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See Notes to Condensed Consolidated Financial Statements

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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete annual financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three and six-month period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The condensed consolidated balance sheet as of December 31, 2003, has been extracted from the audited financial statements included in S&T's 2003 Annual Report to Shareholders. For further information, refer to the consolidated financial stat ements and footnotes thereto included in the annual report on Form 10-K for the year ended December 31, 2003.

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Options, warrants and other potentially dilutive securities are excluded from the basic calculation, but are included in computing diluted earnings per share.

NOTE B - STOCK-BASED COMPENSATION

S&T accounts for stock options using the intrinsic value method. The following proforma information regarding net income and earnings per share assumes stock options had been accounted for under the fair value method and the estimated fair value of the options was amortized to expense over the vesting period. Compensation expense, net of related tax, of $248,000 and $156,000 for the three months ended and $495,000 and $311,000 for the six months ended June 30, 2004 and 2003, is included in the proforma net income as reported below.

The fair value was estimated at the grant dates using a Black-Scholes option pricing model with the following assumptions at June 30, 2004 and June 30, 2003, respectively: risk-free interest rates of 3.27% and 3.03%; a dividend yield of 3.30% and 3.60%; volatility of the expected market price of S&T's common stock of .266 and .275; and a weighted-average expected life of five years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. S&T's employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

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NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS

On March 9, 2004, the Securities and Exchange Commission ("SEC") issued SAB 105, "Application of Accounting Principles to Loan Commitments" to inform registrants of the SEC Staff's view that the fair value of the recorded loan commitments, that are required to follow derivative accounting under Statement 133, Accounting for Derivative Instruments and Hedging Activities, should not consider the expected future cash flows related to the associated servicing of the future loan. S&T enters into such commitments with customers in connection with residential mortgage loan applications. S&T recognizes on its balance sheet the fair value of the outstanding commitments in accordance with SAB 105.

On March 31, 2004, the Financial Accounting Standards Board (FASB) issued its Exposure Draft, Share-Based Payment, which is a proposed amendment to FASB Statement No. 123, Accounting for Stock-Based Compensation. Generally, the approach in the Exposure Draft is similar to the approach described in Statement 123. However, the Exposure Draft would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. FASB expects to issue a final standard late in 2004 that would be effective for fiscal years beginning after December 15, 2004. S&T is currently assessing the impact of this pending guidance, but it does not expect the adoption to have a material effect on S&T's consolidated financial statements, based on the current level of stock options granted.

NOTE D - GOODWILL AND OTHER INTANGIBLES

S&T's balance sheet includes both tangible assets (such as loans, buildings, and investments) and intangible assets (such as goodwill and core deposit intangibles). Goodwill is periodically reviewed for impairment. Other intangibles are comprised of core deposit intangibles and other mortgage servicing assets and are also reviewed for impairment on a periodic basis.

NOTE E - EMPLOYEE BENEFITS

The following table summarizes the components of net periodic pension expense for S&T's defined benefit plan:

S&T previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $3.0 million to its pension plan in 2004. As of June 30, 2004, $3.0 million of contributions have been made. No further contributions are expected to be made during 2004.

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NOTE F - SECURITIES - continued

The amortized cost and estimated market value of debt securities at June 30, 2004, by contractual maturity, are as set forth below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based upon the current estimated prepayment rates. The mortgage-backed securities may mature earlier or later than their weighted-average estimated maturities because of principal prepayments.

At June 30, 2004 and December 31, 2003, investment securities with a principal amount of $370,511,000 and $389,922,000, respectively, were pledged to secure repurchase agreements, public funds and trust fund deposits.

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S&T BANCORP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE G - LOANS AND ALLOWANCE FOR LOAN LOSSES - continued

The following table represents S&T's investment in loans considered to be impaired and related information on those impaired loans as of June 30, 2004 and December 31, 2003.

S&T, in the normal course of business, commits to extend credit and issue standby letters of credit. The obligations are not recorded in S&T's financial statements. Loan commitments and standby letters of credit are subject to S&T's normal credit underwriting policies and procedures and generally require collateral based upon management's evaluation of each customer's financial condition and ability to satisfy completely the terms of the agreement. S&T's exposure to credit loss in the event the customer does not satisfy the terms of the agreement equals the notional amount of the obligation less the value of any collateral. Unfunded commercial loan commitments totaled $494,299,000, unfunded other loan commitments totaled $128,385,000 and obligations under standby letters of credit totaled $200,756,000 at June 30, 2004.

NOTE I - LITIGATION

S&T, in the normal course of business, is subject to various legal proceedings in which claims for monetary damages are asserted. No material losses are anticipated by S&T as a result of any current proceedings.

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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 financial data presented elsewhere in this report.

Business Summary

S&T is a financial holding company with its headquarters located in Indiana, Pennsylvania with assets of $3.0 billion at June 30, 2004. S&T provides a full range of financial services through a branch network of 49 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; estate planning and administration; employee benefit investment management and administration; corporate trust services and other fiduciary services.

Total assets averaged $2.9 billion in the first six months of 2004. Average loans increased $140.4 million and average securities and federal funds decreased $44.2 million in the first six months of 2004 compared to the 2003 full year average. Average deposits increased $46.0 million and average borrowings increased $31.4 million during the six months ended June 30, 2004 as compared to the 2003 full year average.

Lending Activity

Average loans increased $140.4 million to $2.2 billion during the six months ended June 30, 2004 from the 2003 full year average. Changes in the composition of the average loan portfolio during the first six months of 2004 included increases of $51.9 million of commercial loans and $121.1 million of commercial real estate loans, offset by decreases of $21.3 million of residential mortgages and $11.3 million of installment loans.

Real estate construction and commercial loans, including mortgage and industrial, comprised 74% of the average loan portfolio as of June 30, 2004. Although commercial loans can be an area of higher risk, management believes these risks are mitigated by limiting concentrations and a rigorous underwriting review by loan administration.

Residential mortgage loans comprised 23% of the average loan portfolio as of June 30, 2004. Residential mortgage lending continued to be a strategic focus for the second quarter of 2004 through our centralized mortgage origination department, product redesign, secondary market activities and the utilization of commission compensated originators. Management believes that S&T is fairly well insulated from the impact of potential future declines in its local real estate market due to its conservative mortgage lending policies. These policies generally require, for portfolio loans, a maximum term of twenty years for fixed rate mortgages and private mortgage insurance for loans with less than a 20% down payment. At June 30, 2004, 13% of the residential mortgage portfolio was adjustable rate mortgages.

S&T periodically sells longer-term, lower-yielding 1-4 family mortgages 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, to generate fee revenue from servicing, and still maintain the primary customer relationship. During the first six months of 2004, S&T sold $22.5 million of 1-4 family mortgages to Fannie Mae compared to $34.1 million during the first six months of 2003. S&T will continue to sell longer-term loans to Fannie Mae in the future on a selective basis, especially during periods of lower interest rates.

Consumer installment loans comprised 3% of the average loan portfolio as of June 30, 2004. Direct auto loans decreased $5.0 million for the six months ending June 30, 2004 as compared to the 2003 full year average.

Loan underwriting standards for S&T are established by a formal policy administered by the S&T Bank Credit Administration Department and are subject to the periodic review and approval of the S&T Bank Board of Directors.

Rates and terms for commercial real estate and equipment loans normally are negotiated, subject to such variables as economic conditions, marketability of collateral, credit history of the borrower and future cash flows. The loan to value policy guideline for commercial real estate loans is generally 75-80%.

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The loan to value policy guideline is 80% for residential first lien mortgages. Higher loan to value loans may be approved with the appropriate private mortgage insurance coverage. Second lien positions are sometimes incurred with home equity loans, but normally only to the extent that the combined credit exposure for both first and second liens does not exceed 100% of loan to value.

S&T offers a variety of unsecured and secured installment loan and credit card products. However, the majority of the consumer loa