FSBC - Earnings call 3 2023 | Five Star Bancorp

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Operator

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. After today's presentation, there will be an opportunity for those provided with a dial-in number to ask a question. [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. Such statements involve risks and uncertainties and future activities and results may differ materially from these expectations.

For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from the company's forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2022, and quarterly report on Form 10-Q for the quarter ended June 30, 2023, and in particular, the information set forth in Item 1A, Risk Factors in those reports. Please refer to Slide 2 of the presentation, which includes disclaimers regarding forward-looking statements, industry data and non-GAAP financial information included in this presentation. measures in most presentation. Please the event being financial measures comparable note non-GAAP is included are appendix recorded. of to directly their GAAP this Reconciliations to the James turn CEO. presentation to President like now Star Bancorp, would over I to Beckwith, Five and the ahead. go Please

James Beckwith

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

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

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

the During and of In group. Third XX, return of September and market our XXXX, Quarter, assets equity the our team expansion addition an we average Area on another near were professionals. Bay X.XX% average seasoned us the into of top X-months on with positioning the XX.XX%, peer our ended respectively, enhanced return remain to

to quarter. well a earnings, management the with to dividend, company shareholders are execution provided our of commercial with a the we during $XXX.X million Our organic in believe trends and of of Quarter deposits Third growth X-months Quarter as Non-brokered relationships positioned section, accounts the story of evidenced horizon, and in have XX% footprint XX, growth of seen continued in evidenced also brief to Third deposit balance geographic our continue exhibited by XXXX. Despite In and as share to sheet and succeed ] as with new by XX% managed our $X.XX estate, the conservatively and September conditions expected overview per LTV underwrite ability executive the endure the our team. deliver we ended XXXX overview value expenses management growth continued headwinds expense on as change. In the we on strategy our real our of ratio [ efficiency the addition

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

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

from end represent for to of the of was end growth, of the mix experienced quality a investment Asset X.XX% environment. of million of to the totaled allowance nonperforming X.XX% the credit ratio for They updates the remain losses a quarter, Third as The challenges continues recorded total assets million at Quarter, million we type credit provision increased primarily and $XX.X million, our designated the quarter. during $X.X at allowance the an end. Loans to several borrowers. financial related $X.X portfolio. At end the from substandard $X.X loan at totaled held of for previous credit strong. was for as increase subset the small a quarter approximately to the losses result quarters quarter, which the Though loan macro loans the have losses last by of

loan the Now that to we deposits on have will and discussed capital. portfolio, we continue

previous the XX.X% Quarter of the deposits (sic) deposits depositors Third the of million million at the end of accounts a accounted increased [XX.X%] approximately our $XXX.X September Quarter, During totaling on Local at approximately of and the relationships X-years. or more XX, slightly XX% quarter. these to as percent as composition, highlight was as detail constituted Noninterest-bearing want on previous at deposits our XX% age total the XXXX. to of quarter. To offer end $X deposit deposits, agency I deposits the deposit from X.X% $XX.X total average Third for that approximately compared decreased least to million of

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

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

by through As of dollar mix duration base. Overall, during certain Quarter. reliable Total million, prior interest-bearing increased quarter. cost the $X.X increased XXX increased million. of a we we deposits and million of believe points relationships, the and Non-brokered to core the deposits seen by $XXX.X by the high $XXX.X Third accounts deposits deposit balances deposits have non-interest-bearing deposit was have compared increased customer when basis

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

X voting the and to on Heather? results our that XXXX. operations. X, On XXXX, announced stock by as of Board, X.XX% Our of discuss dividend Heather be X.XX% the ratio company's Tier common will XX, common of share cash from November to to September Friday, it XX, October XXXX. On hand shareholders a paid declaration per a to XX, over increased expected November of equity we $X.XX between on to June XXXX, record I note, XX,

Heather Luck

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

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

primarily September ended unrealized XX, during XX the tax previous and June compared as ended the million as in X-months by income $X.X effect, in of advertising and XX. Non-interest June $XX.X in XX, million ended and result ended of was our other by XXXX. Non-interest X-months XXXX, other available-for-sale $X.X X changes to XX, the in operating million interest factors, as and debt funds $XX.X comprehensive to rates million million expenses. million other decreased on million million $X Quarter gain expense $X.X and from $X.X million of venture-backed increased a As quarter, net was XX, the as to to distributions from months increase loss in primarily a on on $X.X securities the Third due losses, of in of September during which received grew partially salaries and decreases a $X.X benefits, in income recognized to June due employee September promotional offset X-months investments $XX,XXX other the

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

James Beckwith

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

success trust performance the are Places among a listed which our we profitability, our metrics, Sm-All to bank, Piper differentiated also to model Quarter, the demand Star financial were of the is serve, very a result We customers customer Work. top-performing as the acknowledged for Journal's were services. for Best quality Sandler's including efforts Five Sacramento Our treating for our we Stars and experience, shareholders. In capital. We small-cap growth, with business among Business attribute were care, including earn power and outperformance several XXXX empathetic proud sustained Third truly continues asset relationship-based listed we recognized as spirit, of an in and prudent to Bank's those understanding to

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

are environment long-term remain future and on in strategy. company's in We and any resilience focused confident the the our

concludes to We presentation. time We will believe your disciplined we benefit employees, and appreciate practices, community today's our continue shareholders. execute This today. our growth business which organic customers, will and

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

Operator

session. [Operator answer with The the We first D.A. and Gary will now comes begin from question today Instructions] questions Davidson. Tenner

Gary Tenner

to pretty and between home ask multifamily. commercial RV Park The quarter. community, about estate this growth Wanted growth the looked Manufactured loan concentrated real

on they wondering loan the production just loan from kind like board kind And metrics what kind the you of in debt demand, new of there? any ongoing coverage, us the loans particularly about new right now, what around service a LTV, So what underlying could look areas. of maybe tell those coming

James Beckwith

things Gary, Well, slowed. Sure. have

Quarter, Quarter we over are and to expect changed haven't We in out-of-state our speaking. it's do have our for been given than standards of Fourth and higher all years We originations, into for generally underwriting rates consistent rates new credit that cap interest in-state where In anything. the loan the and are well the First probably very see portfolio, credit.

So it's very been consistent.

communities Parks, we We RV in continue and we home Manufactured But and C&I starting to see book. similar on the to grow are focus to expect Fourth Quarter. our

bank can the So down you proposition we're with us. for prospects hopefully attractive on, capital Bay effort pretty have up right Sacramento will. now here if come going in to do significant also We but the Area, in a -- that the Gary, our in region, be business

changed really perspective. nothing's underwriting from an So

what our deck flow can I we're in much are, think the cash lenders. very you see LTVs and

cash to we have flow. nice So like always very a

book think but business, origination very million of in of we've at park terms the been $XXX consistent years. I is over mobile our home

Gary Tenner

James. but deposits? it, or you XX, Great, us September it don't the spot then that. Heather, I could so I missed the that provide question, appreciate saw deposit a interest-bearing as know I in I that apologize rate second I of either total if And for deck, if

Heather Luck

Yes. XXX [ was ]. rate Total spot

Gary Tenner

[ was XXX ]. average The Okay.

So was the a of of over Quarter? kind change slowdown there pace of in the course notable Third the

James Beckwith

such of -- but of much the given think It's sensitive. Yes, slowed. pressure, There's we a -- in rate have very customers, that agency local a big our our are book lot pace that I has still so. change very we're very

does, the change But depending it's some upon what so see Fed could of the And has we really pace slowed. there. reaction

Operator

with comes question Andrew Stephens. next Terrell from The

Andrew Terrell

hitting recent Good teams $XX focus like I morning. about just the are the of Bay curious those the ground so Area. there mostly kind of deposits? Quarter, or the non-interest-bearing I of running. C&I-oriented know a the to there. more did looked there team in Third deposits there's obviously expansion was wanted of million ask some I It the

this anything it for NIBs board? And from mostly separately, teams quarter on side loans? pipeline is loan they up and for were the the So production then just both those or shaping deposits just across how was there and the

James Beckwith

$XX Francisco we Right deposits as folks. from today, folks, got think million our Sure. we've here now, in San sit Area Bay I about

now. We're when all together, of that Andrew, balances those getting that think that's anywhere equally upon but we're And we're for X% account, so we're is between operating also right X.X% those that in. account depending the anywhere I up between mush interest-bearing. of their the liquidity relationship getting reason and kind picking you to looking their typical split the non-interest-bearing

I we is of be a or most expect think far. so credit. similar. From it it of to lines perspective, $X million There's the of lot C&I. same got CRE, some A of is we've of So book it lending that credit

distribution a of and there. a terms want accounts of whereas As credit And some -- mostly move company piece all C&I, the to entire CRE finance. really warehouse got of line similar we but want has in credit, And forward, us we'll and that expect relationship, having in is that they of course, and we up same their smattering CRE, then operating so that we pick of take liquidity. owner-occupied their we'll a

it's So all-in an relationship.

Andrew Terrell

Understood. Yes.

to just on I And slowing that the appreciate then heard it. going I Okay. down. growth. back of production was some the commentary point maybe loan

we balance your certainly origination Would originations. growth quarter that net and then just $XXX Fourth the kind think saw I this at from your that expectation forward? expectations of you could moving growth, of loan million overall, levels share million deposit that maybe both into moderate be Quarter? And sheet for $XXX

James Beckwith

conditions. Sure. loan market seeing given slowdown we're a in production

Fourth it expect probably million growth do going will loan today, in probably Third no Quarter. the would net probably $XX are than than was it some million Quarter. we be our don't so I in in expect to the less probably to we originate here as something I that. Fourth that level We will payoffs, sit better Quarter do So say $XX

got probably coming to safe some verticals we've relate of than probably very very X on a which depository that's in. a got a we're the pipeline that large substantial to think more the had we've statement. From X -- customers and months, potentially in in so we've last perspective, I some -- pretty some

again, But growth exceed the we that. things our So do expect time. our loan And we're about to deposit Quarter. growth take these excited Fourth in

or that not side, I at side, the much similar loan the same think Fourth on Quarter expect maybe marginally deposit but you but the that and we the levels, could results certainly Third side. did reduced see so on on in in loan the certainly Quarter, we

Heather Luck

the given oh at we've to we looking as XX% I before, XX% we are through And forecast that, growth, but deposit look XXXX know for also, this sorry, deposit X% X% growth flip period. loan growth, growth still loan guidance --

James Beckwith

of that growth about top certainly, growth. pretty deposit loans. has right maybe deposits, I on loan much exceeded year-to-date, on right a think but we're on But little lower that

Andrew Terrell

of one what Yes. $XXX I was originations? this for yield for the originations million weighted me, it. new appreciate know made the average quarter. And you the Do last

Heather Luck

Yes. That was X.XX%.

Andrew Terrell

X.XX%. Got it.

Operator

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

Gary Tenner

comment Heather, and clarify to want XXXX? to the relative loan you I just just upon was the deposit That made growth.

Heather Luck

Correct, annual...

Gary Tenner

kind early XXXX? metrics Any similar and the of of outlook thoughts kind on for

Heather Luck

Yes, thing, X% deposits, a loans. similar XX%

Operator

The next question Terrell Andrew with comes Stephens. from

Andrew Terrell

idea, good your any been, And well But into in preliminary on thoughts get run when thoughts pretty I'd certainly job get also I the at it Heather, on run mean the expense expense this maybe then guys done I has wanted wanted have rate year. a in call expense the XXXX? heading Quarter? contained. I to Fourth an I to growth hiring look expenses, rate you

Heather Luck

our We make effectively acknowledging you thank on are expenses, -- that efficiently. for sure that. spending we right. mindful money We're to always want and So for

this, we events pretty whenever one-time new you give the more estimate. We should about to some happened at But do Bay, I QX, continue that also hire QX. non-interest add the did in think we expenses, good people. to if have you look add For people we'll that $XXX,XXX a in

think of you I as X for And next that proxy year. So quarters rest first I the the the use for year. of there can $XXX,XXX could about get a probably then think you

Andrew Terrell

Okay.

quarter around So million feels $XX.X a level, good?

Heather Luck

for I for estimate that's a next good think quarters. X pretty now the

Andrew Terrell

for Okay. more then one And Perfect. maybe James.

you where Where to been your feel market appetite added. point you or place already what's here? do mind like continue there to And your teams from there a And to you've today? it's stand hiring certainly, building Just Is you Or incrementally what out of continue you seeing need to the do the footprint Bay mean, you're see. that like need in your have Area? today? in anywhere great to on continue and that hiring else feel I then you kind opportunity? hire across --

James Beckwith

X think we targeting And January. end in to we or they We're in X come the think ways I Andrew. have people. maybe coming they on at go When on will the more a least to of Bay X little Well, quarter. Area, here on, be the come may probably before

and So that the team, in we very shape to think Francisco we're surrounds. good be going with San in Proper

in in Bay whether starting that the East we're North are that the Bay we've there several are hires Now potential those in dialogues. -- Area, they'd be or Bay the

could that of ultimately, the upwards XX So we of down have in market people that Bay aspects are covering there. all

see have a I'm will, comprehend. that say, cycle account all that that the down you stay and occurs now, times. turmoil, we've for, And whatnot how sensitive near So you There's that and there folks pretty are to, several to just have if into bonuses stagings going of various in to right people. with take terms now. Right potential we time now met goes X given them some we to term hires of got have right kind we've we're

So consideration, terms driver of in that, I timing. that a a is think

stay just getting of close best to quality opportunities. some quality. we're the look but we So for They're and people. high have they're really expensive, And

Andrew Terrell

you XQ of feel into Or when like quarter like margin Very If you the early into really point spot just Quarter? guess Yes. heading the look further kind other end. of at counter the I I it it appreciate could Fourth some balance with compression is the into more or XQ? good. inflection pair of side expect slowed deposit that rate, I sheet, maybe one -- in a the would margin, costs does on of appreciate the the does sneak in kind the the on color. and I Heather.

Heather Luck

definitely compression. We're assumption will and and think on see good some now we that's right I be to And some NIM. between Yes, X.XX pressure. targeting for There's X.XX QX. our QX pretty a

Andrew Terrell

Yes.

Okay.

So maybe few points relatively a levels, to off stable XQ so. basis or

Heather Luck

That's correct.

Operator

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

James Beckwith

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

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

Sandler X are company industry also Sacramento Rating is of pleased, Piper recognition bank Superior We stars X super from a the Superior Business very recent maintains and out were an company IDC Bauer the Financial Reports. pleased the with The Findley Journal. We the of also a with and Rating. performing

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

Operator

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

may disconnect. now You

Five Star Bancorp (FSBC) 31 Oct 232023 Q3 Earnings call transcript