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S&T BANCORP, INC. ANNOUNCES RECORD FOURTH QUARTER AND FULL YEAR 2022 RESULTS

S&T BANCORP, INC. ANNOUNCES RECORD FOURTH QUARTER AND FULL YEAR 2022 RESULTS
PR Newswire
INDIANA, Pa., Jan. 25, 2023

INDIANA, Pa., Jan. 25, 2023 /PRNewswire/ — S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Ban…

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S&T BANCORP, INC. ANNOUNCES RECORD FOURTH QUARTER AND FULL YEAR 2022 RESULTS

PR Newswire

INDIANA, Pa., Jan. 25, 2023

INDIANA, Pa., Jan. 25, 2023 /PRNewswire/ -- S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Bank, with operations in Pennsylvania and Ohio announced its fourth quarter and full year 2022 earnings. Net income was $40.3 million, or $1.03 per diluted share, for the fourth quarter compared to net income of $37.2 million, or $0.95 per diluted share, for the third quarter of 2022, and $22.5 million, or $0.57 per diluted share, for the fourth quarter of 2021.

Net income was $135.5 million, or $3.46 per diluted share, for the year ended December 31, 2022 compared to net income of $110.3 million, or $2.81 per diluted share, for 2021.

Fourth Quarter of 2022 Highlights:

  • Record EPS and net income for the fourth quarter of 2022.
  • Strong return metrics with return on average assets (ROA) of 1.78%, return on average equity (ROE) of 13.68% and return on average tangible equity (ROTE) (non-GAAP) of 20.36% compared to ROA of 1.64%, ROE of 12.47% and ROTE (non-GAAP) of 18.46% for the third quarter of 2022.
  • Pre-provision net revenue to average assets (PPNR) (non-GAAP) of 2.36% compared to 2.15% for the third quarter of 2022.
  • Net interest margin (NIM) (FTE) (non-GAAP) expanded 29 basis points to 4.33% compared to 4.04% for the third quarter of 2022.
  • Net interest income increased by $5.3 million, or 6.3%, compared to the third quarter of 2022.
  • Total portfolio loans increased $87.1 million, or 4.9% annualized, compared to September 30, 2022.
  • Nonperforming assets decreased $6.7 million, or 23.2%, resulting in a nonperforming assets to total loans plus other real estate owned, or OREO, ratio of 0.31% compared to 0.41% at September 30, 2022.
  • S&T's Board of Directors approved a $0.32 per share cash dividend, an increase of $0.01, or 3.2%, compared to the prior quarter. This is an increase of $0.03, or 10.3%, compared to the same period in the prior year.

Full Year 2022 Highlights:

  • Record EPS and net income for the full year 2022.
  • ROA of 1.48%, ROE of 11.47% and ROTE (non-GAAP) of 17.02% compared to ROA of 1.18%, ROE of 9.30% and ROTE (non-GAAP) of 13.85% in the prior year.
  • PPNR (non-GAAP) of 1.93% compared to 1.62% in the prior year.
  • Net interest margin (NIM) (FTE) (non-GAAP) expanded 54 basis points to 3.76% compared to 3.22% for the prior year.
  • Net interest income increased by $39.7 million, or 14.4%, compared to 2021.
  • Total portfolio loans, excluding PPP, increased $268.3 million, or 3.9% compared to December 31, 2021.
  • Nonperforming assets decreased $57.5 million, or 72.2%, resulting in a nonperforming assets to total loans plus OREO ratio of 0.31% compared to 1.13% at December 31, 2021.
  • Full year 2022 dividends declared increased 6.2% to $1.20 compared to $1.13 in 2021.

"2022 was truly a historic year for S&T," said Chris McComish, chief executive officer. "We began the year celebrating our 120th anniversary and market leading recognition for customer satisfaction and employee engagement. We have now finished the year with two consecutive quarters of record net income and earnings per share and record full year net income and earnings per share. We look forward to 2023, a transformative year for S&T focused on living our purpose of building a better future together through people-forward banking."

Fourth Quarter of 2022 Results (three months ended December 31, 2022)

Net Interest Income

Net interest income increased $5.3 million, or 6.3%, to $89.1 million compared to $83.8 million in the third quarter of 2022. The increase in net interest income was primarily due to higher interest rates in the fourth quarter. The yield on total average loans increased 69 basis points to 5.38% compared to 4.69% in the third quarter of 2022. Total interest-bearing deposit costs increased 50 basis points to 0.93% compared to 0.43% in the third quarter of 2022. Average interest-bearing deposit balances declined $129.7 million compared to the prior quarter due to the competitive market driven by rising interest rates. Total borrowing costs increased 108 basis points to 4.60% compared to 3.52% in the third quarter of 2022. Average borrowings increased $122.8 million to $217.6 million compared to $94.8 million in the third quarter. Net interest margin on a fully taxable equivalent basis (NIM) (FTE) (non-GAAP) expanded 29 basis points to 4.33% compared to 4.04% in the prior quarter. The increase in NIM (FTE) (non-GAAP) was due to higher yields on loans only partially offset by a higher cost of interest-bearing liabilities.

Asset Quality

Total nonperforming assets decreased $6.7 million, or 23.2%, to $22.1 million at December 31, 2022 compared to $28.8 million at September 30, 2022. Nonperforming assets to total loans plus OREO, decreased 10 basis points to 0.31% at December 31, 2022 compared to 0.41% at September 30, 2022. Net loan charge-offs were $0.9 million for the fourth quarter of 2022 compared to $0.7 million in the third quarter of 2022. The provision for credit losses was $3.2 million for the fourth quarter of 2022 compared to $2.5 million in the third quarter of 2022. The allowance for credit losses was 1.41% of total portfolio loans as of December 31, 2022 compared to 1.40% at September 30, 2022.

Noninterest Income and Expense

Noninterest income increased $0.8 million to $15.6 million in the fourth quarter of 2022 compared to $14.8 million in the third quarter of 2022. The increase in noninterest income was primarily due to higher other income of $1.7 million related to a net gain on the sale of OREO of $2.0 million. Noninterest expense increased $1.7 million to $51.3 million in the fourth quarter of 2022 compared to $49.6 million in the third quarter of 2022. The increase was mainly due to an increase in salaries and employee benefits of $1.3 million compared to the prior quarter primarily due to higher incentives. The efficiency ratio (non-GAAP) improved to 48.73% compared to 50.19% for the third quarter of 2022.

Financial Condition

Total assets increased $0.2 billion to $9.1 billion at December 31, 2022 compared to $8.9 billion at September 30, 2022. Total portfolio loans increased $87.1 million, or 4.9% annualized, compared to September 30, 2022. Consumer loans increased $80.2 million, or 17.1% annualized, which primarily consisted of residential mortgage growth of $72.6 million, or 27.6% annualized. Total deposits decreased $190.6 million with decreases in all categories due to the competitive market driven by rising interest rates. S&T continues to maintain a strong capital position with all capital ratios above the well-capitalized thresholds of federal bank regulatory agencies.

Full Year 2022 Results (twelve months ended December 31, 2022)

Full year net income increased nearly 23% and was a record $135.5 million, or $3.46 per diluted share, for the year ended December 31, 2022 compared to net income of $110.3 million, or $2.81 per diluted share, for 2021.

Net interest income increased $39.7 million, or 14.4% compared to 2021 primarily due to the impact of rising interest rates. The yield on total average loans increased 66 basis points to 4.50% compared to 3.84% in 2021. Total interest-bearing deposit costs increased 20 basis points to 0.40% compared to 0.20% in 2021. Net interest margin (FTE) (non-GAAP) expanded 54 basis points to 3.76% compared to 3.22% for 2021. The increase in NIM (FTE) (non-GAAP) was due to higher yields on loans only partially offset by a higher cost of interest-bearing liabilities.

Noninterest income decreased $6.4 million compared to the prior year. Mortgage banking income decreased $7.5 million due to a decline in loan sale activity caused by rising interest rates and a shift to holding originated mortgage loans. Other income decreased $1.8 million compared to the prior year primarily related to the decline in the fair value of the assets in a nonqualified benefit plan and other market value adjustments partially offset by a net gain on the sale of OREO. Debit and credit card fees increased $1.1 million and service charges on deposit accounts increased $1.8 million due to increased customer activity. Noninterest expense increased $7.8 million compared to 2021. Salaries and employee benefits increased $3.0 million primarily due to higher incentives. Professional services and legal increased $2.0 million related to various consulting engagements during 2022. The efficiency ratio (non-GAAP) for 2022 was 52.34% compared to 55.06% for 2021.

Asset quality improved significantly during 2022. Nonperforming assets decreased $57.5 million, or 72.2%, to $22.1 million resulting in a nonperforming assets to total loans plus other real estate owned, or OREO, ratio of 0.31% compared to 1.13% at December 31, 2021. The provision for credit losses decreased $7.8 million to $8.4 million for 2022 compared to $16.2 million for 2021 primarily due to lower net charge-offs. Net loan charge-offs were $2.6 million for 2022 compared to $34.5 million for 2021. The allowance for credit losses was 1.41% of total portfolio loans as of December 31, 2022 and December 31, 2021.

Dividend

S&T's Board of Directors approved a $0.32 per share cash dividend on January 25, 2023. This is an increase of $0.03, or 10.3%, compared to a $0.29 per share cash dividend declared in the same period in the prior year. The dividend is payable February 23, 2023 to shareholders of record on February 10, 2023. Dividends declared in 2022 increased $0.07 to $1.20 compared to $1.13 for 2021.

Non-GAAP Financial Measures

This release presents certain non-GAAP financial measures. For a reconciliation to the most directly comparable GAAP measures, see "Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures" in the accompanying tables.

Conference Call

S&T will host its fourth quarter 2022 earnings conference call live over the Internet at 1:00 p.m. ET on Thursday, January 26, 2023. To access the webcast, go to S&T Bancorp, Inc.'s Investor Relations webpage www.stbancorp.com. After the live presentation, the webcast will be archived at www.stbancorp.com for 12 months.

About S&T Bancorp, Inc.

S&T Bancorp, Inc. is a $9.1 billion bank holding company that is headquartered in Indiana, Pennsylvania and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank, was established in 1902 and operates in Pennsylvania and Ohio. S&T Bank was recently named by Forbes as a 2022 Best-in-State Bank. S&T Bank also received the highest ranking in customer satisfaction for retail banking in the Pennsylvania region by J.D. Power in 2022. For more information visit stbancorp.com or stbank.com. Follow us on Follow us on Facebook, Instagram and LinkedIn.

This information 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; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; changes in accounting policies, practices or guidance; 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, 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; general economic or business conditions, including the strength of regional economic conditions in our market area; environmental, social and governance practices and disclosures, including climate change, hiring practices, the diversity of the work force, and racial and social justice issues; 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, 2021, 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 as 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.

 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited



2022


2022


2021



Fourth


Third


Fourth


(dollars in thousands, except per share data)

Quarter


Quarter


Quarter


INTEREST AND DIVIDEND INCOME







Loans, including fees

$96,220


$83,035


$66,373


Investment Securities:







Taxable

6,507


6,305


4,173


Tax-exempt

233


380


495


Dividends

248


115


94


Total Interest and Dividend Income

103,208


89,835


71,135









INTEREST EXPENSE







Deposits

11,067


5,197


2,186


Borrowings, junior subordinated debt securities and other

3,083


840


511


Total Interest Expense

14,150


6,037


2,697









NET INTEREST INCOME

89,058


83,798


68,438


Provision for credit losses

3,176


2,498


7,128


Net Interest Income After Provision for Credit Losses

85,882


81,300


61,310









NONINTEREST INCOME







Net gain on sale of securities

—


198


—


Debit and credit card

4,421


4,768


4,467


Service charges on deposit accounts

4,341


4,333


4,001


Wealth management

3,016


3,212


3,314


Mortgage banking

309


425


1,528


Other

3,556


1,824


2,794


Total Noninterest Income

15,643


14,760


16,104









NONINTEREST EXPENSE







Salaries and employee benefits

27,998


26,700


27,144


Data processing and information technology

4,159


4,220


4,668


Occupancy

3,806


3,490


3,624


Furniture, equipment and software

2,975


2,915


2,897


Professional services and legal

2,138


1,851


1,650


Other taxes

1,842


1,559


1,545


Marketing

1,348


1,367


1,346


FDIC insurance

437


598


1,044


Other

6,572


6,933


6,271


Total Noninterest Expense

51,275


49,633


50,189


Income Before Taxes

50,250


46,427


27,225


Income tax expense

9,980


9,178


4,748


Net Income

$40,270


$37,249


$22,477









Per Share Data







Shares outstanding at end of period

38,999,733


39,012,773


39,351,194


Average shares outstanding - diluted

38,944,575


38,975,145


39,082,285


Diluted earnings per share

$1.03


$0.95


$0.57


Dividends declared per share

$0.31


$0.30


$0.29


Dividend yield (annualized)

3.63 %


4.09 %


3.68 %


Dividends paid to net income

29.85 %


31.39 %


50.64 %


Book value

$30.38


$29.56


$30.66


Tangible book value (1)

$20.69


$19.87


$21.03


Market value

$34.18


$29.31


$31.52









Profitability Ratios (Annualized)







Return on average assets

1.78 %


1.64 %


0.94 %


Return on average shareholders' equity

13.68 %


12.47 %


7.39 %


Return on average tangible shareholders' equity(2)

20.36 %


18.46 %


10.95 %


Pre-provision net revenue / average assets(3)

2.36 %


2.15 %


1.44 %


Efficiency ratio (FTE)(4)

48.73 %


50.19 %


59.01 %









 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited





Twelve Months Ended December 31,


(dollars in thousands, except per share data)



2022


2021


INTEREST AND DIVIDEND INCOME







Loans, including fees



$314,866


$270,460


Investment Securities:







Taxable



23,743


15,706


Tax-exempt



1,579


2,593


Dividends



563


503


Total Interest and Dividend Income



340,751


289,262









INTEREST EXPENSE







Deposits



19,907


10,757


Borrowings, junior subordinated debt securities and other



5,061


2,393


Total Interest Expense



24,968


13,150









NET INTEREST INCOME



315,783


276,112


Provision for credit losses



8,366


16,215


Net Interest Income After Provision for Credit Losses



307,417


259,897









NONINTEREST INCOME







Net gain on sale of securities



198


29


Debit and credit card



19,008


17,952


Service charges on deposit accounts



16,829


15,040


Wealth management



12,717


12,889


Mortgage banking



2,215


9,734


Other



7,292


9,052


Total Noninterest Income



58,259


64,696









NONINTEREST EXPENSE







Salaries and employee benefits



103,221


100,214


Data processing and information technology



16,918


16,681


Occupancy



14,812


14,544


Furniture, equipment and software



11,606


10,684


Professional services and legal



8,318


6,368


Other taxes



6,620


6,644


Marketing



5,600


4,553


FDIC insurance



2,854


4,224


Other



26,797


25,013


Total Noninterest Expense



196,746


188,925


Income Before Taxes



168,930


135,668


Income tax expense



33,410


25,325









Net Income



$135,520


$110,343









Per Share Data







Average shares outstanding - diluted



39,030,934


39,052,961


Diluted earnings per share



$3.46


$2.81


Dividends declared per share



$1.20


$1.13


Dividends paid to net income



34.64 %


40.18 %









Profitability Ratios







Return on average assets



1.48 %


1.18 %


Return on average shareholders' equity



11.47 %


9.30 %


Return on average tangible shareholders' equity(5)



17.02 %


13.85 %


Pre-provision net revenue / average assets(6)



1.93 %


1.62 %


Efficiency ratio (FTE)(7)



52.34 %


55.06 %









 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited



2022


2022


2021



Fourth


Third


Fourth


(dollars in thousands)

Quarter


Quarter


Quarter


ASSETS







Cash and due from banks, including interest-bearing deposits

$210,009


$134,903


$922,215


Securities, at fair value

1,002,778


997,428


910,793


Loans held for sale

16


1,039


1,522


Commercial loans:







Commercial real estate

3,128,187


3,134,841


3,236,653


Commercial and industrial

1,718,976


1,714,714


1,728,969


Commercial construction

399,371


390,093


440,962


Total Commercial Loans

5,246,534


5,239,648


5,406,584


Consumer loans:







Residential mortgage

1,116,528


1,043,973


899,956


Home equity

652,066


642,937


564,219


Installment and other consumer

124,896


126,629


107,928


Consumer construction

43,945


43,729


21,303


Total Consumer Loans

1,937,435


1,857,268


1,593,406


Total Portfolio Loans

7,183,969


7,096,916


6,999,990


Allowance for credit losses

(101,340)


(99,694)


(98,576)


Total Portfolio Loans, Net

7,082,629


6,997,222


6,901,414


Federal Home Loan Bank and other restricted stock, at cost

23,035


10,900


9,519


Goodwill

373,424


373,424


373,424


Other assets

418,676


421,053


369,642


Total Assets

$9,110,567


$8,935,969


$9,488,529









LIABILITIES







Deposits:







Noninterest-bearing demand

$2,588,692


$2,663,176


$2,748,586


Interest-bearing demand

846,653


847,825


979,133


Money market

1,731,521


1,818,642


2,070,579


Savings

1,118,511


1,128,169


1,110,155


Certificates of deposit

934,593


952,785


1,088,071


Total Deposits

7,219,970


7,410,597


7,996,524









Borrowings:







Securities sold under repurchase agreements

—


—


84,491


Short-term borrowings

370,000


35,000


—


Long-term borrowings

14,741


14,853


22,430


Junior subordinated debt securities

54,453


54,438


54,393


Total Borrowings

439,194


104,291


161,314


Other liabilities

266,744


267,900


124,237


Total Liabilities

7,925,908


7,782,788


8,282,075









SHAREHOLDERS' EQUITY







Total Shareholders' Equity

1,184,659


1,153,181


1,206,454


Total Liabilities and Shareholders' Equity

$9,110,567


$8,935,969


$9,488,529









Capitalization Ratios







Shareholders' equity / assets

13.00 %


12.90 %


12.71 %


Tangible common equity / tangible assets(9)

9.24 %


9.06 %


9.08 %


Tier 1 leverage ratio

11.06 %


10.75 %


9.74 %


Common equity tier 1 capital

12.81 %


12.53 %


12.03 %


Risk-based capital - tier 1

13.21 %


12.93 %


12.43 %


Risk-based capital - total

14.73 %


14.43 %


13.79 %









 

S&T Bancorp, Inc.


Consolidated Selected Financial Data


Unaudited





2022


2022


2021




Fourth


Third


Fourth



(dollars in thousands)

Quarter


Quarter


Quarter



Net Interest Margin (FTE) (QTD Averages)








ASSETS








Interest-bearing deposits with banks

$79,881

4.04 %

$158,700

2.05 %

$877,738

0.16 %


Securities, at fair value

991,774

2.43 %

1,051,534

2.28 %

883,066

2.02 %


Loans held for sale

491

6.19 %

1,032

5.36 %

2,057

3.03 %


Commercial real estate

3,118,874

5.14 %

3,159,543

4.63 %

3,252,946

3.59 %


Commercial and industrial

1,724,480

6.15 %

1,704,271

5.10 %

1,729,014

4.21 %


Commercial construction

387,737

6.64 %

405,460

5.05 %

446,219

3.19 %


Total Commercial Loans

5,231,091

5.58 %

5,269,274

4.81 %

5,428,179

3.76 %


Residential mortgage

1,077,114

4.25 %

1,005,139

4.12 %

889,758

4.03 %


Home equity

648,340

5.44 %

629,827

4.34 %

558,158

3.37 %


Installment and other consumer

126,570

6.97 %

123,010

6.10 %

103,450

5.63 %


Consumer construction

41,385

3.81 %

40,975

3.47 %

16,203

3.50 %


Total Consumer Loans

1,893,409

4.83 %

1,798,951

4.31 %

1,567,569

3.90 %


Total Portfolio Loans

7,124,500

5.38 %

7,068,225

4.69 %

6,995,748

3.79 %


Total Loans

7,124,991

5.38 %

7,069,257

4.69 %

6,997,805

3.79 %


Federal Home Loan Bank and other restricted stock

24,043

5.32 %

8,398

4.55 %

9,720

3.06 %


Total Interest-earning Assets

8,220,689

5.01 %

8,287,889

4.33 %

8,768,329

3.25 %


Noninterest-earning assets

763,927


721,480


722,029



Total Assets

$8,984,616


$9,009,369


$9,490,357











LIABILITIES AND SHAREHOLDERS' EQUITY








Interest-bearing demand

$836,585

0.24 %

$872,302

0.07 %

$967,826

0.07 %


Money market

1,792,162

1.60 %

1,861,389

0.69 %

2,063,447

0.17 %


Savings

1,127,987

0.22 %

1,131,575

0.10 %

1,090,211

0.03 %


Certificates of deposit

941,774

1.14 %

962,898

0.61 %

1,147,664

0.36 %


Total Interest-bearing Deposits

4,698,508

0.93 %

4,828,164

0.43 %

5,269,148

0.16 %


Securities sold under repurchase agreements

—

— %

12,668

0.10 %

76,171

0.10 %


Short-term borrowings

148,370

4.22 %

10,379

3.16 %

—

— %


Long-term borrowings

14,801

2.55 %

17,278

2.25 %

22,566

1.96 %


Junior subordinated debt securities

54,443

6.21 %

54,428

4.78 %

54,383

2.77 %


Total Borrowings

217,614

4.60 %

94,753

3.52 %

153,120

1.32 %


Total Other Costing Liabilities

60,156

3.72 %

—

— %

—

— %


Total Interest-bearing Liabilities

4,976,278

1.13 %

4,922,917

0.49 %

5,422,269

0.20 %


Noninterest-bearing liabilities

2,840,315


2,901,290


2,861,873



Shareholders' equity

1,168,023


1,185,162


1,206,216



Total Liabilities and Shareholders' Equity

$8,984,616


$9,009,369


$9,490,357











Net Interest Margin(10)


4.33 %


4.04 %


3.12 %










 

S&T Bancorp, Inc.


Consolidated Selected Financial Data


Unaudited







Twelve Months Ended December 31,



(dollars in thousands)



2022


2021



Net Interest Margin (FTE) (YTD Averages)








ASSETS








Interest-bearing deposits with banks



$378,323

0.78 %

$722,057

0.13 %


Securities, at fair value



1,017,471

2.25 %

832,304

2.18 %


Loans held for sale



1,115

4.38 %

4,094

3.03 %


Commercial real estate



3,182,821

4.39 %

3,249,559

3.68 %


Commercial and industrial



1,706,861

4.90 %

1,829,563

4.15 %


Commercial construction



401,780

4.68 %

471,286

3.28 %


Total Commercial Loans



5,291,462

4.57 %

5,550,407

3.80 %


Residential mortgage



980,134

4.10 %

881,494

4.11 %


Home equity



611,134

4.24 %

543,777

3.46 %


Installment and other consumer



119,703

6.00 %

90,129

5.94 %


Consumer construction



33,922

3.53 %

14,748

4.53 %


Total Consumer Loans



1,744,893

4.26 %

1,530,148

3.99 %


Total Portfolio Loans



7,036,355

4.50 %

7,080,555

3.84 %


Total Loans



7,037,470

4.50 %

7,084,649

3.84 %


Federal Home Loan Bank and other restricted stock



12,694

4.54 %

10,363

3.83 %


Total Interest-earning Assets



8,445,958

4.06 %

8,649,372

3.37 %


Noninterest-earning assets



721,080


726,478



Total Assets



$9,167,038


$9,375,850











LIABILITIES AND SHAREHOLDERS' EQUITY








Interest-bearing demand



$918,222

0.11 %

$956,211

0.08 %


Money market



1,909,208

0.63 %

2,033,631

0.18 %


Savings



1,121,818

0.10 %

1,047,855

0.03 %


Certificates of deposit



993,722

0.58 %

1,255,370

0.47 %


Total Interest-bearing deposits



4,942,970

0.40 %

5,293,066

0.20 %


Securities sold under repurchase agreements



35,836

0.10 %

69,964

0.11 %


Short-term borrowings



40,013

4.15 %

6,301

0.19 %


Long-term borrowings



19,090

2.15 %

22,995

1.99 %


Junior subordinated debt securities



54,420

4.40 %

61,653

2.99 %


Total Borrowings



149,359

3.01 %

160,913

1.49 %


Total Other Costing Liabilities



15,163

3.69 %

—

— %


Total Interest-bearing Liabilities



5,107,492

0.49 %

5,453,979

0.24 %


Noninterest-bearing liabilities



2,877,758


2,735,710



Shareholders' equity



1,181,788


1,186,161



Total Liabilities and Shareholders' Equity



$9,167,038


$9,375,850











Net Interest Margin(8)




3.76 %


3.22 %


 

S&T Bancorp, Inc.


Consolidated Selected Financial Data


Unaudited





2022


2022


2021




Fourth


Third


Fourth



(dollars in thousands)

Quarter


Quarter


Quarter



Nonaccrual Loans








Commercial loans:


% Loans


% Loans


% Loans


Commercial real estate

$7,323

0.23 %

$8,556

0.27 %

$32,892

1.02 %


Commercial and industrial

2,974

0.17 %

3,847

0.22 %

19,810

1.15 %


Commercial construction

384

0.10 %

384

0.10 %

2,471

0.56 %


Total Nonaccrual Commercial Loans

10,681

0.20 %

12,787

0.24 %

55,173

1.02 %


Consumer loans:








Residential mortgage

6,063

0.54 %

7,357

0.70 %

8,227

0.91 %


Home equity

2,031

0.31 %

2,216

0.34 %

2,733

0.48 %


Installment and other consumer

277

0.22 %

417

0.33 %

158

0.15 %


Total Nonaccrual Consumer Loans

8,371

0.43 %

9,990

0.54 %

11,118

0.70 %


Total Nonaccrual Loans

$19,052

0.27 %

$22,777

0.32 %

$66,291

0.95 %





2022


2022


2021




Fourth


Third


Fourth



(dollars in thousands)

Quarter


Quarter


Quarter



Loan Charge-offs (Recoveries)








Charge-offs

$1,718


$1,239


$18,048



Recoveries

(808)


(529)


(393)



Net Loan Charge-offs

$910


$710


$17,655











Net Loan Charge-offs (Recoveries)








Commercial loans:








Commercial real estate

$412


$304


$1,352



Commercial and industrial

150


80


16,053



Commercial construction

—


—


(10)



Total Commercial Loan Charge-offs

562


384


17,395



Consumer loans:








Residential mortgage

51


41


104



Home equity

136


111


8



Installment and other consumer

161


174


148



Total Consumer Loan Charge-offs

348


326


260



Total Net Loan Charge-offs

$910


$710


$17,655








Twelve Months Ended December 31,



(dollars in thousands)



2022


2021



Loan Charge-offs (Recoveries)








Charge-offs



$11,617


$37,524



Recoveries



(9,022)


(2,994)



Net Loan Charge-offs



$2,595


$34,530











Net Loan Charge-offs (Recoveries)








Commercial loans:








Commercial real estate



$768


$12,296



Commercial and industrial



213


21,483



Commercial construction



(1)


42



Total Commercial Loan Charge-offs



980


33,821



Consumer loans:








Residential mortgage



186


121



Home equity



233


288



Installment and other consumer



1,196


300



Total Consumer Loan Charge-offs



1,615


709



Total Net Loan Charge-offs



$2,595


$34,530











 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited



2022


2022


2021



Fourth


Third


Fourth


(dollars in thousands)

Quarter


Quarter


Quarter


Asset Quality Data







Nonaccrual loans

$19,052


$22,777


$66,291


OREO

3,065


6,022


13,313


Total nonperforming assets

22,117


28,799


79,604


Troubled debt restructurings (nonaccruing)

2,894


3,860


21,774


Troubled debt restructurings (accruing)

8,891


8,925


9,921


Total troubled debt restructurings

11,785


12,785


31,695


Nonaccrual loans / total loans

0.27 %


0.32 %


0.95 %


Nonperforming assets / total loans plus OREO

0.31 %


0.41 %


1.13 %


Allowance for credit losses / total portfolio loans

1.41 %


1.40 %


1.41 %


Allowance for credit losses / total portfolio loans excluding PPP

1.41 %


1.41 %


1.43 %


Allowance for credit losses / nonaccrual loans

532 %


438 %


149 %


Net loan charge-offs

$910


$710


$17,655


Net loan charge-offs (annualized) / average loans

0.05 %


0.04 %


1.02 %












Twelve Months Ended December 31,


(dollars in thousands)



2022


2021


Asset Quality Data







Net loan charge-offs



$2,595


$34,530


Net loan charge-offs / average loans



0.04 %


0.49 %


   

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited


Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures:



2022


2022


2021



Fourth


Third


Fourth


(dollars and shares in thousands)

Quarter


Quarter


Quarter


(1) Tangible Book Value (non-GAAP)







Total shareholders' equity

$1,184,659


$1,153,181


$1,206,454


Less: goodwill and other intangible assets, net of deferred tax
liability

(377,673)


(377,961)


(378,871)


Tangible common equity (non-GAAP)

$806,986


$775,220


$827,583


Common shares outstanding

39,000


39,013


39,351


Tangible book value (non-GAAP)

$20.69


$19.87


$21.03









(2) Return on Average Tangible Shareholders' Equity (non-GAAP)







Net income (annualized)

$159,765


$147,781


$89,176


Plus: amortization of intangibles (annualized), net of tax

1,144


1,181


1,376


Net income before amortization of intangibles (annualized)

$160,909


$148,962


$90,552









Average total shareholders' equity

$1,168,023


$1,185,162


$1,206,216


Less: average goodwill and other intangible assets, net of deferred
tax liability

(377,857)


(378,154)


(379,090)


Average tangible equity (non-GAAP)

$790,166


$807,008


$827,126


Return on average tangible shareholders' equity (non-GAAP)

20.36 %


18.46 %


10.95 %









(3) PPNR / Average Assets (non-GAAP)







Income before taxes

$50,250


$46,427


$27,225


Plus: Provision for credit losses

3,176


2,498


7,128


Total

$53,426


$48,925


$34,353


Total (annualized) (non-GAAP)

$211,961


$194,106


$136,292


Average assets

$8,984,616


$9,009,369


$9,490,357


PPNR / Average Assets (non-GAAP)

2.36 %


2.15 %


1.44 %









(4) Efficiency Ratio (non-GAAP)







Noninterest expense

$51,275


$49,633


$50,189









Net interest income per consolidated statements of net income

89,058


83,798


68,438


Plus: taxable equivalent adjustment

532


521


510


Net interest income (FTE) (non-GAAP)

$89,590


$84,319


$68,948


Noninterest income

15,643


14,760


16,104


Less: net gains on sale of securities

—


(198)


—


Net interest income (FTE) (non-GAAP) plus noninterest income

$105,233


$98,881


$85,052


Efficiency ratio (non-GAAP)

48.73 %


50.19 %


59.01 %









 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited


Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures:





Twelve Months Ended December 31,


(dollars in thousands)



2022


2021


(5) Return on Average Tangible Shareholders' Equity (non-GAAP)







Net income



$135,520


$110,343


Plus: amortization of intangibles, net of tax



1,199


1,400


Net income before amortization of intangibles



$136,719


$111,743









Average total shareholders' equity



$1,181,788


$1,186,161


Less: average goodwill and other intangible assets, net of deferred
tax liability



(378,303)


(379,612)


Average tangible equity (non-GAAP)



$803,485


$806,549


Return on average tangible shareholders' equity (non-GAAP)



17.02 %


13.85 %









(6) PPNR / Average Assets (non-GAAP)







Income before taxes



$168,930


$135,668


Plus: Provision for credit losses



8,366


16,215


Total



$177,296


$151,883


Average assets



$9,167,038


$9,375,850


PPNR / Average Assets (non-GAAP)



1.93 %


1.62 %









(7) Efficiency Ratio (non-GAAP)







Noninterest expense



$196,746


$188,925









Net interest income per consolidated statements of net income



315,783


276,112


Plus: taxable equivalent adjustment



2,052


2,316


Net interest income (FTE) (non-GAAP)



$317,835


$278,428


Noninterest income



58,259


64,696


Less: net gains on sale of securities



(198)


(29)


Net interest income (FTE) (non-GAAP) plus noninterest income



$375,896


$343,095


Efficiency ratio (non-GAAP)



52.34 %


55.06 %









(8) Net Interest Margin Rate (FTE) (non-GAAP)







Interest income and dividend income



$340,751


$289,262


Less: interest expense



(24,968)


(13,150)


Net interest income per consolidated statements of net income



$315,783


$276,112


Plus: taxable equivalent adjustment



2,052


2,316


Net interest income (FTE) (non-GAAP)



$317,835


$278,428


Average interest-earning assets



$8,445,958


$8,649,372


Net interest margin - (FTE) (non-GAAP)



3.76 %


3.22 %


 

 

S&T Bancorp, Inc.

Consolidated Selected Financial Data

Unaudited


Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures:



2022


2022


2021



Fourth


Third


Fourth


(dollars in thousands)

Quarter


Quarter


Quarter


(9) Tangible Common Equity / Tangible Assets (non-GAAP)







Total shareholders' equity

$1,184,659


$1,153,181


$1,206,454


Less: goodwill and other intangible assets, net of deferred tax
liability

(377,673)


(377,961)


(378,871)


Tangible common equity (non-GAAP)

$806,986


$775,220


$827,583









Total assets

$9,110,567


$8,935,969


$9,488,529


Less: goodwill and other intangible assets, net of deferred tax
liability

(377,673)


(377,961)


(378,871)


Tangible assets (non-GAAP)

$8,732,894


$8,558,008


$9,109,658


Tangible common equity to tangible assets (non-GAAP)

9.24 %


9.06 %


9.08 %









(10) Net Interest Margin Rate (FTE) (non-GAAP)







Interest income and dividend income

$103,208


$89,835


$71,135


Less: interest expense

(14,150)


(6,037)


(2,697)


Net interest income per consolidated statements of net income

$89,058


$83,798


$68,438


Plus: taxable equivalent adjustment

532


521


510


Net interest income (FTE) (non-GAAP)

$89,590


$84,319


$68,948


Net interest income (FTE) (annualized)

$355,438


$334,526


$273,537


Average interest-earning assets

$8,220,689


$8,287,889


$8,768,329


Net interest margin (FTE) (non-GAAP)

4.33 %


4.04 %


3.12 %









 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/st-bancorp-inc-announces-record-fourth-quarter-and-full-year-2022-results-301731118.html

SOURCE S&T Bancorp, Inc.

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Tight inventory and frustrated buyers challenge agents in Virginia

With inventory a little more than half of what it was pre-pandemic, agents are struggling to find homes for clients in Virginia.

Published

3 hours ago

on

March 14, 2024

By

No matter where you are in the state, real estate agents in Virginia are facing low inventory conditions that are creating frustrating scenarios for their buyers.

“I think people are getting used to the interest rates where they are now, but there is just a huge lack of inventory,” said Chelsea Newcomb, a RE/MAX Realty Specialists agent based in Charlottesville. “I have buyers that are looking, but to find a house that you love enough to pay a high price for — and to be at over a 6.5% interest rate — it’s just a little bit harder to find something.”

Newcomb said that interest rates and higher prices, which have risen by more than $100,000 since March 2020, according to data from Altos Research, have caused her clients to be pickier when selecting a home.

“When rates and prices were lower, people were more willing to compromise,” Newcomb said.

Out in Wise, Virginia, near the westernmost tip of the state, RE/MAX Cavaliers agent Brett Tiller and his clients are also struggling to find suitable properties.

“The thing that really stands out, especially compared to two years ago, is the lack of quality listings,” Tiller said. “The slightly more upscale single-family listings for move-up buyers with children looking for their forever home just aren’t coming on the market right now, and demand is still very high.”

Statewide, Virginia had a 90-day average of 8,068 active single-family listings as of March 8, 2024, down from 14,471 single-family listings in early March 2020 at the onset of the COVID-19 pandemic, according to Altos Research. That represents a decrease of 44%.

Virginia-Inventory-Line-Chart-Virginia-90-day-Single-Family

In Newcomb’s base metro area of Charlottesville, there were an average of only 277 active single-family listings during the same recent 90-day period, compared to 892 at the onset of the pandemic. In Wise County, there were only 56 listings.

Due to the demand from move-up buyers in Tiller’s area, the average days on market for homes with a median price of roughly $190,000 was just 17 days as of early March 2024.

“For the right home, which is rare to find right now, we are still seeing multiple offers,” Tiller said. “The demand is the same right now as it was during the heart of the pandemic.”

According to Tiller, the tight inventory has caused homebuyers to spend up to six months searching for their new property, roughly double the time it took prior to the pandemic.

For Matt Salway in the Virginia Beach metro area, the tight inventory conditions are creating a rather hot market.

“Depending on where you are in the area, your listing could have 15 offers in two days,” the agent for Iron Valley Real Estate Hampton Roads | Virginia Beach said. “It has been crazy competition for most of Virginia Beach, and Norfolk is pretty hot too, especially for anything under $400,000.”

According to Altos Research, the Virginia Beach-Norfolk-Newport News housing market had a seven-day average Market Action Index score of 52.44 as of March 14, making it the seventh hottest housing market in the country. Altos considers any Market Action Index score above 30 to be indicative of a seller’s market.

Virginia-Beach-Metro-Area-Market-Action-Index-Line-Chart-Virginia-Beach-Norfolk-Newport-News-VA-NC-90-day-Single-Family

Further up the coastline on the vacation destination of Chincoteague Island, Long & Foster agent Meghan O. Clarkson is also seeing a decent amount of competition despite higher prices and interest rates.

“People are taking their time to actually come see things now instead of buying site unseen, and occasionally we see some seller concessions, but the traffic and the demand is still there; you might just work a little longer with people because we don’t have anything for sale,” Clarkson said.

“I’m busy and constantly have appointments, but the underlying frenzy from the height of the pandemic has gone away, but I think it is because we have just gotten used to it.”

While much of the demand that Clarkson’s market faces is for vacation homes and from retirees looking for a scenic spot to retire, a large portion of the demand in Salway’s market comes from military personnel and civilians working under government contracts.

“We have over a dozen military bases here, plus a bunch of shipyards, so the closer you get to all of those bases, the easier it is to sell a home and the faster the sale happens,” Salway said.

Due to this, Salway said that existing-home inventory typically does not come on the market unless an employment contract ends or the owner is reassigned to a different base, which is currently contributing to the tight inventory situation in his market.

Things are a bit different for Tiller and Newcomb, who are seeing a decent number of buyers from other, more expensive parts of the state.

“One of the crazy things about Louisa and Goochland, which are kind of like suburbs on the western side of Richmond, is that they are growing like crazy,” Newcomb said. “A lot of people are coming in from Northern Virginia because they can work remotely now.”

With a Market Action Index score of 50, it is easy to see why people are leaving the Washington-Arlington-Alexandria market for the Charlottesville market, which has an index score of 41.

In addition, the 90-day average median list price in Charlottesville is $585,000 compared to $729,900 in the D.C. area, which Newcomb said is also luring many Virginia homebuyers to move further south.

Median-Price-D.C.-vs.-Charlottesville-Line-Chart-90-day-Single-Family

“They are very accustomed to higher prices, so they are super impressed with the prices we offer here in the central Virginia area,” Newcomb said.

For local buyers, Newcomb said this means they are frequently being outbid or outpriced.

“A couple who is local to the area and has been here their whole life, they are just now starting to get their mind wrapped around the fact that you can’t get a house for $200,000 anymore,” Newcomb said.

As the year heads closer to spring, triggering the start of the prime homebuying season, agents in Virginia feel optimistic about the market.

“We are seeing seasonal trends like we did up through 2019,” Clarkson said. “The market kind of soft launched around President’s Day and it is still building, but I expect it to pick right back up and be in full swing by Easter like it always used to.”

But while they are confident in demand, questions still remain about whether there will be enough inventory to support even more homebuyers entering the market.

“I have a lot of buyers starting to come off the sidelines, but in my office, I also have a lot of people who are going to list their house in the next two to three weeks now that the weather is starting to break,” Newcomb said. “I think we are going to have a good spring and summer.”

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These Cities Have The Highest (And Lowest) Share Of Unaffordable Neighborhoods In 2024

These Cities Have The Highest (And Lowest) Share Of Unaffordable Neighborhoods In 2024

Authored by Sam Bourgi via CreditNews.com,

Homeownership…

Published

7 hours ago

on

March 14, 2024

By

These Cities Have The Highest (And Lowest) Share Of Unaffordable Neighborhoods In 2024

Authored by Sam Bourgi via CreditNews.com,

Homeownership is one of the key pillars of the American dream. But for many families, the idyllic fantasy of a picket fence and backyard barbecues remains just that—a fantasy.

Thanks to elevated mortgage rates, sky-high house prices, and scarce inventory, millions of American families have been locked out of the opportunity to buy a home in many cities.

To shed light on America’s housing affordability crisis, Creditnews Research ranked the 50 most populous cities by the percentage of neighborhoods within reach for the typical married-couple household to buy a home in.

The study reveals a stark reality, with many cities completely out of reach for the most affluent household type. Not only that, the unaffordability has radically worsened in recent years.

Comparing how affordability has changed since Covid, Creditnews Research discovered an alarming pattern—indicating consistently more unaffordable housing in all but three cities.

Fortunately, there’s still hope for households seeking to put down roots in more affordable cities—especially for those looking beyond Los Angeles, New York, Boston, San Jone, and Miami.

The typical American family has a hard time putting down roots in many parts of the country. In 11 of the top 50 cities, at least 50% of neighborhoods are out of reach for the average married-couple household. The affordability gap has widened significantly since Covid; in fact, no major city has reported an improvement in affordability post-pandemic.

Sam Bourgi, Senior Analyst at Creditnews

Key findings

  • The most unaffordable cities are Los Angeles, Boston, St. Louis, and San Jose; in each city, 100% of neighborhoods are out of reach for for married-couple households earning a median income;

  • The most affordable cities are Cleveland, Hartford, and Memphis—in these cities, the typical family can afford all neighborhoods;

  • None of the top 50 cities by population saw an improvement in affordable neighborhoods post-pandemic;

  • California recorded the biggest spike in unaffordable neighborhoods since pre-Covid;

  • The share of unaffordable neighborhoods has increased the most since pre-Covid in San Jose (70 percentage points), San Diego (from 57.8 percentage points), and Riverside-San Bernardino (51.9 percentage points);

  • Only three cities have seen no change in housing affordability since pre-Covid: Cleveland, Memphis, and Hartford. They’re also the only cities that had 0% of unaffordable neighborhoods before Covid.

Cities with the highest share of unaffordable neighborhoods

With few exceptions, the most unaffordable cities for married-couple households tend to be located in some of the nation’s most expensive housing markets.

Four cities in the ranking have an unaffordability percentage of 100%—indicating that the median married-couple household couldn’t qualify for an average home in any neighborhood.

The following are the cities ranked from the least affordable to the most:

  • Los Angeles, CA: Housing affordability in Los Angeles has deteriorated over the last five years, as average incomes have failed to keep pace with rising property values and elevated mortgage rates. The median household income of married-couple families in LA is $117,056, but even at that rate, 100% of the city’s neighborhoods are unaffordable.

  • St. Louis, MO: It may be surprising to see St. Louis ranking among the most unaffordable housing markets for married-couple households. But a closer look reveals that the Mound City was unaffordable even before Covid. In 2019, 98% of the city’s neighborhoods were unaffordable—way worse than Los Angeles, Boston, or San Jose.

  • Boston, MA: Boston’s housing affordability challenges began long before Covid but accelerated after the pandemic. Before Covid, married couples earning a median income were priced out of 90.7% of Boston’s neighborhoods. But that figure has since jumped to 100%, despite a comfortable median household income of $172,223.

  • San Jose, CA: Nestled in Silicon Valley, San Jose has long been one of the most expensive cities for housing in America. But things have gotten far worse since Covid, as 100% of its neighborhoods are now out of reach for the average family. Perhaps the most shocking part is that the median household income for married-couple families is $188,403—much higher than the national average.

  • San Diego, CA: Another California city, San Diego, is among the most unaffordable places in the country. Despite boasting a median married-couple household income of $136,297, 95.6% of the city’s neighborhoods are unaffordable.

  • San Francisco, CA: San Francisco is another California city with a high married-couple median income ($211,585) but low affordability. The percentage of unaffordable neighborhoods for these homebuyers stands at 89.2%.

  • New York, NY: As one of the most expensive cities in America, New York is a difficult housing market for married couples with dual income. New York City’s share of unaffordable neighborhoods is 85.9%, marking a 33.4% rise from pre-Covid times.

  • Miami, FL: Partly due to a population boom post-Covid, Miami is now one of the most unaffordable cities for homebuyers. Roughly four out of five (79.4%) of Miami’s neighborhoods are out of reach price-wise for married-couple families. That’s a 34.7% increase from 2019.

  • Nashville, TN: With Nashville’s population growth rebounding to pre-pandemic levels, the city has also seen greater affordability challenges. In the Music City, 73.7% of neighborhoods are considered unaffordable for married-couple households—an increase of 11.9% from pre-Covid levels.

  • Richmond, VA: Rounding out the bottom 10 is Richmond, where 55.9% of the city’s 161 neighborhoods are unaffordable for married-couple households. That’s an 11.9% increase from pre-Covid levels.

Cities with the lowest share of unaffordable neighborhoods

All the cities in our top-10 ranking have less than 10% unaffordable neighborhoods—meaning the average family can qualify for a home in at least 90% of the city.

Interestingly, these cities are also outside the top 15 cities by population, and eight are in the bottom half.

The following are the cities ranked from the most affordable to the least:

  • Hartford, CT: Hartford ranks first with the percentage of unaffordable neighborhoods at 0%, unchanged since pre-Covid times. Married couples earning a median income of $135,612 can afford to live in any of the city’s 16 neighborhoods. Interestingly, Hartford is the smallest city to rank in the top 10.

  • Memphis, TN: Like Hartford, Memphis has 0% unaffordable neighborhoods, meaning any married couple earning a median income of $101,734 can afford an average homes in any of the city’s 12 neighborhoods. The percentage of unaffordable neighborhoods also stood at 0% before Covid.

  • Cleveland, OH: The Midwestern city of Cleveland is also tied for first, with the percentage of unaffordable neighborhoods at 0%. That means households with a median-couple income of $89,066 can qualify for an average home in all of the city’s neighborhoods. Cleveland is also among the three cities that have seen no change in unaffordability compared to 2019.

  • Minneapolis, MN: The largest city in the top 10, Minneapolis’ share of unaffordable neighborhoods stood at 2.41%, up slightly from 2019. Married couples earning the median income ($149,214) have access to the vast majority of the city’s 83 neighborhoods.

  • Baltimore, MD: Married-couple households in Baltimore earn a median income of $141,634. At that rate, they can afford to live in 97.3% of the city’s 222 neighborhoods, making only 2.7% of neighborhoods unaffordable. That’s up from 0% pre-Covid.

  • Louisville, KY: Louisville is a highly competitive market for married households. For married-couple households earning a median wage, only 3.6% of neighborhoods are unaffordable, up 11.9% from pre-Covid times.

  • Cincinnati, OH: The second Ohio city in the top 10 ranks close to Cleveland in population but has a much higher median married-couple household income of $129,324. Only 3.6% of the city’s neighborhoods are unaffordable, up slightly from pre-pandemic levels.

  • Indianapolis, IN: Another competitive Midwestern market, only 4.4% of Indianapolis is unaffordable, making the vast majority of the city’s 92 neighborhoods accessible to the average married couple. Still, the percentage of unaffordable neighborhoods before Covid was less than 1%.

  • Oklahoma City, OK: Before Covid, Oklahoma City had 0% neighborhoods unaffordable for married-couple households earning the median wage. It has since increased to 4.69%, which is still tiny compared to the national average.

  • Kansas City, MO: Kansas City has one of the largest numbers of neighborhoods in the top 50 cities. Its married-couple residents can afford to live in nearly 95% of them, making only 5.6% of neighborhoods out of reach. Like Indiana, Kansas City’s share of unaffordable neighborhoods was less than 1% before Covid.

The biggest COVID losers

What's particularly astonishing about the current housing market is just how quickly affordability has declined since Covid.

Even factoring in the market correction after the 2022 peak, the price of existing homes is still nearly one-third higher than before Covid. Mortgage rates have also more than doubled since early 2022.

Combined, the rising home prices and interest rates led to the worst mortgage affordability in more than 40 years.

Against this backdrop, it’s hardly surprising that unaffordability increased in 47 of the 50 cities studied and remained flat in the other three. No city reported improved affordability in 2024 compared to 2019.

The biggest increases are led by San Jose (70 percentage points), San Diego (57.8 percentage points), Riverside-San Bernardino (51.9 percentage points), Sacramento (43 percentage points), Orlando (37.4 percentage points), Miami (34.7 percentage points), and New York City (33.4 percentage points).

The following cities in our study are ranked by the largest percentage point change in unaffordable neighborhoods since pre-Covid:

Tyler Durden Thu, 03/14/2024 - 14:00

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Your financial plan may be riskier without bitcoin

It might actually be riskier to not have bitcoin in your portfolio than it is to have a small allocation.

Published

8 hours ago

on

March 14, 2024

By

This article originally appeared in the Sound Advisory blog. Sound Advisory provide financial advisory services and are specialize in educating and guiding clients to thrive financially in a bitcoin-powered world. Click here to learn more.

“Belief is a wise wager. Granted that faith cannot be proved, what harm will come to you if you gamble on its truth and it proves false? If you gain, you gain all; if you lose, you lose nothing. Wager, then, without hesitation, that He exists.”

- Blaise Pascal

Blaise Pascal only lived to age 39 but became world-famous for many contributions in the fields of mathematics, physics, and theology. The above quote encapsulates Pascal’s wager—a philosophical argument for the Christian belief in the existence of God.

The argument's conclusion states that a rational person should live as though God exists. Even if the probability is low, the reward is worth the risk.

Pascal’s wager as a justification for bitcoin? Yes, I’m aware of the fallacies: false dichotomy, appeal to emotion, begging the question, etc. That is not the point. The point is that binary outcomes instigate extreme results, and the game theory of money suggests that it’s a winner-take-all game.

The Pascalian investor: A rational approach to bitcoin

Humanity’s adoption of “the best money over time” mimics a series of binary outcomes—A/B tests.

Throughout history, inferior forms of money have faded as better alternatives emerged (see India’s failed transition to a gold standard). And if bitcoin is trying to be the premier money of the future, it will either succeed or it won’t.

“If you ain’t first, you’re last.” -Ricky Bobby, Talladega Nights, on which monies succeed over time.

So, we can look at bitcoin success similarly to Pascal’s wager—let’s call it Satoshi’s wager. The translated points would go something like this:

  • If you own bitcoin early and it becomes a globally valuable money, you gain immensely. ????
  • If you own bitcoin and it fails, you’ve lost that value. ????
  • If you don’t own bitcoin and it goes to zero, no pain and no gain. ????
  • If you don’t own bitcoin and it succeeds, you will have missed out on the significant financial revolution of our lifetimes and fall comparatively behind. ????

If bitcoin is successful, it will be worth far more than it is today and have a massive impact on your financial future. If it fails, the losses are only limited to your exposure. The most that you could lose is the money that you invested.

It is hypothetically possible that bitcoin could be worth 100x more than it is today, but it can only possibly lose 1x its value as it goes to zero. The concept we’re discussing here is asymmetric upside - significant gains with relatively limited downside. In other words, the potential rewards of the investment outweigh the potential risks.

Bitcoin offers an asymmetric upside that makes it a wise investment for most portfolios. Even a small allocation provides potential protection against extreme currency debasement.

Salt, gasoline, and insurance

“Don’t over salt your steak, pour too much gas on the fire, or buy too much insurance.”

A little bit goes a long way, and you can easily overdo it. The same applies when looking at bitcoin in the context of a financial plan.

Bitcoin’s asymmetric upside gives it “insurance-like” qualities, and that insurance pays off very well in times of money printing. This was exemplified in 2020 when bitcoin's value increased over 300% in response to pandemic money printing, far outpacing stocks, gold, and bonds.

Bitcoin offers a similar asymmetric upside today. Bitcoin's supply is capped at 21 million coins, making it resistant to inflationary debasement. In contrast, the dollar's purchasing power consistently declines through unrestrained money printing. History has shown that societies prefer money that is hard to inflate.

If recent rampant inflation is uncontainable and the dollar system falters, bitcoin is well-positioned as a successor. This global monetary A/B test is still early, but given their respective sizes, a little bitcoin can go a long way. If it succeeds, early adopters will benefit enormously compared to latecomers. Of course, there are no guarantees, but the potential reward justifies reasonable exposure despite the risks.

Let’s imagine Nervous Nancy, an extremely conservative investor. She wants to invest but also take the least risk possible. She invests 100% of her money in short-term cash equivalents (short-term treasuries, money markets, CDs, maybe some cash in the coffee can). With this investment allocation, she’s nearly certain to get her initial investment back and receive a modest amount of interest as a gain. However, she has no guarantees that the investment returned to her will purchase the same amount as it used to. Inflation and money printing cause each dollar to be able to purchase less and less over time. Depending on the severity of the inflation, it might not buy anything at all. In other words, she didn’t lose any dollars, but the dollar lost purchasing power.

Now, let’s salt her portfolio with bitcoin.

99% short-term treasuries. 1% bitcoin.

With a 1% allocation, if bitcoin goes to zero overnight, she’ll have only lost a penny on the dollar, and her treasury interest will quickly fill the gap. Not at all catastrophic to her financial future.

However, if the hypothetical hyperinflationary scenario from above plays out and bitcoin grows 100x in purchasing power, she’s saved everything. Metaphorically, her entire dollar house burned down, and “bitcoin insurance” made her whole. Powerful. A little bitcoin salt goes a long way.

(When protecting against the existing system, it’s important to remember that you need to get your bitcoin out of the system. Keeping bitcoin on an exchange or with a counterparty will do you no good if that entity fails. If you view bitcoin as insurance, it’s essential to keep your bitcoin in cold storage and hold your keys. Otherwise, it’s someone else’s insurance.)

When all you have a hammer, everything looks like a…

A construction joke:

There are only three rules to construction: 1.) Always use the right tool for the job! 2.) A hammer is always the right tool! 3.) Anything can be a hammer!

Yeah. That’s what I thought, too. Slightly funny and mostly useless.

But if you spend enough time swinging a hammer, you’ll eventually realize it can be more than it first appears. Not everything is a nail. A hammer can tear down walls, break concrete, tap objects into place, and wiggle other things out. A hammer can create and destroy; it builds tall towers and humbles novice fingers. The use cases expand with the skill of the carpenter.

Like hammers, bitcoin is a monetary tool. And a 1-5% allocator to the asset typically sees a “speculative insurance” use case - valid. Bitcoin is speculative insurance, but it is not only speculative insurance. People invest and save in bitcoin for many different reasons.

I’ve seen people use bitcoin to pursue all of the following use cases:

  • Hedging against a financial collapse (speculative insurance)
  • Saving for family and future (long-term general savings and safety net)
  • Growing a downpayment for a house (medium-term specific savings)
  • Shooting for the moon in a manner equivalent to winning the lottery (gambling)
  • Opting out of government-run, bank-controlled financial systems (financial optionality)
  • Making a quick buck (short-term trading)
  • Escaping a hostile country (wealth evacuation)
  • Locking away wealth that can’t be confiscated (wealth preservation)
  • As a means to influence opinions and gain followers (social status)
  • Fix the money and fix the world (mission and purpose)

Keep this in mind when taking other people’s financial advice. They are often playing a different game than you. They have different goals, upbringings, worldviews, family dynamics, and circumstances. Even though they might use the same hammer as you, it could be for a completely different job.

Wrapping Up

A massive allocation to bitcoin may seem crazy to some people, yet perfectly reasonable to others. The same goes for having a 1% allocation.

But, given today’s macroeconomic environment and bitcoin’s trajectory, I find very few use cases where 0% bitcoin makes sense. By not owning bitcoin, you implicitly say that you are 100% certain it will fail and go to zero. Given its 14-year history so far, I’d recommend reducing your confidence. Nobody is 100% right forever. A little salt goes a long way. Your financial plan may be riskier without bitcoin. Diversify accordingly.

“We must learn our limits. We are all something, but none of us are everything.” - Blaise Pascal.

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