(NASDAQ:FSBC),
RANCHO CORDOVA, Calif., April 28, 2025 (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 $13.1 million for the three months ended March 31, 2025, as compared to $13.3 million for the three months ended December 31, 2024 and $10.6 million for the three months ended March 31, 2024.
First 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) | March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||||
| Return on average assets (“ROAA”) | 1.30 | % | 1.31 | % | 1.22 | % | |||||
| Return on average equity (“ROAE”) | 13.28 | % | 13.48 | % | 14.84 | % | |||||
| Pre-tax income | $ | 18,391 | $ | 19,367 | $ | 14,961 | |||||
| Pre-tax, pre-provision income(1) | $ | 20,291 | $ | 20,667 | $ | 15,861 | |||||
| Net income | $ | 13,111 | $ | 13,317 | $ | 10,631 | |||||
| Basic earnings per common share | $ | 0.62 | $ | 0.63 | $ | 0.62 | |||||
| Diluted earnings per common share | $ | 0.62 | $ | 0.63 | $ | 0.62 | |||||
| Weighted average basic common shares outstanding | 21,209,881 | 21,182,143 | 17,190,867 | ||||||||
| Weighted average diluted common shares outstanding | 21,253,588 | 21,235,318 | 17,272,994 | ||||||||
| Shares outstanding at end of period | 21,329,235 | 21,319,083 | 17,353,251 | ||||||||
| (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:
“The strength of Five Star Bank's first quarter 2025 financial results is emblematic of a reputation built on an unwavering commitment to customers and community partners who rely on our speed to serve and certainty of execution for their own successes. This differentiated customer experience has created great demand for our services and seized market opportunities in San Francisco. As we continue to grow our presence, we now have 31 San Francisco Bay Area employees. As of March 31, 2025 our San Francisco Bay Area operations had $379.8 million in total deposits.
At the Company level, total loans held for investment increased by $89.1 million, or 2.52% (10.09% when annualized). Total deposits increased by $178.4 million, or 5.01% (20.05% when annualized), with wholesale deposits increasing by $130.0 million, or 23.21%, and non-wholesale deposits increasing by $48.4 million, or 1.61%. Short-term borrowings remained at zero as of March 31, 2025 and December 31, 2024. Net interest margin increased by nine basis points to 3.45% and our efficiency ratio increased to 42.58%, as compared to 41.21% for the fourth quarter of 2024, while cost of funds decreased nine basis points to 2.56%.
In the first quarter of 2025, we were pleased to declare another cash dividend of $0.20 per share. We were also pleased to have been ranked third among best-performing banks in the nation by S&P Global Market Intelligence (among banks with assets between $3 billion and $10 billion).
As we execute on the expansion of industry verticals and our presence in new geographies to meet customer demand, we expect the ongoing acceleration of our growth to benefit our customers, employees, and shareholders. We also expect our demonstrated ability to adapt to changing economic conditions to serve us well into the future as we remain vigilant and focused on disciplined business practices. We thank our employees for their outstanding commitment to ensuring Five Star Bank remains a safe, trusted, and steadfast banking partner.”
Financial highlights during the quarter included the following:
- The San Francisco Bay Area team increased from 27 to 31 employees who generated deposit balances totaling $379.8 million at March 31, 2025, an increase of $87.4 million from December 31, 2024.
- Cash and cash equivalents were $452.6 million, representing 12.11% of total deposits at March 31, 2025, as compared to 9.90% at December 31, 2024.
- Total deposits increased by $178.4 million, or 5.01%, during the three months ended March 31, 2025, due to increases in both non-wholesale and wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits. During the three months ended March 31, 2025, non-wholesale deposits increased by $48.4 million, or 1.61%, and wholesale deposits increased by $130.0 million, or 23.21%.
- The Company had no short-term borrowings at March 31, 2025 or December 31, 2024.
- Consistent, disciplined management of expenses contributed to our efficiency ratio of 42.58% for the three months ended March 31, 2025, as compared to 41.21% for the three months ended December 31, 2024.
- For the three months ended March 31, 2025, net interest margin was 3.45%, as compared to 3.36% for the three months ended December 31, 2024 and 3.14% for the three months ended March 31, 2024. The effective Federal Funds rate was 4.33% as of March 31, 2025, remaining constant from December 31, 2024 and decreasing from 5.33% at March 31, 2024.
- Other comprehensive income was $0.7 million during the three months ended March 31, 2025. Unrealized losses, net of tax effect, on available-for-sale securities were $11.6 million as of March 31, 2025. Total carrying value of held-to-maturity and available-for-sale securities represented 0.06% and 2.35% of total interest-earning assets, respectively, as of March 31, 2025.
- The Company's common equity Tier 1 capital ratio was 11.00% and 11.02% as of March 31, 2025 and December 31, 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 March 31, 2025 was as follows:
| (in thousands) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | ||||||||
| Loans held for investment | $ | 3,621,819 | $ | 3,532,686 | $ | 89,133 | 2.52 | % | ||||
| Non-interest-bearing deposits | 933,652 | 922,629 | 11,023 | 1.19 | % | |||||||
| Interest-bearing deposits | 2,802,702 | 2,635,365 | 167,337 | 6.35 | % | |||||||
| (in thousands) | March 31, 2025 |
March 31, 2024 |
$ Change | % Change | ||||||||
| Loans held for investment | $ | 3,621,819 | $ | 3,104,130 | $ | 517,689 | 16.68 | % | ||||
| Non-interest-bearing deposits | 933,652 | 817,388 | 116,264 | 14.22 | % | |||||||
| Interest-bearing deposits | 2,802,702 | 2,138,384 | 664,318 | 31.07 | % | |||||||
- The ratio of nonperforming loans to loans held for investment at period end remained at 0.05% from December 31, 2024 to March 31, 2025.
- The Company's Board of Directors declared on January 16, 2025, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended March 31, 2025. The Company's Board of Directors subsequently declared another cash dividend of $0.20 per share on April 17, 2025, which the Company expects to pay on May 12, 2025 to shareholders of record as of May 5, 2025.
Summary Results
Three months ended March 31, 2025, as compared to three months ended December 31, 2024
The Company's net income was $13.1 million for the three months ended March 31, 2025, as compared to $13.3 million for the three months ended December 31, 2024. Net interest income increased by $0.5 million, primarily due to a decrease in interest expense due to lower average rates on deposits, partially offset by a decrease in interest income driven by lower balances and yields on interest-earning deposits in banks, as compared to the three months ended December 31, 2024. The provision for credit losses increased by $0.6 million, reflecting adjustments to expectations for credit losses based on economic trends and forecasts in the three months ended March 31, 2025 compared to the three months ended December 31, 2024. Non-interest income decreased by $0.3 million, primarily due to a reduction in income received on equity investments in venture-backed funds during the three months ended March 31, 2025, as compared to the three months ended December 31, 2024. Non-interest expense increased by $0.6 million, primarily related to an increase in salaries and employee benefits, partially offset by decreases in advertising, promotional, and other operating expenses during the three months ended March 31, 2025, as compared to the three months ended December 31, 2024.
Three months ended March 31, 2025, as compared to three months ended March 31, 2024
The Company's net income was $13.1 million for the three months ended March 31, 2025, as compared to $10.6 million for the three months ended March 31, 2024. Net interest income increased by $7.2 million, primarily due to an increase in interest income driven by a higher balance of loans with higher yields, partially offset by an increase in interest expense due to larger average deposit balances, as compared to the three months ended March 31, 2024. The provision for credit losses increased by $1.0 million, relating to loan growth and adjustments to expectations for credit losses based on economic trends and forecasts during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Non-interest income decreased by $0.5 million, primarily due to a reduction in income received on equity investments in venture-backed funds during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Non-interest expense increased by $2.3 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, with an increase in salaries and employee benefits related to increased headcount 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) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | |||||||||||
| Selected operating data: | |||||||||||||||
| Net interest income | $ | 33,977 | $ | 33,489 | $ | 488 | 1.46 | % | |||||||
| Provision for credit losses | 1,900 | 1,300 | 600 | 46.15 | % | ||||||||||
| Non-interest income | 1,359 | 1,666 | (307 | ) | (18.43 | )% | |||||||||
| Non-interest expense | 15,045 | 14,488 | 557 | 3.84 | % | ||||||||||
| Pre-tax income | 18,391 | 19,367 | (976 | ) | (5.04 | )% | |||||||||
| Provision for income taxes | 5,280 | 6,050 | (770 | ) | (12.73 | )% | |||||||||
| Net income | $ | 13,111 | $ | 13,317 | $ | (206 | ) | (1.55 | )% | ||||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | 0.62 | $ | 0.63 | $ | (0.01 | ) | (1.59 | )% | ||||||
| Diluted | $ | 0.62 | $ | 0.63 | $ | (0.01 | ) | (1.59 | )% | ||||||
| Performance and other financial ratios: | |||||||||||||||
| ROAA | 1.30 | % | 1.31 | % | |||||||||||
| ROAE | 13.28 | % | 13.48 | % | |||||||||||
| Net interest margin | 3.45 | % | 3.36 | % | |||||||||||
| Cost of funds | 2.56 | % | 2.65 | % | |||||||||||
| Efficiency ratio | 42.58 | % | 41.21 | % | |||||||||||
| Three months ended | |||||||||||||||
| (in thousands, except per share data) | March 31, 2025 |
March 31, 2024 |
$ Change | % Change | |||||||||||
| Selected operating data: | |||||||||||||||
| Net interest income | $ | 33,977 | $ | 26,744 | $ | 7,233 | 27.05 | % | |||||||
| Provision for credit losses | 1,900 | 900 | 1,000 | 111.11 | % | ||||||||||
| Non-interest income | 1,359 | 1,833 | (474 | ) | (25.86 | )% | |||||||||
| Non-interest expense | 15,045 | 12,716 | 2,329 | 18.32 | % | ||||||||||
| Pre-tax income | 18,391 | 14,961 | 3,430 | 22.93 | % | ||||||||||
| Provision for income taxes | 5,280 | 4,330 | 950 | 21.94 | % | ||||||||||
| Net income | $ | 13,111 | $ | 10,631 | $ | 2,480 | 23.33 | % | |||||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | 0.62 | $ | 0.62 | $ | — | — | % | |||||||
| Diluted | $ | 0.62 | $ | 0.62 | $ | — | — | % | |||||||
| Performance and other financial ratios: | |||||||||||||||
| ROAA | 1.30 | % | 1.22 | % | |||||||||||
| ROAE | 13.28 | % | 14.84 | % | |||||||||||
| Net interest margin | 3.45 | % | 3.14 | % | |||||||||||
| Cost of funds | 2.56 | % | 2.62 | % | |||||||||||
| Efficiency ratio | 42.58 | % | 44.50 | % | |||||||||||
Balance Sheet Summary
| (in thousands) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | |||||||||
| Selected financial condition data: | |||||||||||||
| Total assets | $ | 4,245,057 | $ | 4,053,278 | $ | 191,779 | 4.73 | % | |||||
| Cash and cash equivalents | 452,571 | 352,343 | 100,228 | 28.45 | % | ||||||||
| Total loans held for investment | 3,621,819 | 3,532,686 | 89,133 | 2.52 | % | ||||||||
| Total investments | 99,696 | 100,914 | (1,218 | ) | (1.21 | )% | |||||||
| Total liabilities | 3,838,606 | 3,656,654 | 181,952 | 4.98 | % | ||||||||
| Total deposits | 3,736,354 | 3,557,994 | 178,360 | 5.01 | % | ||||||||
| Subordinated notes, net | 73,932 | 73,895 | 37 | 0.05 | % | ||||||||
| Total shareholders' equity | 406,451 | 396,624 | 9,827 | 2.48 | % | ||||||||
- Insured and collateralized deposits were approximately $2.5 billion, representing 67.55% of total deposits as of March 31, 2025, as compared to 66.92% as of December 31, 2024. Net uninsured and uncollateralized deposits were approximately $1.2 billion as of March 31, 2025, remaining constant from December 31, 2024.
- Non-wholesale deposit accounts constituted 81.53% of total deposits as of March 31, 2025, as compared to 84.26% at December 31, 2024. Deposit relationships of greater than $5 million represented 60.87% of total deposits, as compared to 61.13% as of December 31, 2024, and had an average age of approximately 8.80 years as of March 31, 2025, as compared to 9.28 years as of December 31, 2024.
- Cash and cash equivalents as of March 31, 2025 were $452.6 million, representing 12.11% of total deposits at March 31, 2025, as compared to 9.90% as of December 31, 2024.
- Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $2.0 billion as of March 31, 2025, as compared to $1.9 billion at December 31, 2024.
| March 31, 2025 | |||||||||||||
| (in thousands) | Line of Credit | Letters of Credit Issued | Borrowings | Available | |||||||||
| Federal Home Loan Bank of San Francisco (“FHLB”) advances | $ | 1,276,072 | $ | 731,500 | $ | — | $ | 544,572 | |||||
| Federal Reserve Discount Window | 856,366 | — | — | 856,366 | |||||||||
| Correspondent bank lines of credit | 175,000 | — | — | 175,000 | |||||||||
| Cash and cash equivalents | — | — | — | 452,571 | |||||||||
| Total | $ | 2,307,438 | $ | 731,500 | $ | — | $ | 2,028,509 | |||||
The increase in total assets from December 31, 2024 to March 31, 2025 was primarily due to a $100.2 million increase in cash and cash equivalents and an $89.1 million increase in total loans held for investment. The $100.2 million increase in cash and cash equivalents primarily resulted from net cash inflows related to financing and operating activities of $174.1 million and $15.5 million, respectively, partially offset by net cash outflows related to investing activities of $89.3 million. The $89.1 million increase in total loans held for investment between December 31, 2024 and March 31, 2025 was a result of $259.3 million in loan originations and advances, partially offset by $65.6 million and $104.6 million in loan payoffs and paydowns, respectively. The $89.1 million increase in total loans held for investment included $19.8 million in purchases of loans within the consumer concentration of the loan portfolio.
The increase in total liabilities from December 31, 2024 to March 31, 2025 was primarily due to an increase in interest-bearing deposits of $167.3 million. The increase in interest-bearing deposits was largely due to increases in time and money market deposits of $131.2 million and $52.2 million, respectively.
The increase in total shareholders' equity from December 31, 2024 to March 31, 2025 was primarily a result of net income recognized of $13.1 million and a $0.7 million increase in accumulated other comprehensive income, partially offset by $4.3 million in cash dividends 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) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | |||||||||||
| Interest and fee income | $ | 57,087 | $ | 57,745 | $ | (658 | ) | (1.14 | )% | ||||||
| Interest expense | 23,110 | 24,256 | (1,146 | ) | (4.72 | )% | |||||||||
| Net interest income | $ | 33,977 | $ | 33,489 | $ | 488 | 1.46 | % | |||||||
| Net interest margin | 3.45 | % | 3.36 | % | |||||||||||
| Three months ended | |||||||||||||||
| (in thousands) | March 31, 2025 |
March 31, 2024 |
$ Change | % Change | |||||||||||
| Interest and fee income | $ | 57,087 | $ | 47,541 | $ | 9,546 | 20.08 | % | |||||||
| Interest expense | 23,110 | 20,797 | 2,313 | 11.12 | % | ||||||||||
| Net interest income | $ | 33,977 | $ | 26,744 | $ | 7,233 | 27.05 | % | |||||||
| Net interest margin | 3.45 | % | 3.14 | % | |||||||||||
The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:
| Three months ended | |||||||||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |||||||||||||||||||||||||
| (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 | $ | 328,571 | $ | 3,575 | 4.41 | % | $ | 363,828 | $ | 4,335 | 4.74 | % | $ | 233,002 | $ | 3,102 | 5.35 | % | |||||||||
| Investment securities | 100,474 | 581 | 2.34 | % | 103,930 | 607 | 2.33 | % | 109,177 | 653 | 2.41 | % | |||||||||||||||
| Loans held for investment and sale | 3,567,992 | 52,931 | 6.02 | % | 3,498,109 | 52,803 | 6.01 | % | 3,082,290 | 43,786 | 5.71 | % | |||||||||||||||
| Total interest-earning assets | 3,997,037 | 57,087 | 5.79 | % | 3,965,867 | 57,745 | 5.79 | % | 3,424,469 | 47,541 | 5.58 | % | |||||||||||||||
| Interest receivable and other assets, net | 93,543 | 91,736 | 93,983 | ||||||||||||||||||||||||
| Total assets | $ | 4,090,580 | $ | 4,057,603 | $ | 3,518,452 | |||||||||||||||||||||
| Liabilities and shareholders' equity | |||||||||||||||||||||||||||
| Interest-bearing transaction accounts | $ | 303,822 | $ | 1,112 | 1.48 | % | $ | 298,518 | $ | 1,249 | 1.66 | % | $ | 300,325 | $ | 1,126 | 1.51 | % | |||||||||
| Savings accounts | 123,599 | 772 | 2.53 | % | 127,298 | 887 | 2.77 | % | 124,561 | 861 | 2.78 | % | |||||||||||||||
| Money market accounts | 1,540,879 | 12,435 | 3.27 | % | 1,596,116 | 13,520 | 3.37 | % | 1,410,264 | 12,155 | 3.47 | % | |||||||||||||||
| Time accounts | 706,528 | 7,629 | 4.38 | % | 617,596 | 7,438 | 4.79 | % | 429,586 | 5,369 | 5.03 | % | |||||||||||||||
| Subordinated notes and other borrowings | 73,908 | 1,162 | 6.37 | % | 73,872 | 1,162 | 6.25 | % | 82,775 | 1,286 | 6.25 | % | |||||||||||||||
| Total interest-bearing liabilities | 2,748,736 | 23,110 | 3.41 | % | 2,713,400 | 24,256 | 3.56 | % | 2,347,511 | 20,797 | 3.56 | % | |||||||||||||||
| Demand accounts | 910,954 | 921,881 | 842,105 | ||||||||||||||||||||||||
| Interest payable and other liabilities | 30,389 | 29,234 | 40,730 | ||||||||||||||||||||||||
| Shareholders' equity | 400,501 | 393,088 | 288,106 | ||||||||||||||||||||||||
| Total liabilities & shareholders' equity | $ | 4,090,580 | $ | 4,057,603 | $ | 3,518,452 | |||||||||||||||||||||
| Net interest spread | 2.38 | % | 2.23 | % | 2.02 | % | |||||||||||||||||||||
| Net interest income/margin | $ | 33,977 | 3.45 | % | $ | 33,489 | 3.36 | % | $ | 26,744 | 3.14 | % | |||||||||||||||
Net interest income during the three months ended March 31, 2025 increased $0.5 million, or 1.46%, to $34.0 million compared to $33.5 million during the three months ended December 31, 2024. Net interest margin totaled 3.45% for the three months ended March 31, 2025, an increase of nine basis points compared to the prior quarter. The increase in net interest income is primarily attributable to a $1.1 million decrease in interest expense, driven by a 15 basis point decrease in the average rate on interest-bearing deposits compared to the prior quarter. The decrease in interest expense was partially offset by a $0.7 million decrease in interest income, primarily due to a $35.3 million, or 9.69%, decrease in the average balance of interest-earning deposits in banks, combined with a 33 basis point decrease in the average yield on interest-earning deposits in banks.
As compared to the three months ended March 31, 2024, net interest income increased $7.2 million, or 27.05%, to $34.0 million from $26.7 million. Net interest margin totaled 3.45% for the three months ended March 31, 2025, an increase of 31 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $9.1 million in loan interest income due to a $485.7 million, or 15.76%, increase in the average balance of loans and a 31 basis point improvement in the average yield on loans during the three months ended March 31, 2025 compared to the same quarter of the prior year. The increase in interest income was partially offset by a $2.4 million increase in deposit interest expense compared to the same quarter of the prior year. The increase in deposit interest expense is primarily attributable to a $478.9 million, or 15.42%, increase in the average balance of deposits and a five basis point increase in the average cost of deposits during the three months ended March 31, 2025 compared to the same quarter of the prior year.
Loans by Type
The following table provides loan balances, excluding deferred loan fees, by type as of March 31, 2025:
| (in thousands) | ||||
| Real estate: | ||||
| Commercial | $ | 2,941,201 | ||
| Commercial land and development | 3,556 | |||
| Commercial construction | 113,002 | |||
| Residential construction | 5,747 | |||
| Residential | 34,053 | |||
| Farmland | 43,643 | |||
| Commercial: | ||||
| Secured | 170,525 | |||
| Unsecured | 34,970 | |||
| Consumer and other | 277,093 | |||
| Net deferred loan fees | (1,971 | ) | ||
| Total loans held for investment | $ | 3,621,819 | ||
Interest-bearing Deposits
The following table provides interest-bearing deposit balances by type as of March 31, 2025:
| (in thousands) | ||||
| Interest-bearing transaction accounts | $ | 295,633 | ||
| Money market accounts | 1,577,473 | |||
| Savings accounts | 128,210 | |||
| Time accounts | 801,386 | |||
| Total interest-bearing deposits | $ | 2,802,702 | ||
Asset Quality
Allowance for Credit Losses
At March 31, 2025, the Company's allowance for credit losses was $39.2 million, as compared to $37.8 million at December 31, 2024. The $1.4 million increase in the allowance is due to a $2.2 million provision for credit losses recorded during the three months ended March 31, 2025, partially offset by net charge-offs mainly attributable to commercial and industrial loans of $0.7 million, during the same period.
The Company's ratio of nonperforming loans to loans held for investment remained at 0.05% from December 31, 2024 to March 31, 2025. Loans designated as watch decreased from $123.4 million to $112.0 million between December 31, 2024 and March 31, 2025. Loans designated as substandard increased from $2.6 million to $3.7 million between December 31, 2024 and March 31, 2025. There were no loans with doubtful risk grades at March 31, 2025 or December 31, 2024.
A summary of the allowance for credit losses by loan class is as follows:
| March 31, 2025 | December 31, 2024 | |||||||||||
| (in thousands) | Amount | % of Total | Amount | % of Total | ||||||||
| Real estate: | ||||||||||||
| Commercial | $ | 27,027 | 68.91 | % | $ | 25,864 | 68.44 | % | ||||
| Commercial land and development | 70 | 0.18 | % | 78 | 0.21 | % | ||||||
| Commercial construction | 2,227 | 5.68 | % | 2,268 | 6.00 | % | ||||||
| Residential construction | 78 | 0.20 | % | 64 | 0.17 | % | ||||||
| Residential | 279 | 0.71 | % | 270 | 0.71 | % | ||||||
| Farmland | 598 | 1.52 | % | 607 | 1.61 | % | ||||||
| 30,279 | 77.20 | % | 29,151 | 77.14 | % | |||||||
| Commercial: | ||||||||||||
| Secured | 5,905 | 15.05 | % | 5,866 | 15.52 | % | ||||||
| Unsecured | 403 | 1.03 | % | 278 | 0.74 | % | ||||||
| 6,308 | 16.08 | % | 6,144 | 16.26 | % | |||||||
| Consumer and other | 2,637 | 6.72 | % | 2,496 | 6.60 | % | ||||||
| Total allowance for credit losses | $ | 39,224 | 100.00 | % | $ | 37,791 | 100.00 | % | ||||
The ratio of allowance for credit losses to loans held for investment was 1.08% at March 31, 2025, as compared to 1.07% at December 31, 2024.
Non-interest Income
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | |||||||||||||
| (in thousands) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | |||||||||
| Service charges on deposit accounts | $ | 215 | $ | 179 | $ | 36 | 20.11 | % | |||||
| Gain on sale of loans | 125 | 150 | (25 | ) | (16.67 | )% | |||||||
| Loan-related fees | 448 | 400 | 48 | 12.00 | % | ||||||||
| FHLB stock dividends | 331 | 332 | (1 | ) | (0.30 | )% | |||||||
| Earnings on bank-owned life insurance | 161 | 182 | (21 | ) | (11.54 | )% | |||||||
| Other income | 79 | 423 | (344 | ) | (81.32 | )% | |||||||
| Total non-interest income | $ | 1,359 | $ | 1,666 | $ | (307 | ) | (18.43 | )% | ||||
Service charges on deposit accounts. The increase resulted primarily from individually immaterial increases in fees earned for services and products to support deposit accounts including, but not limited to, service charges, check order fees, and debit card income.
Gain on sale of loans. The decrease resulted from a decline in the volume and effective yield of loans sold. During the three months ended March 31, 2025, approximately $1.7 million of loans were sold with an effective yield of 7.24%, as compared to approximately $2.0 million of loans sold with an effective yield of 7.60% during the three months ended December 31, 2024.
Other income. The decrease resulted primarily from $0.3 million of income received on equity investments in venture-backed funds during the three months ended December 31, 2024 which did not reoccur during the three months ended March 31, 2025.
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | |||||||||||||
| (in thousands) | March 31, 2025 |
March 31, 2024 |
$ Change | % Change | |||||||||
| Service charges on deposit accounts | $ | 215 | $ | 188 | $ | 27 | 14.36 | % | |||||
| Gain on sale of loans | 125 | 369 | (244 | ) | (66.12 | )% | |||||||
| Loan-related fees | 448 | 429 | 19 | 4.43 | % | ||||||||
| FHLB stock dividends | 331 | 332 | (1 | ) | (0.30 | )% | |||||||
| Earnings on bank-owned life insurance | 161 | 142 | 19 | 13.38 | % | ||||||||
| Other income | 79 | 373 | (294 | ) | (78.82 | )% | |||||||
| Total non-interest income | $ | 1,359 | $ | 1,833 | $ | (474 | ) | (25.86 | )% | ||||
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 March 31, 2025, approximately $1.7 million of loans were sold with an effective yield of 7.24%, as compared to approximately $5.2 million of loans sold with an effective yield of 7.08% during the three months ended March 31, 2024.
Other income. The decrease related primarily to $0.3 million of income received on equity investments in venture-backed funds during the three months ended March 31, 2024, which did not reoccur during the three months ended March 31, 2025.
Non-interest Expense
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | |||||||||||||
| (in thousands) | March 31, 2025 |
December 31, 2024 |
$ Change | % Change | |||||||||
| Salaries and employee benefits | $ | 9,134 | $ | 8,360 | $ | 774 | 9.26 | % | |||||
| Occupancy and equipment | 637 | 649 | (12 | ) | (1.85 | )% | |||||||
| Data processing and software | 1,457 | 1,369 | 88 | 6.43 | % | ||||||||
| Federal Deposit Insurance Corporation (“FDIC”) insurance | 455 | 440 | 15 | 3.41 | % | ||||||||
| Professional services | 913 | 774 | 139 | 17.96 | % | ||||||||
| Advertising and promotional | 522 | 752 | (230 | ) | (30.59 | )% | |||||||
| Loan-related expenses | 319 | 321 | (2 | ) | (0.62 | )% | |||||||
| Other operating expenses | 1,608 | 1,823 | (215 | ) | (11.79 | )% | |||||||
| Total non-interest expense | $ | 15,045 | $ | 14,488 | $ | 557 | 3.84 | % | |||||
Salaries and employee benefits. The increase related primarily to: (i) a $0.9 million increase in salaries, benefits, and bonus expense; and (ii) a $0.3 million decrease in loan origination costs due to fewer loan originations, net of purchased consumer loans. The increase was partially offset by a $0.5 million decrease in commissions expense due to fewer loan originations, net of purchased consumer loans, period-over-period.
Professional services. The increase was primarily due to $0.1 million in fees paid for compensation consulting services, which did not occur in the three months ended December 31, 2024.
Advertising and promotional. The decrease related primarily to a $0.1 million decrease in expenses related to sponsored events and partnerships and $0.1 million decrease related to business development expenses.
Other operating expenses. The decrease was primarily due to a $0.1 million decrease in director expenses, such as conferences and meetings, combined with individually immaterial decreases in expenses related to operations, including administrative and operational expenses.
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | ||||||||||||
| (in thousands) | March 31, 2025 |
March 31, 2024 |
$ Change | % Change | ||||||||
| Salaries and employee benefits | $ | 9,134 | $ | 7,577 | $ | 1,557 | 20.55 | % | ||||
| Occupancy and equipment | 637 | 626 | 11 | 1.76 | % | |||||||
| Data processing and software | 1,457 | 1,157 | 300 | 25.93 | % | |||||||
| FDIC insurance | 455 | 400 | 55 | 13.75 | % | |||||||
| Professional services | 913 | 707 | 206 | 29.14 | % | |||||||
| Advertising and promotional | 522 | 460 | 62 | 13.48 | % | |||||||
| Loan-related expenses | 319 | 297 | 22 | 7.41 | % | |||||||
| Other operating expenses | 1,608 | 1,492 | 116 | 7.77 | % | |||||||
| Total non-interest expense | $ | 15,045 | $ | 12,716 | $ | 2,329 | 18.32 | % | ||||
Salaries and employee benefits. The increase related primarily to: (i) a $1.6 million increase in salaries, benefits, and bonus expense, mainly related to a 13.19% increase in headcount between March 31, 2024 and March 31, 2025; and (ii) a $0.1 million increase in commissions paid. This increase was partially offset by a $0.2 million increase in loan origination costs due to a greater 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 $0.1 million in fees paid for compensation consulting services and $0.1 million in consulting services relating to operations in San Francisco, neither of which occurred in the three months ended March 31, 2024.
Other operating expenses. The increase was primarily due to individually immaterial increases in expenses related to operations, including administrative and operational expenses such as travel, subscriptions, and professional association memberships.
Provision for Income Taxes
Three months ended March 31, 2025, as compared to three months ended December 31, 2024
Provision for income taxes decreased to $5.3 million for the three months ended March 31, 2025 from $6.1 million for the three months ended December 31, 2024, which was primarily due to: (i) a slight decline in taxable income recognized during the three months ended March 31, 2025; and (ii) a $0.6 million provision to return true-up recorded during the three months ended December 31, 2024 related primarily to the timing of recognition of low income housing tax credits, which did not reoccur during the three months ended March 31, 2025. The effective tax rates were 28.71% and 31.24% for the three months ended March 31, 2025 and December 31, 2024, respectively.
Three months ended March 31, 2025, as compared to three months ended March 31, 2024
Provision for income taxes increased by $1.0 million, or 21.94%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily driven by an increase in taxable income. The effective tax rates were 28.71% and 28.94% for the three months ended March 31, 2025 and March 31, 2024, respectively.
Webcast Details
Five Star Bancorp will host a live webcast for analysts and investors on Tuesday, April 29, 2025 at 1:00 PM ET (10:00 AM PT) to discuss its first 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.
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, 2024 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.
Condensed Financial Data (Unaudited)
| Three months ended | ||||||||||||
| (in thousands, except per share and share data) | March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
|||||||||
| Revenue and Expense Data | ||||||||||||
| Interest and fee income | $ | 57,087 | $ | 57,745 | $ | 47,541 | ||||||
| Interest expense | 23,110 | 24,256 | 20,797 | |||||||||
| Net interest income | 33,977 | 33,489 | 26,744 | |||||||||
| Provision for credit losses | 1,900 | 1,300 | 900 | |||||||||
| Net interest income after provision | 32,077 | 32,189 | 25,844 | |||||||||
| Non-interest income: | ||||||||||||
| Service charges on deposit accounts | 215 | 179 | 188 | |||||||||
| Gain on sale of loans | 125 | 150 | 369 | |||||||||
| Loan-related fees | 448 | 400 | 429 | |||||||||
| FHLB stock dividends | 331 | 332 | 332 | |||||||||
| Earnings on bank-owned life insurance | 161 | 182 | 142 | |||||||||
| Other income | 79 | 423 | 373 | |||||||||
| Total non-interest income | 1,359 | 1,666 | 1,833 | |||||||||
| Non-interest expense: | ||||||||||||
| Salaries and employee benefits | 9,134 | 8,360 | 7,577 | |||||||||
| Occupancy and equipment | 637 | 649 | 626 | |||||||||
| Data processing and software | 1,457 | 1,369 | 1,157 | |||||||||
| FDIC insurance | 455 | 440 | 400 | |||||||||
| Professional services | 913 | 774 | 707 | |||||||||
| Advertising and promotional | 522 | 752 | 460 | |||||||||
| Loan-related expenses | 319 | 321 | 297 | |||||||||
| Other operating expenses | 1,608 | 1,823 | 1,492 | |||||||||
| Total non-interest expense | 15,045 | 14,488 | 12,716 | |||||||||
| Income before provision for income taxes | 18,391 | 19,367 | 14,961 | |||||||||
| Provision for income taxes | 5,280 | 6,050 | 4,330 | |||||||||
| Net income | $ | 13,111 | $ | 13,317 | $ | 10,631 | ||||||
| Comprehensive Income | ||||||||||||
| Net income | $ | 13,111 | $ | 13,317 | $ | 10,631 | ||||||
| Net unrealized holding gain (loss) on securities available-for-sale during the period | 1,030 | (3,747 | ) | (955 | ) | |||||||
| Less: Income tax expense (benefit) related to other comprehensive income (loss) | 305 | (1,108 | ) | (282 | ) | |||||||
| Other comprehensive income (loss) | 725 | (2,639 | ) | (673 | ) | |||||||
| Total comprehensive income | $ | 13,836 | $ | 10,678 | $ | 9,958 | ||||||
| Share and Per Share Data | ||||||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.62 | $ | 0.63 | $ | 0.62 | ||||||
| Diluted | 0.62 | 0.63 | 0.62 | |||||||||
| Book value per share | 19.06 | 18.60 | 16.86 | |||||||||
| Tangible book value per share(1) | 19.06 | 18.60 | 16.86 | |||||||||
| Weighted average basic common shares outstanding | 21,209,881 | 21,182,143 | 17,190,867 | |||||||||
| Weighted average diluted common shares outstanding | 21,253,588 | 21,235,318 | 17,272,994 | |||||||||
| Shares outstanding at end of period | 21,329,235 | 21,319,083 | 17,353,251 | |||||||||
| Selected Financial Ratios | ||||||||||||
| ROAA | 1.30 | % | 1.31 | % | 1.22 | % | ||||||
| ROAE | 13.28 | % | 13.48 | % | 14.84 | % | ||||||
| Net interest margin | 3.45 | % | 3.36 | % | 3.14 | % | ||||||
| Loan to deposit(2) | 97.01 | % | 99.38 | % | 105.37 | % | ||||||
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
(2) Loan balance in loan to deposit ratio is total loans held for investment and sale at period end. Deposit balance in loan to deposit ratio is total deposits at period end.
| (in thousands) | March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
|||||||||
| Balance Sheet Data | ||||||||||||
| Cash and due from financial institutions | $ | 42,473 | $ | 33,882 | $ | 29,750 | ||||||
| Interest-bearing deposits in banks | 410,098 | 318,461 | 155,575 | |||||||||
| Time deposits in banks | 4,024 | 4,121 | 5,878 | |||||||||
| Securities – available-for-sale, at fair value | 97,111 | 98,194 | 105,006 | |||||||||
| Securities – held-to-maturity, at amortized cost | 2,585 | 2,720 | 3,000 | |||||||||
| Loans held for sale | 2,669 | 3,247 | 10,243 | |||||||||
| Loans held for investment | 3,621,819 | 3,532,686 | 3,104,130 | |||||||||
| Allowance for credit losses | (39,224 | ) | (37,791 | ) | (34,653 | ) | ||||||
| Loans held for investment, net of allowance for credit losses | 3,582,595 | 3,494,895 | 3,069,477 | |||||||||
| FHLB stock | 15,000 | 15,000 | 15,000 | |||||||||
| Operating leases, right-of-use asset | 5,944 | 6,245 | 6,932 | |||||||||
| Premises and equipment, net | 1,524 | 1,584 | 1,569 | |||||||||
| Bank-owned life insurance | 23,246 | 19,375 | 18,872 | |||||||||
| Interest receivable and other assets | 57,788 | 55,554 | 55,058 | |||||||||
| Total assets | $ | 4,245,057 | $ | 4,053,278 | $ | 3,476,360 | ||||||
| Non-interest-bearing deposits | $ | 933,652 | $ | 922,629 | $ | 817,388 | ||||||
| Interest-bearing deposits | 2,802,702 | 2,635,365 | 2,138,384 | |||||||||
| Total deposits | 3,736,354 | 3,557,994 | 2,955,772 | |||||||||
| Subordinated notes, net | 73,932 | 73,895 | 73,786 | |||||||||
| Other borrowings | — | — | 120,000 | |||||||||
| Operating lease liability | 6,591 | 6,857 | 7,320 | |||||||||
| Interest payable and other liabilities | 21,729 | 17,908 | 26,902 | |||||||||
| Total liabilities | 3,838,606 | 3,656,654 | 3,183,780 | |||||||||
| Common stock | 302,788 | 302,531 | 220,804 | |||||||||
| Retained earnings | 115,309 | 106,464 | 84,216 | |||||||||
| Accumulated other comprehensive loss, net of taxes | (11,646 | ) | (12,371 | ) | (12,440 | ) | ||||||
| Total shareholders' equity | 406,451 | 396,624 | 292,580 | |||||||||
| Total liabilities and shareholders' equity | $ | 4,245,057 | $ | 4,053,278 | $ | 3,476,360 | ||||||
| Quarterly Average Balance Data | ||||||||||||
| Average loans held for investment and sale | $ | 3,567,992 | $ | 3,498,109 | $ | 3,082,290 | ||||||
| Average interest-earning assets | 3,997,037 | 3,965,867 | 3,424,469 | |||||||||
| Average total assets | 4,090,580 | 4,057,603 | 3,518,452 | |||||||||
| Average deposits | 3,585,782 | 3,561,409 | 3,106,841 | |||||||||
| Average total equity | 400,501 | 393,088 | 288,106 | |||||||||
| Credit Quality | ||||||||||||
| Allowance for credit losses to nonperforming loans | 2,222.32 | % | 2,101.78 | % | 1,806.73 | % | ||||||
| Nonperforming loans to loans held for investment | 0.05 | % | 0.05 | % | 0.06 | % | ||||||
| Nonperforming assets to total assets | 0.04 | % | 0.05 | % | 0.06 | % | ||||||
| Nonperforming loans plus performing loan modifications to loans held for investment | 0.05 | % | 0.05 | % | 0.06 | % | ||||||
| Capital Ratios | ||||||||||||
| Total shareholders' equity to total assets | 9.57 | % | 9.79 | % | 8.42 | % | ||||||
| Tangible shareholders' equity to tangible assets(1) | 9.57 | % | 9.79 | % | 8.42 | % | ||||||
| Total capital (to risk-weighted assets) | 13.97 | % | 13.99 | % | 12.34 | % | ||||||
| Tier 1 capital (to risk-weighted assets) | 11.00 | % | 11.02 | % | 9.13 | % | ||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 11.00 | % | 11.02 | % | 9.13 | % | ||||||
| Tier 1 leverage ratio | 10.17 | % | 10.05 | % | 8.63 | % | ||||||
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
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. Management believes that tangible shareholders' equity to tangible assets is a useful financial measure because it enables management, investors, and others to assess the Company's financial health based on tangible capital. 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. Management believes that tangible book value per share is a useful financial measure because it enables management, investors, and others to assess the Company's value and use of equity. 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. Management believes that pre-tax, pre-provision income is a useful financial measure because it enables management, investors, and others to assess the Company's ability to generate operating profit and capital.
The following reconciliation table provides a more detailed analysis of this non-GAAP financial measure:
| Three months ended | |||||||||
| (in thousands) | March 31, 2025 |
December 31, 2024 |
March 31, 2024 |
||||||
| Pre-tax, pre-provision income | |||||||||
| Pre-tax income | $ | 18,391 | $ | 19,367 | $ | 14,961 | |||
| Add: provision for credit losses | 1,900 | 1,300 | 900 | ||||||
| Pre-tax, pre-provision income | $ | 20,291 | $ | 20,667 | $ | 15,861 | |||
Investor Contact:
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
