FSBC - Earnings call 2 2023 | Five Star Bancorp

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Operator

Good day, everyone. Welcome to the Five Star Bancorp Second Quarter Earnings 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 those risks may and involve materially differ expectations. statements uncertainties activities and results Such

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

refer presentation, note data regarding which is Please directly this to included well includes Please Slide the financial financial in recorded. non-GAAP included to the X in industry most to which measures statements, reconciliations GAAP presentation this their presentation. as of event as comparable forward-looking figures, information appendix being this disclaimers is and non-GAAP to

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

James Beckwith

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

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

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

remain San average During second expansion into top the the the on and Area announced average Francisco were our equity X group. us near Bay market. return months peer ended and X.XX% to June respectively, XX, we on XXXX, our the of assets return quarter, In XX.XX%, our positioning

as in deposits deposit with also second the accounts growth story million the XXXX. and the of growth months in $XX quarter organic non-broker X the ended addition Our in of of new seen June relationships continued

underwrite, and as well-positioned we Despite endure expenses headwinds value ability continue continues. shareholders believe to horizon, succeed conditions manage deliver change. are to We to conservatively to the our on and

geographic our overview management have footprint section, team. provided overview of company a we the and In brief executive

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

and since Additionally, total deposits loans, have prior consistently the periods. assets grown

to operated we X.XX% real continues presented loan the the commercial Loans the as XXXX of in estate end verticals historically quarter portfolio $XXX.X increased have million within loan the prior million by were of pipeline payoffs Loan during held remain the $XXX.X at the $XX.X in, originations diversification the primarily or concentration quarter, during million. second of within the Our were investment portfolio. solid for approximately and quarter the slide. from quarter

strong end $X.X quality mix to designated quarters. the approximately the only from remaining of The the updates which the X.XX% million. decrease end. was the recorded total type last allowance loans continues to end with for unchanged several for the quarter X.XX% million portfolio, At as at of quarter, investment loan allowance Asset credit provision $X.X ratio million quarter. $X.X for a and million during losses remain a to totaled for the second related the the quarter, representing We the of nonperforming growth, credit primarily losses end loan largely $XX loans losses the of Loans was at totaled of credit substandard held quarter, previous macroeconomic from at environment. to

and portfolio, capital. Now deposits that continue to loan we've discussed the on we

Noninterest-bearing XX% approximately agency least on XX% at that average deposits, of X.XX% million XX, from end or was the second Local XXXX. these slightly for X second XX.X% a by end of relationships constituted previous quarter, to as deposit at the increased deposits percentage I XX.X% of $X the as at more During quarter detail as deposits deposit to approximately the age previous accounts approximately the total and We'll quarter. of composition, compared deposits the years. on quarter. highlight of decreased our total deposits want offer of June to totaling $X.X million depositors the accounted

X noted inflows deposit As month the June. months during June XX, ended earlier, we had net the including XXXX, we are that a for of inflow pleased

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

million, was by balances decreased by compared XXX million Non-broker to and the $XX.X increased quarter. noninterest-bearing million. interest-bearing the deposit by during points have when $X basis The of increased second total increased quarter. $XX deposits Overall, deposits prior deposits deposits cost

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

XX, common X and as a of X.XX% of the XXXX, June Tier July XX, by we XX, between cash increased of our equity of XXXX, X.XX% company's announced voting Friday, On record to a March shareholders August on X, ratio $X.XX Board paid XXXX. August declaration Our per to XXXX. stock to XX, on be from expected share dividend common

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

Heather Luck

for X.XX% increase prior as average rate and third was XX.XX%. increases Average was equity basis return the return Net May on $XX.X yield loan year. and increase continued an quarter in of XX million, points the with was James, over the representing average XXXX, on income you, everyone. Thank X.X%, for hello, this quarter the quarter assets was

recent X.XX% prior for interest increases continue pressure the was put was deposit the on most costs. The net to quarter quarter, Our while net interest Fed for rate X.XX%. margin margin

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

the income during X funds in distributions in second June in the months income primarily Noninterest other $X.X $X.X a ended increased XXXX. to million received million million and quarter recognized to the quarter previous $X.X XX, investments due from gain on on venture-backed

June to conference promotional largely and the compared seasonal in in $XXX,XXX as offset Noninterest expense in ended benefits. XX, X months grew March XXXX, $XXX,XXX the for to processing months increases to due XXXX, by with related primarily $XXX,XXX X $X.X million and employee $XXX,XXX XX, operating and ended in of data software fees, development expenses salaries by corresponding partially and bank, in a advertising the and decrease growth of business travel expenses

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

James Beckwith

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

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

sustained success attribute model with We spirit, an care. customers business and to our and understanding treating prudent empathetic

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

banks quarter, created In XXXX, efforts community to for award recognized long-term which Cup are second the shareholder as were we our Bankers value. was the building Community received James that Raymond

continued shareholder monitor remainder conditions. to as Looking of market the we by XXXX, focus we guided on be value a will

benefit are our shareholders. in which execute on resilience will any environment, we'll practices customers, community company's and We believe we growth the in and our strategy and confident business organic our disciplined employees, continue to

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

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

Operator

first Andrew comes Our from question Stephens. from Terrell today Instructions] [Operator

Andrew Terrell

getting if some into quarter, James, on the start of could team the I just hired maybe specifics. this

over to size build then came you the your staff? BDO type both many this with bankers team How time? the team? the that or of frontline think does BDOs of how can of deposit current business what loan do and Just book the on compare And side

James Beckwith

Sure. a To date, we've -- are hired X more particular experienced so manager in relationship role. And in X that officers far that's we've development so business are people, what X market. and done

do some We we expect that may more.

expect lending probably But the their they've book in business deposit-forward been do some their owner-occupied very emphasis posted similar successful. lending, a career, And real that individuals they're C&I commercial and keep on what that. business on that development perspective. will very certainly going estate do to is of up officers. these commercial had lending. we depository estate they'll I are here The of kind So they've real everybody that's side, we from after

Andrew Terrell

stepped hiring and Okay. Very the then for Heather, end opportunities market the bit expense And just this good. some on expenses up know capitalizing I little guys. quarter, obviously, and you on front, a

expense maybe out Just thinking us you forward? with help moving rate the run about can

Heather Luck

Yes.

in So expenses. for if you that would $XXX,XXX for incurred a from QX, be year shave the good run rate off we what probably the about of remainder

Andrew Terrell

we the the think third lending Got back it. the remarks, side? heading tailwinds the pipeline got about does And year? like with your deposit How then referencing deposit sounded just But just perhaps the C&I-oriented prepared It strength how then quarter. And from should on heading the you've here? the mix that James, pipeline incremental what on of loans bankers. and of growth the half into of specifically, into some compare some I pipeline to about the the heard

James Beckwith

The pipeline to continues our higher be higher, than loan significantly pipeline. deposit

also And out our capital very in of the we're team these Francisco about down addition grow up So that of region, expect down we execution valley. happy continue folks and of -- the pipeline to our continued that. with the San here to and in

going bring is I noninterest-bearing So liquidity businesses board. we for be deposits oriented and mix, to the more probably think, towards on that

where operating that accounts probably these is. lot their As have mix there's they then you liquidity of their have commercial a They a know, have. and accounts

areas. those So I growth you'll in think see

you'll right I Certainly, March eliminate the to as carry from I be for XX/XX think which goal going deposits see the deposit say, way. to on to -- now, of we also decreased may by the I'm it's remainder book our what XX Heather, wholesale of diminishment from buy to XX, think, a of broker as June our more year.

Heather Luck

$XX during million. the pay end. quarter then the We quarter broker also second broker to deposits declined down since continued by we've deposits And

James Beckwith

Yes.

think wholesale forward had So is mix. to deposit of structures. will, we're you aspect, particular I mix our what kind success, diminish and And to looking those if more we're deposit I that think trying some we've of in Andrew, success do

Andrew Terrell

in it No, appreciate second see I to the was great it. quarter. that

Operator

from question next our Davidson. from D.A. And comes Gary Tenner

Gary Tenner

versus of pipeline regarding into deposit weighted the I know year commentary pretty earnings, the ask was wanted the to about of the towards significantly even deposit versus kind I and question coming pipeline April pipeline. deposits. loan the loan during size another

of quarter. unusual I you the at here pipeline maybe had think times in a deposit second Obviously, lot Xx versus point the loans. in one

So I'm outweighing loan to net terms core hold growth it relative that the or in trying translate number quarter. not of growth. you But the growth didn't obviously, deposit to in outpacing to

deposit So the I'm core looked of intra-quarter within could like churn about the just quarter wondering, kind James, a maybe portfolio, from us trends book comment April. if kind just in what sense give to deposit you the of of

James Beckwith

think -- Sure. slight as Yes, of I deposits. there's mentioned, diminishment a we diminishment broker previously

was that expect that for move trend, good the think I forward a year. So and of -- as that we was remainder to the continue we

Here's the than Loans pipelines get interesting lot pipelines. your being brought thing a loan deposits relationships in quickly versus on. about deposit booked more pipeline

I kind pipelines have of going so Xx terms is take a which days, if loan is that that. loan, i.e., that it's I pipeline, maybe to when say of twice would XX average XX Xx that book I'm you to say take going relationship and deposit you maybe what And and would in kind could hits sometimes was a our to I our a the deposit pipeline in think length that it days to if a quantify of duration be, a of

necessarily at time. they same So don't on come board the

your targeting to pipeline second loan basis, think deposit growth On for XX% growth, in your the our be ahead saw is to significantly outpace an want loan you pipeline. loan a year-to-date loan X% deposits. than opposed growth as slightly And you saw growth. deposit higher the of of growth I what year-to-date year, deposit and Gary, a We're why quarter, that's we X.X%. So X.X% growth loan

think, mark. forward, that I as to we wholesale move off way we're going good deposits. some not we're core be So important, replacing deposits with What's

operate deposits So to just you environment which deposit in on competitive to it's is all really be And difficult accomplish bring not mix I very to in a trying is loan. grow a it's bring appreciably more to significantly going you here. on to which -- may like we're relationships than is going in know, change, what see think we but and it those the growth

all I think coming they're together. now But

and better got we us group getting a We've process. we're that a do that a at We business have officers. that little officers. relationship of from group what managers now of onboarding a development relationship help great think XX development business great do I

little If you do, and Mike if don't include Rizzo, you it's me a higher.

bringing of of system-wide, and what we're in new relationships, on which going success So remainder to great to think we're for we've continue the doing the year. about had expand we very excited terms deposit large are

Gary Tenner

in -- interest-bearing rate then possible, again, if there. Heather, follow-up I the but June available? deposits, on terms just appreciate the deposits, deposit And the you if a And core of spot interest-bearing thoughts XX? that's that's provide maybe can of something as

Heather Luck

Yes.

X.XX% was rate quarter. And that's interest-bearing spot the the at all-in. of So end just our the

Gary Tenner

X.XX% interest was that for bearing, deposits? all

Heather Luck

XX, At June for yes, deposits. all

James Beckwith

costs. Yes, That's deposit full everything.

Operator

Our Instructions] Wood Lay [Operator from next comes KBW. question from

Wood Lay

to Just outlook based up spot the and rate. on follow deposit maybe NIM on wanted that

quarter. So like the stabilize can think sort mean, the the towards do here it a of next done coming lot quarter? you of into I the looks lifting the was heavy begin of NIM beginning to

James Beckwith

probably anywhere be more Yes, a X.X% little in -- in bit X.XX%. quarter, the to NIM our sense, see third between you're decline going may to

where to and settle going it's of can rapidly bring in in pipeline, our function some to on that to execute the to that's a be But how there's So we pipeline. do going level. that's I probably particular third Woody, be Again, that, decline our deposit quarter, on going expect out. we think NIM

Wood Lay

it. hit level rate stable it's the just if of would a Or do it's sort Got there? Do mean, you with NIM we you reacts loans interest assuming from think think increases? you're could you how the we period, so on, steady? a think environment, bringing I see then, more it we get holding -- And rate

James Beckwith

we And to range It's that look improvement XXXX, hope point of XX to our steady see QX. we'd that and that, a forward from kind QX as would XX basis we expectation that represent a level. in

would able not on. in to stop the comments. declines in be funds Fed it -- not the rate. going if that's and we it -- think any say -- what just just point, those wouldn't settle -- in We're this Fed to out Now not be I'm not we're a -- we're a That's at anticipating be at pause, we'll

Now if think our see there can you are of improvement strong declines, some NIM. I

Wood Lay

housekeeping Right. then a for last know the That makes item, sense. tax total noise the for but just rate some quarter. was I And more in me, there

XX% go-forward the that a up closer basis, increase to do level? on back to Just expect you

Heather Luck

what to It amended state. of will still did second That's we're we're in -- the year, have new state some forecasting. returns We targeting and half we'll about during study the XX.XX%. returns file tax a and

is about So XX.XX% going forward, we anticipate our tax rate.

Operator

follow-up a Andrew is Stephens. question Terrell next our from And from

Andrew Terrell

pretty payoff but I'm this looking at there Thanks quarter? loan curious, first quarter, the step-up for seemed from just was here. anything payoffs versus a paydowns in perspective pretty the quarter, stepped the pretty James, follow-up or I it originations questions and and healthy healthy materially. the also the -- the unusual was a up paydown

James Beckwith

kind fair to had reposition Well, of significant we a amount of loan about We investors MHC we were portfolio have we within pretty office portfolios. operator as had talking -- payoff, that, just churn Andrew. which all were our happy We a our normally see. their

large -- are present. which to normal rates, lower us it but pay see. loans. amortizations loans as opportunity into usually happy always principally an just higher some we're that's there were loans, off, really, We're at payoffs, to gives they And those So redeploy and

saw the in so we going help anticipate QX. QX don't the in that we're know to I originations as going term And margins. of think in degree we long to same that's our if

on Andrew. -- we I still go-forward for diminished. loan to think year, to wouldn't We're going that expect And our growth it the expect will a so that be I full X% stick basis.

Andrew Terrell

that on average what the quarter, appreciate originations then there. yield new it. made color those were Got the was at? the Understood. I weighted And this

Heather Luck

Yes.

originated X.XX%. about those So at were

Andrew Terrell

guess, capital the loan it -- like X% the of rate, kind -- in I James, from an at should are Got And your like build Okay. modestly growth sound as well. back there position your does growth it. tailwinds here, seems it some then but

today. to of wanted just So the thoughts on you kind stand where position get capital updated

James Beckwith

grow common to certainly equity assets. would risk-weighted we to Well, like tangible

So second We in a the improvement that's quarter. slight our focus. saw

respect orientation grow what can sustain of we're growth. So i.e., deposit type now positions this we trying think capital and X% loan to We with We sustain do capital position. our the of growth, there. XX% that this we can in that's our to growth, terms think our

So time tell. will

grow, side the we'll on If to opportunities outpace of take we deposit have that, certainly that. that advantage

that capital, may we we additional require good in million, understand Now X and you Andrew, and years. shelf know, as file a QX, did $XXX that's for

open -- don't capital that's now. the that so right markets not I'm available. And are I suggesting

So but weeks. certainly, have last couple -- over things improved the of

-- we that. to is risk-weighted tangible advantage growing of to So there, advantage -- again, And our take we equity need think assets. don't our we right now, focus common take it's whether

Operator

our And closing ladies like session. will remarks. the conclude and to back any to time, I'd question-and-answer that over for turn management gentlemen, At floor this

James Beckwith

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

Recent the the between of company $X Intelligence earning and community successes with rankings the in Market on XXXX's annual billion. S&P $XX #X include billion ranking assets Global nation best-performing banks the

very also Rating X Financial Superior to and believe of trust the Superior this premier have of The with The communities. an has bank company also upon ranking and a Findley and be out XXX. customers pleased XXX builds of X a created we Rating recognized has The We out with are company performing Reports. of super our Bauer IDC

a with for listening. community. our third We Have We for a force day, resource October earnings the to look advocate economic great our forward for thank you a driving in and again for trusted development, are of speaking quarter to of you discuss committed a and XXXX. customers

Operator

gentlemen, and you conference concluded. Ladies We for attending now today's presentation. the has thank

now may lines. You disconnect your

Five Star Bancorp (FSBC) 25 Jul 232023 Q2 Earnings call transcript