S&T Bancorp, Inc.
S&T BANCORP INC (Form: 10-Q, Received: 11/02/2017 06:02:41)
                                            
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 ______________________________________
FORM 10-Q
______________________________________ 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
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)
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   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     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
x
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
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  x
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 - 34,979,192 shares as of October 31, 2017


Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES

INDEX
S&T BANCORP, INC. AND SUBSIDIARIES
 
 
 
Page No.    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1

Table of Contents

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



 
September 30, 2017
 
December 31, 2016
(dollars in thousands, except per share data)
(Unaudited)
 
(Audited)
ASSETS
 
 
 
Cash and due from banks, including interest-bearing deposits of $59,725 and $87,201 at September 30, 2017 and December 31, 2016
$
114,440

 
$
139,486

Securities available-for-sale, at fair value
697,954

 
693,487

Loans held for sale
47,936

 
3,793

Portfolio loans, net of unearned income
5,820,758

 
5,611,419

Allowance for loan losses
(56,712
)
 
(52,775
)
Portfolio loans, net
5,764,046

 
5,558,644

Bank owned life insurance
71,639

 
72,081

Premises and equipment, net
42,888

 
44,999

Federal Home Loan Bank and other restricted stock, at cost
33,120

 
31,817

Goodwill
291,670

 
291,670

Other intangible assets, net
3,956

 
4,910

Other assets
102,530

 
102,166

Total Assets
$
7,170,179

 
$
6,943,053

LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing demand
$
1,348,939

 
$
1,263,833

Interest-bearing demand
646,195

 
638,300

Money market
1,036,726

 
936,461

Savings
940,989

 
1,050,131

Certificates of deposit
1,431,431

 
1,383,652

Deposits held for sale
38,960

 

Total Deposits
5,443,240

 
5,272,377

Securities sold under repurchase agreements
39,923

 
50,832

Short-term borrowings
685,000

 
660,000

Long-term borrowings
12,911

 
14,713

Junior subordinated debt securities
45,619

 
45,619

Other liabilities
55,910

 
57,556

Total Liabilities
6,282,603

 
6,101,097

SHAREHOLDERS’ EQUITY
 
 
 
Common stock ($2.50 par value)
Authorized—50,000,000 shares
Issued—36,130,480 shares at September 30, 2017 and December 31, 2016
Outstanding— 34,979,192 shares at September 30, 2017 and 34,913,023 shares at December 31, 2016
90,326

 
90,326

Additional paid-in capital
215,451

 
213,098

Retained earnings
626,283

 
585,891

Accumulated other comprehensive (loss) income
(12,604
)
 
(13,784
)
Treasury stock (1,151,288 shares at September 30, 2017 and 1,217,457 shares at December 31, 2016, at cost)
(31,880
)
 
(33,575
)
Total Shareholders’ Equity
887,576

 
841,956

Total Liabilities and Shareholders’ Equity
$
7,170,179

 
$
6,943,053

See Notes to Consolidated Financial Statements

2

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(dollars in thousands, except per share data)
2017
 
2016
 
2017
 
2016
INTEREST INCOME
 
 
 
 
 
 
 
Loans, including fees
$
62,450

 
$
53,956

 
$
179,908

 
$
157,133

Investment Securities:
 
 
 
 
 
 
 
Taxable
2,988

 
2,570

 
8,783

 
7,704

Tax-exempt
896

 
907

 
2,744

 
2,764

Dividends
389

 
375

 
1,352

 
1,077

Total Interest Income
66,723

 
57,808

 
192,787

 
168,678

INTEREST EXPENSE
 
 
 
 
 
 
 
Deposits
6,748

 
5,119

 
18,103

 
14,403

Borrowings and junior subordinated debt securities
2,519

 
1,234

 
6,779

 
3,474

Total Interest Expense
9,267

 
6,353

 
24,882

 
17,877

NET INTEREST INCOME
57,456

 
51,455

 
167,905

 
150,801

Provision for loan losses
2,850

 
2,516

 
12,901

 
12,379

Net Interest Income After Provision for Loan Losses
54,606

 
48,939

 
155,004

 
138,422

NONINTEREST INCOME
 
 
 
 
 
 
 
Securities gains (losses), net

 

 
3,987

 

Service charges on deposit accounts
3,207

 
3,208

 
9,218

 
9,272

Debit and credit card
3,067

 
3,163

 
8,952

 
8,818

Wealth management
2,406

 
2,565

 
7,237

 
7,947

Insurance
1,333

 
1,208

 
4,258

 
4,187

Bank owned life insurance
1,209

 
532

 
2,249

 
1,569

Mortgage banking
872

 
1,077

 
2,280

 
2,185

Gain on sale of credit card portfolio

 

 

 
2,066

Other
1,457

 
1,695

 
4,631

 
5,669

Total Noninterest Income
13,551

 
13,448

 
42,812

 
41,713

NONINTEREST EXPENSE
 
 
 
 
 
 
 
Salaries and employee benefits
20,325

 
19,011

 
60,770

 
57,539

Net occupancy
2,692

 
2,776

 
8,258

 
8,413

Data processing
2,284

 
2,128

 
6,670

 
6,758

Furniture and equipment
1,890

 
1,932

 
5,746

 
5,580

Other taxes
1,208

 
1,080

 
3,268

 
3,076

FDIC insurance
1,152

 
1,005

 
3,461

 
2,938

Professional services and legal
870

 
817

 
2,871

 
2,545

Marketing
766

 
896

 
2,468

 
2,872

Other
5,366

 
4,794

 
16,448

 
17,886

Total Noninterest Expense
36,553

 
34,439

 
109,960

 
107,607

Income Before Taxes
31,604

 
27,948

 
87,856

 
72,528

Provision for income taxes
8,883

 
7,367

 
24,182

 
18,795

Net Income
$
22,721

 
$
20,581

 
$
63,674

 
$
53,733

Earnings per share—basic
$
0.65

 
$
0.59

 
$
1.83

 
$
1.55

Earnings per share—diluted
$
0.65

 
$
0.59

 
$
1.82

 
$
1.54

Dividends declared per share
$
0.20

 
$
0.19

 
$
0.60

 
$
0.57

Comprehensive Income
$
22,975

 
$
19,686

 
$
64,854

 
$
64,547

See Notes to Consolidated Financial Statements

3

Table of Contents

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

(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, 2016
$
90,326

 
$
210,545

 
$
544,228

 
$
(16,457
)
 
$
(36,405
)
 
$
792,237

Net income for Nine months ended September 30, 2016

 

 
53,733

 

 

 
53,733

Other comprehensive income (loss), net of tax

 

 

 
10,814

 

 
10,814

Cash dividends declared ($0.57 per share)

 

 
(19,824
)
 

 

 
(19,824
)
Treasury stock issued for restricted awards (110,643 shares, net of 5,717 forfeitures)

 

 
(2,945
)
 

 
2,830

 
(115
)
Recognition of restricted stock compensation expense

 
1,862

 

 

 

 
1,862

Balance at September 30, 2016
$
90,326

 
$
212,407

 
$
575,192

 
$
(5,643
)
 
$
(33,575
)
 
$
838,707

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
$
90,326

 
$
213,098

 
$
585,891

 
$
(13,784
)
 
$
(33,575
)
 
$
841,956

Net income for Nine months ended September 30, 2017

 

 
63,674

 

 

 
63,674

Other comprehensive income (loss), net of tax

 

 

 
1,180

 

 
1,180

Cash dividends declared ($0.60 per share)

 

 
(20,899
)
 

 

 
(20,899
)
Treasury stock issued for restricted awards (90,115 shares, net of 23,946 forfeitures)

 

 
(2,383
)
 

 
1,695

 
(688
)
Recognition of restricted stock compensation expense

 
2,353

 

 

 

 
2,353

Balance at September 30, 2017
$
90,326

 
$
215,451

 
$
626,283

 
$
(12,604
)
 
$
(31,880
)
 
$
887,576

See Notes to Consolidated Financial Statements


4

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Nine Months Ended September 30,
(dollars in thousands)
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net income
$
63,674

 
$
53,733

Adjustments to reconcile net income to net cash provided by operating activities:

 

Provision for loan losses
12,901

 
12,379

Net (decrease) increase in Provision for unfunded loan commitments
(546
)
 
90

Depreciation, amortization and accretion
1,597

 
2,858

Net amortization of discounts and premiums on securities
3,065

 
2,816

Stock-based compensation expense
2,353

 
1,862

Securities gains
(3,987
)
 

Mortgage loans originated for sale
(66,535
)
 
(75,505
)
Proceeds from the sale of mortgage loans
66,604

 
77,009

Gain on the sale of mortgage loans, net
(1,061
)
 
(1,154
)
Gain on the sale of credit card portfolio

 
(2,066
)
Pension plan curtailment gain

 
(1,017
)
Net increase in interest receivable
(3,886
)
 
(4,019
)
Net increase in interest payable
448

 
1,117

Net decrease in other assets
8,735

 
702

Net increase in other liabilities
69

 
3,586

Net Cash Provided by Operating Activities
83,431

 
72,391

INVESTING ACTIVITIES
 
 
 
Purchases of securities available-for-sale
(69,699
)
 
(53,282
)
Proceeds from maturities, prepayments and calls of securities available-for-sale
58,601

 
52,049

Proceeds from sales of securities available-for-sale
7,751

 

Net proceeds from (purchases of) Federal Home Loan Bank stock
1,304

 
(5,298
)
Net increase in loans
(268,132
)
 
(406,370
)
Proceeds from sale of loans not originated for resale
3,581

 
8,433

Purchases of premises and equipment
(3,646
)
 
(2,744
)
Proceeds from the sale of premises and equipment
376

 
20

Proceeds from the sale of credit card portfolio

 
25,019

Net Cash Used in Investing Activities
(269,864
)
 
(382,173
)
FINANCING ACTIVITIES
 
 
 
Net increase in deposits
109,637

 
169,751

Net increase in certificates of deposit
61,048

 
99,612

Net decrease in securities sold under repurchase agreements
(10,909
)
 
(21,138
)
Net increase in short-term borrowings
25,000

 
209,000

Repayments of long-term borrowings
(1,802
)
 
(101,740
)
Treasury shares issued-net
(688
)
 
(115
)
Cash dividends paid to common shareholders
(20,899
)
 
(19,824
)
Net Cash Provided by Financing Activities
161,387

 
335,546

Net (decrease) increase in cash and cash equivalents
(25,046
)
 
25,764

Cash and cash equivalents at beginning of period
139,486

 
99,399

Cash and Cash Equivalents at End of Period
$
114,440

 
$
125,163

Supplemental Disclosures
 
 
 
Loans transferred to held for sale, net
$
43,151

 
$
1,540

Deposits transferred to held for sale
$
38,960

 
$

Interest paid
$
24,682

 
$
16,761

Income taxes paid, net of refunds
$
21,096

 
$
17,974

Transfers of loans to other real estate owned
$
2,116

 
$
581

See Notes to Consolidated Financial Statements

5

Table of Contents

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, 2016 , filed with the Securities and Exchange Commission, or SEC, on February 24, 2017. 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.
We previously reported in our annual report on Form 10-K, three reportable operating segments: Community Banking, Insurance and Wealth Management. We have reevaluated our segment reporting as of January 1, 2017 and have determined that Insurance and Wealth Management activities are not material to our consolidated financial results, therefore, we are no longer reporting segment information.
Reclassification
A mounts 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
Stock Compensation - Improvements to Employee Share-Based Payment Accounting
On March 31, 2016 the Financial Accounting Standards Board, or FASB, issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. The ASU changes seven aspects of the accounting for share-based payment award transactions, including: 1. accounting for income taxes; 2. classification of excess tax benefits on the statement of cash flows; 3. forfeitures; 4. minimum statutory tax withholding requirements; 5. classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes; 6. practical expedient - expected term (nonpublic only); and 7. intrinsic value (nonpublic only). This ASU is effective for fiscal years beginning after December 15, 2016 and interim periods within those years for public business entities. The adoption of this ASU had no material impact on our results of operations or financial position.
Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting
In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, which eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. The amendments will be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. The adoption of this ASU had no impact on our results of operations or financial position.

6

Table of Contents

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

NOTE 1. BASIS OF PRESENTATION - continued

Receivables - Nonrefundable Fees and Other Costs - Premium Amortization on Purchased Callable Debt Securities
In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date. This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount, which continues to be amortized to maturity. This Update is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. We have early adopted the provisions of this ASU and it had no impact on our results of operations or financial position.
Recently Issued Accounting Standards Updates not yet Adopted
Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension Costs and Net Periodic Post Retirement Benefit Costs
In March 2017, the FASB issued ASU No. 2017-07, Compensation Retirement Benefits - Improving the Presentation of Net Periodic Pension Costs and Net Periodic Post Retirement Benefit Costs (Topic 715). The main objective of this ASU is to provide financial statement users with clearer and disaggregated information related to the components of net periodic benefit cost and improve transparency of the presentation of net periodic benefit cost in the financial statements. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. Effective March 31, 2016, our qualified and nonqualified defined benefit plans were amended to freeze benefit accruals for all persons entitled to benefits under the plan; as such, the provisions of this ASU will have no impact on our results of operations and financial position.
Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets - Clarifying the Scope of Assets Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
In February 2017, the FASB issued ASU No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). The main objective in this ASU is intended to provide greater detail on what types of transactions should be accounted for as partial sales of nonfinancial assets. The scope of this ASU, as originally issued in ASU No. 2014-09 (described below), is intended to reduce the complexity of current GAAP requirements by clarifying which accounting guidance applies to various types of contracts that transfer assets or ownership interest to another entity. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017 and at the same time that ASU No. 2014-09 is effective. Early adoption is permitted, but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The provisions of this ASU will not materially impact our results of operations and financial position.
Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment (Topic 350). The main objective in this ASU is intended to simplify the current requirements for testing goodwill for impairment by eliminating step two from the goodwill impairment test. The amendments are expected to reduce the complexity and costs associated with performing the goodwill impairment test, which could result in recording impairment charges sooner than under the current guidance. This Update is effective for any interim and annual impairment tests in reporting periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the provisions of this ASU; however, we do not anticipate that this ASU will materially impact our results of operations and financial position.

7

Table of Contents

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

NOTE 1. BASIS OF PRESENTATION - continued

Business Combinations - Clarifying the Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations - Clarifying the Definition of a Business (Topic 805). The main objective of this ASU is to help financial statement preparers evaluate whether a set of transferred assets and activities (either acquired or disposed of) is a business under Topic 805, Business Combinations by changing the definition of a business. The revised definition will result in fewer acquisitions being accounted for as business combinations than under existing guidance. The definition of a business is significant because it affects the accounting for acquisitions, the identification of reporting units, consolidation evaluations and the accounting for dispositions. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is permitted for transactions not yet reflected in financial statements that have been issued or made available for issuance. The provisions of this ASU will have no impact on our results of operations and financial position.
Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory
In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The main objective of this ASU is to require companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. This represents a change from existing guidance, which requires companies to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized. The new guidance will require companies to defer the income tax effects only of intercompany transfers of inventory. This Update is effective for annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period. If an entity chooses to early adopt the amendments in the ASU, it must do so in the first interim period of its annual financial statements. That is, an entity cannot adopt the amendments in the ASU in a later interim period and apply them as if they were in effect as of the beginning of the year. The provisions of this ASU will have no impact on our results of operations and financial position.
Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The main objective of this ASU is to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The amendments in this Update provide guidance on the following eight specific cash flow issues: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of bank-owned life insurance (BOLI) policies, distributions received from equity method investments, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The provisions of this ASU will not materially impact our results of operations and financial position.
Financial Instruments - Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments of this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The collective changes to the recognition and measurement accounting standards for financial instruments and their anticipated impact on the allowance for credit losses modeling have been universally referred to as the CECL, or current expected credit loss, model. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019. Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are evaluating the provisions of this ASU to determine the potential impact on our results of operations and financial position.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers

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

NOTE 1. BASIS OF PRESENTATION - continued

control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are: 1. identify the contract with the customer; 2. identify the separate performance obligations in the contract; 3. determine the transaction price; 4. allocate the transaction price to the separate performance obligations; and 5. recognize revenue when each performance obligation is satisfied. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This ASU defers the effective date of ASU No. 2014-09 for all entities by one year.
In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), as an amendment to ASU No. 2014-09 to improve Topic 606, Revenue from Contracts with Customers, by reducing: 1. The potential for diversity in practice arising from inconsistent application of the principal versus agent guidance, and 2. The cost and complexity of applying Topic 606 both at transition and on an ongoing basis.
In April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing, as an amendment to ASU No. 2014-09 to improve Topic 606, Revenue from Contracts with Customers, by reducing: 1. The potential for diversity in practice at initial application, and 2. The cost and complexity of applying Topic 606 both at transition and on an ongoing basis.
In May 2016, the FASB issued ASU No. 2016-12, Narrow-scope Improvements and Practical Expedients. The amendments in this ASU do not change the core principles of Topic 606, Revenue from Contracts with Customers. These amendments affect only the narrow aspects of Topic 606: 1. Collectibility Criterion, 2. Presentation of Sales Taxes and Other Similar Taxes Collected from Customers, 3. Noncash Consideration, 4. Contract Modifications at Transition, and 5. Completed Contracts at Transition.
ASU 2014-09, including transition requirements for all amendments, is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the original effective date for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Our revenue is comprised of net interest income, which is excluded from the scope of ASU 2014-09, and noninterest income. We are substantially complete with our overall assessment of revenue streams and reviewing of related contracts potentially affected by the ASU, including trust and asset management fees, deposit related fees, interchange fees, merchant income and annuity and insurance commissions. Our assessment suggests that adoption of this ASU should not materially change the method in which we currently recognize revenue for these revenue streams. We are also substantially complete with our evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue. In addition, we are evaluating the ASU’s expanded disclosure requirements. We plan to adopt ASU No. 2014-09 on January 1, 2018 utilizing the modified retrospective approach with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be material.
Leases - Section A-Amendments to the FASB Accounting Standards Codification, Section B-Conforming Amendments Related to Leases and Section C-Background Information and Basis for Conclusions
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases on the balance sheet. Lessor accounting remains substantially similar to current GAAP. ASU 2016-02 supersedes Topic 840, Leases. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method for all entities. Early adoption of this ASU is permitted. We anticipate that this ASU will impact our financial statements as it relates to the recognition of right-to-use assets and lease obligations on our Consolidated Balance Sheet. We are evaluating the provisions of this ASU; however, we do not anticipate that this ASU will materially impact our results of operations and financial position.

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

NOTE 1. BASIS OF PRESENTATION - continued

Accounting for Financial Instruments - Overall: Classification and Measurement
In January 2016, the FASB issued ASU No. 2016-01, Accounting for Financial Instruments - Overall: Classification and Measurement (Subtopic 825-10). The amendments in this ASU address the following: 1. require equity investments to be measured at fair value with changes in fair value recognized in net income; 2. simplify the impairment assessment of equity investments without readily-determinable fair values by requiring a qualitative assessment to identify impairment; 3. eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; 4. require entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 5. require separate presentation in other comprehensive income for the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; 6. require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements; and 7. clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2017. The provisions of this ASU will not materially impact our results of operations and financial position.

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

NOTE 2. EARNINGS PER SHARE


The following table reconciles the numerators and denominators of basic and diluted earnings per share for the periods presented:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands, except shares and per share data)
2017
 
2016
 
2017
 
2016
Numerator for Earnings per Share—Basic:

 

 

 

Net income
$
22,721

 
$
20,581

 
$
63,674

 
$
53,733

Less: Income allocated to participating shares
73

 
68

 
214

 
167

Net Income Allocated to Shareholders
$
22,648

 
$
20,513

 
$
63,460

 
$
53,566

 
 
 
 
 
 
 
 
Numerator for Earnings per Share—Diluted:

 

 

 

Net income
$
22,721

 
$
20,581

 
$
63,674

 
$
53,733

Net Income Available to Shareholders
$
22,721

 
$
20,581

 
$
63,674

 
$
53,733

 
 
 
 
 
 
 
 
Denominators for Earnings per Share:

 

 

 

Weighted Average Shares Outstanding—Basic
34,751,266

 
34,687,487

 
34,722,370

 
34,674,453

Add: Potentially dilutive shares
208,873

 
81,018

 
208,139

 
72,724

Denominator for Treasury Stock Method—Diluted
34,960,139

 
34,768,505

 
34,930,509

 
34,747,177

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding—Basic
34,751,266

 
34,687,487

 
34,722,370

 
34,674,453

Add: Average participating shares outstanding
111,821

 
114,746

 
116,969

 
108,414

Denominator for Two-Class Method—Diluted
34,863,087

 
34,802,233

 
34,839,339

 
34,782,867

 
 
 
 
 
 
 
 
Earnings per share—basic
$
0.65

 
$
0.59

 
$
1.83

 
$
1.55

Earnings per share—diluted
$
0.65

 
$
0.59

 
$
1.82

 
$
1.54

Warrants considered anti-dilutive excluded from potentially dilutive shares - exercise price $31.53 per share, expires January 2019
443,575

 
517,012

 
452,188

 
517,012

Restricted stock considered anti-dilutive excluded from potentially dilutive shares
92,577

 
146,695

 
95,707

 
134,983


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

NOTE 3. FAIR VALUE MEASUREMENT

We use fair value measurements when recording and disclosing certain financial assets and liabilities. Securities available-for-sale, trading assets 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, impaired 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 is 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
Securities Available-for-Sale
Securities available-for-sale include both debt and equity 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 service which provides us with a sufficient understanding of the valuation models, assumptions, inputs and pricing to reasonably measure the fair value of our debt securities. The market valuation sources for debt securities include observable inputs rather than significant unobservable inputs and are classified as Level 2. The service provider utilizes pricing models that vary by asset class and include available trade, bid and other market information. Generally, the methodologies include broker quotes, proprietary models and vast descriptive terms and conditions databases, as well as extensive quality control programs.
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.
Trading Assets
We use quoted market prices to determine the fair value of our trading assets. Our trading assets are held in a Rabbi Trust under a deferred compensation plan and are invested in readily quoted mutual funds. Accordingly, these assets are classified as Level 1. Rabbi Trust 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

Derivative Financial Instruments
We use derivative instruments, including interest rate swaps for commercial loans with our customers, interest rate lock commitments and the sale of mortgage loans in the secondary market. We calculate the fair value for derivatives using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Each valuation considers the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and implied volatilities. Accordingly, derivatives are classified as Level 2. We incorporate credit valuation adjustments into the valuation models to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in calculating fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements and collateral postings.
Nonrecurring Basis
Loans Held for Sale
Loans held for sale consist of 1-4 family residential loans originated for sale in the secondary market and, from time to time, certain loans transferred from the loan portfolio to loans held for sale, all of which are carried at the lower of cost or fair value. The fair value of 1-4 family residential loans is based on the principal or most advantageous market currently offered for similar loans using observable market data. The fair value of the loans transferred from the loan portfolio is based on the amounts offered for these loans in currently pending sales transactions. Loans held for sale carried at fair value are classified as Level 3.
Impaired Loans
Impaired loans are carried at the lower of carrying value or fair value. Fair value is determined as the recorded investment balance less any specific reserve. We establish specific reserves based on the following three impairment 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. Impaired loans carried at fair value are classified as Level 3.
OREO and Other Repossessed Assets
OREO and other repossessed assets obtained in partial or total satisfaction of a loan are recorded at the lower of recorded investment in the loan or fair value less cost to sell. Subsequent to foreclosure, these assets are carried at the lower of the amount recorded at acquisition date or fair value less cost to sell. Accordingly, it may be necessary to record nonrecurring fair value adjustments. Fair value, when recorded, is generally based upon appraisals by approved, independent state certified appraisers. Like impaired loans, appraisals on OREO may be discounted based on our historical knowledge, changes in market conditions from the time of appraisal or other information available to us. OREO and other repossessed assets carried at fair value are classified as Level 3.
Mortgage Servicing Rights
The 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. The valuation model includes significant unobservable inputs; therefore, MSRs are classified as Level 3. MSRs are reported in other assets in the Consolidated Balance Sheets and are amortized into noninterest income in the Consolidated Statements of Comprehensive Income.

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

NOTE 3. FAIR VALUE MEASUREMENTS – continued

Other Assets
We measure certain other assets at fair value on a nonrecurring basis. Fair value is based on the application of lower of cost or fair value accounting, or write-downs of individual assets. Valuation methodologies used to measure fair value are consistent with overall principles of fair value accounting and consistent with those described above.
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 willing seller engaged in an exchange transaction. Also, it is our general practice 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
The fair value of variable rate performing loans that may reprice frequently at short-term market rates is based on carrying values adjusted for credit risk. The fair value of variable rate performing 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 credit risk. The fair value of fixed rate performing loans is estimated using a discounted cash flow analysis that utilizes interest rates currently being offered for similar loans and adjusted for credit risk. The fair value of nonperforming loans is the carrying value less any specific reserve on the loan if it is impaired. The carrying amount of accrued interest approximates fair value.
Bank Owned Life Insurance
Fair value approximates net cash surrender value of bank owned life insurance.
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; restricted stock is presented at carrying 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.
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.

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

NOTE 3. FAIR VALUE MEASUREMENTS – continued

Junior Subordinated Debt Securities
The interest rate on the variable rate junior subordinated debt securities is reset quarterly; therefore, the carrying values approximate their fair values.
Loan Commitments and Standby Letters of Credit
Off-balance sheet financial instruments consist of commitments to extend credit and letters of credit. Except for interest rate lock commitments, estimates of the fair value of these off-balance sheet items are not made because of the short-term nature of these arrangements and the credit standing of the counterparties.
Other
Estimates of fair value are not made for items that are not defined as financial instruments, including such items as our core deposit intangibles and the value of our trust operations.
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 September 30, 2017 and December 31, 2016 . There were no transfers between Level 1 and Level 2 for items measured at fair value on a recurring basis during the periods presented.
 
September 30, 2017
(dollars in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
ASSETS
 
 
 
 
 
 
 
Securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities
$

 
$
24,894

 
$

 
$
24,894

Obligations of U.S. government corporations and agencies

 
196,008

 

 
196,008

Collateralized mortgage obligations of U.S. government corporations and agencies

 
114,895

 

 
114,895

Residential mortgage-backed securities of U.S. government corporations and agencies

 
35,197

 

 
35,197

Commercial mortgage-backed securities of U.S. government corporations and agencies

 
192,604

 

 
192,604

Obligations of states and political subdivisions

 
129,304

 

 
129,304

Marketable equity securities

 
5,052

 

 
5,052

Total securities available-for-sale

 
697,954

 

 
697,954

Trading securities held in a Rabbi Trust
5,039

 

 

 
5,039

Total securities
5,039

 
697,954

 

 
702,993

Derivative financial assets:
 
 
 
 
 
 
 
Interest rate swap contracts - commercial loans

 
4,814

 

 
4,814

Interest rate lock commitments - mortgage loans

 
452

 

 
452

Total Assets
$
5,039

 
$
703,220

 
$

 
$
708,259

LIABILITIES
 
 
 
 
 
 
 
Derivative financial liabilities:
 
 
 
 
 
 
 
Interest rate swap contracts - commercial loans
$

 
$
4,786

 
$

 
$
4,786

Forward sale contracts - mortgage loans

 
16

 

 
16

Total Liabilities
$

 
$
4,802

 
$

 
$
4,802


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

NOTE 3. FAIR VALUE MEASUREMENTS – continued

 
December 31, 2016
(dollars in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
ASSETS
 
 
 
 
 
 
 
Securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities
$

 
$
24,811

 
$

 
$
24,811

Obligations of U.S. government corporations and agencies

 
232,179

 

 
232,179

Collateralized mortgage obligations of U.S. government corporations and agencies

 
129,777

 

 
129,777

Residential mortgage-backed securities of U.S. government corporations and agencies

 
37,358

 

 
37,358

Commercial mortgage-backed securities of U.S. government corporations and agencies

 
125,604

 

 
125,604

Obligations of states and political subdivisions

 
132,509

 

 
132,509

Marketable equity securities

 
11,249

 

 
11,249

Total securities available-for-sale

 
693,487

 

 
693,487

Trading securities held in a Rabbi Trust
4,410

 

 

 
4,410

Total securities
4,410

 
693,487

 

 
697,897

Derivative financial assets:
 
 
 
 
 
 
 
Interest rate swap contracts - commercial loans

 
6,960

 

 
6,960

Interest rate lock commitments - mortgage loans

 
236

 

 
236

Total Assets
$
4,410

 
$
700,683

 
$

 
$
705,093

LIABILITIES
 
 
 
 
 
 
 
Derivative financial liabilities:
 
 
 
 
 
 
 
Interest rate swap contracts - commercial loans
$

 
$
6,958

 
$

 
$
6,958

Forward sale contracts - mortgage loans

 
27

 

 
27

Total Liabilities
$

 
$
6,985

 
$

 
$
6,985

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 September 30, 2017 or December 31, 2016 . The following table presents our assets that are measured at fair value on a nonrecurring basis by the fair value hierarchy level as of the dates presented:
 
September 30, 2017
 
December 31, 2016
(dollars in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
ASSETS (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for sale
$

 
$

 
$

 
$

 
$

 
$

 
$
1,802

 
$
1,802

Impaired loans

 

 
11,407

 
11,407

 

 

 
10,329

 
10,329

Other real estate owned

 

 
718

 
718

 

 

 
396

 
396

Mortgage servicing rights

 

 
481

 
481

 

 

 
538

 
538

Total Assets
$

 
$

 
$
12,606

 
$
12,606

 
$

 
$

 
$
13,065

 
$
13,065

(1) This table presents only the nonrecurring items that are recorded at fair value in our financial statements.

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

NOTE 3. FAIR VALUE MEASUREMENTS – continued

The carrying values and fair values of our financial instruments at September 30, 2017 and December 31, 2016 are presented in the following tables:
 
Carrying
Value (1)  
 
Fair Value Measurements at September 30, 2017
(dollars in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks, including interest-bearing deposits
$
114,440

 
$
114,400

 
$
114,400

 
$

 
$

Securities available-for-sale
697,954

 
697,954

 

 
697,954

 

Loans held for sale
47,936

 
48,045

 

 

 
48,045

Portfolio loans, net of unearned income
5,820,758

 
5,758,326

 

 

 
5,758,326

Bank owned life insurance
71,639

 
71,639

 

 
71,639

 

FHLB and other restricted stock
33,120

 
33,120

 

 

 
33,120

Trading securities held in a Rabbi Trust
5,039

 
5,039

 
5,039

 

 

Mortgage servicing rights
3,992

 
4,286

 

 

 
4,286

Interest rate swap contracts - commercial loans
4,814

 
4,814

 

 
4,814

 

Interest rate lock commitments - mortgage loans
452

 
452

 

 
452

 

LIABILITIES
 
 

 
 
 
 
 
 
Deposits
$
5,443,240

 
$
5,448,025

 
$

 
$

 
$
5,448,025

Securities sold under repurchase agreements
39,923

 
39,923

 

 

 
39,923

Short-term borrowings
685,000

 
685,000

 

 

 
685,000

Long-term borrowings
12,911

 
13,318

 

 

 
13,318

Junior subordinated debt securities
45,619

 
45,619

 

 

 
45,619

Interest rate swap contracts - commercial loans
4,786

 
4,786

 

 
4,786

 

Forward sale contracts - mortgage loans
16

 
16

 

 
16

 

(1)  As reported in the Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
Carrying
Value (1)
 
Fair Value Measurements at December 31, 2016
(dollars in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks, including interest-bearing deposits
$
139,486

 
$
139,486

 
$
139,486

 
$

 
$

Securities available-for-sale
693,487

 
693,487

 

 
693,487

 

Loans held for sale
3,793

 
3,815

 

 

 
3,815

Portfolio loans, net of unearned income
5,611,419

 
5,551,266

 

 

 
5,551,266

Bank owned life insurance
72,081

 
72,081

 

 
72,081

 

FHLB and other restricted stock
31,817

 
31,817

 

 

 
31,817

Trading securities held in a Rabbi Trust
4,410

 
4,410

 
4,410

 

 

Mortgage servicing rights
3,744

 
4,098

 

 

 
4,098

Interest rate swap contracts - commercial loans
6,960

 
6,960

 

 
6,960

 

Interest rate lock commitments - mortgage loans
236

 
236

 

 
236

 

LIABILITIES
 
 
 
 
 
 
 
 
 
Deposits
$
5,272,377

 
$
5,276,499

 
$

 
$

 
$
5,276,499

Securities sold under repurchase agreements
50,832

 
50,832

 

 

 
50,832

Short-term borrowings
660,000

 
660,000

 

 

 
660,000

Long-term borrowings
14,713

 
15,267

 

 

 
15,267

Junior subordinated debt securities
45,619

 
45,619

 

 

 
45,619

Interest rate swap contracts - commercial loans
6,958

 
6,958

 

 
6,958

 

Forward sale contracts - mortgage loans
27

 
27

 

 
27

 

(1)  As reported in the Consolidated Balance Sheets  
 
 
 
 
 
 
 
 
 

17

Table of Contents

S&T BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTE 4. SECURITIES AVAILABLE-FOR-SALE

The following table presents the amortized cost and fair value of available-for-sale securities as of the dates presented:
 
September 30, 2017
 
December 31, 2016
(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
$
24,930

 
$
2

 
$
(38
)
 
$
24,894

 
$
24,891

 
$
47

 
$
(127
)
 
$
24,811

Obligations of U.S. government corporations and agencies
195,194

 
1,171

 
(357
)
 
196,008

 
230,989

 
1,573

 
(383
)
 
232,179

Collateralized mortgage obligations of U.S. government corporations and agencies
115,027

 
476

 
(608
)
 
114,895

 
130,046

 
465

 
(734
)
 
129,777

Residential mortgage-backed securities of U.S. government corporations and agencies
34,452

 
896

 
(151
)
 
35,197

 
36,606

 
984

 
(232
)
 
37,358

Commercial mortgage-backed securities of U.S. government corporations and agencies
193,382

 
511

 
(1,289
)
 
192,604

 
127,311

 
243

 
(1,950
)
 
125,604

Obligations of states and political subdivisions
123,672

 
5,632

 

 
129,304

 
128,783

 
3,772

 
(46
)
 
132,509

Debt Securities
686,657

 
8,688

 
(2,443
)
 
692,902

 
678,626

 
7,084

 
(3,472
)
 
682,238

Marketable equity securities
3,815

 
1,237

 

 
5,052

 
7,579

 
3,670

 

 
11,249

Total
$
690,472

 
$
9,925

 
$
(2,443
)
 
$
697,954

 
$
686,205

 
$
10,754

 
$
(3,472
)
 
$
693,487



18

Table of Contents

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

NOTE 4. SECURITIES AVAILABLE-FOR-SALE – continued

The following tables present the fair value and the age of gross unrealized losses by investment category as of the dates presented:
 
September 30, 2017
 
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
2
 
$
14,903

 
$
(38
)
 
 
$

 
$

 
2
 
$
14,903

 
$
(38
)
Obligations of U.S. government corporations and agencies
8
 
72,102

 
(357
)
 
 

 

 
8
 
72,102

 
(357
)
Collateralized mortgage obligations of U.S. government corporations and agencies
8
 
62,408

 
(608
)
 
 

 

 
8
 
62,408

 
(608
)
Residential mortgage-backed securities of U.S. government corporations and agencies
2
 
9,071

 
(151
)
 
 

 

 
2
 
9,071

 
(151
)
Commercial mortgage-backed securities of U.S. government corporations and agencies
10
 
100,322

 
(1,057
)
 
1
 
7,586

 
(232
)
 
11
 
107,908

 
(1,289
)
Obligations of states and political subdivisions
 

 

 
 

 

 
 

 

Debt Securities
30
 
258,806

 
(2,211
)
 
1
 
7,586

 
(232
)
 
31
 
266,392

 
(2,443
)
Marketable equity securities
 

 

 
 

 

 
 

 

Total Temporarily Impaired Securities
30
 
$
258,806

 
$
(2,211
)
 
1
 
$
7,586

 
$
(232
)
 
31
 
$
266,392

 
$
(2,443
)

 
December 31, 2016
 
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
1
 
$
9,811

 
$
(127
)
 
 
$

 
$

 
1
 
$
9,811

 
$
(127
)
Obligations of U.S. government corporations and agencies
7
 
62,483

 
(383
)
 
 

 

 
7
 
62,483

 
(383
)
Collateralized mortgage obligations of U.S. government corporations and agencies
10
 
83,031

 
(734
)
 
 

 

 
10
 
83,031

 
(734
)
Residential mortgage-backed securities of U.S. government corporations and agencies
2
 
10,022

 
(232
)
 
 

 

 
2
 
10,022

 
(232
)
Commercial mortgage-backed securities of U.S. government corporations and agencies
10
 
96,576

 
(1,950
)
 
 

 

 
10
 
96,576

 
(1,950
)
Obligations of states and political subdivisions
1