Five Star Bancorp (FSBC) 30 Jan 242023 Q4 Earnings call transcript

Welcome to the Five Star Bancorp Fourth Quarter and Year-End Earnings webcast. Please note, this is a closed conference call, and you are encouraged to listen via the webcast. [Operator Instructions].

Before we get started, let me remind you that today's meeting will include some forward-looking statements within the meaning of applicable securities laws. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the company's future operating results and financial position. and from future these risks may and involve materially differ expectations. statements uncertainties, activities and results Such

For a materially more annual uncertainties forward-looking that complete please report discussion of cause statements, for results forth quarterly the in year on actual Form XX, particular, in to XXXX, the the and Form in XA, for Factors, report set differ Risk Item see ended from XX-K reports. December company's XX, may the XX-Q the those and the on company's risks and XXXX, quarter September information ended

Please figures which financial data non-GAAP refer forward-looking included to appendix are this to and Slide disclaimers industry of GAAP X Reconciliations measures of in the to in the statements, presentation. included presentation. includes the presentation, their non-GAAP most information financial comparable regarding directly

Please being note, this is recorded. event

the would ahead. Please over conference to to James CEO. like I Five and go Bancorp now President turn Star Beckwith,

review you results to Thank Bancorp's fourth XXXX. XX, ended joining the and financial for for the December year us Five Star quarter

today Joining and Financial President Chief Luck, Vice Senior Heather Officer. is me

to our will and on [ a Our yesterday. the of Relations obtain wasn't please earnings announcement the in fivestarbank.com refer financial released To information comments copy release, tab. the ] website today at included visit that the Investor click

remain average X top ended the on and average were equity December group. us near return months peer the and X.XX% to During respectively, XX, on XXXX, return of assets our XX.XX%, our positioning

XXXX, X.XX% XX.XX%, and on were return December and During assets the average year our return XX, average on ended respectively. equity

our Area XX continued addition story San Francisco during Bay the growth market. of Our the seasoned support professionals to into with expansion organic XXXX

ended relationships in new horizon. XX, non-broker to December the deposit growth year XXXX $XXX.X million accounts add of continued during expected also on despite as the seen headwinds and deposits of the We

share dividend change. as manage positioned to our conservatively are we with continue, to per well underwrite and and value to we XX% to expenses conditions shareholders succeed and our ratio, our deliver believe $X.XX ability with continue Our efficiency endure

continued strategy, our during and growth fourth of evidenced balance exhibited our XXXX The expense quarter by execution management sheet trends the earnings of quarter. as

and loans while have prior deposits slightly. decreased grown, consistently periods, assets since Additionally, have total

pipeline solid of historically we operated at remain continues Our within to verticals, end XXXX the in. have

As portfolio. presented in $XX.X diversification by held the from concentration during million the XX.XX% quarter within primarily loans estate the prior or or X.XX% portfolio increased and investment for commercial slide, quarter, $XXX.X real the loan the million year-over-year, of by increased

approximately were Loan million, during the million. payoffs were $XXX.X $XX.X and quarter originations

originations were payoffs During XXXX, $XXX.X were loan approximately and $XXX.X million million.

to a by quality quarters they over only nonperforming remain Asset small of several as increased last result portfolio. the of X.XX% loans our financial continues a represent subset the have challenges of Though strong. borrowers, experienced

for the for of credit As for fourth totaled losses provision growth, credit total million recorded loan $XX.X quarter, XX, losses to XXXX, losses the $X related -- ratio December to million. credit $X.X primarily for at We allowance precision loans year-end. the a ended XX, total a for December year credit losses XXXX. allowance The X.XX% of provision for during held of was million investment for the

$X.X $X representing at the of of year-end, the substandard increase prior remaining an the million with approximately as designated quarter. end consistent approximately previous Loans totaled XXXX, from while million

compared deposits or previous X.XX% slightly as the decreased $X.X quarter, to During by quarter. the fourth million

increased end by X.X% $XXX.X deposits XXXX. since XXXX, During or the million of

decreased the previous percent deposits, end previous of of XX.X% at a and this of of quarter, of money Noninterest-bearing as related from to quarter, end as the the compared year. the accounts. million the the fourth deposits at at total remained increase XX.X% $XXX.X end market stable to

least as want approximately deposits of was approximately $X to detail deposits accounts average more our December XX% offer these our of on agency approximately totaling our X of composition. I Local of the deposits, at million total age XX, on that and our constitute XXXX. relationships years. deposit We'll depositors highlight XX% top for deposit accounted

we net deposit XX, ended noted had inflows pleased December that As for are we've year earlier, the XXXX.

Our ability deposit the accounts customer model grow of centric supports trust reliable deposit our have customers differentiated relationships, to customer core of seen a mix high we and through certain believe dollar that value as base. we accounts and our the duration

points quarter. quarter XXXX basis when deposits deposits deposits total slightly, XXX interest-bearing basis by prior decreased the was Overall, overall. million, by Cost compared with deposit XXX decreased $X.X fourth balances and while of $X.X Noninterest-bearing have during during quarter-over-quarter. decreased the million points

be continue quarter above and with the for regulatory all to the ratios well thresholds We year. well-capitalized, capital

remained Our and between at X XXXX, X.XX% ratio Tier September common equity XXXX. XX, December constant XX,

February as Friday, record Board per of be on $X.XX X, XX, XXXX. stock, shareholders to XX, a announced On we common January declaration share by company's on of the expected to our of dividend XXXX cash of voting February paid the

On Heather that I hand note, it to discuss operations. results the over Heather? of will to

everyone. James, return average return equity assets average was equity was on assets quarter X.XX%. Return was for Net XX.XX%. was Return XX.XX%. million. on on average the was year million. X.XX%. Net for $XX.X and And you, hello, Thank was income $XX.X income And average the on

of was Average X for quarter. over an XXXX. prior increase X.XX%, over an loans basis points on representing basis XX loan X.XX%, of yield yield increase the for points the Average representing quarter was XXXX

while interest the margin quarter, X.XX% net for X.XX%. the net quarter interest Our prior margin was for was

costs. year continued Fed margin put for Our net prior pressure in to on for the X.XX% interest margin XXXX net deposit was X.XX%. rate increases while year, was interest the

$XX.X other XX, as As million other changes XXXX. as effect, factors, was our losses, from of as income a securities debt on $XX.X million $X.X of in of tax to December comprehensive rates of result September interest XXXX, and unrealized million available-for-sale net XX, decreased

funds venture-backed from the in primarily quarter, distributions funds during from the fees gains Noninterest quarter. million income investments and on swap the due income $X.X recognition of XXXX, $X.X million Noninterest and gains primarily in in million increased previous in from $X.X to XXXX to increased to the investments the year. on during $X.X from quarter to million venture-backed fourth in due distributions referral

$X.X Noninterest FDIC in $XX the an other primarily in insurance customer to of $X.X expense related million expenses to costs, the support Noninterest driven expansion $X.X the previous in increase. $XX.X increased $XX.X San company's larger million XXXX, salaries, in $XX.X from a from the in expense operating and overall quarter Bay, expenses the to million assessments, increase million increase primarily in and benefits, incurred XXXX expansion drivers quarter, fourth this promotional million million decline a million Bay increase employee increased due in Francisco as into increased the and the leading area. related loan a origination to employee advertising, to a benefits by salaries base to in into

that operations, overall results we've Now to discussed I'll the some it closing hand now remarks. of James back provide to

and supports I thank fourth and as serve execution, built joining Bank Heather. we to year-end reputation our trust, us, to you, results. for quarter discuss everyone on clients' speed of Thank want success. Star which certainty has Five a

Bank's continues care. customers with the result and understanding of sustained customer for attribute prudent to empathetic and is relationship-based success our Star a performance an spirit, services. for which Five treating financial power experience, We differentiated business the demand Our truly model

those serve, proud our trust very to the are have We we including shareholders. of earned

XXXX, to continued guided Looking on be we value. a by shareholder focus will

market we our in the on are As long-term and and strategy. confident any monitor conditions, environment resilience in we future, company's the focused remain

shareholders. and disciplined growth organic our execute our to benefit will believe business community continue and will employees, We which we practices, customers,

appreciate your That We today's concludes today. presentation. time

Now have. Heather questions to will that you and happy take I be any might

Woody KBW. comes begin We question question-and-answer with now Our the first Lay [Operator will Instructions] session. today from

if start here. margin. any on rates next the quarters, if you just I of just outlook out assuming over to the stayed stable from Wanted wondering couple expectations for the was had that

Sure. expectations. We have do

think be we will the to that So going were our if bottom margin, of QX this out. you graph probably

to growth the first right up. and we'll of and be as increase see I And our we're core And execute rates think margin, now. that's see in grow expecting we're But for we kind the Woody, strategy might an anywhere continue quarter margin between ends more how quarter. I in we X.XX% our if our what think deposits. don't X.XX% thinking change, So to

Having rate cuts happens, any some to if movement, little year, got are this bit, we've one we occur. sensitive. and market the if said which timing that still have But that, expects I up first slightly when is is think air the certainly a going to liability the the in

the a we benefit So to moving Fed decent happen expect with in.

will And aggressive we moving rates down. on be

way. declining do mindful rate is in think that banks not are to be expect it that in happens I not when industry, We environment. a sometimes aggressive and the

Maybe quarter super growth. That's over another It was it. Got helpful loan color. to shifting steady growth. of

single-digit and XXXX is still pipeline, you into does at the that look right look feel high your range we all? target you As for the like

we're X last was -- Yes, than achieved XXXX, growth quarters, And growth X% loan move probably of deposit the has little a XX% an into right? and think as for which expecting we our I a been we X%. mantra loan higher kind growth

in and XXXX. XX% about was I well X% for we went growth deposit think over

X% of development So our we'd capable growth like think doing XX% see loan given we're a And that growth. activities. and an able and to deposit fully we fully business

a majority segment of the expect you would that would growth? And Yes. community manufactured drive home

they've what in the I in would continue expect do past, done to they'll XXXX.

So that also XX% probably thinking. to growth the between in we But from anywhere from I to RV which, storage. parks, XX% particular that's RV is and by our space loan going what -- that, we're come include think vertical, would of that way,

The from Andrew Stephens. next Terrell question comes with

base. the noninterest-bearing I quarter. was from to of, quarter. sounds this deposit it California know see call the good could on NIBs I'd tax it start payments I them, like kind the a if of lot this flat on banks some mean, headwinds Maybe, faced And really deposits I

relative impressive. a on basis, is the strength So

that if I'm maybe the headwind fourth could you seasonal just quantify or you quarter. tax-related faced guys during the curious

kind like Just sense of saw trying underlying was growth you able that to of that new to headwind. potentially that get a the offset

that a the A couple in especially December, of our lot lot happened, Yes. service There professional were of payments out top last of bonus was frankly. their a part employees. bonusing of and firms factors

decline some from balances in that. some saw we So

declared, I of California, we deferral And were January, on guess, the County, Sacramento a we I in given most were in rain counties was. atmospheric Disaster that also, know had the the

in counties of a And to October have XX. and the to the allowed individuals payments until final their that not and make counties so businesses that the lot reside those

So that did have an impact.

That by, capital from we out San also activity some think, other region. I here and our saw that in then we activity was Francisco our the operations that saw pretty offset strong folks, in

to effort roll ever all of we're you I And it get that decline. that, all when too. together to a slight net-net, was -- So a saw think lot

Yes.

appreciate I costs have the do spot Okay. either of deposits it. the on or XX/XX? interest-bearing total the Heather, you as

Yes.

year-end. -- spot So X.XX ] was total rate at the [

could a been your for Okay. maybe in then here. And on, get thoughts it's the long job I impressive then, XXXX. particularly really on hire your you've of if know front, done the I half time new And back mantra a James,

you maybe of announced in Just I the into XXXX, out as today. you see And you additions earlier was that? any do know your of talent neck on woods horizon? deal see there the Any look opportunities coming incremental a

certainly we of well, of region Fargo that Commerce pretty the the Bank Wells operations operate California of capital know out of kind them the came from within Well, here. Most actually. folks

And they mean, there Some good I small- professionals. focus are C&I. some there. on good to that talent medium-sized

tell. will haven't them talked to Time any yet. of I

but do to so. Yes. plan So --

about to also there of Area, too, Bay growing some in were continue down out, talent down we're continue terms talent that there's excited But in doing opportunistic. we're to the mean, We I there. be what there.

to the that. would planning of I So are development of hires additional expect the XXXX. happen I business first half mean, some we year in on

question, your going firepower the we're more answer bring serve. to to markets some bear to So in we

in hires you what for deal. have in target the terms kind new would or of first year? Good half, in you a of Do mind the target of

number, the we sit I of want I to we new goes as be the that's think talent. as a XXXX happen, opportunistic. good today X But in continue X dev X as probably And to end pivoted to about and in X we hiring certainly I here to think folks. in think year could going of biz opportunistic January. here We to we're -- add being today, people, sit transactions terms we

Yes.

Heather. for me for one last maybe then And Okay.

managing Just I mean, kind of you've expense job throughout a done the year, base. good this really

looking Just you'd run be as you overall XXXX, on out look year into growth expense and next rate thoughts kind of expense 'XX? any for then into

Yes.

We that. definitely thank -- being ourselves we pride on there. and for mindful So you managing expenses

add had at at could XXX,XXX look in you'd looking what QX. If XXXX, to you from rolling we about really QX,

where to probably shake proxy I out. we'll for good a think that's start

of expense okay. We will ] Bay year, about little be in year, the a there. XXX,XXX the the bit of I flowing first we should of to creep see the you through add new once [ if second half you But the a from half for location have the rent think, XXX,XXX

next with Davidson. The D.A. question from is Tenner Gary

outside team? that the can in Area back And They've call you on mind and that the $XX Bay team. of Going to just been relative expectations about for, X for million think, you seem talk year-end kind door. board of over the beyond trends quarters I to something had Where does deposits, it, that, the maybe in that deposit them?

be. we Xx Sure. It thought would we from was what

working And relationships. time and lot their customers them. there helping onboard So they well. them performed it's was spent We their and -- down a really great with it of

So level. to that we expect grow that maybe to at continue similar

So we from XXXX, ended that at where at be it we'd down XX/XX/XXXX. up look base to the as we there deposit hope XX/XX, double able

the we're off we're about of start. Area, doing to a excited pretty verticals, Bay what of in good growth outside and terms all In we're our of

be So I very target of going deposit to growth. think it's of XX% our supportive

where kind on of that's we So that. stand

our execute we're seeing nonprofit business, doing starting and then And excited to in it's construction there. I decent really Special business, think, business in industry C&I we're our which growth especially professional think District business, deposit our well. about some I And that. our we're services basic just

working the So across I to in our health care going all we're board think with to verticals, they're with respect group. they were of growth. deposit -- what still our practice execute We're --

it We more is win spend that vertical something But to expect to that terms have in a getting here on of we decent going. want particular in time QX. really

appreciate a And James. that, just I then follow-up.

your underlying exact of confidence your kind view think markets? of there you in on talk clouds broader remarks, but your the I term, if prepared prepared of in kind that kind of phrase or storm economy remember risk note horizon and I your about the a horizon, the in your you used, don't on that was maybe core in remarks kind the can

to to recession, mild just Well, still is it's uncertainty the soft if there's a be or associated amount a know. there fair how -- of landing We going don't with economy a going and recession.

increase by, think continue we have national as unemployment. to hopefully, we've type seen, I quarter of goes that the every GDP in without any appreciable

We've that through helpful. of going our of they respect In crops But our which strong. a issues lot diversified we're prices few, our say, working California, are And markets commodity here to it relates terms that. I'm ag to the is a I remain as business. in they in with grow, really think farmers got to

So we don't there. anticipate any problems

with think, statements. Gary, But being cautious, I'm I just those

and opinions bombardment to they're and of Fed data the to it's speaks You that recession, some people's business can't some and a rates article going going is just when affect when without pick points that move move. and up having a newspaper not about continual

here. We've just problematic a I'd settle it's national world geopolitical And are some have be you that the a economy to events -- like things in -- but happening down our that now got is are could see right to that creating also election uncertainty, bit. some

those kind of if it's I given think I cautiousness, So you facts. a guess, will, all comprehensive

management our the remarks. concludes like any This to question-and-answer would over turn back conference I session. for closing to

we strategic includes Great. while -- and of our Star is continued which initiatives, execute Five and geographies, growth Thank path our verticals retaining growing a on talent. attracting Bancorp as you. on included

management and to its contributed we expense success operating efficiencies, also have and our conservative technology, people, with share the underwriting employees shareholders. practices Our

in Super we Raymond XXXX Stars. Sandler These amongst Bankers James numerous Sm-All Reports also Superior successes We Rating, Financial Piper rating, Premier XXXX. Rating, ratings Bauer include were X. Community Performing and stars received and X XXXX the prestigious and awards the We a were out Superior Cup, Findley awarded a IDC

That's more were with Community were Top banks as billion Independent Banker's size with assets, In the billion. among Best-Performing on the Bank and $XX Banks in with $X XXXX, between nation. billion We also Market in than asset and to S&P $XX nation. in Bankers Global Commercial recognized in in and were listed American XXXX, $X with listed Top-Performing #X assets, XXXX, in Banks ranked billion We the banks #XX. #X XXXX banks we Intelligence billion $X ranked

Sacramento Award. a Leadership Award, Women Business C-Suite leaders In were Real Award, a senior Bee Women Magazine's Changemakers Estate Sacramento a XXXX, in awarded our Comstock Latino and Award, Journal Commercial a executives

Star in Five as out continue mind recognized we verticals. community to we markets ensures our leaders Being serve remains of Bank as top the build

are We team's our accomplishments. humbled of and proud

speaking listening. of great forward We look again thank with day, the to first earnings quarter April discuss for XXXX. to Have and you a in for you

conference today's attending for you The has now concluded. presentation. Thank

You may now disconnect.