Five Star Bancorp (FSBC) 29 Oct 242024 Q3 Earnings call transcript

Good day, everyone, and welcome to the Five Star Bancorp third quarter 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, we would like to 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.

Such statements involve risks and uncertainties and future activities and results may differ materially from these expectations.

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

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

Please note, being event is this recorded.

to like Star ahead. presentation I'd Bancorp time, and to Five CEO. President this turn Please go James Beckwith, the At over

Five third you Star Thank to results of quarter for for financial Bancorp's XXXX. joining us review the

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

was today that the visit copy the website the on please will to and the Investor yesterday. fivestarbank.com in obtain click financial at refer of release, announcement information tab. Relations a our comments To earnings Our released included

ended of story of San XX, in this relationships of September deposits $XX.X in seen X, add momentum core allowing and Area. new to wholesale Our added as our X organic XXXX, San our growth during X with the Financial XXXX. Bay to more increase opening quarter the on District the deposit seasoned continued expansion to We whole the in months million and continue the successful support third Francisco's service office September Francisco us also continue professionals in accounts non

commercial our third of with and we XX.XX% per maintained our value conservatively to share dividend expenses estate, XX% by evidenced XXXX. a first quarter, underwrite shareholders quarter, loan-to-value deliver In our quarter efficiency and to ability ratio quarter as for real the our on managed third the with $X.XX second

maintain Additionally, loans. deposits Total able which margin, prior decreased basis to and we interest have were our by grown periods. points X only since and assets net

to XXXX the verticals at end we of pipeline have within the continues portfolio in, of in as the quarter historically third solid remain operated Our diversification slide. loan presented

the by held million, respectively. Loans during or representing quarter X.XX% -- the of million, portfolio, decreased primarily increased million originations the quarter within concentration consumer and of loan to the $XXX.X loans prior were from for Loan me, payoffs the purchase during and the investments increase. excuse were related of $XX.X $XXX.X $XX.X quarter the million $XXX.X million paydowns while

quarter, a million the held Asset quality compared loans continues the quarter. end of for investment to at for trends $XX.X the of of risk at losses end prior provision X.XX% associated continued the the for X.XX% end growth Nonperforming forecast. loan decreased the allowance and credit to At third remain credit strong. general loans to period economic $X.X was with million. and quarter, We during recorded reflecting losses

quarter. at is ratio at million allowance approximately Loans the end was of end investment previous for as the the designated losses held credit of or totaled from $X.X approximately X.XX% quarter The quarter, for -- doubtful the loans of the which to substandard end. unchanged

Noninterest-bearing at X.XX% from end or the third slightly third XX.XX% a by end previous During to as at the quarter, percent XX.XX% of the as increased quarter deposits to the previous the total quarter. of compared deposits the quarter. of increased deposits $XXX.X million

the months XX, X As XXXX. deposit noted earlier, net had September we we non-wholesale pleased for are ended inflows

customer-centric accounts and value. trust deposit Our support to our that customers grow model differentiated ability our

a have certain of high through mix believe the base. reliable core dollar customer deposit accounts and duration seen the relationships, of we As we

And offer our age constitutes XX.XX% totaling at total composition, To to least that XXXX. on deposits. relationships want I these September of XX, years deposit of $X million detail average more was X the approximately as on deposit highlight accounts

agency deposits compared accounted XX, XX.XX% balances Wholesale deposit as deposits defined and XXXX. public deposits noninterest-bearing as which prior of September increase and by by time deposits increased increase the have in increased to of Overall, we $XX.X interest-bearing deposits, $XXX.X $XX.X million. million for deposits. Local deposits deposits quarter. Non-wholesale $XX.X when an a million broker non-wholesale million increased driven by in

deposits of an quarter, increase total quarter. from of previous basis basis the was during Cost the points XX XXX points

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

decreased Tier Our between September ratio XX, and 'XX XX, common June equity XX.XX% X from to XX.XX% XXXX.

$X.XX our On expected per of common of of on on a share November stock as XXXX, declared to XXXX. XX, voting November company's Board be shareholders dividend to XX, cash X, record paid the October

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

for was representing increase Return income assets $XX.X quarter average X.XX%, yield and was million. and an the equity James, average Average you, return X.XX%, XX Thank over basis the points quarter. XX.XX%. was on prior everyone. was quarter Net on of loan hello, for the

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

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

during from from primarily to months X during to employee to Noninterest X ended quarter. expense the the loans by a compared ended due quarter $X.X is to months June XX to in in Noninterest the ended million XXXX. This September in $X.X in June salaries income decreased XX, months XX the X in due primarily million and previous increases grew compared third quarter. XX, the benefits September sold million $X.X reduction gains

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

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

continues of for Five truly customer differentiated to relationship-based result experience, demand which a Our services. financial the is performance Star Bank's power the

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

As the into long-term any confident company's resilience fourth we quarter focused we move strategy. our of and in the in XXXX, and are remain environment the on future

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

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

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

our question [Operator today from first And Woody from KBW. Lay Instructions] comes

the growth. on deposit start to wanted noninterest-bearing I

in that pretty granular comments, really just your was was balances the you in mentioned you was from customer to it those curious, I your continue As opening move quarter. here? And across can higher do to base? impressive see think

Let's see.

many that probably everything pretty X has for probably balances grew XX% increase had accounts we've else that relationship X say decently years for been -- granular. well, and their to have of years, that I'm We going

Got go it. that like Does it ahead. feel --

We hitting of as noninterest-bearing our respect think opening as our deposits And that sense DDA, call accounts that we're those build. here. of is stride them I to we've just pre somewhat we the number with been balances function growing a

not the to And so to fourth quarter saw certainly third see but we in extent increases the we Maybe there. some that noticeable. expect quarter

quarter what expect quarter? that the was the side. into to just and the Do strategy pipeline shifting continue loan of on the it. how Maybe to purchase in And over the curious just into fourth you outside I does look purchase the fourth is Got 'XX. heading strategy, here? from

Sure. Group, Health The purchase loans BHG. strategy purchased that centered we around was from Bankers

carry going number capped $XXX loans we've the to we're so of on that with to BHG And balance sheet our million.

there. we're as And today, so I think of

had bought. million, I think a $X million we October that in maybe $X we

At September were $XXX at Yes. we XX, million.

Yes.

little that. than a more it's bit So

So we've capped $XXX that at million.

be increase that, see in it's be you're QX out, on steady going balance there'll maintained of what at from some just after -- And here million. so $XXX a to going to but

we've -- Now couple the in terms here weeks. increases in nice of last of seen some our pipeline

So we mid-single-digit Woody, in fourth quarter, in level. growth probably expect to the loan be the

big our like our geographies. verticals pipeline see. looking right we we're where and is now But pipeline so across deals at. And got we'll some of all our that is, loan We've

color. That's helpful

Just the fourth quarter? to in any recent expectations NIM point just cut the near-term and -- last NIM the basis how the impact XX could turning just with that

Sure.

purchased in So with or deposits. with state we financed of broker our our loans BHG deposits California wholesale our loan strategy and fundamentally increase

very Now the broker deposits deposits, them California short. in kept the we've state of

on X-month repricing intervals. they're So

So over those expect pay the X X months, to rates consistently those with we to very have we moves. next yields to down any Fed come that

terms of QX, it see XXXX. of what in in those like of you what of looks probably QX, So QX but of won't deposits we certainly the in of an in impact are too cost terms much like and will, kind that

next Terrell from Our comes Andrew Stephens. from question

on bit the If up questioning. just I line little follow a could margin of

in and correctly. a on you some those during understanding you're the average you're that average have at on portfolio have obviously a like $XXX so, up of CDs the On Do $XXX if kind cost. X.XX% quarter. million was Do on big costs at the million quarter CD specifically, on putting the putting build period reprices or the to everything the We end the weighted of remember X-month you it I saw broker in pretty term?

wholesale Yes. outside have We don't strategy. of our much CDs

So shy at state, that of X well with the was on we put about X.XX. large X and

mostly in the And we'll those but see -- but all as in so price CDs December? reprice, brokers would QX,

Yes.

will roll rate December, So off got average million weighted X.XX%. we've that that's in of of brokers a $XXX at

Yes.

Andrew? So significant could December, those kind an CDs, move we're November At appreciable planning expect a rate of So see on does pretty decline. depending you Fed those. upon we to what point, and in re-up this

Yes.

quarter kind about to well, Okay. maybe understand of the was the on third just And wholesale yield purchase purchase for loan the the side if kind the margin during the funding put X.X% net the on purchases, loan strategy? of of marginal of then kind wholesaler territory, strategy, the to we think can as more help was so just asset what us

X.XX%. about They done at Sure. were

Weighted.

Weighted average X.XX%.

I Great. it. Okay. And you appreciate said... then

was that fixed a Yes, at rate.

CDs to widen that we So expect when reprice. our margin

Got it.

Bankers for think you portfolio profile sense. this maybe that out liquid to the mentioned just That purchases how enough would the can liquidity then of a lot discuss book. And Group. overall, similar I are these in Can and Okay. they a you purchase for -- of makes bond just pools, trade were kind you Healthcare you

specific And that the question. reason kind for of

of of we couple kind next extent about a couple loan core growth of years in the ramps saw the the back if years, business, thinking to Just ago.

kind growth funds. through deposit think the of to to liquidity outside contemplate there of trying dynamics that source your of Just

they've Well, we've pretty network, salable their other and been told that a got broad to they're folks network. readily in

need don't we quick expect So But be execute that. should we'd we loans. of we mean any amortizing to have are strategy be, believe exit to. I we pretty to able type that these if

they with pay outstandings the our off fairly would quickly. So we if balances, didn't maintain

an have the balance the probably to or folks I'm They going off that are to X in are told. But X to BHG we can years, years move -- X so. say, our average life, been we've they as network them sheet

able that, to. have Now we if done Andrew, feel we've we but confident to never do that that would we be

Understood. Yes.

to Okay. Yes, last... is I I just quarter, to The in. just this fantastic obviously know that but want deposit -- I throw growth wanted

capped your to to are that's $XXX to models make cap I you BHG that want kind that of though, pretty I that. guys that close we're and a reiterate, side. for that, on want just million, the so for the know program at sure

more not we're to going it. of do Yes, any

For sure.

framework just kind said dislocated to, about year, in at then kind the the Do mid I from you starting this last me, appreciate today Area. up expectations lift And like employees just for looks you're and about that. in when the about of a XX I last the pipeline of huge then James, obviously point? maybe, of talent of feel And Okay. what release has a in picture, this new standpoint. ahead? increase your higher X you the the a think Bay think talk out found market year most the for It's talent big expansion just like home specifically

Sure.

market general I dynamics have think a changed changed opportunities the also the hiring but certainly too. we've perspective, that of from

Bay are people out, and Now down recognizable maybe that we're in us case the the X whereas ago. wasn't year Area a entity seeking

in with -- And to so we've so jumped feet made people are who are. splash. a We know both we beginning big

communities, in San in the various particular. getting in involved but We're Francisco, communities,

maybe X we've And that our all dev eyeing X now, we're other that like got right pipeline looks biz X then -- so folks. what are people and hiring other support

-- So pipeline hiring the good. very remains pipeline

banks. some Again, Fargo, from some and we're attracting banks, high-quality not major some Republic, really Wells be but First the and whether it necessarily also folks banks community other old

we job -- down where we've that recognizable. telling we our think profile. folks we're that And are there. hired are. very like done at our good And So the story I we've We a like

And to respect so that with carries some hires. future cachet

see there. So we're we excited about what

Tenner comes Gary Our next question from from Davidson. D.A.

ask to growth quarter. about in wanted I the deposit the

the balances noninterest-bearing If look DDA. in high-class or public problem. quarter, non-wholesale growth the of that you I XX% XX% have at a and been And funds it's think would

just seems be such disconnect amount -- So a to I'm having sort about fantastic that bearing. of job. it But a in noninterest growth of non-wholesale a of the of just curious sizable

So could the a mix cetera. Obviously, basis? the San in et to bit? of But a market, of what's deposit that wondering coming core in just talk about door you a little Francisco success lot the on

to I to the previously, onboarding take as that of we're lot now beginning a And new this and to -- opened X seeing build you fund. accounts up of they could cycle right balances evidence And A the and that relationship, year, open Sure. very based. the X those accounts Gary, months are they're typical then so start of to we've populate that. sometimes mentioned is and what relationship

and we extent to continue new balances those robust on pipeline we deposit a the that very to have expect bring continue we So to to grow. relationships,

Now looking they to then as extent out to I'm in they're we're same did to them we and into certainly to QX if grow but QX expect not continue XXXX, past sure grow. the going

those interest-bearing balances the James. lines of book, pay is any of that, what or to there? just using or Are again, seeing kind churn down appreciate customers -- I the trend sort any you non-wholesale within

noticeably. Not

and I think pipeline home origination deals pretty folks our payoffs Park mobile of our that RV in But the take amount have we in pipeline, business as agency. remains book, to book especially normal our robust. CRE of park that

of liquidity to seeing use down So that. if we're of evidence loans, too not any pay much

rate? for -- cost of XX last X X deposit -- you Heather, just And Great. If spot question September the me. have

X.XX%.

X.XX%.

questions. Instructions] closing for management call to I'd [Operator session. And no conference the like question-and-answer then additional conclude over today's to turn We'll showing back any remarks.

is we the with people, on Great. attracting growth verticals as conservative while and Thank operating successes employees practices we retaining strategic growing and its a have efficiencies, initiatives, and which contributed you. path our expense our Star continued underwriting execute Bancorp include our Five geographies technology, of on share to management and also talent, shareholders.

awards. and ratings numerous include successes These

in Best was of XXXX included addition In than banks. Magazine's to XXXX, Five Bank Sm-All Sandler, U.S. Class as study Five by ranked Bancorp Star Piper Director RankingBanking the XXXX billion. the #XX half Director #X XXXX less XX the the banks Bancorp received among numerous first and among with Stars Star Magazine's Bank awards also $X the of U.S. top study of assets was also ranked RankingBanking

a the for We XXXX. look Bank January a customers Sacramento communities. company for Under for thank Our earnings to force with recognized you Have Five was listening. Business Star driving leadership Award. the our of to discuss day, a a again and fourth for for XX resource trusted to in forward you and economic committed Journals, XX quarter be development, our advocate great speaking continues with

Ladies conference with and thank attending today's We today's we'll gentlemen, you call. that, conclude do presentation. for

may You disconnect now your lines.