than some of our peers, too. That being said, in the new environment that we're in, you have a lot of pressures on expense. A few years back, our FDIC insurance was $500,000, now today it is going to be $3 million or $4 million, down from the high point, close to $7.5 million. Revenue streams have been impacted somewhat, and then, you just have a higher cost structure to operate in today's environment from a regulatory standpoint. We've got a lot of resources over on the control side of the house versus more on the production side.
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