UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 28, 2024
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). 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. ☐
Item 2.02 Results of Operations and Financial Condition
On October 28, 2024, Five Star Bancorp (the “Company”) issued a press release announcing its results of operations and financial condition for the quarter ended September 30, 2024. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
This information (including Exhibit 99.1) is being furnished under Item 2.02 hereof and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure
The Company is conducting an earnings call on October 29, 2024 at 10:00 am PT/1:00 pm ET to discuss its third quarter 2024 financial results. A copy of the investor presentation to be used during the earnings call is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.
This information (including Exhibit 99.2) is being furnished under Item 7.01 hereof and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Number | Description | ||||||||||
99.1 | |||||||||||
| 99.2 | |||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL) | ||||||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FIVE STAR BANCORP | ||||||||
| By: | /s/ Heather C. Luck | |||||||
| Name: Heather C. Luck | ||||||||
| Title: Senior Vice President and Chief Financial Officer | ||||||||
| Date: October 28, 2024 | ||||||||
| PRESS RELEASE | FOR IMMEDIATE RELEASE | ||||
Five Star Bancorp Announces Third Quarter 2024 Results
RANCHO CORDOVA, CA October 28, 2024 (GLOBE NEWSWIRE) – Five Star Bancorp (Nasdaq: FSBC) (“Five Star” or the “Company”), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the “Bank”), today reported net income of $10.9 million for the three months ended September 30, 2024, as compared to $10.8 million for the three months ended June 30, 2024 and $11.0 million for the three months ended September 30, 2023.
Third Quarter Highlights
Performance and operating highlights for the Company for the periods noted below included the following:
| Three months ended | |||||||||||||||||
(in thousands, except per share and share data) | September 30, 2024 | June 30, 2024 | September 30, 2023 | ||||||||||||||
| Return on average assets (“ROAA”) | 1.18 | % | 1.23 | % | 1.30 | % | |||||||||||
| Return on average equity (“ROAE”) | 11.31 | % | 11.72 | % | 16.09 | % | |||||||||||
| Pre-tax income | $ | 15,241 | $ | 15,152 | $ | 15,795 | |||||||||||
Pre-tax, pre-provision income(1) | 17,991 | 17,152 | 16,845 | ||||||||||||||
| Net income | 10,941 | 10,782 | 11,045 | ||||||||||||||
| Basic earnings per common share | $ | 0.52 | $ | 0.51 | $ | 0.64 | |||||||||||
| Diluted earnings per common share | 0.52 | 0.51 | 0.64 | ||||||||||||||
| Weighted average basic common shares outstanding | 21,182,143 | 21,039,798 | 17,175,034 | ||||||||||||||
| Weighted average diluted common shares outstanding | 21,232,758 | 21,058,085 | 17,194,825 | ||||||||||||||
| Shares outstanding at end of period | 21,319,583 | 21,319,583 | 17,257,357 | ||||||||||||||
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
James E. Beckwith, President and Chief Executive Officer, commented on the financial results:
“We are pleased to have opened a full-service office in San Francisco’s Financial District on September 3rd, further demonstrating our commitment to serving clients and communities in the San Francisco Bay Area. The San Francisco Bay Area now has 24 employees contributing $189.0 million in deposits since the bank’s expansion there began in June 2023. Five Star Bank’s high-tech and high-touch, relationship-based and purpose-driven banking continues to earn the trust and respect of those we serve.
We are also pleased with strong third quarter results. Total loans held for investment increased by $194.3 million, or 5.95%, and total deposits increased by $250.3 million, or 7.95%, during the third quarter. Non-wholesale loans held for investment increased by $75.2 million, or 2.42%, and wholesale loans held for investment, which we define as purchased loans, increased by $119.1 million, or 76.91%, in each case during the third quarter of 2024. Non-wholesale deposits increased by $92.9 million, or 3.21%, and wholesale deposits, which we define as brokered deposits and public time deposits, increased by $157.4 million, or 62.35%, in each case during the third quarter of 2024. Short-term borrowings remained at zero as of June 30, 2024 and September 30, 2024. We attribute this growth to the continued demand for our differentiated customer experience and the strength of our team.
Although cost of funds increased 16 basis points to 2.72%, we were able to maintain net interest margin which decreased by only two basis points to 3.37% during the third quarter of 2024. Our efficiency ratio decreased to 43.37% compared to 44.07% for the second quarter of 2024, exhibiting our ability to preserve disciplined business practices and expense management as we expand our footprint. We are also pleased that, in addition to first and
1
second quarter cash dividends in 2024, we declared a third quarter cash dividend of $0.20 per share, exemplifying our focus on shareholder value.
In addition to numerous awards received in the first half of 2024, Five Star Bancorp was included among the Piper Sandler Sm-All Stars Class of 2024 and was also ranked number five by Bank Director Magazine’s RankingBanking study of the 2024 Best U.S. Banks with assets less than $5 billion. Bank Director Magazine’s RankingBanking study also ranked Five Star Bancorp as number 18 among the 2024 Top 25 U.S. Banks. Furthermore, a member of the Company’s leadership was recognized with a Sacramento Business Journal 40 Under 40 Award.”
Financial highlights during the quarter included the following:
•The Company’s full-service office in San Francisco’s Financial District opened on September 3, 2024. The San Francisco Bay Area team increased from 19 to 24 employees who generated deposit balances totaling $189.0 million at September 30, 2024, an increase of $27.7 million from June 30, 2024.
•Cash and cash equivalents were $250.9 million, representing 7.38% of total deposits at September 30, 2024, as compared to 6.04% at June 30, 2024.
•Total deposits increased by $250.3 million, or 7.95%, during the three months ended September 30, 2024, due to increases in both non-wholesale and wholesale deposits, which the Company defines as brokered deposits and public time deposits. During the three months ended September 30, 2024, non-wholesale deposits increased by $92.9 million, or 3.21%, and wholesale deposits increased by $157.4 million.
•The Company had no short-term borrowings at September 30, 2024 and June 30, 2024.
•Consistent, disciplined management of expenses contributed to our efficiency ratio of 43.37% for the three months ended September 30, 2024, as compared to 44.07% for the three months ended June 30, 2024.
•For the three months ended September 30, 2024, net interest margin was 3.37%, as compared to 3.39% for the three months ended June 30, 2024 and 3.31% for the three months ended September 30, 2023. The effective Federal Funds rate decreased to 4.83% as of September 30, 2024 from 5.33% at June 30, 2024 and September 30, 2023.
•Other comprehensive income was $2.5 million during the three months ended September 30, 2024. Unrealized losses, net of tax effect, on available-for-sale securities were $9.7 million as of September 30, 2024. Total carrying value of held-to-maturity and available-for-sale securities represented 0.07% and 2.76% of total interest-earning assets, respectively, as of September 30, 2024.
•The Company’s common equity Tier 1 capital ratio was 10.93% and 11.27% as of September 30, 2024 and June 30, 2024, respectively. The Bank continues to meet all requirements to be considered “well-capitalized” under applicable regulatory guidelines.
•Loan and deposit growth in the three and twelve months ended September 30, 2024 was as follows:
| (in thousands) | September 30, 2024 | June 30, 2024 | $ Change | % Change | |||||||||||||||||||
Loans held for investment | $ | 3,460,565 | $ | 3,266,291 | $ | 194,274 | 5.95 | % | |||||||||||||||
Non-interest-bearing deposits | 906,939 | 825,733 | 81,206 | 9.83 | % | ||||||||||||||||||
Interest-bearing deposits | 2,493,040 | 2,323,898 | 169,142 | 7.28 | % | ||||||||||||||||||
| (in thousands) | September 30, 2024 | September 30, 2023 | $ Change | % Change | |||||||||||||||||||
| Loans held for investment | $ | 3,460,565 | $ | 3,009,930 | $ | 450,635 | 14.97 | % | |||||||||||||||
| Non-interest-bearing deposits | 906,939 | 833,434 | 73,505 | 8.82 | % | ||||||||||||||||||
| Interest-bearing deposits | 2,493,040 | 2,198,776 | 294,264 | 13.38 | % | ||||||||||||||||||
•The ratio of nonperforming loans to loans held for investment at period end decreased to 0.05% at September 30, 2024 from 0.06% at June 30, 2024.
•The Company’s Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended September 30, 2024. The Company’s Board of Directors subsequently declared another cash dividend of $0.20 per share on October 17, 2024, which the Company expects to pay on November 12, 2024 to shareholders of record as of November 4, 2024.
2
Summary Results
Three months ended September 30, 2024, as compared to three months ended June 30, 2024
The Company’s net income was $10.9 million for the three months ended September 30, 2024, as compared to $10.8 million for the three months ended June 30, 2024. Net interest income increased by $1.3 million, primarily due to an increase in interest income driven by higher yields on new and repriced loans, partially offset by an increase in interest expense due to larger average deposit balances at higher rates, as compared to the three months ended June 30, 2024. The provision for credit losses increased by $0.8 million, relating to loan growth and net charge-offs of $0.8 million in the three months ended September 30, 2024, as compared to the three months ended June 30, 2024. Non-interest income decreased by $0.2 million, primarily due to a reduction in gains from loans sold during the three months ended September 30, 2024, as compared to the three months ended June 30, 2024. Non-interest expense increased by $0.3 million, primarily related to increases in: (i) salaries and employee benefits; and (ii) data processing and software, as compared to the three months ended June 30, 2024.
Three months ended September 30, 2024, as compared to three months ended September 30, 2023
The Company’s net income was $10.9 million for the three months ended September 30, 2024, as compared to $11.0 million for the three months ended September 30, 2023. Net interest income increased by $2.9 million, primarily due to an increase in interest income driven by higher yields on new and repriced loans, partially offset by an increase in interest expense due to larger average deposit balances at higher rates, as compared to the three months ended September 30, 2024. The provision for credit losses increased by $1.7 million, relating to loan growth and net charge-offs of $0.8 million in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. Non-interest income was unchanged from the three months ended September 30, 2023. Non-interest expense increased by $1.8 million, with an increase in salaries and employee benefits related to the Company’s expansion into the San Francisco Bay Area as the leading driver.
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
| (in thousands, except per share data) | September 30, 2024 | June 30, 2024 | $ Change | % Change | ||||||||||||||||||||||
| Selected operating data: | ||||||||||||||||||||||||||
| Net interest income | $ | 30,386 | $ | 29,092 | $ | 1,294 | 4.45 | % | ||||||||||||||||||
| Provision for credit losses | 2,750 | 2,000 | 750 | 37.50 | % | |||||||||||||||||||||
| Non-interest income | 1,381 | 1,573 | (192) | (12.21) | % | |||||||||||||||||||||
| Non-interest expense | 13,776 | 13,513 | 263 | 1.95 | % | |||||||||||||||||||||
| Pre-tax income | 15,241 | 15,152 | 89 | 0.59 | % | |||||||||||||||||||||
| Provision for income taxes | 4,300 | 4,370 | (70) | (1.60) | % | |||||||||||||||||||||
| Net income | $ | 10,941 | $ | 10,782 | $ | 159 | 1.47 | % | ||||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.51 | $ | 0.01 | 1.96 | % | ||||||||||||||||||
| Diluted | 0.52 | 0.51 | 0.01 | 1.96 | % | |||||||||||||||||||||
| Performance and other financial ratios: | ||||||||||||||||||||||||||
| ROAA | 1.18 | % | 1.23 | % | ||||||||||||||||||||||
| ROAE | 11.31 | % | 11.72 | % | ||||||||||||||||||||||
| Net interest margin | 3.37 | % | 3.39 | % | ||||||||||||||||||||||
| Cost of funds | 2.72 | % | 2.56 | % | ||||||||||||||||||||||
| Efficiency ratio | 43.37 | % | 44.07 | % | ||||||||||||||||||||||
3
| Three months ended | ||||||||||||||||||||||||||
| (in thousands, except per share data) | September 30, 2024 | September 30, 2023 | $ Change | % Change | ||||||||||||||||||||||
| Selected operating data: | ||||||||||||||||||||||||||
| Net interest income | $ | 30,386 | $ | 27,476 | $ | 2,910 | 10.59 | % | ||||||||||||||||||
| Provision for credit losses | 2,750 | 1,050 | 1,700 | 161.90 | % | |||||||||||||||||||||
| Non-interest income | 1,381 | 1,384 | (3) | (0.22) | % | |||||||||||||||||||||
| Non-interest expense | 13,776 | 12,015 | 1,761 | 14.66 | % | |||||||||||||||||||||
| Pre-tax income | 15,241 | 15,795 | (554) | (3.51) | % | |||||||||||||||||||||
| Provision for income taxes | 4,300 | 4,750 | (450) | (9.47) | % | |||||||||||||||||||||
| Net income | $ | 10,941 | $ | 11,045 | $ | (104) | (0.94) | % | ||||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic | $ | 0.52 | $ | 0.64 | $ | (0.12) | (18.75) | % | ||||||||||||||||||
| Diluted | 0.52 | 0.64 | (0.12) | (18.75) | % | |||||||||||||||||||||
| Performance and other financial ratios: | ||||||||||||||||||||||||||
| ROAA | 1.18 | % | 1.30 | % | ||||||||||||||||||||||
| ROAE | 11.31 | % | 16.09 | % | ||||||||||||||||||||||
| Net interest margin | 3.37 | % | 3.31 | % | ||||||||||||||||||||||
| Cost of funds | 2.72 | % | 2.28 | % | ||||||||||||||||||||||
| Efficiency ratio | 43.37 | % | 41.63 | % | ||||||||||||||||||||||
Balance Sheet Summary
| (in thousands) | September 30, 2024 | December 31, 2023 | $ Change | % Change | ||||||||||||||||||||||
| Selected financial condition data: | ||||||||||||||||||||||||||
| Total assets | $ | 3,887,004 | $ | 3,593,125 | $ | 293,879 | 8.18 | % | ||||||||||||||||||
| Cash and cash equivalents | 250,852 | 321,576 | (70,724) | (21.99) | % | |||||||||||||||||||||
| Total loans held for investment | 3,460,565 | 3,081,719 | 378,846 | 12.29 | % | |||||||||||||||||||||
| Total investments | 106,958 | 111,160 | (4,202) | (3.78) | % | |||||||||||||||||||||
| Total liabilities | 3,497,074 | 3,307,351 | 189,723 | 5.74 | % | |||||||||||||||||||||
| Total deposits | 3,399,979 | 3,026,896 | 373,083 | 12.33 | % | |||||||||||||||||||||
| Subordinated notes, net | 73,859 | 73,749 | 110 | 0.15 | % | |||||||||||||||||||||
| Total shareholders’ equity | 389,930 | 285,774 | 104,156 | 36.45 | % | |||||||||||||||||||||
•Insured and collateralized deposits were approximately $2.2 billion, representing 63.90% of total deposits as of September 30, 2024. Net uninsured and uncollateralized deposits were approximately $1.2 billion as of September 30, 2024.
•Commercial and consumer deposit accounts constituted 73.14% of total deposits. Deposit relationships of at least $5 million represented 60.58% of total deposits and had an average age of approximately 8.89 years as of September 30, 2024.
•Cash and cash equivalents as of September 30, 2024 were $250.9 million, representing 7.38% of total deposits at September 30, 2024, as compared to 6.04% as of June 30, 2024.
4
•Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $1.8 billion as of September 30, 2024.
| September 30, 2024 | ||||||||||||||||||||||||||
| (in thousands) | Line of Credit | Letters of Credit Issued | Borrowings | Available | ||||||||||||||||||||||
FHLB advances | $ | 1,123,388 | $ | 567,500 | $ | — | $ | 555,888 | ||||||||||||||||||
| Federal Reserve Discount Window | 858,251 | — | — | 858,251 | ||||||||||||||||||||||
| Correspondent bank lines of credit | 175,000 | — | — | 175,000 | ||||||||||||||||||||||
| Cash and cash equivalents | — | — | — | 250,852 | ||||||||||||||||||||||
| Total | $ | 2,156,639 | $ | 567,500 | $ | — | $ | 1,839,991 | ||||||||||||||||||
The increase in total assets from December 31, 2023 to September 30, 2024 was primarily due to a $378.8 million increase in total loans held for investment, partially offset by a $70.7 million decrease in cash and cash equivalents. The $378.8 million increase in total loans held for investment between December 31, 2023 and September 30, 2024 was a result of $873.7 million in loan originations and advances, partially offset by $190.6 million and $304.2 million in loan payoffs and paydowns, respectively. The $378.8 million increase in total loans held for investment included $254.7 million in purchases of loans within the consumer concentration of the loan portfolio. The $70.7 million decrease in cash and cash equivalents primarily resulted from net cash outflows related to investing activities of $376.5 million, partially offset by net cash inflows related to financing and operating activities of $272.0 million and $33.8 million, respectively.
The increase in total liabilities from December 31, 2023 to September 30, 2024 was primarily due to an increase in interest-bearing deposits of $297.2 million, partially offset by a decrease in other borrowings of $170.0 million. The increase in interest-bearing deposits was largely due to increases in money market and time deposits of $264.1 million and $24.4 million, respectively.
The increase in total shareholders’ equity from December 31, 2023 to September 30, 2024 was primarily a result of $80.9 million of additional common stock outstanding and net income recognized of $32.4 million, partially offset by $12.0 million in cash distributions paid during the period.
Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
| (in thousands) | September 30, 2024 | June 30, 2024 | $ Change | % Change | ||||||||||||||||||||||
| Interest and fee income | $ | 52,667 | $ | 48,998 | $ | 3,669 | 7.49 | % | ||||||||||||||||||
| Interest expense | 22,281 | 19,906 | 2,375 | 11.93 | % | |||||||||||||||||||||
| Net interest income | $ | 30,386 | $ | 29,092 | $ | 1,294 | 4.45 | % | ||||||||||||||||||
| Net interest margin | 3.37 | % | 3.39 | % | ||||||||||||||||||||||
| Three months ended | ||||||||||||||||||||||||||
| (in thousands) | September 30, 2024 | September 30, 2023 | $ Change | % Change | ||||||||||||||||||||||
| Interest and fee income | $ | 52,667 | $ | 45,098 | $ | 7,569 | 16.78 | % | ||||||||||||||||||
| Interest expense | 22,281 | 17,622 | 4,659 | 26.44 | % | |||||||||||||||||||||
| Net interest income | $ | 30,386 | $ | 27,476 | $ | 2,910 | 10.59 | % | ||||||||||||||||||
| Net interest margin | 3.37 | % | 3.31 | % | ||||||||||||||||||||||
5
The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:
| Three months ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | June 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | |||||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning deposits in banks | $ | 126,266 | $ | 1,657 | 5.22 | % | $ | 148,936 | $ | 1,986 | 5.36 | % | $ | 198,751 | $ | 2,584 | 5.16 | % | ||||||||||||||||||||||||||||||||||||||
Investment securities | 106,256 | 620 | 2.32 | % | 105,819 | 650 | 2.47 | % | 112,154 | 653 | 2.31 | % | ||||||||||||||||||||||||||||||||||||||||||||
Loans held for investment and sale | 3,354,050 | 50,390 | 5.98 | % | 3,197,921 | 46,362 | 5.83 | % | 2,982,140 | 41,861 | 5.57 | % | ||||||||||||||||||||||||||||||||||||||||||||
Total interest-earning assets | 3,586,572 | 52,667 | 5.84 | % | 3,452,676 | 48,998 | 5.71 | % | 3,293,045 | 45,098 | 5.43 | % | ||||||||||||||||||||||||||||||||||||||||||||
Interest receivable and other assets, net | 91,965 | 84,554 | 77,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 3,678,537 | $ | 3,537,230 | $ | 3,370,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing transaction accounts | $ | 302,188 | $ | 1,237 | 1.63 | % | $ | 291,470 | $ | 1,104 | 1.52 | % | $ | 296,230 | $ | 972 | 1.30 | % | ||||||||||||||||||||||||||||||||||||||
Savings accounts | 124,851 | 979 | 3.12 | % | 120,080 | 856 | 2.87 | % | 134,920 | 880 | 2.59 | % | ||||||||||||||||||||||||||||||||||||||||||||
Money market accounts | 1,578,244 | 14,688 | 3.70 | % | 1,547,814 | 13,388 | 3.48 | % | 1,328,290 | 9,536 | 2.85 | % | ||||||||||||||||||||||||||||||||||||||||||||
Time accounts | 326,640 | 4,172 | 5.08 | % | 272,887 | 3,369 | 4.96 | % | 399,514 | 4,998 | 4.96 | % | ||||||||||||||||||||||||||||||||||||||||||||
Subordinated notes and other borrowings | 76,988 | 1,205 | 6.23 | % | 75,747 | 1,189 | 6.31 | % | 79,085 | 1,236 | 6.20 | % | ||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 2,408,911 | 22,281 | 3.68 | % | 2,307,998 | 19,906 | 3.47 | % | 2,238,039 | 17,622 | 3.12 | % | ||||||||||||||||||||||||||||||||||||||||||||
Demand accounts | 852,872 | 817,668 | 825,254 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest payable and other liabilities | 32,062 | 41,429 | 35,123 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 384,692 | 370,135 | 272,386 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities & shareholders’ equity | $ | 3,678,537 | $ | 3,537,230 | $ | 3,370,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest spread | 2.16 | % | 2.24 | % | 2.31 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income/margin | $ | 30,386 | 3.37 | % | $ | 29,092 | 3.39 | % | $ | 27,476 | 3.31 | % | ||||||||||||||||||||||||||||||||||||||||||||
6
Net interest income during the three months ended September 30, 2024 increased $1.3 million, while net interest margin decreased two basis points compared to the three months ended June 30, 2024. Interest income increased by $3.7 million compared to the prior quarter, primarily due to higher yields on new and repriced loans. Average loan yields increased 15 basis points compared to the prior quarter and average balances increased 4.88% during the same period. The increase in interest income compared to the prior quarter was partially offset by a $2.4 million increase in interest expense, primarily due to larger average deposit balances at higher rates. Average cost of total deposits increased 16 basis points compared to the prior quarter and average balances increased 4.42% during the same period.
As compared to the three months ended September 30, 2023, net interest income increased $2.9 million and net interest margin increased six basis points. Interest income increased by $7.6 million compared to the same quarter of the prior year, primarily due to higher yields on new and repriced loans. Average loan yields increased 41 basis points compared to the same quarter of the prior year and average balances increased 12.47% during the same period. The increase in interest income was partially offset by an additional $4.7 million in interest expense compared to the same quarter of the prior year. Average cost of total deposits increased 45 basis points compared to the same quarter of the prior year and average balances increased 6.72% during the same period.
Loans by Type
The following table provides loan balances, excluding deferred loan fees, by type as of September 30, 2024:
| (in thousands) | ||||||||
| Real estate: | ||||||||
| Commercial | $ | 2,812,600 | ||||||
| Commercial land and development | 4,709 | |||||||
| Commercial construction | 92,841 | |||||||
| Residential construction | 3,452 | |||||||
| Residential | 33,415 | |||||||
| Farmland | 47,907 | |||||||
| Commercial: | ||||||||
| Secured | 171,855 | |||||||
| Unsecured | 25,011 | |||||||
| Consumer and other | 270,760 | |||||||
| Net deferred loan fees | (1,985) | |||||||
| Total loans held for investment | $ | 3,460,565 | ||||||
Interest-bearing Deposits
The following table provides interest-bearing deposit balances by type as of September 30, 2024:
| (in thousands) | ||||||||
Interest-bearing transaction accounts | $ | 324,028 | ||||||
Money market accounts | 1,546,443 | |||||||
Savings accounts | 131,561 | |||||||
Time accounts | 491,008 | |||||||
| Total interest-bearing deposits | $ | 2,493,040 | ||||||
7
Asset Quality
Allowance for Credit Losses
At September 30, 2024, the Company’s allowance for credit losses was $37.6 million, as compared to $34.4 million at December 31, 2023. The $3.2 million increase in the allowance is due to a $6.0 million provision for credit losses recorded during the nine months ended September 30, 2024, partially offset by net charge-offs of $2.8 million, mainly attributable to commercial and industrial loans, during the same period.
The Company’s ratio of nonperforming loans to loans held for investment decreased from 0.06% at December 31, 2023 to 0.05% at September 30, 2024. Loans designated as watch increased from $39.6 million to $90.9 million between December 31, 2023 and September 30, 2024. Loans designated as substandard decreased from $2.0 million to $1.9 million between December 31, 2023 and September 30, 2024. There were no loans with doubtful risk grades at September 30, 2024 or December 31, 2023.
A summary of the allowance for credit losses by loan class is as follows:
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| (in thousands) | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
| Real estate: | ||||||||||||||||||||||||||
| Commercial | $ | 26,217 | 69.74 | % | $ | 29,015 | 84.27 | % | ||||||||||||||||||
| Commercial land and development | 89 | 0.24 | % | 178 | 0.52 | % | ||||||||||||||||||||
| Commercial construction | 1,756 | 4.67 | % | 718 | 2.08 | % | ||||||||||||||||||||
| Residential construction | 47 | 0.13 | % | 89 | 0.26 | % | ||||||||||||||||||||
| Residential | 284 | 0.76 | % | 151 | 0.44 | % | ||||||||||||||||||||
| Farmland | 581 | 1.55 | % | 399 | 1.16 | % | ||||||||||||||||||||
| 28,974 | 77.09 | % | 30,550 | 88.73 | % | |||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||
| Secured | 6,049 | 16.10 | % | 3,314 | 9.62 | % | ||||||||||||||||||||
| Unsecured | 251 | 0.67 | % | 189 | 0.55 | % | ||||||||||||||||||||
| 6,300 | 16.77 | % | 3,503 | 10.17 | % | |||||||||||||||||||||
| Consumer and other | 2,309 | 6.14 | % | 378 | 1.10 | % | ||||||||||||||||||||
| Total allowance for credit losses | $ | 37,583 | 100.00 | % | $ | 34,431 | 100.00 | % | ||||||||||||||||||
The ratio of allowance for credit losses to loans held for investment was 1.09% at September 30, 2024, as compared to 1.12% at December 31, 2023.
Non-interest Income
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
| (in thousands) | September 30, 2024 | June 30, 2024 | $ Change | % Change | ||||||||||||||||||||||
| Service charges on deposit accounts | $ | 165 | $ | 189 | $ | (24) | (12.70) | % | ||||||||||||||||||
| Gain on sale of loans | 306 | 449 | (143) | (31.85) | % | |||||||||||||||||||||
| Loan-related fees | 406 | 370 | 36 | 9.73 | % | |||||||||||||||||||||
| FHLB stock dividends | 327 | 329 | (2) | (0.61) | % | |||||||||||||||||||||
| Earnings on bank-owned life insurance | 162 | 158 | 4 | 2.53 | % | |||||||||||||||||||||
| Other income | 15 | 78 | (63) | (80.77) | % | |||||||||||||||||||||
| Total non-interest income | $ | 1,381 | $ | 1,573 | $ | (192) | (12.21) | % | ||||||||||||||||||
Gain on sale of loans. The decrease resulted from a decline in the volume of loans sold, partially offset by an increase in the effective yield of loans sold. During the three months ended September 30, 2024, approximately $4.4
8
million of loans were sold with an effective yield of 7.03%, as compared to approximately $6.8 million of loans sold with an effective yield of 6.60% during the three months ended June 30, 2024.
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
| (in thousands) | September 30, 2024 | September 30, 2023 | $ Change | % Change | ||||||||||||||||||||||
| Service charges on deposit accounts | $ | 165 | $ | 158 | $ | 7 | 4.43 | % | ||||||||||||||||||
| Gain on sale of loans | 306 | 396 | (90) | (22.73) | % | |||||||||||||||||||||
| Loan-related fees | 406 | 355 | 51 | 14.37 | % | |||||||||||||||||||||
| FHLB stock dividends | 327 | 274 | 53 | 19.34 | % | |||||||||||||||||||||
| Earnings on bank-owned life insurance | 162 | 127 | 35 | 27.56 | % | |||||||||||||||||||||
| Other income | 15 | 74 | (59) | (79.73) | % | |||||||||||||||||||||
| Total non-interest income | $ | 1,381 | $ | 1,384 | $ | (3) | (0.22) | % | ||||||||||||||||||
Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold, partially offset by an improvement in the effective yield of loans sold. During the three months ended September 30, 2024, approximately $4.4 million of loans were sold with an effective yield of 7.03%, as compared to approximately $7.0 million of loans sold with an effective yield of 5.63% during the three months ended September 30, 2023.
Non-interest Expense
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
(in thousands) | September 30, 2024 | June 30, 2024 | $ Change | % Change | ||||||||||||||||||||||
Salaries and employee benefits | $ | 7,969 | $ | 7,803 | $ | 166 | 2.13 | % | ||||||||||||||||||
Occupancy and equipment | 626 | 646 | (20) | (3.10) | % | |||||||||||||||||||||
Data processing and software | 1,327 | 1,235 | 92 | 7.45 | % | |||||||||||||||||||||
Federal Deposit Insurance Corporation (“FDIC”) insurance | 405 | 390 | 15 | 3.85 | % | |||||||||||||||||||||
Professional services | 830 | 767 | 63 | 8.21 | % | |||||||||||||||||||||
Advertising and promotional | 584 | 615 | (31) | (5.04) | % | |||||||||||||||||||||
Loan-related expenses | 292 | 297 | (5) | (1.68) | % | |||||||||||||||||||||
Other operating expenses | 1,743 | 1,760 | (17) | (0.97) | % | |||||||||||||||||||||
Total non-interest expense | $ | 13,776 | $ | 13,513 | $ | 263 | 1.95 | % | ||||||||||||||||||
Salaries and employee benefits. The increase related primarily to: (i) a $0.4 million decrease in loan origination costs due to fewer loan originations, net of purchased consumer loans; and (ii) a $0.2 million increase in salaries, benefits, and bonus expense related to a 4.28% increase in headcount during the quarter. These increases were partially offset by a $0.4 million decrease in commissions expense due to fewer loan originations, net of purchased consumer loans, period-over-period.
9
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | ||||||||||||||||||||||||||
| (in thousands) | September 30, 2024 | September 30, 2023 | $ Change | % Change | ||||||||||||||||||||||
| Salaries and employee benefits | $ | 7,969 | $ | 6,876 | $ | 1,093 | 15.90 | % | ||||||||||||||||||
| Occupancy and equipment | 626 | 561 | 65 | 11.59 | % | |||||||||||||||||||||
| Data processing and software | 1,327 | 1,020 | 307 | 30.10 | % | |||||||||||||||||||||
| FDIC insurance | 405 | 375 | 30 | 8.00 | % | |||||||||||||||||||||
| Professional services | 830 | 700 | 130 | 18.57 | % | |||||||||||||||||||||
| Advertising and promotional | 584 | 535 | 49 | 9.16 | % | |||||||||||||||||||||
| Loan-related expenses | 292 | 345 | (53) | (15.36) | % | |||||||||||||||||||||
| Other operating expenses | 1,743 | 1,603 | 140 | 8.73 | % | |||||||||||||||||||||
| Total non-interest expense | $ | 13,776 | $ | 12,015 | $ | 1,761 | 14.66 | % | ||||||||||||||||||
Salaries and employee benefits. The increase related primarily to: (i) a $1.0 million increase in salaries, benefits, and bonus expense, mainly for employees hired since September 2023 to support expansion into the San Francisco Bay Area; and (ii) a $0.2 million increase in commissions paid, primarily to new employees in the San Francisco Bay Area. This was partially offset by a $0.1 million increase in loan origination costs due to a higher number of loan originations, net of purchased consumer loans, period-over-period.
Data processing and software. The increase was primarily due to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system.
Professional services. The increase was primarily due to a $0.1 million increase in fees for 2024 audits and examinations.
Other operating expenses. The increase was primarily due to $0.1 million in operational losses on deposit accounts.
Provision for Income Taxes
Three months ended September 30, 2024, as compared to three months ended June 30, 2024
Provision for income taxes decreased slightly to $4.3 million for the three months ended September 30, 2024 from $4.4 million for the three months ended June 30, 2024, primarily driven by a slight decline in the effective tax rate. The effective tax rates were 28.21% and 28.84% for the three months ended September 30, 2024 and June 30, 2024, respectively.
Three months ended September 30, 2024, as compared to three months ended September 30, 2023
Provision for income taxes decreased by $0.5 million, or 9.47%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decline was primarily driven by an overall decrease in pre-tax income combined with a $0.2 million adjustment to the provision during the three months ended September 30, 2023 to true-up the year-to-date effective tax rate which did not occur during the three months ended September 30, 2024. The effective tax rates for the three months ended September 30, 2024 and September 30, 2023, were 28.21% and 30.07% respectively.
Webcast Details
Five Star Bancorp will host a live webcast for analysts and investors on Tuesday, October 29, 2024 at 1:00 pm ET (10:00 am PT) to discuss its third quarter financial results. To view the live webcast, visit the “News & Events” section of the Company’s website under “Events” at https://investors.fivestarbank.com/news-events/events. The webcast will be archived on the Company’s website for a period of 90 days.
About Five Star Bancorp
Five Star is a bank holding company headquartered in Rancho Cordova, California. Five Star operates through its wholly owned banking subsidiary, Five Star Bank. The Bank has eight branches in Northern California.
10
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors, which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2024 and June 30, 2024, in each case under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time.
The Company disclaims any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law.
11
Condensed Financial Data (Unaudited)
| Three months ended | ||||||||||||||||||||
(in thousands, except per share and share data) | September 30, 2024 | June 30, 2024 | September 30, 2023 | |||||||||||||||||
Revenue and Expense Data | ||||||||||||||||||||
Interest and fee income | $ | 52,667 | $ | 48,998 | $ | 45,098 | ||||||||||||||
Interest expense | 22,281 | 19,906 | 17,622 | |||||||||||||||||
Net interest income | 30,386 | 29,092 | 27,476 | |||||||||||||||||
Provision for credit losses | 2,750 | 2,000 | 1,050 | |||||||||||||||||
Net interest income after provision | 27,636 | 27,092 | 26,426 | |||||||||||||||||
Non-interest income: | ||||||||||||||||||||
Service charges on deposit accounts | 165 | 189 | 158 | |||||||||||||||||
Gain on sale of loans | 306 | 449 | 396 | |||||||||||||||||
Loan-related fees | 406 | 370 | 355 | |||||||||||||||||
FHLB stock dividends | 327 | 329 | 274 | |||||||||||||||||
Earnings on bank-owned life insurance | 162 | 158 | 127 | |||||||||||||||||
Other income | 15 | 78 | 74 | |||||||||||||||||
Total non-interest income | 1,381 | 1,573 | 1,384 | |||||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and employee benefits | 7,969 | 7,803 | 6,876 | |||||||||||||||||
Occupancy and equipment | 626 | 646 | 561 | |||||||||||||||||
Data processing and software | 1,327 | 1,235 | 1,020 | |||||||||||||||||
FDIC insurance | 405 | 390 | 375 | |||||||||||||||||
Professional services | 830 | 767 | 700 | |||||||||||||||||
Advertising and promotional | 584 | 615 | 535 | |||||||||||||||||
Loan-related expenses | 292 | 297 | 345 | |||||||||||||||||
Other operating expenses | 1,743 | 1,760 | 1,603 | |||||||||||||||||
Total non-interest expense | 13,776 | 13,513 | 12,015 | |||||||||||||||||
Income before provision for income taxes | 15,241 | 15,152 | 15,795 | |||||||||||||||||
Provision for income taxes | 4,300 | 4,370 | 4,750 | |||||||||||||||||
Net income | $ | 10,941 | $ | 10,782 | $ | 11,045 | ||||||||||||||
| Comprehensive Income | ||||||||||||||||||||
| Net income | $ | 10,941 | $ | 10,782 | $ | 11,045 | ||||||||||||||
Net unrealized holding gain (loss) on securities available-for-sale during the period | 3,549 | 295 | (4,195) | |||||||||||||||||
Less: Income tax expense (benefit) related to other comprehensive income (loss) | 1,049 | 87 | (1,240) | |||||||||||||||||
Other comprehensive income (loss) | 2,500 | 208 | (2,955) | |||||||||||||||||
| Total comprehensive income | $ | 13,441 | $ | 10,990 | $ | 8,090 | ||||||||||||||
12
| Three months ended | ||||||||||||||||||||
(in thousands, except per share and share data) | September 30, 2024 | June 30, 2024 | September 30, 2023 | |||||||||||||||||
Share and Per Share Data | ||||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 0.52 | $ | 0.51 | $ | 0.64 | ||||||||||||||
Diluted | 0.52 | 0.51 | 0.64 | |||||||||||||||||
Book value per share | 18.29 | 17.85 | 15.88 | |||||||||||||||||
Tangible book value per share(1) | 18.29 | 17.85 | 15.88 | |||||||||||||||||
Weighted average basic common shares outstanding | 21,182,143 | 21,039,798 | 17,175,034 | |||||||||||||||||
Weighted average diluted common shares outstanding | 21,232,758 | 21,058,085 | 17,194,825 | |||||||||||||||||
Shares outstanding at end of period | 21,319,583 | 21,319,583 | 17,257,357 | |||||||||||||||||
Credit Quality | ||||||||||||||||||||
Allowance for credit losses to period end nonperforming loans | 2,041.44 | % | 1,882.30 | % | 1,699.35 | % | ||||||||||||||
Nonperforming loans to loans held for investment | 0.05 | % | 0.06 | % | 0.07 | % | ||||||||||||||
Nonperforming assets to total assets | 0.05 | % | 0.05 | % | 0.06 | % | ||||||||||||||
Nonperforming loans plus performing loan modifications to loans held for investment | 0.05 | % | 0.06 | % | 0.07 | % | ||||||||||||||
Selected Financial Ratios | ||||||||||||||||||||
ROAA | 1.18 | % | 1.23 | % | 1.30 | % | ||||||||||||||
ROAE | 11.31 | % | 11.72 | % | 16.09 | % | ||||||||||||||
Net interest margin | 3.37 | % | 3.39 | % | 3.31 | % | ||||||||||||||
Loan to deposit | 101.87 | % | 103.87 | % | 99.57 | % | ||||||||||||||
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
13
(in thousands) | September 30, 2024 | June 30, 2024 | September 30, 2023 | |||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
Cash and due from financial institutions | $ | 44,531 | $ | 28,572 | $ | 26,744 | ||||||||||||||
Interest-bearing deposits in banks | 206,321 | 161,787 | 296,804 | |||||||||||||||||
Time deposits in banks | 4,118 | 4,097 | 6,971 | |||||||||||||||||
Securities - available-for-sale, at fair value | 104,238 | 103,204 | 104,086 | |||||||||||||||||
Securities - held-to-maturity, at amortized cost | 2,720 | 2,973 | 3,104 | |||||||||||||||||
Loans held for sale | 2,910 | 5,322 | 9,326 | |||||||||||||||||
Loans held for investment | 3,460,565 | 3,266,291 | 3,009,930 | |||||||||||||||||
Allowance for credit losses | (37,583) | (35,406) | (34,028) | |||||||||||||||||
Loans held for investment, net of allowance for credit losses | 3,422,982 | 3,230,885 | 2,975,902 | |||||||||||||||||
FHLB stock | 15,000 | 15,000 | 15,000 | |||||||||||||||||
| Operating leases, right-of-use asset | 6,590 | 6,630 | 4,799 | |||||||||||||||||
Premises and equipment, net | 1,657 | 1,610 | 1,564 | |||||||||||||||||
Bank-owned life insurance | 19,192 | 19,030 | 17,023 | |||||||||||||||||
Interest receivable and other assets | 56,745 | 55,107 | 43,717 | |||||||||||||||||
Total assets | $ | 3,887,004 | $ | 3,634,217 | $ | 3,505,040 | ||||||||||||||
Non-interest-bearing deposits | $ | 906,939 | $ | 825,733 | $ | 833,434 | ||||||||||||||
Interest-bearing deposits | 2,493,040 | 2,323,898 | 2,198,776 | |||||||||||||||||
Total deposits | 3,399,979 | 3,149,631 | 3,032,210 | |||||||||||||||||
Subordinated notes, net | 73,859 | 73,822 | 73,713 | |||||||||||||||||
| Other borrowings | — | — | 90,000 | |||||||||||||||||
Operating lease liability | 7,101 | 7,077 | 5,043 | |||||||||||||||||
Interest payable and other liabilities | 16,135 | 23,217 | 30,050 | |||||||||||||||||
Total liabilities | 3,497,074 | 3,253,747 | 3,231,016 | |||||||||||||||||
Common stock | 302,251 | 301,968 | 220,266 | |||||||||||||||||
Retained earnings | 97,411 | 90,734 | 69,689 | |||||||||||||||||
Accumulated other comprehensive loss, net of taxes | (9,732) | (12,232) | (15,931) | |||||||||||||||||
Total shareholders’ equity | 389,930 | 380,470 | 274,024 | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,887,004 | $ | 3,634,217 | $ | 3,505,040 | ||||||||||||||
Quarterly Average Balance Data | ||||||||||||||||||||
Average loans held for investment and sale | $ | 3,354,050 | $ | 3,197,921 | $ | 2,982,140 | ||||||||||||||
Average interest-earning assets | 3,586,572 | 3,452,676 | 3,293,045 | |||||||||||||||||
Average total assets | 3,678,537 | 3,537,230 | 3,370,802 | |||||||||||||||||
Average deposits | 3,184,795 | 3,049,919 | 2,984,208 | |||||||||||||||||
Average total equity | 384,692 | 370,135 | 272,386 | |||||||||||||||||
Capital Ratios | ||||||||||||||||||||
Total shareholders’ equity to total assets | 10.03 | % | 10.47 | % | 7.82 | % | ||||||||||||||
Tangible shareholders’ equity to tangible assets(1) | 10.03 | % | 10.47 | % | 7.82 | % | ||||||||||||||
Total capital (to risk-weighted assets) | 13.94 | % | 14.38 | % | 12.37 | % | ||||||||||||||
Tier 1 capital (to risk-weighted assets) | 10.93 | % | 11.27 | % | 9.07 | % | ||||||||||||||
Common equity Tier 1 capital (to risk-weighted assets) | 10.93 | % | 11.27 | % | 9.07 | % | ||||||||||||||
Tier 1 leverage ratio | 10.83 | % | 11.05 | % | 8.58 | % | ||||||||||||||
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
14
Non-GAAP Reconciliation (Unaudited)
The Company uses financial information in its analysis of the Company’s performance that is not in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP. Additionally, these non-GAAP measures are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses, but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons.
Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated.
Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.
Pre-tax, pre-provision income is defined as pre-tax income plus provision for credit losses. The most directly comparable GAAP financial measure is pre-tax income.
The following reconciliation table provides a more detailed analysis of this non-GAAP financial measure:
| Three months ended | ||||||||||||||||||||
(in thousands) | September 30, 2024 | June 30, 2024 | September 30, 2023 | |||||||||||||||||
Pre-tax, pre-provision income | ||||||||||||||||||||
| Pre-tax income | $ | 15,241 | $ | 15,152 | $ | 15,795 | ||||||||||||||
| Add: provision for credit losses | 2,750 | 2,000 | 1,050 | |||||||||||||||||
| Pre-tax, pre-provision income | $ | 17,991 | $ | 17,152 | $ | 16,845 | ||||||||||||||
Investor Contact:
Heather C. Luck, Chief Financial Officer
Five Star Bancorp
(916) 626-5008
hluck@fivestarbank.com
Heather C. Luck, Chief Financial Officer
Five Star Bancorp
(916) 626-5008
hluck@fivestarbank.com
Media Contact:
Shelley R. Wetton, Chief Marketing Officer
Five Star Bancorp
(916) 284-7827
swetton@fivestarbank.com
Five Star Bancorp
(916) 284-7827
swetton@fivestarbank.com
15
Investor Presentation Third Quarter 2024
Safe Harbor Statement and Disclaimer Forward-Looking Statements In this presentation, “we,” “our,” “us,” “Five Star,” or “the Company” refers to Five Star Bancorp, a California corporation, and our consolidated subsidiaries, including Five Star Bank, a California state- chartered bank, unless the context indicates that we refer only to the parent company, Five Star Bancorp. This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2024 and June 30, 2024, in each case under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company disclaims any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law. Industry Information This presentation includes statistical and other industry and market data that we obtained from government reports and other third-party sources. Our internal data, estimates, and forecasts are based on information obtained from government reports, trade, and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. Although we believe that this information (including the industry publications and third-party research, surveys, and studies) is accurate and reliable, we have not independently verified such information. In addition, estimates, forecasts, and assumptions are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. Finally, forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements in this presentation. Unaudited Financial Data Numbers contained in this presentation for the quarter ended September 30, 2024 and for other quarterly periods are unaudited. Additionally, all figures presented as year-to-date, except for periods that represent a full fiscal year ended December 31, represent unaudited results. As a result, subsequent information may cause a change in certain accounting estimates and other financial information, including the Company’s allowance for credit losses, fair values, and income taxes. Non-GAAP Financial Measures The Company uses financial information in its analysis of the Company’s performance that is not in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. See the appendix to this presentation for a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Third Quarter 2024 Investor Presentation | 2
Agenda Third Quarter 2024 Investor Presentation | 3 •Company Overview •Financial Highlights •Loans and Credit Quality •Deposit and Capital Overview •Financial Results
Company Overview Third Quarter 2024 Investor Presentation | 4
Company Overview Nasdaq: Headquarters: Asset Size: Loans HFI: Deposits: Bank Branches: Third Quarter 2024 Investor Presentation | 5 FSBC Rancho Cordova, CA $3.9 billion $3.5 billion $3.4 billion 8 Note: Balances are as of September 30, 2024. References to loans HFI are loans held for investment. Five Star is a community business bank that was founded to serve the commercial real estate industry. Today, the markets we serve have expanded to meet customer demand and now include manufactured housing and storage, faith-based, government, nonprofits, and more.
Executive Team Third Quarter 2024 Investor Presentation | 6 James Beckwith President and Chief Executive Officer Five Star since 2003 John Dalton Senior Vice President and Chief Credit Officer Five Star since 2011 Mike Lee Senior Vice President and Chief Regulatory Officer Five Star since 2005 Michael Rizzo Senior Vice President and Chief Banking Officer Five Star since 2005 Brett Wait Senior Vice President and Chief Information Officer Five Star since 2011 Lydia Ramirez Senior Vice President and Chief Operations and Chief DE&I Officer Five Star since 2017 Heather Luck Senior Vice President and Chief Financial Officer Five Star since 2018 Shelley Wetton Senior Vice President and Chief Marketing Officer Five Star since 2015
Financial Highlights Third Quarter 2024 Investor Presentation | 7
$604 $811 $840 $973 $1,272 $1,480 $1,954 $2,557 $3,227 $3,593 $3,887 $1,806 $2,535 $148 $22 Total Assets Excluding PPP Loans PPP Loans 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Q3 2024 Consistent and Organic Asset Growth Third Quarter 2024 Investor Presentation | 8 Note: Dollars are in millions. Balances are end of period. References to PPP are the Paycheck Protection Program. 1. CAGR is based upon balances as of September 30, 2024. 2. A reconciliation of this non-GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years 10 years Total Assets 22.54 % 21.05 %
Financial Highlights Third Quarter 2024 Investor Presentation | 9 (in thousands, except per share data) For the three months ended 9/30/2024 6/30/2024 9/30/2023 Profitability Net income $ 10,941 $ 10,782 $ 11,045 Return on average assets ("ROAA") 1.18 % 1.23 % 1.30 % Return on average equity ("ROAE") 11.31 % 11.72 % 16.09 % Earnings per share (basic and diluted) $ 0.52 $ 0.51 $ 0.64 Net Interest Margin Net interest margin 3.37 % 3.39 % 3.31 % Average loan yield 5.98 % 5.83 % 5.57 % Average cost of interest-bearing deposits 3.60 % 3.37 % 3.01 % Average cost of total deposits 2.63 % 2.47 % 2.18 % Total cost of funds 2.72 % 2.56 % 2.28 % 9/30/2024 12/31/2023 Deposits and Securities Non-interest-bearing deposits $ 906,939 $ 831,101 Interest-bearing deposits 2,493,040 2,195,795 Total deposits 3,399,979 3,026,896 Total securities 106,958 111,160 Total securities to interest-earning assets 2.83 % 3.17 % Asset Quality Nonperforming loans to loans held for investment 0.05 % 0.06 % Allowance for credit losses to loans held for investment 1.09 % 1.12 % Note: Yields are based on average balance and annualized quarterly interest income. Costs are based on average balance and annualized quarterly interest expense.
Financial Highlights - September 30, 2024 Third Quarter 2024 Investor Presentation | 10 Growth • Continued balance sheet growth with increases in loans held for investment of $194.3 million and non-wholesale deposits of $92.9 million since June 30, 2024. Funding • Non-interest-bearing deposits comprised 26.67% of total deposits, as compared to 26.22% of total deposits as of June 30, 2024. • Deposits comprised 97.22% of total liabilities, as compared to 96.80% of total liabilities as of June 30, 2024. Liquidity • Insured and collateralized deposits were approximately $2.2 billion, representing 63.90% of total deposits, compared to 64.70% as of June 30, 2024. • Cash and cash equivalents were $250.9 million, representing 7.38% of total deposits, compared to 6.04% as of June 30, 2024. Capital • All capital ratios were above well-capitalized regulatory thresholds. • On July 18, 2024 and October 17, 2024, the Company declared cash dividends of $0.20 per share for the three months ended June 30, 2024 and September 30, 2024, respectively.
Loans and Credit Quality Third Quarter 2024 Investor Presentation | 11
To ta l L oa ns (M ill io ns ) $1,180 $1,355 $1,912 $2,791 $2,870 $2,927 $3,010 $3,082 $3,104 $3,266 $3,461 $148 $22 5.45% 4.96% 4.82% 4.75% 5.36% 5.50% 5.57% 5.64% 5.71% 5.83% 5.98% Non-PPP Loans PPP Loans Average Loan Yield Average Loan Yield Excluding PPP Loans 2019 2020 2021 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Consistent Loan Growth Third Quarter 2024 Investor Presentation | 12 Note: Loan balances are end of period loans held for investment. Yields are based on average balance and annualized quarterly interest income. 1. CAGR is based upon balances as of September 30, 2024. 2. A reconciliation of this non-GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years Total Loans 25.41 %
Commercial real estate, 81.17% Commercial land and development, 0.14% Commercial construction, 2.68% Residential construction, 0.10% Residential, 0.96% Farmland, 1.38% Secured, 5.04% Unsecured, 0.72% PPP, 0.00%Consumer and other, 7.81% Loan Portfolio Composition Third Quarter 2024 Investor Presentation | 13 Types of collateral securing commercial real estate ("CRE") loans Loan Balance ($000s) # of Loans % of CRE Manufactured home community $ 897,854 406 31.92 % RV Park 367,063 123 13.05 % Retail 269,596 92 9.59 % Industrial 220,032 135 7.82 % Faith-based 181,677 99 6.46 % Mini storage 170,254 46 6.05 % Multifamily 166,383 91 5.92 % All other types (1) 539,741 267 19.19 % Total $ 2,812,600 1,259 100.00 % Note: Balances are net book value as of September 30, 2024, before allowance for credit losses, before deferred loan fees, and exclude loans held for sale. 1. Types of collateral in “all other types” are those that individually make up less than 5% CRE concentration.
$898M $367M $270M $220M $182M $170M $166M $540M $1,600M $642M $539M $486M $485M $348M $359M $1,161M 61.50% 60.97% 56.12% 51.61% 45.82% 56.54% 52.60% 54.45% Loan Balance Collateral Value Weighted Average Loan-to-Value Manufactured home community RV Park Retail Industrial Faith-based Mini storage Multifamily All other types $0M $250M $500M $750M $1,000M $1,250M $1,500M $1,750M CRE Collateral Values Third Quarter 2024 Investor Presentation | 14 (1) Note: Balances are net book value as of September 30, 2024, before allowance for credit losses, before deferred loan fees, and exclude loans held for sale. 1. Types of collateral in “all other types” are those that individually make up less than 5% CRE concentration. Total CRE Weighted Average Loan-to-Value 50.06%
CA, 56.8% TX, 7.2% NC, 3.3% AZ, 3.1% FL, 2.8% NV, 2.5% OR, 2.4% GA, 1.8%TN, 1.7%CO, 1.5% MO, 1.2% WI, 1.2% PA, 1.2% WA, 1.1% Other, 12.2% CML Term CRE NOO, 35.8% CML Term Multifamily, 30.7% CML Term CRE OO, 14.5% CSM Unsecured, 7.6% CML Secured, 3.0% CML Const CRE, 2.7%CML Term Ag RE, 1.4% SBA 7A Secured, 1.4% Others, 2.9% CRE Manufactured Home, 25.8% CRE Other, 14.0% CRE RV Park, 10.6% CRE Retail, 7.8% Consumer Unsecured, 7.6% CRE Industrial, 6.4% Commercial Other, 5.6% CRE Faith- based, 5.2% CRE Mini Storage, 4.9% CRE Multifamily, 4.8%CRE Office, 4.0% Commercial Construction, 2.8% Others, 0.5% Loan Portfolio Diversification We focus primarily on commercial lending, with an emphasis on commercial real estate. We offer a variety of loans to small and medium-sized businesses, professionals, and individuals, including commercial real estate, commercial land and construction, and farmland loans. To a lesser extent, we also offer residential real estate, construction real estate, and consumer loans. Third Quarter 2024 Investor Presentation | 15Note: Balances are net book value as of September 30, 2024, before allowance for credit losses, before deferred loan fees, and exclude loans held for sale. Loans by Product Loans by Purpose Real Estate Loans by Geography
Loan Rollforward Third Quarter 2024 Investor Presentation | 16Note: Dollars are in millions. Beginning and ending balances are end of period, before allowance for credit losses, including deferred loan fees, and exclude loans held for sale. $135 $254 $135 $144 $150 $390 $334 $(38) $(158) $(39) $(59) $(51) $(155) $(99)$(18) $(39) $(13) $(13) $(77) $(73) $(41) Originations & Advances Paydowns Payoffs Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Beginning Balance $ 2,791 $ 2,870 $ 2,927 $ 3,010 $ 3,082 $ 3,104 $ 3,266 Ending Balance $ 2,870 $ 2,927 $ 3,010 $ 3,082 $ 3,104 $ 3,266 $ 3,461
1.26% 1.48% 1.20% 1.02% 1.12% 1.12% 1.08% 1.09% 0.21% 0.12% 0.04% 0.07% 0.11% 0.03% 0.04% 0.02% Allowance for Credit Losses to Loans HFI Net Charge-offs to Average Loans HFI 2019 2020 2021 2022 2023 Q1 2024 Q2 2024 Q3 2024 Asset Quality Our primary objective is to maintain a high level of asset quality in our loan portfolio. Therefore, we: – Place emphasis on our commercial portfolio, where we reevaluate risk assessments as a result of reviewing commercial property operating statements and borrower financials – Monitor payment performance, delinquencies, and tax and property insurance compliance – Design our practices to facilitate the early detection and remediation of problems within our loan portfolio – Employ the use of an outside, independent consulting firm to evaluate our underwriting and risk assessment process Third Quarter 2024 Investor Presentation | 17 Nonperforming Loan Trend Allowance for Credit Losses and Net Charge-off Trend Note: References to loans HFI are loans held for investment, which are the equivalent of total loans outstanding at each period end. References to average loans HFI are average loans held for investment during the period. $0.8M $0.5M $0.6M $0.4M $2.0M $1.9M $1.9M $1.8M 0.07% 0.03% 0.03% 0.01% 0.06% 0.06% 0.06% 0.05% Nonperforming Loans Nonperforming Loans to Loans HFI 2019 2020 2021 2022 2023 Q1 2024 Q2 2024 Q3 2024
Allocation of Allowance for Credit Losses Third Quarter 2024 Investor Presentation | 18 (in thousands) December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 Allowance for Credit Losses Amount % of Total Amount % of Total Amount % of Total Amount % of Total Real estate: Commercial $ 29,015 84.27 % $ 28,895 83.40 % $ 24,708 69.79 % $ 26,217 69.74 % Commercial land & development 178 0.52 % 164 0.47 % 72 0.20 % 89 0.24 % Commercial construction 718 2.08 % 697 2.01 % 1,097 3.10 % 1,756 4.67 % Residential construction 89 0.26 % 114 0.33 % 100 0.28 % 47 0.13 % Residential 151 0.44 % 164 0.47 % 195 0.55 % 284 0.76 % Farmland 399 1.16 % 438 1.26 % 402 1.14 % 581 1.55 % Total real estate loans 30,550 88.73 % 30,472 87.94 % 26,574 75.06 % 28,974 77.09 % Commercial: Secured 3,314 9.62 % 3,262 9.41 % 7,386 20.86 % 6,049 16.10 % Unsecured 189 0.55 % 259 0.75 % 214 0.60 % 251 0.67 % Total commercial loans 3,503 10.17 % 3,521 10.16 % 7,600 21.46 % 6,300 16.77 % Consumer and other 378 1.10 % 660 1.90 % 1,232 3.48 % 2,309 6.14 % Total allowance for credit losses $ 34,431 100.00 % $ 34,653 100.00 % $ 35,406 100.00 % $ 37,583 100.00 %
Risk Grade Migration Third Quarter 2024 Investor Presentation | 19 Classified Loans (Loans Rated Substandard or Doubtful) (in thousands) 2022 2023 Q1 2024 Q2 2024 Q3 2024 Real estate: Commercial $ 106 $ 1,892 $ 1,852 $ 1,822 $ 1,787 Commercial land and development — — — — — Commercial construction — — — — — Residential construction — — — — — Residential 175 — — — — Farmland — — — — — Commercial: Secured 123 72 66 60 54 Unsecured — — — — — Consumer and other 26 12 11 10 9 Total $ 430 $ 1,976 $ 1,929 $ 1,892 $ 1,850 % of Loan Portfolio Outstanding by Risk Grade: Pass 99.20 % 98.66 % 98.27 % 98.17 % 97.33 % Watch 0.78 % 1.28 % 1.67 % 1.77 % 2.62 % Substandard 0.02 % 0.06 % 0.06 % 0.06 % 0.05 % Note: Loan portfolio outstanding is total balance of loans outstanding at period end, before deferred loan fees, before allowance for credit losses, and exclude loans held for sale.
Deposit and Capital Overview Third Quarter 2024 Investor Presentation | 20
Government, 18.87% Other, 19.25% Commercial Real Estate & Construction, 15.33% Small to Medium Sized Business, 11.74% Professional Service Practice, 10.28% Non- profit, 7.38% Manufactured Home Community, 6.96% Healthcare & Practice, 5.02%Faith-based, 2.00% Venture Banking, 1.80% Agriculture & Ag Tech, 1.37% Deposit Composition 8.89 Years Average Age of Relationships > $5 million Note: Balances are as of September 30, 2024 and include time and wholesale deposits. 1. Types of accounts in “Other” are brokered deposits, which comprise 8.09%, individuals, trusts, estates, and market verticals that individually make up less than 0.40% of all deposits. 2. Government and Local Agency Depositors includes State of California, which comprises 3.97%. $260,000 Average Deposit Account Balance Relationships > $5 million, 60.58% Relationships ≤ $5 million, 39.42% Total Deposits by Relationship Size Local Agency BreakoutTotal Deposits by Market Vertical Local Agency Depositors, 18.77% All Other Depositors, 81.23% Third Quarter 2024 Investor Presentation | 21 (2) (1) (2)
Diversified Funding Third Quarter 2024 Investor Presentation | 22 Total Deposits(1) = $3.4 billion 97.2% of Total Liabilities Liability Mix 1. Balance as of September 30, 2024. 2. Loan balance in loan to deposit ratio is total loans held for investment and sale at period end. Loan(2) to Deposit Ratio Non-Interest-Bearing Deposits to Total Deposits 90.5% 84.5% 85.1% 100.7% 102.2% 105.4% 103.9% 101.9% 2019 2020 2021 2022 2023 Q1 2024 Q2 2024 Q3 2024 29.6% 39.3% 39.5% 34.9% 27.5% 27.7% 26.2% 26.7% 2019 2020 2021 2022 2023 Q1 2024 Q2 2024 Q3 2024 Money Market, 44.2% Non-Interest- Bearing Demand, 25.9% Time Deposits, 14.0% Interest- Bearing Transaction, 9.3% Savings, 3.8% Borrowings & Subordinated Notes, 2.1% Other Liabilities, 0.7%
$1.3B $1.8B $2.3B $2.8B $3.0B $3.0B $3.1B $3.4B $708M $889M $1,001M $1,228M $1,409M $1,554M $1,691M $1,678M$389M $701M $902M $971M $831M $817M $826M $907M $119M $146M $279M $240M $320M $296M $300M $324M $97M $48M $104M $343M $467M $288M $333M $491M Money Market & Savings Non-Interest-Bearing Demand Interest-Bearing Transaction Time Deposits 2019 2020 2021 2022 2023 Q1 2024 Q2 2024 Q3 2024 Strong Deposit Growth Third Quarter 2024 Investor Presentation | 23 Note: Balances are end of period. Cost of total deposits is based on total average balance of interest-bearing and non-interest-bearing deposits and annualized quarterly deposit interest expense. 1. CAGR is based upon balances as of September 30, 2024. Cost of Total Deposits 0.81% 0.44% 0.11% 0.43% 1.97% 2.53% 2.47% 2.63% CAGR (1) 5 years Total Deposits 22.20 %
Capital Ratios Third Quarter 2024 Investor Presentation | 24 Tier 1 Leverage Ratio Tier 1 Capital to RWA Total Capital to RWA Common Equity Tier 1 to RWA Note: References to RWA are risk-weighted assets. 7.51% 6.58% 9.47% 8.60% 8.73% 10.83% 2019 2020 2021 2022 2023 Q3 2024 8.21% 8.98% 11.44% 8.99% 9.07% 10.93% 2019 2020 2021 2022 2023 Q3 2024 8.21% 8.98% 11.44% 8.99% 9.07% 10.93% 2019 2020 2021 2022 2023 Q3 2024 11.52% 12.18% 13.98% 12.46% 12.30% 13.94% 2019 2020 2021 2022 2023 Q3 2024
Financial Results Third Quarter 2024 Investor Presentation | 25
Earnings Track Record Third Quarter 2024 Investor Presentation | 26 $19.4M $18.4M $16.8M $16.0M $15.9M $17.2M $18.0M $18.5M $17.2M $15.8M $15.2M $15.0M $15.2M $15.2M Pre-tax, pre-provision income Pre-tax income Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 $0.0M $2.5M $5.0M $7.5M $10.0M $12.5M $15.0M $17.5M $20.0M $22.5M 1. A reconciliation of this non-GAAP measure is set forth in the appendix. (1)
Operating Metrics Third Quarter 2024 Investor Presentation | 27 Efficiency RatioNet Interest Margin 3.98% 3.68% 3.64% 3.75% 3.42% 3.30% 2019 2020 2021 2022 2023 2024 YTD 38.63% 37.92% 42.46% 36.90% 40.35% 43.96% 2019 2020 2021 2022 2023 2024 YTD Note: All 2024 figures are through September 30, 2024.
Non-interest Income and Expense Comparison Third Quarter 2024 Investor Presentation | 28 (in thousands) For the three months ended 9/30/2024 6/30/2024 9/30/2023 Non-interest Income Service charges on deposit accounts $ 165 $ 189 $ 158 Gain on sale of loans 306 449 396 Loan-related fees 406 370 355 FHLB stock dividends 327 329 274 Earnings on bank-owned life insurance 162 158 127 Other income 15 78 74 Total non-interest income $ 1,381 $ 1,573 $ 1,384 Non-interest Expense Salaries and employee benefits $ 7,969 $ 7,803 $ 6,876 Occupancy and equipment 626 646 561 Data processing and software 1,327 1,235 1,020 Federal Deposit Insurance Corporation insurance 405 390 375 Professional services 830 767 700 Advertising and promotional 584 615 535 Loan-related expenses 292 297 345 Other operating expenses 1,743 1,760 1,603 Total non-interest expense $ 13,776 $ 13,513 $ 12,015
Shareholder Returns Third Quarter 2024 Investor Presentation | 29 ROAA ROAE Value per Share (book and tangible book(1)) Note: All 2024 figures are through September 30, 2024. 1. A reconciliation of this non-GAAP measure is set forth in the appendix. 2.15% 1.95% 1.86% 1.57% 1.44% 1.21% 2019 2020 2021 2022 2023 2024 YTD 31.40% 31.16% 22.49% 18.80% 17.85% 12.43% 2019 2020 2021 2022 2023 2024 YTD $11.25 $12.16 $13.65 $14.66 $16.56 $18.29 2019 2020 2021 2022 2023 2024
Five Star Bank customer, Visit Sacramento, ensures our region is a leading destination for meetings, conventions, travel trade and leisure, which support the vitality of our regional economy by driving almost $200 million in visitor spending annually. Their vision is for every person in the world to say, “I want to visit Sacramento!” David Eadie, Chief Sports & Entertainment Officer Sonya Bradley, Chief DEI & Community Relations Officer Mariles Krock, Chief Convention Sales & Services Officer Kari Miskit, Chief Operating Officer & Media Relations Mike Testa, President & CEO Five Star Bank customer, Cristo Rey High School Sacramento, is a Catholic, fully-accredited, college preparatory high school. They offer focused curriculum designed to support students not only in being accepted to college, but in graduating from college. Their goal is to educate the “whole person,” that is the mind, body and spirit of each student. They offer challenging academic curriculum, as well as opportunities for co-curricular, spiritual and religious formation. Dave Lucchetti, Five Star Bancorp Retired Board Chair Father Christopher Calderon, President Cristo Rey Students Five Star Bank supports our customer, Street Soccer USA ("SSUSA"), and their mission to fight poverty and strengthen communities through soccer. SSUSA serves youth and special needs populations including families experiencing homelessness, adults recovering from addiction/substance abuse, and mental health diagnoses. SSUSA is the official partner of the Homeless World Cup and Street Child World Cup. We share their mission to fight poverty and strengthen others as they encourage positive changes in their players' lives. Sienna Jackson, Homeless World Cup 2023 Sacramento, California – Team USA Lisa Wrightsman, Managing Director, SSUSA and Homeless World Cup 2010 Rio De Janeiro, Brazil – Team USA Angela Draws, Homeless World Cup 2014 Santiago, Chile – Team USA We strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. We aim to consistently deliver value that meets or exceeds the expectations of our shareholders, customers, employees, business partners, and community.
Appendix: Non-GAAP Reconciliation (Unaudited) The Company uses financial information in its analysis of the Company's performance that is not in conformity with GAAP. The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP. Additionally, these non-GAAP measures are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons. Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP financial measure is average loan yield. We had no PPP loans nor interest and fee income on PPP loans for the periods shown in this presentation other than the years ended December 31, 2020, 2021, and 2022. As a result, average loan yield, excluding PPP loans, is the same as daily average loan yield for all periods presented other than the years ended December 31, 2020, 2021, and 2022. Reconciliations for such periods are provided below. Total assets, excluding PPP loans, is defined as total assets less PPP loans. The most directly comparable GAAP financial measure is total assets. We had no PPP loans as of the period ends shown in this presentation other than as of December 31, 2020 and 2021. As a result, total assets, excluding PPP loans, is the same as total assets for all periods presented, other than as of December 31, 2020 and 2021. Reconciliations for such periods are provided below. Pre-tax, pre-provision income is defined as pre-tax income plus provision for credit losses. The most directly comparable GAAP financial measure is pre-tax net income. Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated. Third Quarter 2024 Investor Presentation | 31
Appendix: Non-GAAP Reconciliation (Unaudited) Third Quarter 2024 Investor Presentation | 32 (in millions) Total assets, excluding PPP loans 12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Total assets $ 1,954 $ 2,557 $ 3,227 $ 3,593 $ 3,476 $ 3,634 $ 3,887 Less: PPP loans 148 22 — — — — — Total assets, excluding PPP loans $ 1,806 $ 2,535 $ 3,227 $ 3,593 $ 3,476 $ 3,634 $ 3,887 (in thousands) Three months ended Pre-tax, pre-provision income 3/31/2023 6/30/2023 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Pre-tax income $ 18,501 $ 17,169 $ 15,795 $ 15,151 $ 14,961 $ 15,152 $ 15,241 Add: provision for credit losses 900 1,250 1,050 800 900 2,000 2,750 Pre-tax, pre-provision income $ 19,401 $ 18,419 $ 16,845 $ 15,951 $ 15,861 $ 17,152 $ 17,991 (in thousands) Year ended Three months ended Average loan yield, excluding PPP loans 12/31/2020 12/31/2021 12/31/2022 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Interest and fee income on loans $ 71,405 $ 78,894 $ 111,795 $ 162,713 $ 43,786 $ 46,362 $ 50,390 Less: interest and fee income on PPP loans 6,535 7,417 635 — — — — Interest and fee income on loans, excluding PPP loans 64,870 71,477 111,160 162,713 43,786 46,362 50,390 Annualized interest and fee income on loans, excluding PPP loans (numerator) 64,870 71,477 111,160 162,713 176,106 186,467 200,465 Average loans held for investment and sale 1,439,380 1,637,280 2,353,148 2,947,603 3,082,290 3,197,921 3,354,050 Less: average PPP loans 165,414 116,652 2,297 — — — — Average loans held for investment and sale, excluding PPP loans (denominator) 1,273,966 1,520,628 2,350,851 2,947,603 3,082,290 3,197,921 3,354,050 Average loan yield, excluding PPP loans 5.09 % 4.70 % 4.73 % 5.52 % 5.71 % 5.83 % 5.98 %