FSBC - Earnings call transcript Q4 2021

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Operator

00:06 Welcome to the Five Star Bancorp Fourth Quarter and Year-End Earnings Webcast. Please note, this is a close conference call and you are encouraged to listen via the webcast. After today's presentation, there will be an opportunity for those provided with a dial-in number to ask questions. [Operator Instructions]. 00:30 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. to trends things, company's that results financial relate events plans, future statements and industry and may position. forward-looking among current other expectations, operating These affect the results uncertainties future and these risks involve materially from statements activities Such and may differ expectations. and ongoing the pandemic XX industry risks the may business the company's other prospects. affect banking COVID Among significantly and impact on the of company’s actions response ultimate the on variance particularly economy, the and partners, in will pandemic, developments, future effectiveness on customers highly impact company's pandemic. and uncertain results duration The which be cannot scope business its the including predicted, as and of taken emerge vaccines, authorities depend the its the business by government COVID and and XX are to new financial

over Beckwith, this being James go XX:XX to in recorded. presentation data most financial Please this note the I'd and statements, the information set on particular, complete September the is to Please please and to XX-Q ended slide actual event the XX, figures, more quarter may in appendix comparable cause as information materially of report like to financial include statements, refer the and please presentation. Star company's Factors forward-looking a X the to ahead. which Item reconciliations industry quarterly Bancorp’s GAAP disclaimers And that Form discussion of CEO. to measures well as results the non-GAAP directly presentation, turn presentation, XXXX. their company's uncertainties in XA differ forward-looking therein, included non-GAAP from for which Risk to the Five forth is President included now regarding the risks see XX:XX in For

James Beckwith

Vice ended joining Officer. XX:XX Senior XX, Bancorp's review is December and quarter us XXXX. year and financial Chief results Thank Heather Star Joining Luck, XX:XX for President today Financial the fourth me you Five for to

announcement a earnings in provided and on the obtain copy information click the visit released and organic of IPO quarter that the a was strategy our please tab. Our the XX:XX have continued the footprint by XXXX fourth execution fivestarbank.com Team. the will financial Relations to sheet refer at growth as The of balance today our our management we evidenced during in expense release, exhibited In following trends brief yesterday. overview section Investor Executive of our May, comments included of geographic Management quarter. To and website overview our company our earnings,

to year-over-year. the XXXX historically total verticals Non-PPP have PPP $XX.X manufactured grown pipeline Our of and $XX continues substantial $XXX recognized deposits be in loans portfolio. XX:XX fees recognized fourth by CRE portfolio. quarter in XXXX, year-end. loans, fees assets remain end PPP consistently of and at presented in, as and we Additionally, quarter XX.X% grew multifamily, concentrations loan million or loan million loans the XX:XX and retail were forgiven home primarily community, industrial the Approximately PPP CRE of of million year-over-year, at million during during $X.X leaving deferred to interest and the outstanding quarter and of million loans were the of operated have $X.X of since the previous the within the manufactured press portfolio the Non-PPP XX.X%, measurement million by primarily slide. that grew within loan CRE during of in retail, CRE quarter reconciled community, release diversification industrial concentrations a is or the non-GAAP loans, $XXX.X our the home

as forgiven fourth million, to million PPP term. PPP loans and $XXX $XX of which the and were anticipate loans quarter. PPP during XX:XX higher watch were million in loans Loan the $X.X off quarter We excluding and of loans QX $XXX were interest be last or approximately than full XXXX, loans were PPP excluding originations higher classified. Approximately paid near XX% the of rated of risk than million PPP in forgiven is which million, For balance XX% $XXX fees was approximately payoffs, recognized. last were quarter

respectively Loans million $X.X non-GAAP results million was for designated discuss discussed and substandard PPP approximately the for of and deposits, originations Asset with X.XX% at loan quality loans it loans Now COVID-XX during were the as million year-end consistent COVID-XX to a the to watch respectively and over totaling loan will classified borrowers the release totaled several at $X.X million. growth $X.X loan allowance losses after from million status operations, PPP the previous reserves there from the to of total loans of to in end. the loan million year loans, Heather by loan I have of the a pre-COVID-XX quarter. fourth press end. We million, totaled end $XX.X losses of hand continues our quarter remain that the representing million a their return Heather? -- that losses quarter excluding of XX:XX During and and losses respectively only their loans provisions forbid offset for all the At and million XXXX measure $X.X watch deferments non-performing were reduced ratio for quarters. recorded aggregate by end XX:XX including year. which portfolio, million The contractual was X.XX% excluding the representing $XX.X total for loans the $XX.X At were excluding provision X of approximately during $XX.X payment to billion capital for We XXXX, and XXXX, to is anticipate This strong allowance the $X.X million. payoffs XX:XX portfolio, loan XX:XX related $XX.X with $XXX program. we last the and decrease our on provision $XX.X PPP additional year-end. loan to $XX.X a loans reconciled previous to for in million

Heather Luck

you, hello and James, Thank XX:XX everyone.

XXXX. quarter $XXX.X third grew compared the fourth During quarter of by deposits as or X.X% the million to

third end to in non-interest Non-interest or related to growth from XX:XX of grew the deposits. for percent over XX:XX fourth through XX.X% of deposits During Cost growth $XXX a for the as XX.X% to to We $XXX.X decreased fourth quarter. total bearing last by when was deposits of deposit quarter's the X quarter. XXXX increased quarter the have quarter, current XXXX. XX.X% million deposits of deposits bearing of XXXX compared points the and the of XX.X% total XX.X% the had this from strong which during since million basis XXXX, but

the recur salaries and back in on provide related our Non-interest by I'll benefits James in in for results basis sale not QX due which in return decline QX XXXX other capital representing the As basis course increased net increased increased was QX. on in continue XXXX. to margin $X.X increase margin for assets included quarter, from fourth fees million quarter income factors, Net and for as loan as which X.XX% to million on million basis due decline recognized hand XX:XX QX and yields for on to for was for of increased included and million X.XX% to from IPO. to of million employee rate basis was primarily Non-interest an XXXX the and matters lower decrease offset of on by income decreased in primarily average to the X.XX% while Net a the has fourth as a related quarter, X.XX% million points in able to commissions loan was XXXX. PPP a for well We deposit XX largely over year to was basis and loan Now million, from the compared gain Average cost our of fees, continued decline employee above $X.X expenses loan decrease quarter funds, for a XX.XX%. $XX.X recognized decreased result expenses. X.X%, interest sold. securities XX in all ratios have average of $X the of of and fees and thresholds on related Non-interest year. average as overall excluding $XX.X yields, XXXX, by regulatory return and the in was XX:XX interest previous operations. result benefits XX:XX the we quarter matter $X.X million presentation services a Offset XX:XX average environment over on an year. equity decrease the assets a loans, XX:XX to XX referral for previous The XX points quarter XXXX in to and forgiven respectively. XXXX we've for the was million points previous of accrual some a quarter partially for normal with was Non-interest the for million a capitalized XX:XX million return XX XX:XX $X,XXX which loan in interest primarily of QX swap the growth, recognized loans. for well non-GAAP basis low driven prior been to loan professional driven $X.X XXXX this the year, $XX.X PPP from due volumes was a as $X in put by $XX.X pressure X.XX%, be income included loans, well business, the the to interest discussed prior that expense $X.X in XX.XX% in did current with average from XXXX fees now in points in increases equity it our SBA to a and and these salaries to forgiven increased closing quarter, measure on and which return reconciled PPP in $X.X based various and expense to and points points that’s operating based in yield XX net income million compared remarks. for

James Beckwith

of offer XX:XX we XXXX similar if remarkable Heather. renewed a year you, communities serve. purpose banks not the Most our and and customers, same Thank to growth shareholders commitment employees, was products.

our has understanding empathetic our bank no serve However, bank No our has team, to or to customers our execution. other spirit, commitment with of other engaged care. certainty treating speed and

work, supporting robust to trust and exciting an own Star an year to Bank organization exceptionally those we evidenced Five deep the new market. story capital XX:XX our new continued of record region technology their We growth engage and offerings, success. and experience a organic a trust and look presentation has in pipeline, development lending build officers This proud loans growth deposits, as of serve. now. earned XX:XX out product attractive made today's business for of by concludes are which staff to was sense XXXX by We appreciate have the shared and operational California today, this in your forward Northern all expanded enhanced are the We in purpose. verticals, time of

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

Operator

first session. XX:XX We question-and-answer Stuart Our Please begin KBW. now from [Operator will question Lotz from comes go the ahead. Instructions]

Stuart Lotz

Hey, XX:XX are you doing. guys and James Heather. How

James Beckwith

are XX:XX you? How Great.

Stuart Lotz

Doing XX:XX well.

the So if could quarter was start just this on growth off exceptional. outlook,

at next you Tough growth to XX%. get XXXX for better maybe like? expectation to just but pipeline Your ended right your growth looks year-over-year year for what imagine what trying current repeat year, in can where And full your feel -- initial that guys standing now? a

James Beckwith

XX:XX remain we bit difficult replicate Thanks, But and an a was exceptional Stuart. Sure. we roll XXXX. into that. been Certainly year XXXX as optimistic to

think deposits. heading. sit a think Having Stuart, the double-digit the and we more we're as numbers, on see here low terms -- first we'll is I of today we'll I have visibility lot loans quarter those at in outlook of where for end growth said that, our both

also the negative of provision, and a income with the getting an from and an the last we tax And the made of decreased where So We a impact revenue more call, PPP have great think X drag quarter. overcome balance from the think to and to we're end that growth trying a we're I loan we through have as that which loans on this comfortable we've we'll couple area. as matters. earnings a But we earnings really One, aspects strides think growth. attempted XXXX. on year with XX:XX roll into in where And a – earnings those terms to recognition deal stand in visibility out sheet some sense of better and do There respect the then with on I on think I perspective perspective is what the interest going. the to uncertainty its of also of rest impact may there is Fed matter first the that on lot of by rates. we shared

we're going to of not really long would sense end in see increases XX:XX how but the this a that curve We much works We think of think was that end the your we can we'll that is curve. the be the maybe I short have matter, a curve. certainly but is those -- the out, end from short of prepared on benefit responsive, so question. responsive I to and I So,

Stuart Lotz

if XX:XX remarks I I look variable XXX peaks bearing asset guess Heather, No, And to looks X% think pivoting you think I at sensitivity that's like for mean, cycle basis I helpful. do disclosures, rate X% asset points. last interest I earning of is deposit your you and mean, about your then your kind right about very of Fed. cost the base guys? of on around how

Fed reprice And we a here in we higher portfolio sensitivity? how of March. see any loan So asset your kind your get quickly if should hike do color on

Heather Luck

Yeah. XX:XX Sure.

So position, $XXX will immediately. we've sitting as year end be sizable million got about repriced we got are of asset of cash -- a the sensitive. the We've that

For got next reprice XXXX we've the from and month that basis of and Total to And on to timing $XX set to off definitely about XXXX. that within benefit a get XX we are rate in their over in XXXX five we are year we of that XX reprice rates. need the basis floors. estimate that point increase going loans about to that million XX depending treasury tied to Fed loans are to years, environment of XXXX loans XX:XX set the really to the grand raises reprice a tune million are probably on rising all a will $XX only about point when the those interest X the

So position hikes that. we'll any be in rate good after for sequential

James Beckwith

into that Heather, XX tied point is a XX move. kind month So, of XX:XX basis really

more So then that, moves there is Stuart.

be this resulting us. when the for which the their impact. You Fed And pretty we'll off see floors, those can could come continue have move, loans favorable

we next with like heard going it many to X few other going there where moves, how [indiscernible] respect be there security and we're to over we said Fed So sure years. are the I be. the Fed a not is move day is to

wide So I respect if might think opinion, there of of is a with you Fed do. lot what to degree the will,

Stuart Lotz

to do the portfolio then, what get XX:XX a reprice quantify Okay. And portion just of be we hike? your if a after what you follow-up a, reprice one there. able would And point XX would say, of hike portfolios Would percentage basis in March?

James Beckwith

are course, of going to move I'm about -- LIBOR, XX:XX got immediately, that as can, that tied so are month to that to accurate LIBOR to and to Well, then, going this prime-based be going loans of to was see we're $XX as cash say probably we swaps position. -- million one $XX million impact we're going million of book tied that they're $XXX are move to that and – we've to our

all that impact. I see aggregate you the up, can if So think you

Stuart Lotz

Great. XX:XX

James Beckwith

will points XX:XX move affect prime-based next to -- basis XX of the And probably loans. the move rest next the then

Heather Luck

in Yeah, QX. bulk QX and the about to -- X-year the in will first We've QX will the portion QX. that of be of so a reprice $XX treasury, million, small million tied are XX:XX between reprice got will the and quarter $X.X it but loans

Stuart Lotz

this expansion did really quarter. loan build it tremendous think some from XX:XX your came the not securities book, out growth. Really saw Tying margin nice I altogether, the core that you just

X X you quantify -- do budget baked to baseline get, if the many core do progressing XXXX year? right this of upside hikes kind now? your And ultimately you have throughout So thinking hikes we say maybe in how are margin your and about how your

James Beckwith

could $XXX,XXX $XXX of got math. -- to the that what very may a on this $XXX,XXX do XX:XX of repricing, of a Well, neighborhood this can be to reprice, thinking the beneficial to that's you've – level high $XXX us. -- you're $XXX you in -- And assets be could that the $XXX,XXX million of is But worth to going million if million show. very assets numbers terms in that

we start pretty some book, do in significant always million, $XXX about to expect funds, side, tricky but liability that's the too. On government you it's matter cost which up, our see XX:XX could a creep to We -- which lagging you certainly will a can creep a is think But although [indiscernible] move of have month, index. quarter to Stuart. tied could point a if every is $XX,XXX

math. the can You do

Stuart Lotz

expense one-time Kind the were rate maybe at about expense in and growth some well outlook me. just from now? double-digit right thinking core do expense this Sorry, you as if backing XX% growth XX:XX pretty year of environment you other one see out core as more are competitive IPO XXXX annualized comp, about inflation, strong the traditional growth growth expenses the loan How just rate. we given

Heather Luck

build-out. we personnel So and XXXX initiatives, most other definitely a new yeah, really to you We we but really the perspective, for kind year, in up of from of for like a from the X.XX% with XX:XX is part we assets, we in land look -- place XXXX a and our with percent some you in projecting know, at within our X.XX% had perspective. expense at if technology X.XX% infrastructure our have noise initiatives have do some the we remain range. that But do to budget as for IPO are non-interest ended

expenses. So help guidance you that give will some all the non-interest hopefully on

James Beckwith

pretty now place. terms from We've XX:XX a any any don't building in else. of out major we got in initiatives lifts have hiring anybody right team Stuart, solid or units

earning leverage operating as So a we we amount that intuitively continue -- it will know got of add to we assets. fair expect we've

a a XX:XX but great under pretty reporting And think after I And XXXX quarter a you'll from Again this point. think more visible. Corp financial I good, numbers a first this a that's noisy year, that's at be that good think will also QX, be I see year -- C a our was status. full after So a lot perspective. estimate the

Stuart Lotz

the XX:XX I for my Thank hop in questions queue. taking you back today. Awesome. will

Heather Luck

Stuart. you, Thank XX:XX

Operator

Our question next Terrell XX:XX comes Stephens. ahead. Andrew from from go Please

Andrew Terrell

XX:XX Hey, Heather. Hey, James.

James Beckwith

Andrew. XX:XX Hi,

Heather Luck

XX:XX Hi, Andrew.

Andrew Terrell

just heading missed XX:XX for size maybe but could if quarter. kind for you James, I that’s pipeline first apologize of up the new I into the loans Hey, this,

was XQ? about think it recall, I million, I into if heading $XXX

James Beckwith

we fourth sit from that's think growing. Yeah, as sense was exceptional. quarter XX:XX we're The I But down slightly here today. it's it's that that our

it's it's -- pretty -- -- still substantial. but remains still So very

And month. today, good is so far as we here pretty sit January

So XXXX. we certainly are that expect, every market our to about we of less have but with verticals opportunity going year-over-year to XX% in perform guiding to think right given but we loan the production. now how that deeply continue penetrated I'm well on new in -- we're have we opportunities growth, our And -- than that all we're optimistic

So your we say, I pipeline down would to in QX. that slightly specifically, I we're answer from question get think just

Andrew Terrell

you. what growth XX:XX drive thinking maybe will Okay. constituents Very good. net Thank in the of about And just the XXXX.

XX% that a I you us, of portfolio Can Housing And today. in of a expect the guess, just total terms any, Manufactured on moving that if to you as be absolute remind of is dollars? we just forward, driver kind think of of I less growth place of portfolio percentage should the loan around loans? internal cap, kinds

James Beckwith

manufacturing we how in sometimes capital grows XX:XX from have faith-based vertical from industrial terms go to and out the community which of about. from portfolio the those And the in now. our have. same of everybody gets I amount a arise -- particular. it's methodology side right various side strong home assigned we one is and with probably the manufactured perspective. home We a now demand but we're we in still we asset and In but multifamily CRE front right strongest in the side at hope opportunities all to other the percentages rate in to the certain same much that think see classes starting So, dollars, concentration of we're the and communities, limited little the very excited but respect other, all And by XX:XX Sure. are have our the it's markets to room

any a from now, but it's continue we'll Andrew. it, So monitor great respect of I constraints credit it class, perspective, a asset to and to with any don't see our right quality we verticals like

of rains terms In pulling the back in.

Andrew Terrell

it. dollar of we that Maybe Should couldn't sales note doing or about appreciate on the I sale here? think little release maybe SBA the reason kind loans up of to good. of actions any in the and lighter just the you -- quarter. sold saw I that I this income. in gain very XXXX quarter. get think Okay, of million SBA back because on XX:XX million anticipate loan bit And to of amount it's the a you $XX $XX were from steps XXXX some per

any maybe into of on XXXX? going well kind updated SBA sale expectations as just gain on and Just margin volume

James Beckwith

of over was idle process particular bread It's towards traditionally looking XX-year, other Sure. of of revenue. X, loan for opportunities going at to those XX:XX PPP I funding. and that also hoping vertical up take and through. it's the market lending, really or probably will back that back despite we're credits volume, the to That predict the type and efforts, but in XX:XX from those you the And we And equipment all idle of process those just $XXX,XXX work doing really a come most presented and has think And X, volume of that that while that if to were types type loan the hangover, and QX loans, loans will, to think I hasn't our yet. PPP borrowers the loans. the terms last butter get levels difficult QX

with a nice to be to expect it do we what So see. expectations we If it, our surprise. see we've reduced respect will

but be back in of terms all hopeful half we -- in to where the to get for, year. that want we're in level, we'll of terms the getting to of So able back latter

Andrew Terrell

just given on should have noise some a we you expected very kind good tax tax question, rate housekeeping rate. XXXX? Okay, the of be Heather, good. for XX:XX a of using And Do the just

Heather Luck

that year. XX:XX the income I piece of was Yes. noisy another do. And statement this

tax our is XX.XX%. So statutory rate

benefits our the the consider income, estimating XX.XX% about tax like like that. year. you if exempt things We're However, for

Andrew Terrell

questions Okay, I'll queue. taking the XX:XX Thank back quarter. and for on in congrats perfect. you good step my

Heather Luck

XX:XX Thank you.

James Beckwith

XX:XX Thank Andrew. you,

Operator

question from Gary Please Tenner go ahead. next D.A. from Our Davidson. comes XX:XX

Gary Tenner

good morning. questions. Thanks, of Couple into dipped strong XX:XX fourth loan kind of ask of 'XXs. the to this deposit the this and few wanted with I growth It about XX% year more under combination ratio. moderate up deposit first then mid quarter quarters the just of loan growth and back

Just of you curious to you sheet if us from manage optimally could perspective. where remind kind balance like that too the

James Beckwith

little Given we which a to that is XX%, enabling an push and maybe position, earnings us optimal and be perspective. operate between from that number XX% probably XX:XX our could would capital bit,

that we'll terms So would interest us. upside income that – goes. see that and for provide But also how in some of margin net

Gary Tenner

in quarter? down is this loan the little bit, yield loan core production the average what was yield In fourth new of terms quarter, weighted a XX:XX

Heather Luck

XX:XX Yeah.

occupied So average have of for those more non-owner rate high weighted the and threes. around fours, X.XX%. majority loans are our multi-family like heard low CRE The QX in and was

Gary Tenner

in XX:XX the I the to recall average a goals on higher kind of expense of their side. on run-rate expense your year range. you the much hit talked the then and as end last the exceed or from appreciate provided, moderating of past me, to you've just towards one question maybe kind seem range kind the accruals tend I And lenders Heather, I commission to modifying think for about their of have the goals. because commissions, you asset

we think a is little you'd As think be is we XXXX, the progression the or over that XXXX would will expect you moderate quarter. more to in course of what progression the saw quarter it of

James Beckwith

I that XX:XX is. think -- structure it the commission that I think our that way

evolving that to a company. -- this function private and of company think from public a a is I

tiering our be in at bonus have as fourth we and interest with sure commissions terms calculation. associated run. because of making the also growth on that's we're accruals. structure in rate, of going top a a think embedded I they that commission That's getting to and better always on some deposit demand we're that quarter commissions do, But our

a most to higher quarters, of be to other outside than going pretty be it just think, I part we of always there's but think degree smooth. for So in the that, commissions is going QX

Gary Tenner

you Thank XX:XX very much.

Operator

the closing This conference concludes management any our back remarks. for over XX:XX I would turn Instructions] session. to question-and-answer to [Operator like

James Beckwith

XX:XX us you. Great, as Bancorp is for results. thank I Five on and to Star path thank discuss Today's demonstrated growth. the that joining robust everyone quarterly want we a presentation organic of annual continuing

We and of talent speed the driven by are retaining culture, while preserving a attracting and serve uncertainty to execution.

trust Importantly, we driver and is our customers foundational by driven evidenced direct differentiator are the all and are. key market to in of times. This who as integrity growing at acquisition us of a and Purpose have access us to strength our customer banking a our pipeline. XX:XX

a quarter build serve other after quarter employees Have and Please with day. listening. XXXX. first great thank me shareholders, And relationships you speaking for again to we contact our Heather if you you We for or community. as the questions. look of forward any to meaningful earnings to continue discuss first We customers, have our

Operator

now conference for concluded. The Thank is presentation. you XX:XX today's attending

You now may disconnect.

Five Star Bancorp (FSBC) 1 Feb 222021 Q4 Earnings call transcript