The following discussion and analysis is presented so that shareholders may review in further detail the financial condition and results of operations of S&T Bancorp, Inc. and subsidiaries ("S&T"). This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the other financial data presented elsewhere in this report.

Business Summary

S&T is a financial holding company with its headquarters located in Indiana, Pennsylvania and with assets of approximately $4.2 billion at September 30, 2009. S&T provides a full range of financial services through a network of 55 offices located in Allegheny, Armstrong, Blair, Butler, Cambria, Clarion, Clearfield, Indiana, Jefferson and Westmoreland counties of Pennsylvania. S&T provides full service retail and commercial banking products as well as cash management services; insurance; financial and estate planning; estate and trust administration; investment management; employee benefit services and administration; corporate services and other fiduciary services. S&T's common stock trades on the Nasdaq Global Select Market under the symbol "STBA".

Recent turbulence in significant portions of the global financial and real estate markets has adversely impacted our performance, both directly by affecting our revenues and the value of our assets and liabilities, and indirectly by affecting the economy in general. During the first nine months of 2009, S&T's performance was specifically negatively impacted by sharp increases in delinquencies and nonperforming loan levels and the overall slowdown in the economy that is affecting all segments of the loan portfolio. The area of commercial loans has been and continues to be the subject of considerable management focus and review.

During the first nine months of 2009, S&T temporarily reduced borrowings since participation in the U. S. Treasury Capital Purchase Program provided increased liquidity pending deployment into loans or debt securities purchases. The decrease in borrowings is also the result of decreased loan demand as consumers and businesses react to the economic slowdown, and maturing investment securities not being replaced as an S&T Asset Liability Committee ("ALCO") strategy to limit the replacement of matured investment securities to mitigate interest rate and liquidity risk. As a result, total assets at September 30, 2009 decreased from total assets at December 31, 2008.

On June 6, 2008, S&T completed its acquisition of IBT, pursuant to an Agreement and Plan of Merger, by and between S&T and IBT, dated December 16, 2007 (the "Merger Agreement"). Pursuant to the terms of the Merger Agreement, which was approved by the shareholders of IBT on May 13, 2008, IBT was merged with and into S&T, with S&T being the surviving corporation (the "Merger"). In connection with the Merger, IBT shareholders received for each share of IBT common stock they held, at their election, either $31.00 in cash or 0.93 of a share of S&T common stock. IBT shareholders could elect to receive all cash, all S&T common stock, or a combination of cash and S&T common stock for their shares of IBT common

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stock. Directors, officers and employees had their stock options cancelled for a cash payment equal to the difference between $31.00 and the exercise price per share for each such stock option, which IBT paid immediately prior to the merger. S&T issued a total of 2,751,749 shares of S&T common stock at a recorded fair value of $91.7 million and paid a total of $75.1 million in cash to the former IBT shareholders. The acquisition significantly expanded S&T's market share in the growing Allegheny and Westmoreland County markets in western Pennsylvania. The acquisition was accounted for under the purchase method, and all transactions of IBT since the acquisition date are included in S&T's consolidated financial statements.

On January 16, 2009, S&T completed a $108,676,000 capital raise as a participant in the U.S. Treasury Capital Purchase Program. In conjunction with S&T's participation in the Program, S&T issued to the U.S. Treasury 108,676 shares of S&T's Series A Preferred Stock, having a liquidation amount per share equal to $1,000 per share, for a total price of $108,676,000. The Series A Preferred Stock pays cumulative dividends at a rate of 5 percent per year for the first five years and thereafter at a rate of 9 percent per year. S&T calculated the fair value of the preferred stock using a discounted cash flow model and a 10% discount rate. The level yield method is used to amortize the discount on the preferred stock over a period of five years. Under changes made to the program by the American Recovery and Reinvestment Act of 2009 ("ARRA"), subject to approval by banking regulatory agencies, S&T can redeem the Series A Preferred Stock, plus any accrued and unpaid dividends, at any time. If S&T only redeems part of the program investment, then it must pay a minimum of 25 percent of the issuance price, or $27,169,000. The Series A Preferred Stock is generally non-voting. Prior to January 16, 2012, unless S&T has redeemed the Series A Preferred Stock or the U.S. Treasury has transferred the Series A Preferred Stock to a third party, the consent of the U.S. Treasury will be required for S&T to increase its common stock dividend or repurchase its common stock or other equity or capital securities, other than in connection with benefit plans consistent with past practice and certain other circumstances.

In addition, the Series A Preferred Stock issuance includes certain restrictions on executive compensation that could limit the tax deductibility of compensation S&T pays to executive management.

As part of its purchase of the Series A Preferred Stock, the U.S. Treasury received a Warrant to purchase 517,012 shares of S&T's common stock at an initial per share exercise price of $31.53. The Warrant provides for the adjustment of the exercise price and the number of shares of S&T's common stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets to holders of S&T's common stock, and upon certain issuances of S&T's common stock at or below a specified price relative to the initial exercise price. Management engaged an outside expert to calculate the fair value of the common stock warrants issued by S&T on January 16, 2009. The methodology used for deriving fair value was estimated using the binomial pricing model and incorporated assumptions called for by Paragraph 16 and Appendix A of SFAS 123(R) (ASC 718-10). When reviewing the assumptions, the guidance in SEC Staff Accounting Bulletin No. 107 was utilized.

The assumptions used to calculate the fair value of the warrants are summarized below:

          Assumption                                           Value
          Contractual Term                                     10 Years
          Exercise Price                                     $    31.53
          Fair value of Company Stock                        $    29.14
          Expected Life                                        10 Years
          Risk-free rate over expected life of the warrant         2.36 %
          Expected Volatility                                      28.4 %
          Expected Dividend Yield                                  3.85 %

S&T utilized the average of daily and monthly historical volatility for purposes of this valuation. S&T calculated the fair value of the preferred stock using a discounted cash flow model and a 10 percent discount rate. The level yield method is used to amortize the discount on the preferred stock over a period of five years. The Warrant expires ten years from the issuance date. If, on or prior to December 31, 2009, S&T receives aggregate gross cash proceeds of not less than $108,676,000 from qualified equity offerings announced after October 13, 2008, the number of shares of common stock issuable pursuant to the U.S. Treasury's exercise of the Warrant will be reduced by one-half of the original number of shares. In addition, the U.S. Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the Warrant.

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Recent Government Regulation

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the "EES Act") was signed into law. Among other things, the EES Act allocated up to $700 billion towards purchasing and insuring troubled assets held by financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. The EES Act established the basic framework and policy goals, and vested the U. S. Treasury with the authority to carry out the EES Act's purpose.

On October 14, 2008, pursuant to authority granted under the EES Act, the U.S. Treasury announced the Program whereby the U.S. Treasury agreed to purchase senior preferred shares from qualifying U.S. financial institutions. Each participating institution may sell an amount of senior preferred shares ranging from 1.0 percent to 3.0 percent of its September 30, 2008 risk-weighted assets. The preferred shares are generally nonvoting, pay an initial dividend rate of 5.0 percent per year for the first five years increasing to 9.0 percent per year after year five. Under changes made to the program by the ARRA, subject to approval by banking regulatory agencies, S&T can redeem the Series A Preferred Stock, plus any accrued and unpaid dividends, at any time. If S&T only redeems part of the program investment, then it must pay a minimum of 25 percent of the issuance price, or $27,169,000. As part of the consideration for the shares, the U.S. Treasury requires the receipt of Warrants to acquire common stock from the participating institution having an aggregate market price equal to 15.0 percent of the amount of capital invested by the U.S. Treasury in the senior preferred shares, at an exercise price equal to the average trailing 20-trading day market price of the institution's common stock at the time of issuance. Participating institutions must agree to certain limitations on executive compensation, repurchases of junior preferred or common stock and increases in common stock dividend payments. S&T applied to participate in the Program and was approved to receive $108,676,000 in exchange for the U.S. Treasury purchase of S&T senior preferred stock. The transaction closed on January 16, 2009.

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 ("ARRA") was signed into law. Among other things, the ARRA includes new executive compensation and corporate governance restrictions that apply not only prospectively, but also retroactively, to institutions, such as S&T that have received funds under the Program. The ARRA also provides a provision that permits early redemption of Series A Preferred Stock issued in the Program without increasing common equity, subject to approval of banking regulatory agencies. S&T is currently evaluating the effect that the ARRA executive compensation provisions will have on S&T.

On February 18, 2009, the Homeowner Affordability and Stability Plan ("HASP") was announced by the President of the United States. HASP is intended to support a recovery in the housing market and ensure that eligible homeowners can continue to pay their mortgages. HASP includes the following initiatives: (i) a refinance option for homeowners that are current in their mortgage payments and whose mortgages are owned by Fannie Mae or Freddie Mac; (ii) a $75 billion homeowner stability initiative to prevent foreclosures and help eligible borrowers stay in their homes by offering loan modifications that reduce mortgage payments to more affordable and sustainable levels; and (iii) a support for low mortgage rates by increasing the U.S. Treasury's funding commitment to Fannie Mae and Freddie Mac. Among other things, HASP would offer monetary incentives to mortgage servicers and mortgage holders for certain modifications of at-risk loans, and would establish an insurance fund designed to reduce foreclosures. Participation by S&T in HASP is currently voluntary. S&T continues to monitor these developments and assess their potential impact on its business.

Financial Condition

Total assets averaged $4.3 billion in the first nine months of 2009 and $4.0 billion for the 2008 full year average. Average loans increased $262.8 million and average securities, other investments and federal funds sold decreased $6.8 million in the first nine months of 2009 as compared to the 2008 full year average. Average deposits increased $343.9 million and average borrowings decreased $177.5 million during the nine months ended September 30, 2009 as compared to the 2008 full year average. As a result of the IBT acquisition in June of 2008, average assets increased $452.3 million, average securities increased $147.3 million, average loans increased $278.5 million and average deposits increased $326.0 million.

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Average Balance Sheet and Net Interest Income Analysis



                                               Nine Months Ended                    Twelve Months Ended
                                               September 30, 2009                    December 31, 2008
                                         Average                 Average       Average                 Average
(dollars in millions)                    Balance     Interest     Rate         Balance     Interest     Rate
Assets
Loans (1)                               $ 3,493.6   $    138.3      5.29 %    $ 3,230.8   $    201.6      6.24 %
Securities/other (1)                        423.3         13.6      4.29 %        430.1         19.7      4.58 %

Total interest-earning assets             3,916.9        151.9      5.18 %      3,660.9        221.3      6.04 %
Noninterest-earning assets                  373.4                                 310.1

TOTAL                                   $ 4,290.3                             $ 3,971.0

Liabilities And Shareholders' Equity
NOW/money market/savings                $ 1,242.1   $      3.8      0.41 %    $ 1,261.5   $     14.7      1.17 %
Time deposits                             1,376.7         26.1      2.54 %      1,102.7         37.7      3.41 %
Borrowed funds < 1 year                     216.8          0.6      0.37 %        356.8          6.0      1.69 %
Borrowed funds > 1 year                     229.3          7.9      4.62 %        266.8         13.8      5.17 %

Total interest-bearing liabilities        3,064.9         38.4      1.68 %      2,987.8         72.2      2.42 %
Noninterest-bearing liabilities:
Demand deposits                             622.4                                 533.1
Shareholders' equity/other                  603.0                                 450.1

TOTAL                                   $ 4,290.3                             $ 3,971.0

Net yield on interest-earning assets                                3.87 %                                4.07 %

Net Interest Income                                 $    113.5                            $    149.1

(1) The yield on earning assets and the net interest margin are presented on a fully tax-equivalent ("FTE") and annualized basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 35 percent for each period presented. S&T believes this non-GAAP measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. This non-GAAP measure and is further discussed on page 34.

Lending Activity

Average loans increased $262.8 million to $3.5 billion during the nine months ended September 30, 2009 as compared to the 2008 full year average. Changes in the composition of the average loan portfolio included increases of $96.2 million of residential mortgages and home equity loans, $229.9 million of commercial real estate loans, $2.5 million of consumer loans, offset by a decrease of $65.8 million in commercial and industrial loans. As a result of the IBT acquisition in June of 2008, average loans increased $278.5 million. The composition of the IBT loan portfolio included $26.7 million of commercial and industrial loans, $119.2 million of residential mortgages and home equity loans, $125.8 million of commercial real estate loans and $6.8 million of consumer loans. Average organic loans decreased $15.6 million. The composition of the average organic loan decreases included $92.5 million of commercial and industrial loans, $23.0 million of residential mortgages and home equity loans, $4.3 million of consumer loans, offset by an increase of $104.2 million in commercial real estate loans.

Average commercial loans, including commercial real estate, commercial and industrial and real estate construction comprised 73 percent of the average loan portfolio for the nine months ended September 30, 2009 and 74 percent for the 2008 full year average. Although commercial loans can have a relatively higher risk profile, management believes these risks are mitigated through active portfolio management, underwriting and continuous review. The commercial real estate portfolio had $353.6 million or 10 percent of total loans that involved projects outside of western Pennsylvania. Generally, these loans are with existing local customers. The decline in the economic environment has been significantly higher in various parts of the country as compared to western Pennsylvania. Accordingly, the out of state portfolio is experiencing higher credit stress and has been the subject of considerable management focus and review. Rates and terms for commercial real estate, equipment loans and lines of credit are normally negotiated, subject to such variables as the financial condition of the borrower, economic conditions, marketability of collateral, credit history of the borrower and projected future cash flows. The loan to value policy

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guideline for commercial real estate loans is generally 65-85 percent. Variable-rate commercial loans were 49 percent of the commercial loan portfolio at September 30, 2009 and 49 percent at December 31, 2008.

Average residential mortgage loans comprised 25 percent of the average loan portfolio for the nine months ended September 30, 2009 and 23 percent for the 2008 full year average. Residential mortgage lending reached record levels during the first nine months of 2009 as consumers took advantage of lower interest rates. Residential mortgage lending continues to be a strategic focus in 2009 through our centralized mortgage origination department, ongoing product redesign, secondary market activities and the utilization of commission compensated originators. The loan to value policy guideline is 80 percent for residential first lien mortgages. Higher loan to value loans may be approved with the appropriate private mortgage insurance coverage. Second lien positions are 30 percent of residential mortgages and are sometimes assumed with home equity loans, but normally only to the extent that the combined credit exposure for both the first and second liens does not exceed 100 percent of the fair value of the mortgage property. At September 30, 2009, 10 percent of the residential mortgage portfolio consisted of adjustable rate mortgages with repricing terms of one, three and five years compared to 9 percent at December 31, 2008.

S&T periodically designates specific loan originations, generally longer-term, lower-yielding 1-4 family mortgages, as held for sale and sells them to Fannie Mae. The rationale for these sales is to mitigate interest rate risk associated with holding long-term residential mortgages in the loan portfolio, generate fee revenue from servicing, and maintain the primary customer relationship. During the nine months ended September 30, 2009 and 2008, S&T sold $116.7 million and $14.4 million, respectively, of 1-4 family mortgages and services $247.3 million of secondary market mortgage loans sold to Fannie Mae. During the first nine months of 2009, S&T experienced record levels of mortgage banking activities, including but not limited to refinancing, as consumers took advantage of low interest rates. This increase in mortgage banking activities resulted in significantly higher sales of 1-4 family mortgages to Fannie Mae in the first nine months of 2009 as compared to the same period of 2008. S&T intends to continue to sell longer-term loans to Fannie Mae in the future on a selective basis, especially during periods of lower interest rates.

Average consumer loans comprised 2 percent of the loan portfolio for the nine months ended September 30, 2009 and 3 percent for the 2008 full year average. The average balance of consumer loans for the nine months ended September 30, 2009 was $82.0 million as compared to $79.5 million for the 2008 full year average. S&T offers a variety of unsecured and secured consumer loan and credit card products.

Management intends to continue to pursue quality loans in a variety of lending categories in order to enhance shareholder value. S&T's loan portfolio primarily represents loans to businesses and consumers in our market area of western Pennsylvania. Management continues to develop and improve the effectiveness of our credit and loan administration processes and staff, which assists management in evaluating loans before they are made and in identifying problem loans early.

Securities Activity

Average securities, other investments and federal funds sold decreased by $6.8 million in the first nine months of 2009 compared to the 2008 full year average. As a result of the IBT acquisition in June of 2008, Average securities increased $147.3 million, offset by an average decrease of $154.1 million in securities, which is attributable to an ALCO strategy to limit the replacement of matured investment securities with borrowings to mitigate interest rate risk.

The components of the decrease of $6.8 million are decreases of $20.5 million in U.S. government corporations and agencies, $15.9 million in marketable equity securities and $1.7 million in other securities. Offsetting these decreases are increases of $25.0 million in mortgage-backed securities, $3.4 million in obligations of state and political subdivisions and $2.8 million in other investments. The increase of $2.8 million in other investments in the first nine months of 2009 compared to the 2008 full year average are comprised of FHLB stock that is a membership and borrowing requirement and is recorded at historical cost. The amount of S&T's investment in FHLB stock, which is $23.5 million as of September 30, 2009, depends upon S&T's borrowing availability and level from the FHLB. Average federal funds sold increased $0.2 million in the first nine months of 2009 compared to the 2008 full year average. At September 30, 2009, the equity securities portfolio had total fair value of $12.9 million compared to $14.9 million at December 31, 2008 and net unrealized losses of $0.2 million at September 30, 2009

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compared to net unrealized losses of $3.6 million at December 31, 2008. The equity securities portfolio consists of securities traded on the various stock markets and is subject to changes in fair value.

S&T's policy for security classification includes U.S. treasury securities, U.S. government corporations and agencies, mortgage-backed securities of U.S. government corporations and agencies, collateralized mortgage obligations, states and political subdivisions, corporate securities, marketable equity securities and other securities as available for sale. On a quarterly basis, management evaluates the securities portfolios for other-than-temporary declines in fair value in accordance with FSP FAS No. 115-1 and No. 124-1 (ASC 320-10), "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments" as well as FSP FAS No. 115-2 and No. 124-2 (ASC 320-10), "Recognition and Presentation of Other-Than-Temporary Impairments." During the first nine months of 2009, there was $4.1 million of realized losses taken for other-than-temporary impairment on 11 bank equity investment securities. The performance of the equities and debt securities markets could generate further impairment in future periods. At September 30, 2009, net unrealized gains on securities classified as available for sale, including equity securities, were $10.3 million as compared to net unrealized gains of $3.3 million at December 31, 2008. Net unrealized gains related to S&T's debt securities portfolio totaled $10.5 million at September 30, 2009 and $6.9 million unrealized gains at December 31, 2008. S&T does not intend to sell or it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost.

S&T was notified in December of 2008 by the FHLB that they have suspended the payment of dividends and the repurchase of excess capital stock until further notice. FHLB stock does not have a readily determinable fair value for purposes of SFAS No. 115 (ASC 320-10), "Accounting for Certain Investments in Debt and Equity Securities." FHLB stock is viewed as a long-tem investment which is carried at cost. S&T management reviewed and evaluated the FHLB capital stock for other-than-temporary impairment at September 30, 2009 which is determined based on the ultimate recoverability of the par value rather than by temporary declines in value or dividend fluctuations. Management considered the suspension of dividends and the repurchase of excess capital stock by the FHLB Board of Directors in a letter to member banks dated December 23, 2008. Management reviewed the FHLB's Form 10-Q for the period ended June 30, 2009 filed with the Commission on August 12, 2009.

Management considered the following matters in accordance with SOP 01-06 (ASC 942-10), "Disclosures Concerning Credit Losses Related to Loans" :

• Significance and severity of the decline in the net assets of the FHLB (including its investment portfolio) as compared to the capital stock amount of the FHLB and the length of time this situation has persisted.

• Ability of the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the . . .