• Non-Wholesale Deposits Increase: $48.4 million during the three months ended March 31, 2025.
• Efficiency Ratio: 42.58% for the first quarter of 2025.
• Dividend Declared: $0.20 per share for the first quarter of 2025.
• Net Interest Margin: Improved by 9 basis points to 3.45% for the first quarter.
• Total Loans Increase: $89.1 million or 2.52% from the prior quarter.
• Average Loan Yield: Increased by 1 basis point to 6.02%.
• Loan Originations: $259.3 million during the first quarter.
• Non-Performing Loans: Remained at 0.05% of loans held for investment.
• Allowance for Loan Losses: $39.2 million at the end of the first quarter.
• Deposits Increase: $178.4 million or 5.0% compared to the previous quarter.
• Cost of Total Deposits: 248 basis points, a decrease of 10 basis points from the previous quarter.
• Net Income: $13.1 million for the first quarter.
• Return on Average Assets: 1.3% for the first quarter.
• Return on Average Equity: 13.28% for the first quarter.
• Non-Interest Income: Decreased to $1.4 million from $1.7 million in the previous quarter.
• Non-Interest Expense Increase: $0.6 million compared to the previous quarter.

• Warning! GuruFocus has detected 2 Warning Sign with FSBC.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Five Star Bancorp (NASDAQ:FSBC) reported a significant increase in non-wholesale deposits by $48.4 million during the first quarter of 2025.
• The company improved its net interest margin by 9 basis points, reaching 3.45% for the quarter.
• Total loans held for investment increased by $89.1 million or 2.52% from the prior quarter, indicating strong loan growth.
• Asset quality remains strong with non-performing loans at only 0.05% of loans held for investment.
• Five Star Bancorp (NASDAQ:FSBC) was ranked third on the S&P Global Market Intelligence list of best-performing community banks in the nation for banks with assets between $3 billion and $10 billion.

Negative Points

• Non-interest income decreased to $1.4 million in the first quarter from $1.7 million in the previous quarter, primarily due to a reduction in income from equity investments and venture-backed funds.
• Non-interest expense grew by $0.6 million compared to the previous quarter, driven by increases in salaries and employee benefits.
• The allowance for loan losses increased, reflecting adjustments based on economic trends and forecasts.
• The cost of total deposits was 248 basis points, which, although a decrease from the previous quarter, still represents a significant expense.
• Non-interest-bearing deposits as a percentage of total deposits decreased slightly to 24.99% from 25.93% in the prior quarter, indicating a shift towards more interest-bearing deposits.

Q & A Highlights

Q: Can you provide an update on loan growth expectations for the year? A: James Beckwith, President and CEO, stated that they are more bullish than before, expecting 10 to 12% loan growth for the rest of the year. This optimism is supported by their experienced and aggressive sales force, particularly in San Francisco and the capital region.

Q: Why did you increase wholesale funding this quarter, and what is the outlook for core deposit growth? A: Beckwith explained that they aim to maintain a 10% cash position and a loan-to-deposit ratio below 100%. They expect core deposit growth to match loan growth and do not anticipate additional wholesale funding. Heather Luck, CFO, added that they managed to reduce the cost of wholesale deposits by keeping them short-term.

Q: How do you view the impact of tariffs and economic slowdown on your portfolio, particularly in the RV and manufactured housing sectors? A: Beckwith expressed confidence in their portfolio, noting that RV and manufactured housing performed well during the last recession. They are comfortable with their consumer book and believe their bank is well-positioned compared to others due to their loan portfolio's structure.

Q: What drove the increase in the allowance for credit losses this quarter? A: Beckwith and Luck explained that portfolio growth and sensitivity to economic indicators like GDP and unemployment influenced the allowance. They use FOMC models for economic forecasts and expect further increases in economic reserve requirements in Q2.

Q: Can you comment on the competitive loan pricing environment and its impact on your loan production? A: Beckwith acknowledged the competitive environment, especially in multi-family loans, but stated they are still achieving decent pricing. They are benefiting from repricing in their portfolio, with no significant concerns about the impact on their financials.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.