FSBC - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and welcome to the Five Star Bancorp's Second Quarter 2024 Earnings Webcast. Please note that this is a closed conference call, you are encouraged to listen via the 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. Such statements involve risks and uncertainties, and future activities and results may differ materially from these expectations.

discussion results risks the to statements. complete may uncertainties company's more actual cause differ a of and the that forward-looking For materially from see on Form XX-K for the on December Please September XXXX, XX-Q annual XX, ending year XXXX. XX, report the ended Form quarterly and quarter company's the for report

statements, reports. non-GAAP which information Slide the X to GAAP presentation. information the particular, Item the includes in in the of refer regarding forth in presentation. appendix and directly are XA, figures non-GAAP to the Please presentation, industry Risk included in And financial to included set comparable Factors financial their disclaimers forward-looking in data those Reconciliations of most measures

this note is event Please recorded. being

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

James Beckwith

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

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

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

in growth successful of the with in San $XX.X approximately public to our quarter Our story us continue close common in additional Francisco the momentum issuance the net offering, a resulting shares X,XXX,XXX of proceeds organic our of Bay of continued with second stock million, Area. allowing

we on our quarter of underwrite estate, loan to with to first commercial to our expenses XXXX. ratio the in this per value increase our X and to and during XX, as and XX% accounts add with professionals We shareholders for second a dividend continue the evidenced of by support relationships core expansion external Despite and continued June deposits conservatively efficiency ended $XXX.X of added the XX% real $X.XX seasoned more share headwinds ability XXXX. seen X deposit maintained new delivered manage months also non-wholesale million our as value to quarter

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

Additionally, prior have in turn and and since positive grown saw margin loans, total periods. deposits assets we a compression

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

purchase increased during and $XXX million investment for of consumer or quarter quarter approximately prior concentration the were of the with representing held while $XXX.X Total million loan the the the and Loans originations the during million, quarter X.X% $XX.X $XX.X by of the primarily respectively. increase. relating paydowns were million from loans to portfolio, payoffs million, $XXX

quarter, a as during second allowance charge-offs the drivers. we in increases loans totaled the quarter, provision quality to credit for the losses million, end at X.XX% with growth the net leading credit they continues losses $X to only in the of beginning Though the increased At represent remain Asset quarter continue third of end XXXX, strong. and the portfolio the the of loan million of quarter. for of $XX.X nonperforming the recorded

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

the to $XXX.X by increased deposits quarter, second million previous X.XX% quarter. the or During as compared

previous second deposits from of end XX.X% at from the decreased percent Noninterest-bearing XX.X% the -- the quarter XX.X% quarter. end at of deposits of as total a the slightly to

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

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

to by the accounted deposit more To for $X depositors deposits, Overall, of have prior by $X.X XXXX. an I Wholesale increase of and the of increase million Non-wholesale years. deposits in Local and as approximately deposits detail deposits XX% composition, non-wholesale on as million. million approximately approximately noninterest-bearing by constituted deposits. $XX.X at we agency balances $XXX.X $XXX deposits XX, of and increased X define accounts totaling deposit age XX% our June quarter. total which least to public highlight that increased offer average million, when want compared broker time interest-bearing in relationships deposits, increased these deposits deposit million driven a was

points first quarter. basis was decrease points XXX a of quarter, Cost X total basis of during the second the deposits from

We The additional be ratios thresholds XXXX April quarter. that the with through capitalized the noticeable all closed well continue ratios common regulatory quarter. in capital in for of capital offering above second to for issued is public our the stock well

X Tier equity June XX, ratio increased XX.XX% XXXX. XX, common Our to between and XXXX, from X.XX% March

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

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

Heather Luck

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

growth X.XX% prior for interest yields and on the net reliance was deposits the drivers. wholesale the loan as with was decreased quarter quarter, margin while net interest at for higher primary X.XX%, Our margin

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

quarter a in months on XX, by income the ended ended gains X quarter previous to from in venture-backed $X.X from Noninterest primarily an XXXX. and loans in funds This during X partially sale increase the the second during $X.X was equity on gains in of to distributions June offset June million the decreased months due XX. million reduction the received investments decrease

compared X donations ended March in production, ended membership the to due expense June increases and months XX by $X.X during to in fees travel, months loan sponsorships and higher the quarter. X million and conferences Noninterest to XX, primarily professional the related commissions grew

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

James Beckwith

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

result services. success We customer Bank's treating the understanding with customers prudent to business Five relationship-based attribute Star differentiated Our model for an financial a experience our to power truly and sustained is of the performance spirit, which demand and empathetic care. continues

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

to conditions. As we into as we monitor value continue we are XXXX, guided lean shareholder market a on by focus continued

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

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

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

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

Operator

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

Andrew Terrell

the is the What start the behind the quarter, to specifically? growth raise of capital looks about considering consumer purchase ramping like bit these kind were of kind strategy you it, the and particularly what yield the off, just profile like and recent credit little it Maybe kind in talk a there? kind loan And loans talk can broadly feels of then what profile? about a just more organic of

James Beckwith

credit is Sure. BHG. These very strong. Group, loans Their were originated profile by Bankers Health

for them. mid-XXX say These going with FICOs. loans BHG from we throughout to that I'm strong We've have experience I a States. really think and professional are years had purchased the credit several now United been involved with individuals

at States got them. to yield. we it given of That And of expanded credit And loans years strong small a into CRA with was coverage a for our had We're make buying appropriate been purchases banks very utilize perspective. throughout very the average United experience them. QX. like they've from kind yield that's this the franchise, them, now. lot for our first sure in X.XX% business that by Andrew, operating several favorable an for We wanting

to portfolio, yield shot of So growth on nice terms and overall coming margin, it's it's we're rely Certainly, it characteristics. like the a loan additive, and nice the not we rate, nice going it's on a of in but at the in arm. credit

Andrew Terrell

Yes. Understood.

-- up quarter and day have of Okay. you the And kind get made purchase to points helps do that. the here, loan better specific timing yields in throughout the quarter? sense. I the a was quarter XX basis in as a Just trying obviously mean are

whether the carryforward to some in trying yields there's a get the sense loan Just XQ? of on

James Beckwith

quarter. pretty much done the see half that. was you'll of Yes, It the last

of more overall But yields. will into forward in overall be think tell. doing And terms We'll QX that, will some and maybe forward loan of so carry certainly looking XXXX. but positively impacting I at -- that carry it of time will

rates loan Now other BHG loan call there's also. also of a being downs And pretty from looking lower we off. And this, that's that purchase would outside have our the for are we're of to a wholesale a we're quarter paid portfolio, had I of strong yields of -- outside originations play. the X.X% seeing too. what lot X.XX% The affecting things rates pay some loans

as pushing see And can so in that's really our we're -- loan you up numbers. yields overall, QX

Andrew Terrell

Got it. Yes.

was on hoping overall Is sale then the income for could just you a just seeing last us business? then to maybe in durable upward expectations? just I this of picked XQ And up as Okay. me, kind of what gain quarter. that within really you're kind lift update this and quickly, SBA

James Beckwith

it durable. expect don't we to Yes, be

turned origination of the kind sales we've fact, In the of function.

expectations that in QX on of in basis QX year. we are go-forward So the about half less the our saw gains first certainly a and

of near import we've we're going had an levels So that originating to diminished the lender, We're but not historically. be any we've business. still of the active volumes

all credit. our origination efforts terms a doing loan And are Bay and our from -- the Area so we're what now in on we're verticals in we what of in really doing putting other perspective

will definitely So diminish. gain on sales

for year from probably remainder the to a $XX,XXX of the You're on basis. monthly running $XXX,XXX

Operator

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

Gary Tenner

quarter-over-quarter to particularly expense was ask in run rate. unusual Decent wanted like It pickup. doesn't I the anything there about First, look the numbers.

curious year I for thoughts here. the for of back So half was your the

Heather Luck

Yes.

a So little short. I was

our whenever that more did had in a and QX. attended events think we overall we just conferences I we few estimate,

a little expenses higher. drove So our that

for think I the what rate in the you we can quarter per year, about of add rest the $XXX,XXX QX. for to incurred So run

year. will a the rate think good for be rest the run that of I

our We in do branch have of some for celebration We'll in QX. things grand Francisco opening San September. big our exciting happening do our

that So and like an we'll celebrations that. then things as and expense added employee have

a be expense. of would $XXX,XXX run think I good additional each quarter So rate

Gary Tenner

was which you on split And for growth But it. in deposits, then outpace loan appreciate the deposit the kind growth quarter. I of the the Okay. net between will side, positive obviously, talked the that. non-wholesale about

So get percentage, just I'm is question wholesale similar of to XXX% your where level a I ratio, And are trying of now. now? kind you funding target guess a which right over the right deposit loan little around on comfort sense

James Beckwith

We'll source do a We $XX to into of million deposit we as on We're continue towards put to the in deposits declining. a quarter. of wholesale funding. the corporate and Sure. anticipate the rates lean going did -- end

that type tool. the is we more attractive at funding So the may particular year, of but remainder of be it look as a

try trying then if that's have appropriate we than to make fund We're is loan-to-deposit also wanted that protect and a have sure loans ratio the we make our have that it we to sure really could to, prudently, the We on. Gary, because do could but what have we liquidity act availability margin we -- come to -- now less so. to right significantly --

ratio grow there been successful we're at QX we'll we to we less in to ratio. we're kind see of loan-to-deposit -- in trying QX. Historically, continue than to just could we've but and just and tomorrow looking And see of and if it. chose stay some to XX% we that, really deposits to. visibility we've operated get target hopefully, we that core need more XXX% loan-to-deposit to And But our

Operator

Lay Woody on question from next KBW. our And

Wood Lay

the mean, the was Area? strong year in expect it half growth sort just Area with of deposit how the in you're I and through the in getting of to Bay you markets walk to team. Bay those start trend you you the Wanted growth back in the on the saw quarter. really traction Could

James Beckwith

QX. it We've expect or higher rolling lot big even be more pretty we financial big their and into QX than it producers, producers in was a historically Well, at some and institutions. QX to similar added previous talent

in still we're pretty going there's could that throughout just the the stable. the San So Area. to in like we -- and us. it's South opportunities Bay pretty still the we're kind I'm creates It's it's of Jose in Bay traction in argue San But going down turmoil. getting that much terms proper say Bay, you for where And in within of although Area, Francisco

conversion had in from Memorial the second the in The over from Chase's hear I well our into Woody, didn't that what Chase the from was prospects. old That FRB it JPM we platform necessarily Day quarter, think the go weekend, platform.

personally. and think we to continue so that relationships, who we excited especially market, can think folks we're spending we'll very deep folks there a advantage And of that take able we're to growth since Republic time where we lot lot are we've And have be of a transition. ex down hired that take First of in about

our the Downtown is going lot And for is down it's going grand on now. there. times to exciting San offices, for right District Our outreach is Financial which Francisco. of September last A week the of in of opening us be

Wood Lay

commentary to you're trends the That's great loan in hear. Any those seeing on growth markets?

James Beckwith

contributor that is down We've down outstanding, in commitments million see. composite commitments strong, total expect for a all our we're what to in pipelines of total We not that's in loan strong. the pipelines operation there pipeline but Sarah? teams brought we there and very with what net loan that, seeing. be our loan are overall of terms of was terms $XX Let's the do entity. our very that And had that's to of liquidity

of that bringing And members there. down putting team awfully are work our group exciting on. see clients just And that there. So new about good it's down great in the new we're that a market to excited traction we're it's

doing DJ and there, is is great we down a doing what job, team leader there. Our down the appreciate Kurtze, whole

Wood Lay

the pretty quarter. shifting margin. great second to step-up took in a sizable Yes. to That's over hear. Maybe the It

the quarter? expectations... what's we pull-through could step if the up the the see third another for be Just to third a get the outlook Just quarter? -- trying in third what of what Just sense the in quarter

James Beckwith

going it's moderate to think bit. of I kind a little

sense -- that, we than to So as but be we'll quarter, to X.XX% to able of to better -- the we're goes. do And is just going thinking third have see million that's hopefully, right it we're that for we'll X.XX now. our what how

right greater because impacted on is It a getting by reliance cost, outstanding deposits is those of fundamentally marginal now margin. our wholesale of greater right or the about terms In you're X.XX%. deposits which

generation So But in an extent right will now, X.XX% it sense But do more Woody, that the our that of we that quarter. of core the hope we have impact will accelerate on to deposit is X.XX%. margin. third our we that's our

Wood Lay

with the luck opening. grand Good

Operator

no ladies showing And Instructions] back for management to at time, gentlemen, additional floor and I'd to remarks. questions. I'm any over [Operator this turn closing the like

James Beckwith

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

technology, successes were with the management and half also efficiencies, share Cup. our expense the ratings employees Greater Sustainability In Raymond include conservative Council people, awards. operating and Bankers have shareholders. the recognized to successes first contributed and Cup Economic and XXXX These Community we Sacramento Award, James Our XXXX XXXX, of underwriting we numerous with practices

were best-performing listed Intelligence we in XX Markets banks the XXXX additionally, top among nation. community Global And S&P

a half of Sacramento Owners Journal a first XXXX Women Award, award. XX: America Emerging committed development customers Business Award, our of Bankers force Bank of Journal Board, of recognized communities. XX be for Who Bank driving Business Mean advocate trusted C-suite Association economic our Community Women Business the leadership to Leaders company Star a and Outstanding Leadership was resource Five Independent National a Business also Women for continues Our in with Community Executive under a and the Sacramento

the forward again XXXX. speaking in for thank for quarter great Have with to look to you day, October We earnings of and discuss third a you listening.

Operator

thank for you that gentlemen, and and conference call presentation. does We joining. Ladies conclude today's

lines. your disconnect now may You

Five Star Bancorp (FSBC) 25 Jul 242024 Q2 Earnings call transcript