Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents the composition of income tax expense (benefit) for the years ended December 31:

(dollars in thousands)	2025		2024		2023
Federal
Current	$	32,403	$	32,536	$	33,070
Deferred	185		(31)		459
Total Federal	32,588		32,505		33,529
State and Local
Current	1,132		1,313		352
Deferred	(10)		(265)		142
Total State and Local	1,122		1,048		494
Total Federal and State(1)	$	33,710	$	33,553	$	34,023

[1]With the adoption of PAM on January 1, 2024, the amortization related to LIHTC and HTC equity investments is recognized in income tax expense in the Consolidated Statements of Net Income in 2025 and 2024 and other noninterest expense in 2023.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. We ordinarily generate an annual effective tax rate that is less than the statutory rate of 21 percent primarily due to benefits resulting from certain partnership investments, such as low income housing and historic rehabilitation projects, tax-exempt interest, excludable dividend income and tax-exempt income on BOLI.

ASU 2023-09 was adopted effective January 1, 2025. This ASU requires enhanced disclosures and disaggregation of the effective tax rate. This ASU was adopted on a prospective basis, therefore prior period disclosures have not been adjusted. The following tables present a reconciliation of the statutory tax rate to the effective tax rate under the applicable disclosure guidance for the years ended December 31:

(dollars in thousands)	2025
U.S. Federal Statutory Tax Rate	$	35,267	21.0	%
State and Local Tax, net of federal income tax effect(1)	829		0.5	%
Tax Credits
Low income housing and historic tax credits(2)	(1,032)		(0.6)	%
Nontaxable or Nondeductible Items
Tax-exempt interest, net	(1,295)		(0.8)	%
Bank owned life insurance	(451)		(0.3)	%
Changes in Unrecognized Tax Benefits	58		—	%
Other Adjustments
Other	334		0.2	%
Effective Tax Rate	$	33,710	20.1	%

(1) State taxes in Maryland and New York made up the majority (greater than 50 percent) of the tax effect in this category.

(2) Includes tax credits net of amortization and other tax benefits.

	2024		2023
Statutory tax rate	21.0	%	21.0	%
Tax-exempt interest, net	(0.8)	%	(0.8)	%
Low income housing tax credits, net(1)	(0.2)	%	(1.5)	%
Bank owned life insurance	(0.3)	%	(0.2)	%
Other	0.7	%	0.5	%
Effective Tax Rate(1)	20.4	%	19.0	%

[1] With the adoption of PAM on January 1, 2024, the amortization related to LIHTC and HTC equity investments is recognized in income tax expense in the Consolidated Statements of Net Income in 2024 and other noninterest expense in 2023.

The following table presents significant components of our temporary differences as of the dates presented:

	December 31,
(dollars in thousands)	2025		2024
Deferred Tax Assets:
Allowance for credit losses and other reserves	$	21,455	$	22,953
Net unrealized holding losses on securities available-for-sale	7,509		15,431
Lease liabilities	9,824		10,271
State net operating loss carryforwards	4,105		3,782
Net unrealized losses on interest rate swaps	436		2,063
Cumulative adjustment to funded status of pension	3,495		3,606
Other employee benefits	5,450		4,688
Depreciation on premises and equipment	64		5
Capital loss carryforward	1,125		1,300
Other	1,225		1,243
Deferred Tax Assets	54,688		65,342
Less: Valuation allowance	(4,105)		(3,782)
Total Deferred Tax Assets	50,583		61,560
Deferred Tax Liabilities:
Right-of-use lease assets	(8,323)		(8,825)
Deferred loan income, net	(5,132)		(5,216)
Prepaid pension	(2,780)		(3,131)
Purchase accounting adjustments	(1,477)		(1,650)
Mortgage servicing rights	(122)		(61)
Partnership investments	(354)		(491)
Other	(157)		(113)
Total Deferred Tax liabilities	(18,345)		(19,487)
Net Deferred Tax Asset	$	32,238	$	42,073

We establish a valuation allowance when it is more likely than not that we will not be able to realize the benefit of the deferred tax assets. The valuation allowance is reviewed quarterly and adjusted based on management’s assessment of realizable deferred tax assets. Management believes it is more likely than not that our deferred tax assets will be realized in future periods, except for the Pennsylvania net operating losses, or NOLs. Gross deferred tax assets were reduced by a valuation allowance of $4.1 million in 2025 compared to $3.8 million in 2024 related to Pennsylvania income tax NOLs. The Pennsylvania NOL carryforwards total $82.3 million and will expire in the years 2026-2045.

Unrecognized Tax Benefits

The following table reconciles the change in Federal and State gross unrecognized tax benefits, or UTB, for the years ended December 31:

(dollars in thousands)	2025		2024		2023
Balance at beginning of year	$	2,086	$	1,940	$	1,648
Prior period tax positions	33		146		(434)
Current period tax positions	—		—		726
Balance at End of Year	$	2,119	$	2,086	$	1,940
Amount That Would Affect the Effective Tax Rate if Recognized	$	1,674	$	1,648	$	1,551

As of December 31, 2025, we had $2.1 million of unrecognized gross tax benefits. Gross tax benefits do not reflect the federal tax effect associated with state income tax amounts. The total amount of the net unrecognized tax benefits at December 31, 2025 that would have affected the effective tax rate, if recognized, was $1.7 million.

S&T and its subsidiaries are subject to income tax by U.S. federal and various state and local taxing jurisdictions. As of December 31, 2025, all income tax returns filed for the tax years 2022 - 2024 remain subject to examination by the respective taxing authorities.