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Five Star Bancorp Announces Quarterly and Annual Results

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Five Star Bancorp (FSBC) reported net income of $10.8 million for Q4 2023, compared to $11.0 million for Q3 2023 and $13.3 million for Q4 2022. Year-end net income for 2023 was $47.7 million, compared to $44.8 million for 2022. Key financial highlights include a decrease in net interest margin, increases in non-interest income and expenses, and a decrease in provision for credit losses.
Positive
  • Net income decreased from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
  • Year-end net income increased from 2022 to 2023.
  • Net interest margin decreased from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
  • Non-interest income increased from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
  • Non-interest expenses increased from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
  • Provision for credit losses decreased from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
Negative
  • Decrease in net income from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.
  • Decrease in net interest margin from Q3 2023 to Q4 2023 and from Q4 2022 to Q4 2023.

Insights

The reported net income of Five Star Bancorp for the quarter ending December 31, 2023, showed a slight decline from the previous quarter and a more significant year-over-year decrease. This trend could be indicative of tightening margins or increased competitive pressures within the banking sector. The Return on Average Assets (ROAA) and Return on Average Equity (ROAE) have both decreased, signaling a potential reduction in profitability and efficiency. Additionally, the net interest margin decreased compared to the same quarter the previous year, which might suggest that the bank's interest income is not growing in line with its interest expenses, a concern for future earnings stability.

From an investor's perspective, the expansion into the San Francisco Bay Area and the deposit growth resulting from it could be seen as a strategic move to diversify and grow the bank's market presence. However, the costs associated with this expansion seem to have contributed to the increased non-interest expenses, which could affect the bank's efficiency ratio in the short term. The declaration of consistent dividends may be viewed positively by shareholders looking for steady income, although it's essential to balance this with the bank's need to reinvest in its growth initiatives.

The bank's performance must be contextualized within the broader economic environment, including the Federal Reserve's interest rate policies. The anticipation of potential rate cuts by the Federal Reserve in 2024, as mentioned by the bank's CEO, suggests that the bank is expecting a shift in monetary policy that could relieve some of the margin pressures experienced in Q4 of 2023. A liability-sensitive balance sheet implies that the bank's liabilities (e.g., deposits) may reprice faster than its assets (e.g., loans), which could be advantageous in a declining interest rate environment.

Furthermore, the bank's strategy to focus on organic deposit growth and conservative underwriting practices could position it well to navigate an uncertain economic climate. However, the increased ratio of nonperforming loans, even though still low, should be monitored as an early indicator of potential credit quality issues, especially in an economic downturn.

Five Star Bancorp's strong presence in its core geographical markets and the recognition received through various awards may enhance its brand reputation and customer trust, potentially leading to customer retention and acquisition. The bank's emphasis on being prepared for market conditions and its quick response in serving new clients in the Bay Area could be a competitive advantage. Nonetheless, the overall banking industry is facing challenges such as technological disruption and changing consumer behaviors, which require ongoing investment in digital transformation and innovation to remain competitive.

Investors should consider the bank's long-term strategy and its ability to adapt to industry trends, such as the increased use of fintech solutions and the demand for personalized banking experiences. The bank's current performance ratios and financial highlights should be weighed against these long-term strategic considerations.

RANCHO CORDOVA, Calif., Jan. 29, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (Nasdaq: FSBC) (the “Company” or “Five Star”), the holding company for Five Star Bank, today reported net income of $10.8 million for the three months ended December 31, 2023, as compared to $11.0 million for the three months ended September 30, 2023 and $13.3 million for the three months ended December 31, 2022. Net income for the year ended December 31, 2023 was $47.7 million, as compared to $44.8 million for the year ended December 31, 2022.

Financial Highlights

Performance highlights and other developments for the Company for the periods noted below included the following:

 Three months ended
(in thousands, except per share and share data)December 31,
2023		 September 30,
2023		 December 31,
2022
Return on average assets (“ROAA”) 1.26%  1.30%  1.70%
Return on average equity (“ROAE”) 15.45%  16.09%  21.50%
Pre-tax income$15,151  $15,795  $18,769 
Pre-tax, pre-provision income(1)$15,951  $16,845  $20,019 
Net income$10,799  $11,045  $13,282 
Basic earnings per common share$0.63  $0.64  $0.77 
Diluted earnings per common share$0.63  $0.64  $0.77 
Weighted average basic common shares outstanding 17,175,445   17,175,034   17,143,920 
Weighted average diluted common shares outstanding 17,193,114   17,194,825   17,179,863 
Shares outstanding at end of period 17,256,989   17,257,357   17,241,926 


 Year ended
(in thousands, except per share and share data)December 31,
2023		 December 31,
2022
Return on average assets (“ROAA”) 1.44%  1.57%
Return on average equity (“ROAE”) 17.85%  18.80%
Pre-tax income$66,616  $62,858 
Pre-tax, pre-provision income(1)$70,616  $69,558 
Net income$47,734  $44,801 
Basic earnings per common share$2.78  $2.61 
Diluted earnings per common share$2.78  $2.61 
Weighted average basic common shares outstanding 17,166,592   17,128,282 
Weighted average diluted common shares outstanding 17,187,969   17,165,610 
Shares outstanding at end of period 17,256,989   17,241,926 

(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.

James E. Beckwith, President and Chief Executive Officer, commented on the financial results:

“Five Star Bank is known for turning market disruption into opportunity and 2023 was no exception. While many faced significant headwinds in Q1 due to big bank failures, we seized the opportunity to execute on our organic growth strategy by expanding into the San Francisco Bay Area. This expansion included the onboarding of eight seasoned and highly respected business development officers and two relationship managers who contributed $73.8 million of deposit growth in 2023 from clients who wanted to work with a bank they could trust. The past year demonstrated the importance of being prepared for any market condition and we are pleased with our immediate response to serving new clients in the Bay Area while also ensuring the safety and soundness of our business.

Margin pressures remained in Q4, yet slowed compared to prior quarters. We expect positive news from the Federal Reserve in 2024 to result in an end to the rising rate environment and signal potential rate cuts. As we look to 2024, we anticipate a benefit from these rate cuts as we have a slightly liability sensitive balance sheet. In the meantime, we will continue to grow organically by focusing on deposit growth in our core geographical markets, including the Sacramento Capital Region, North State, and San Francisco Bay Area. We will also manage expenses and execute on conservative underwriting practices which are foundational to our success.

In 2023, we received a Super Premier Performer rating from Findley Reports, an IDC Superior Rating, and a Bauer Financial Superior rating (5 stars out of 5). We were also awarded the prestigious 2022 Raymond James Community Bankers Cup, and were among the 2023 Piper Sandler Sm-All Stars. In 2023, we were recognized as the 2022 S&P Global Market Intelligence #1 Best-Performing Community Bank in the nation (banks with assets between $3 billion and $10 billion). We were also listed in Independent Banker’s Top Commercial Banks in 2023 (banks with more than $1 billion in assets) and ranked #6 in the nation. We were listed among American Banker’s Top-Performing Banks in 2023 (banks with $2 billion to $10 billion in assets) and ranked #12 in the nation. In 2023, our executives and senior leaders were awarded a Sacramento Business Journal C-Suite Award, a Sacramento Bee Latino Changemakers Award, a Commercial Real Estate Women Award, and a Comstock’s Magazine Women in Leadership Award. Being recognized as community leaders ensures Five Star Bank remains top-of-mind in the markets we serve as we continue to build-out our verticals. In closing, we are well-positioned to continue to withstand an array of economic conditions as we enter 2024. I am humbled and proud of our team’s accomplishments as we look to the future.”

  • The Company’s new San Francisco Bay Area team increased to 10 employees who generated deposit balances totaling $73.8 million at December 31, 2023, an increase of $44.8 million from September 30, 2023.
  • Cash and cash equivalents were $321.6 million, representing 10.62% of total deposits at December 31, 2023, compared to 10.67% at September 30, 2023.
  • Total deposits decreased by $5.3 million, or 0.18%, during the three months ended December 31, 2023. Non-brokered deposits decreased by $30.4 million, or 1.03%, over the same period.
  • Consistent, disciplined management of expenses contributed to our efficiency ratio of 44.25% for the three months ended December 31, 2023.
  • For the three months ended December 31, 2023, net interest margin was 3.19%, as compared to 3.31% for the three months ended September 30, 2023 and 3.83% for the three months ended December 31, 2022. For the year ended December 31, 2023, net interest margin was 3.42%, as compared to 3.75% for the year ended December 31, 2022. The effective Federal Funds rate remained at 5.33% as of December 31, 2023, and September 30, 2023 and increased from 4.33% as of December 31, 2022.
  • Other comprehensive income was $4.2 million during the three months ended December 31, 2023. Unrealized losses, net of tax effect, on available-for-sale securities were $11.8 million as of December 31, 2023. Total held-to-maturity and available-for-sale securities represented 0.09% and 3.08% of total interest-earning assets, respectively, as of December 31, 2023.
  • The Company’s common equity Tier 1 capital ratio was 9.07% as of both December 31, 2023 and September 30, 2023. The Bank continues to meet all requirements to be considered “well-capitalized” under applicable regulatory guidelines.
  • Loan and deposit growth was as follows at the dates indicated:
 (in thousands)December 31,
2023		 September 30,
2023		 $ Change % Change
 Loans held for investment$3,081,719  $3,009,930  $71,789  2.39%
 Non-interest-bearing deposits 831,101   833,434   (2,333) (0.28)%
 Interest-bearing deposits 2,195,795   2,198,776   (2,981) (0.14)%
         
 (in thousands)December 31,
2023		 December 31,
2022		 $ Change % Change
 Loans held for investment$3,081,719  $2,791,326  $290,393  10.40%
 Non-interest-bearing deposits 831,101   971,246   (140,145) (14.43)%
 Interest-bearing deposits 2,195,795   1,810,758   385,037  21.26%
  • The ratio of nonperforming loans to loans held for investment at period end increased from 0.01% at December 31, 2022 to 0.06% at December 31, 2023.
  • The Company’s Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended December 31, 2023. The Company’s Board of Directors declared another cash dividend of $0.20 per share on January 18, 2024, which the Company expects to pay on February 12, 2024 to shareholders of record as of February 5, 2024.

Summary Results

Three months ended December 31, 2023, as compared to three months ended September 30, 2023

The Company’s net income was $10.8 million for the three months ended December 31, 2023, compared to $11.0 million for the three months ended September 30, 2023. Net interest income decreased by $0.8 million as increases in interest expense exceeded increases in interest income. The provision for credit losses decreased by $0.3 million as expectations for credit losses improved based on positive economic trends in the three months ended December 31, 2023, compared to the three months ended September 30, 2023. Non-interest income increased by $0.6 million, primarily due to gains from distributions on investments in venture-backed funds and the recognition of swap referral and rate lock fees during the three months ended December 31, 2023 that did not occur during the three months ended September 30, 2023. Non-interest expense increased by $0.6 million, primarily due to increased salaries, employee benefits, advertising, promotional, and other operating expenses related to the Company’s expansion into the San Francisco Bay Area.

Three months ended December 31, 2023, as compared to three months ended December 31, 2022

The Company’s net income was $10.8 million for the three months ended December 31, 2023, compared to $13.3 million for the three months ended December 31, 2022. Net interest income decreased by $2.5 million as increases in interest expense exceeded increases in interest income. The provision for credit losses decreased by $0.5 million as loan originations in the three months ended December 31, 2023 were approximately half of those in the three months ended December 31, 2022. Non-interest income increased by $0.3 million, primarily due to greater gains from distributions on investments in venture-backed funds quarter-over-quarter and the recognition of swap referral and rate lock fees during three months ended December 31, 2023 that did not occur during the three months ended December 31, 2022. Non-interest expense increased by $1.9 million with an increase in salaries and employee benefits related to the Company’s expansion into the San Francisco Bay Area as the leading driver.

Year ended December 31, 2023, as compared to year ended December 31, 2022

The Company’s net income was $47.7 million for the year ended December 31, 2023, compared to $44.8 million for the year ended December 31, 2022. Net interest income increased by $7.8 million as increases in interest income exceeded increases in interest expense, with increases in the average balance of interest-earning assets as the leading driver. The provision for credit losses decreased by $2.7 million as loan originations in the year ended December 31, 2023 were approximately half of those for the year ended December 31, 2022. Non-interest income increased by $0.4 million, primarily due to greater gains from distributions on investments in venture-backed funds during the year ended December 31, 2023 than during the year ended December 31, 2022. Non-interest expense increased by $7.1 million with an increase in salaries and employee benefits related to the Company’s expansion into the San Francisco Bay Area as the leading driver.

The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

  Three months ended    
(in thousands, except per share data) December 31,
2023		 September 30,
2023		 $ Change % Change
Selected operating data:        
Net interest income $26,678  $27,476  $(798) (2.90)%
Provision for credit losses  800   1,050   (250) (23.81)%
Non-interest income  1,936   1,384   552  39.88%
Non-interest expense  12,663   12,015   648  5.39%
Pre-tax income  15,151   15,795   (644) (4.08)%
Provision for income taxes  4,352   4,750   (398) (8.38)%
Net income $10,799  $11,045  $(246) (2.23)%
Earnings per common share:        
Basic $0.63  $0.64  $(0.01) (1.56)%
Diluted $0.63  $0.64  $(0.01) (1.56)%
Performance and other financial ratios:        
ROAA  1.26%  1.30%    
ROAE  15.45%  16.09%    
Net interest margin  3.19%  3.31%    
Cost of funds  2.50%  2.28%    
Efficiency ratio  44.25%  41.63%    


  Three months ended    
(in thousands, except per share data) December 31,
2023		 December 31,
2022		 $ Change % Change
Selected operating data:        
Net interest income $26,678  $29,135  $(2,457) (8.43)%
Provision for credit losses  800   1,250   (450) (36.00)%
Non-interest income  1,936   1,601   335  20.92%
Non-interest expense  12,663   10,717   1,946  18.16%
Pre-tax income  15,151   18,769   (3,618) (19.28)%
Provision for income taxes  4,352   5,487   (1,135) (20.69)%
Net income $10,799  $13,282  $(2,483) (18.69)%
Earnings per common share:        
Basic $0.63  $0.77  $(0.14) (18.18)%
Diluted $0.63  $0.77  $(0.14) (18.18)%
Performance and other financial ratios:        
ROAA  1.26%  1.70%    
ROAE  15.45%  21.50%    
Net interest margin  3.19%  3.83%    
Cost of funds  2.50%  1.16%    
Efficiency ratio  44.25%  34.87%    
             
             
  Year ended    
(in thousands, except per share data) December 31,
2023		 December 31,
2022		 $ Change % Change
Selected operating data:        
Net interest income $110,880  $103,070  $7,810  7.58%
Provision for credit losses  4,000   6,700   (2,700) (40.30)%
Non-interest income  7,511   7,157   354  4.95%
Non-interest expense  47,775   40,669   7,106  17.47%
Pre-tax income  66,616   62,858   3,758  5.98%
Provision for income taxes  18,882   18,057   825  4.57%
Net income $47,734  $44,801  $2,933  6.55%
Earnings per common share:        
Basic $2.78  $2.61  $0.17  6.51%
Diluted $2.78  $2.61  $0.17  6.51%
Performance and other financial ratios:        
ROAA  1.44%  1.57%    
ROAE  17.85%  18.80%    
Net interest margin  3.42%  3.75%    
Cost of funds  2.10%  0.57%    
Efficiency ratio  40.35%  36.90%    


Balance Sheet Summary

(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Selected financial condition data:        
Total assets $3,593,125  $3,227,159  $365,966  11.34%
Cash and cash equivalents  321,576   259,991   61,585  23.69%
Total loans held for investment  3,081,719   2,791,326   290,393  10.40%
Total investments  111,160   119,744   (8,584) (7.17)%
Total liabilities  3,307,351   2,974,334   333,017  11.20%
Total deposits  3,026,896   2,782,004   244,892  8.80%
Subordinated notes, net  73,749   73,606   143  0.19%
Total shareholders’ equity  285,774   252,825   32,949  13.03%
  • Insured and collateralized deposits were approximately $2.0 billion, representing approximately 66.79% of total deposits as of December 31, 2023. Net uninsured and uncollateralized deposits were approximately $1.0 billion as of December 31, 2023.
  • Commercial and consumer deposit accounts constituted approximately 73% of total deposits. Deposit relationships of at least $5 million represented approximately 62% of total deposits and had an average age of approximately 8.78 years as of December 31, 2023.
  • Cash and cash equivalents as of December 31, 2023 were $321.6 million, representing 10.62% of total deposits at December 31, 2023, compared to 9.35% as of December 31, 2022.
  • In the first quarter of 2023, the Federal Reserve created the Bank Term Funding Program to provide depository institutions with additional funding, which allows any federally insured deposit institution to pledge its investment portfolio at par as collateral value. As of December 31, 2023, the Bank had neither used nor established borrowing capacity with the Bank Term Funding Program.
  • Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $1.4 billion as of December 31, 2023.
   December 31, 2023    
 (in thousands) Line of Credit Letters of
Credit Issued		 Borrowings Available
 Federal Home Loan Bank of San Francisco (“FHLB”) advances $996,712  $681,500  $170,000  $145,212 
 Federal Reserve Discount Window  770,572   —   —   770,572 
 Correspondent bank lines of credit  175,000   —   —   175,000 
 Cash and cash equivalents  —   —   —   321,576 
 Total $1,942,284  $681,500  $170,000  $1,412,360 


The increase in total assets from December 31, 2022 to December 31, 2023 was primarily due to a $290.4 million increase in total loans held for investment and a $61.6 million increase in cash and cash equivalents, partially offset by a $8.6 million decrease in investments. The $290.4 million increase in total loans held for investment between December 31, 2022 and December 31, 2023 was the result of $668.2 million in loan originations, partially offset by $377.8 million in loan payoffs and paydowns.

The increase in total liabilities from December 31, 2022 to December 31, 2023 was primarily attributable to an increase in deposits of $244.9 million and an increase in FHLB advances of $70.0 million. The $244.9 million increase in deposits was largely due to increases in money market, time deposits over $250 thousand, and interest-bearing demand deposits of $208.8 million, $146.5 million, and $80.2 million, respectively, partially offset by decreases in non-interest-bearing demand, savings, and other time deposits of $140.1 million, $28.1 million, and $22.5 million, respectively.

The increase in total shareholders’ equity from December 31, 2022 to December 31, 2023 was primarily a result of net income recognized of $47.7 million and an increase of $1.7 million in accumulated other comprehensive income, partially offset by $12.9 million in cash distributions paid during the period and a reduction to retained earnings of $4.5 million, net of tax effect, due to the adoption of Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”).

Net Interest Income and Net Interest Margin

The following is a summary of the components of net interest income for the periods indicated:

  Three months ended    
(in thousands) December 31,
2023		 September 30,
2023		 $ Change % Change
Interest and fee income $46,180  $45,098  $1,082  2.40%
Interest expense  19,502   17,622   1,880  10.67%
Net interest income $26,678  $27,476  $(798) (2.90)%
Net interest margin  3.19%  3.31%    
         
  Three months ended    
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Interest and fee income $46,180  $37,402  $8,778  23.47%
Interest expense  19,502   8,267   11,235  135.90%
Net interest income $26,678  $29,135  $(2,457) (8.43)%
Net interest margin  3.19%  3.83%    
         
  Year ended    
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Interest and fee income $174,382  $117,918  $56,464  47.88%
Interest expense  63,502   14,848   48,654  327.68%
Net interest income $110,880  $103,070  $7,810  7.58%
Net interest margin  3.42%  3.75%    


The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:

  Three months ended
  December 31, 2023 September 30, 2023 December 31, 2022
(in thousands) Average
Balance		 Interest
Income/
Expense		 Yield/
Rate		 Average
Balance		 Interest
Income/
Expense		 Yield/
Rate		 Average
Balance		 Interest
Income/
Expense		 Yield/
Rate
Assets                  
Interest-earning deposits with banks $157,775 $2,100 5.28% $198,751 $2,584 5.16% $200,395 $1,841 3.64%
Investment securities  106,483  651 2.43%  112,154  653 2.31%  117,364  643 2.17%
Loans held for investment and sale  3,055,042  43,429 5.64%  2,982,140  41,861 5.57%  2,703,865  34,918 5.12%
Total interest-earning assets  3,319,300  46,180 5.52%  3,293,045  45,098 5.43%  3,021,624  37,402 4.91%
Interest receivable and other assets, net  80,360      77,757      73,664    
Total assets $3,399,660     $3,370,802     $3,095,288    
                   
Liabilities and shareholders’ equity                  
Interest-bearing demand $291,967 $1,091 1.48% $296,230 $972 1.30% $223,473 $174 0.31%
Savings  130,915  891 2.70%  134,920  880 2.59%  136,753  247 0.72%
Money market  1,347,111  10,824 3.19%  1,328,290  9,536 2.85%  1,060,597  3,652 1.37%
Time  417,434  5,322 5.06%  399,514  4,998 4.96%  299,771  2,467 3.26%
Subordinated debt and other borrowings  88,401  1,374 6.16%  79,085  1,236 6.20%  114,858  1,727 5.96%
Total interest-bearing liabilities  2,275,828  19,502 3.40%  2,238,039  17,622 3.12%  1,835,452  8,267 1.79%
Demand accounts  821,651      825,254      997,815    
Interest payable and other liabilities  24,886      35,123      17,002    
Shareholders’ equity  277,295      272,386      245,019    
Total liabilities and shareholders’ equity $3,399,660     $3,370,802     $3,095,288    
                   
Net interest spread     2.12%     2.31%     3.12%
Net interest income/margin   $26,678 3.19%   $27,476 3.31%   $29,135 3.83%


Net interest income during the three months ended December 31, 2023 decreased $0.8 million as compared to the three months ended September 30, 2023. In addition, net interest margin decreased 12 basis points compared to the prior quarter. The decrease in net interest income is primarily attributable to an additional $1.7 million in deposit interest expense due to increases in interest rates as compared to the prior quarter. The cost of interest-bearing deposits increased 28 basis points as compared to the prior quarter, while average balances increased 1.32%. In addition, the average balance of non-interest-bearing deposits decreased by $3.6 million quarter-over-quarter. The increase to interest expense was partially offset by an increase in total interest income of $1.1 million. Average loan yields increased 7 basis points as compared to the prior quarter, while average balances increased 2.44%.

As compared to the three months ended December 31, 2022, net interest income decreased $2.5 million and net interest margin decreased 64 basis points. The decrease in net interest income is primarily attributable to an additional $11.6 million in deposit interest expense due to increases in interest rates and average balances as compared to the same quarter of the prior year. The cost of interest-bearing deposits increased 178 basis points as compared to the same quarter of the prior year, while average balances increased 27.13%. In addition, the average balance of non-interest-bearing deposits decreased by $176.2 million as compared to the same quarter of the prior year. The increase in interest expense was partially offset by an increase in total interest income of $8.8 million, as compared to the same quarter of the prior year. Average loan yields increased 52 basis points as compared to the same quarter of the prior year, while average balances increased 12.99%.

The following table shows the components of net interest income and net interest margin for the annual periods indicated:

  Year ended
  December 31, 2023 December 31, 2022
(in thousands) Average
Balance		 Interest
Income/
Expense		 Yield/
Rate		 Average
Balance		 Interest
Income/
Expense		 Yield/
Rate
Assets            
Interest-earning deposits with banks $184,103 $9,069 4.93% $260,679 $3,696 1.42%
Investment securities  113,515  2,600 2.29%  131,353  2,427 1.85%
Loans held for investment and sale  2,947,603  162,713 5.52%  2,353,148  111,795 4.75%
Total interest-earning assets  3,245,221  174,382 5.37%  2,745,180  117,918 4.30%
Interest receivable and other assets, net  75,741      99,946    
Total assets $3,320,962     $2,845,126    
             
Liabilities and shareholders’ equity            
Interest-bearing demand $312,944 $3,321 1.06% $242,221 $425 0.18%
Savings  140,060  3,073 2.19%  107,010  376 0.35%
Money market  1,263,539  33,932 2.69%  995,048  6,476 0.65%
Time  372,557  17,535 4.71%  203,392  3,646 1.79%
Subordinated debt and other borrowings  93,279  5,641 6.05%  61,533  3,925 6.38%
Total interest-bearing liabilities  2,182,379  63,502 2.91%  1,609,204  14,848 0.92%
Demand accounts  844,057      982,915    
Interest payable and other liabilities  27,127      14,709    
Shareholders’ equity  267,399      238,298    
Total liabilities and shareholders’ equity $3,320,962     $2,845,126    
             
Net interest spread     2.46%     3.38%
Net interest income/margin   $110,880 3.42%   $103,070 3.75%


Net interest income during the year ended December 31, 2023 increased $7.8 million as compared to the year ended December 31, 2022. Net interest margin decreased 33 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $50.9 million in interest income on loans due to increases in interest rates and average balances as compared to the prior year. The average yield on loans increased 77 basis points as compared to the prior year, while average balances increased 25.26%. The increase to interest income was partially offset by an increase in total interest expense of $48.7 million. The increase in total interest expense is primarily attributable to an additional $46.9 million in deposit interest expense due to increases in interest rates and average balances as compared to the prior year. The cost of interest-bearing deposits increased 206 basis points as compared to the prior year, while average balances increased 34.98%. In addition, the average balance of non-interest-bearing deposits decreased by $138.9 million year-over-year.

Loans by Type

The following table provides loan balances, excluding deferred loan fees, by type as of December 31, 2023:

(in thousands)  
Commercial Term Real Estate Non-Owner Occupied $1,161,502
Commercial Term Multifamily  1,018,372
Commercial Term Real Estate Owner Occupied  495,480
Commercial Secured  87,549
Commercial Construction Real Estate  62,863
Commercial Term Agricultural Real Estate  51,669
SBA 7A Secured  48,289
Others  158,252
Total loans, excluding deferred loan fees $3,083,976


Interest-bearing Deposits

The following table provides interest-bearing deposit balances by type as of December 31, 2023:

(in thousands)  
Interest-bearing demand accounts $320,356
Money market accounts  1,282,369
Savings accounts  126,498
Time accounts  466,572
Total interest-bearing deposits $2,195,795


Asset Quality

Allowance for Credit Losses - Loans

Beginning January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model. Utilizing CECL may have an impact on our allowance for credit losses going forward and result in a lack of comparability between 2022 and 2023 quarterly and annual periods. Refer to information below on the provision for credit losses recorded during the year ended December 31, 2023.

At December 31, 2023, the Company’s allowance for credit losses was $34.4 million, as compared to $28.4 million at December 31, 2022. The $6.0 million increase in the allowance is due to a $5.3 million adjustment recorded in connection with the adoption of CECL and a $4.0 million provision for credit losses recorded during the twelve months ended December 31, 2023, partially offset by net charge-offs of $3.3 million, mainly attributable to commercial and industrial loans, during the same period.

The Company’s ratio of nonperforming loans to loans held for investment increased from 0.01% at December 31, 2022 to 0.06% at December 31, 2023. The provision for credit losses recorded during the year ended December 31, 2023 was primarily related to loan growth, loan type mix, and changes in the macroeconomic environment. Loans designated as substandard increased from $0.4 million to $2.0 million between December 31, 2022 and December 31, 2023. There were no loans with doubtful risk grades at December 31, 2023 or December 31, 2022.

A summary of the allowance for credit losses by loan class is as follows:

  December 31, 2023 December 31, 2022
(in thousands) Amount % of Total Amount % of Total
Real estate:        
Commercial $29,015  84.27% $19,216  67.69%
Commercial land and development  178  0.52%  54  0.19%
Commercial construction  718  2.08%  645  2.27%
Residential construction  89  0.26%  49  0.17%
Residential  151  0.44%  175  0.62%
Farmland  399  1.16%  644  2.27%
   30,550  88.73%  20,783  73.21%
Commercial:        
Secured  3,314  9.62%  7,098  25.00%
Unsecured  189  0.55%  116  0.41%
   3,503  10.17%  7,214  25.41%
Consumer and other  378  1.10%  347  1.22%
Unallocated  —  —%  45  0.16%
Total allowance for credit losses $34,431  100.00% $28,389  100.00%


The ratio of allowance for credit losses to loans held for investment was 1.12% at December 31, 2023, as compared to 1.02% at December 31, 2022.

Non-interest Income

The following table presents the key components of non-interest income for the periods indicated:

  Three months ended    
(in thousands) December 31,
2023		 September 30,
2023		 $ Change % Change
Service charges on deposit accounts $165  $158  $7  4.43%
Net gain (loss) on sale of securities  (167)  —   (167) —%
Gain on sale of loans  317   396   (79) (19.95)%
Loan-related fees  667   355   312  87.89%
FHLB stock dividends  314   274   40  14.60%
Earnings on bank-owned life insurance  155   127   28  22.05%
Other income  485   74   411  555.41%
Total non-interest income $1,936  $1,384  $552  39.88%


Net gain (loss) on sale of securities. The increase in the net loss on sale of securities related to the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the three months ended December 31, 2023, with no sales occurring during the three months ended September 30, 2023.

Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold during the three months ended December 31, 2023 compared to the three months ended September 30, 2023. During the three months ended December 31, 2023, approximately $5.9 million of loans were sold with an effective yield of 5.41%, as compared to approximately $7.0 million of loans sold with an effective yield of 5.63% during the three months ended September 30, 2023.

Loan-related fees. The increase resulted primarily in the recognition of $0.1 million of swap referral fees and $0.2 million of rate lock fees during the three months ended December 31, 2023, which did not occur during the three months ended September 30, 2023.

Other income. The increase resulted primarily from a $0.4 million gain recorded on distributions received on investments in venture-backed funds during the three months ended December 31, 2023, which did not occur during the three months ended September 30, 2023.

The following table presents the key components of non-interest income for the periods indicated:

  Three months ended   
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Service charges on deposit accounts $165  $97  $68  70.10%
Net gain (loss) on sale of securities  (167)  —   (167) —%
Gain on sale of loans  317   637   (320) (50.24)%
Loan-related fees  667   407   260  63.88%
FHLB stock dividends  314   193   121  62.69%
Earnings on bank-owned life insurance  155   119   36  30.25%
Other income  485   148   337  227.70%
Total non-interest income $1,936  $1,601  $335  20.92%


Net gain (loss) on sale of securities. The increase in the net loss on sale of securities related to the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the three months ended December 31, 2023, with no sales occurring during the three months ended December 31, 2022.

Gain on sale of loans. The decrease resulted from an overall decline in the volume of loans sold during the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. During the three months ended December 31, 2023, approximately $5.9 million of loans were sold with an effective yield of 5.41%, as compared to approximately $14.5 million of loans sold with an effective yield of 4.40% during the three months ended December 31, 2022.

Loan-related fees. The increase resulted from the recognition of $0.1 million of swap referral fees and $0.2 million of rate lock fees during the three months ended December 31, 2023, which did not occur during the three months ended December 31, 2022.

FHLB stock dividends. The increase was primarily due to an increase in yield from dividends received from 7.00% to 8.25% for the three months ended December 31, 2022 and December 31, 2023, respectively, combined with an increase in the average number of shares outstanding of approximately 41,000 when comparing the the three months ended December 31, 2023 to the three months ended December 31, 2022 due to FHLB stock purchases completed in 2023.

Other income. The increase resulted primarily from a $0.4 million gain recorded on distributions received on investments in venture-backed funds during the three months ended December 31, 2023, compared to a $0.1 million gain recorded during the three months ended December 31, 2022.

The following table presents the key components of non-interest income for the periods indicated:

  Year ended   
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Service charges on deposit accounts $575  $467  $108  23.13%
Net gain (loss) on sale of securities  (167)  5   (172) (3,440.00)%
Gain on sale of loans  1,952   2,934   (982) (33.47)%
Loan-related fees  1,719   2,207   (488) (22.11)%
FHLB stock dividends  970   546   424  77.66%
Earnings on bank-owned life insurance  510   412   98  23.79%
Other income  1,952   586   1,366  233.11%
Total non-interest income $7,511  $7,157  $354  4.95%


Service charges on deposit accounts. The increase related to individually immaterial increases in fees earned for services and products to support deposit accounts including, but not limited to, service charges, wire transfer fees, check order fees, and debit card income.

Net gain (loss) on sale of securities. The increase in the net loss on sale of securities resulted from the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the year ended December 31, 2023 compared to the sale of approximately $1.6 million of municipal securities, resulting in a gain of $5.0 thousand during the year ended December 31, 2022.

Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold during the year ended December 31, 2023 compared to the year ended December 31, 2022. During the year ended December 31, 2023, approximately $36.5 million of loans were sold with an effective yield of 5.35%, as compared to approximately $50.8 million of loans sold with an effective yield of 5.78% during the year ended December 31, 2022.

Loan-related fees. The decrease was primarily a result of: (i) a decrease of $0.6 million in swap referral fees and (ii) a decrease of $0.2 million in loan fee income earned on various loan types and services. These decreases were partially offset by: (i) a $0.2 million increase in rate lock fees earned and (ii) a $0.1 million increase in income earned from the credit card program recognized during the year ended December 31, 2023 compared to the year ended December 31, 2022.

FHLB stock dividends. The increase primarily relates to an increase in the number of FHLB Class B shares held for the year ended December 31, 2023 compared to the year ended December 31, 2022 combined with an overall increase in the annualized dividend rates earned year-over-year.

Other income. The increase resulted primarily from a $1.7 million gain recorded on distributions received on investments in venture-backed funds during the year ended December 31, 2023, as compared to a $0.4 million gain recognized during the year ended December 31, 2022.

Non-interest Expense

The following table presents the key components of non-interest expense for the periods indicated:

  Three months ended    
(in thousands) December 31,
2023		 September 30,
2023		 $ Change % Change
Salaries and employee benefits $7,182  $6,876  $306  4.45%
Occupancy and equipment  583   561   22  3.92%
Data processing and software  1,110   1,020   90  8.82%
Federal Deposit Insurance Corporation (“FDIC”) insurance  370   375   (5) (1.33)%
Professional services  658   700   (42) (6.00)%
Advertising and promotional  717   535   182  34.02%
Loan-related expenses  268   345   (77) (22.32)%
Other operating expenses  1,775   1,603   172  10.73%
Total non-interest expense $12,663  $12,015  $648  5.39%


Salaries and employee benefits. The increase was primarily a result of: (i) a $0.3 million increase in salaries, insurance, and benefits, which primarily related to four new employees hired in September 2023 and one new employee hired in December 2023 to support expansion into the San Francisco Bay Area and (ii) a $0.2 million decline in loan origination costs related to lower production. These increases were partially offset by a $0.2 million reduction in the 2023 bonus accrual related to 2023 financial performance which was trued-up during the three months ended December 31, 2023, as compared to the three months ended September 30, 2023.

Advertising and promotional. The increase was primarily due to the timing of events sponsored and attended during the three months ended December 31, 2023 compared to the three months ended September 30, 2023.

Other operating expenses. The increase was primarily due to increased expenses incurred for travel and fees paid for attendance of professional events, conferences, and other business-related events during the three months ended December 31, 2023, as compared to the three months ended September 30, 2023.

The following table presents the key components of non-interest expense for the periods indicated:

  Three months ended    
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Salaries and employee benefits $7,182  $5,698  $1,484  26.04%
Occupancy and equipment  583   511   72  14.09%
Data processing and software  1,110   839   271  32.30%
FDIC insurance  370   245   125  51.02%
Professional services  658   553   105  18.99%
Advertising and promotional  717   568   149  26.23%
Loan-related expenses  268   358   (90) (25.14)%
Other operating expenses  1,775   1,945   (170) (8.74)%
Total non-interest expense $12,663  $10,717  $1,946  18.16%


Salaries and employee benefits. The increase was primarily a result of: (i) a $1.1 million increase in salaries, insurance, and benefits, of which approximately $0.7 million related to 10 new employees hired to support expansion into the San Francisco Bay Area, and (ii) a $0.8 million decrease in the allocation of loan origination costs resulting from lower loan production. These increases were partially offset by a $0.4 million decline in commissions expense due to lower production during the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Data processing and software. The increase was primarily due to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system.

FDIC insurance. The increase related primarily to a final rule adopted by the FDIC to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. FDIC insurance also increased for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to a $266.4 million increase in the assessment base period-over-period.

Professional services. The increase was primarily due to increased audit, IT support, and other consulting fees for services provided for the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Advertising and promotional. The increase was primarily due to increases in business development, marketing, and sponsorship expenses incurred during the three months ended December 31, 2023 compared to the three months ended December 31, 2022 related to an increase in the number of Business Development Officers from December 31, 2022 to December 31, 2023.

Other operating expenses. The decrease was primarily due to $0.3 million of subordinated debt issuance costs recognized as an other expense upon redemption of the subordinated notes in December 2022, which did not reoccur during the three months ended December 31, 2023. This was partially offset by an increase of $0.1 million for IntraFi Network fees resulting from an overall increase in balances carried in the network.

The following table presents the key components of non-interest expense for the periods indicated:

  Year ended    
(in thousands) December 31,
2023		 December 31,
2022		 $ Change % Change
Salaries and employee benefits $27,097  $22,571  $4,526  20.05%
Occupancy and equipment  2,218   2,059   159  7.72%
Data processing and software  4,015   3,091   924  29.89%
FDIC insurance  1,557   850   707  83.18%
Professional services  2,575   2,467   108  4.38%
Advertising and promotional  2,403   1,908   495  25.94%
Loan-related expenses  1,192   1,287   (95) (7.38)%
Other operating expenses  6,718   6,436   282  4.38%
Total non-interest expense $47,775  $40,669  $7,106  17.47%


Salaries and employee benefits. The increase was the result of: (i) a $3.2 million increase in salaries, insurance, and benefits, of which approximately $1.2 million related to 10 new employees hired to support expansion into the San Francisco Bay Area and the remainder of the increase related to increased pay rates and promotions for existing employees; (ii) a $2.7 million decrease in loan origination costs due to lower production; and (iii) a $0.3 million increase in bonus expense due to an increase in the base salaries and number of employees eligible for bonuses in 2023. The increase was partially offset by a $1.8 million decline in commissions expense due to lower production during the year ended December 31, 2023, as compared to the year ended December 31, 2022.

Occupancy and equipment. The increase was the result of a $0.1 million increase in rent expense related to temporary office space to support the San Francisco Bay Area during the second half of 2023 and a new office lease to support back office staff beginning during the fourth quarter of 2023.

Data processing and software. The increase related to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system.

FDIC insurance. The increase related primarily to a final rule adopted by the FDIC to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. FDIC insurance also increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to a $266.4 million increase in the assessment base period-over-period.

Professional services. The increase was due to a $0.5 million increase in audit, IT support, and other consulting fees for services provided for the year ended December 31, 2023 compared to the year ended December 31, 2022. This was partially offset by a decline of $0.3 million relating to: (i) $0.2 million of lower legal fees incurred relating to the subordinated debt offering and redemption completed in 2022, which did not reoccur in 2023 and (ii) $0.1 million of lower recruiting fees incurred for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Advertising and promotional. The increase was primarily due to an increased customer base and an increase in the number of Business Development Officers as of December 31, 2023 compared to December 31, 2022.

Other operating expenses. The increase is primarily related to: (i) a $0.3 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; (ii) a $0.1 million increase in bank charges due to increased activity; (iii) a $0.1 million increase in insurance expenses; and (iv) a $0.1 million net increase in travel, conferences, memberships, and subscription expenses incurred. These increases were partially offset by $0.3 million of subordinated debt issuance costs recognized as an other expense upon redemption of the subordinated notes in December 2022, which did not reoccur during the year ended December 31, 2023.

Provision for Income Taxes

Three months ended December 31, 2023, as compared to the three months ended September 30, 2023

Provision for income taxes for the quarter ended December 31, 2023 decreased by $0.4 million, or 8.38%, to $4.4 million, as compared to $4.8 million for the quarter ended September 30, 2023, which was primarily due to: (i) the decrease in taxable income recognized during the three months ended December 31, 2023 and (ii) a $0.2 million adjustment to the provision recorded during the three months ended September 30, 2023 to true-up the year-to-date effective tax rate, which did not reoccur during the three months ended December 31, 2023. The effective tax rate was 28.72% and 30.07% for the three months ended December 31, 2023 and September 30, 2023, respectively.

Three months ended December 31, 2023, as compared to the three months ended December 31, 2022

Provision for income taxes decreased by $1.1 million, or 20.69%, to $4.4 million for the three months ended December 31, 2023, as compared to $5.5 million for the three months ended December 31, 2022. This decrease is due to the decrease in taxable income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The effective tax rate was 28.72% and 29.23% for the three months ended December 31, 2023 and December 31, 2022, respectively. The lower effective tax rate period-over-period related to multi-state tax return filings for the Company since its inception as a C Corporation. The returns were filed during the second quarter of 2023 and reduced the Company’s blended state tax rate.

Year ended December 31, 2023, as compared to the year ended December 31, 2022

Provision for income taxes increased by $0.8 million, or 4.57%, to $18.9 million for the year ended December 31, 2023, as compared to $18.1 million for the year ended December 31, 2022. This increase is due to an increase in taxable income, partially offset by a decline in the effective tax rate for each period, from 28.73% to 28.34% for the years ended December 31, 2022 and December 31, 2023, respectively. The lower effective tax rate period-over-period related to multi-state tax return filings for the Company since its inception as a C Corporation. The returns were filed during the second quarter of 2023 and reduced the Company’s blended state tax rate.

Webcast Details

Five Star Bancorp will host a live webcast for analysts and investors on Tuesday, January 30, 2024, at 1:00 p.m. ET (10:00 a.m. PT), to discuss its fourth quarter and annual financial results. To view the live webcast, visit the “News & Events” section of the Company’s website under “Events” at https://investors.fivestarbank.com/news-events/events. The webcast will be archived on the Company’s website for a period of 90 days.

About Five Star Bancorp

Five Star is a bank holding company headquartered in Rancho Cordova, California. Five Star operates through its wholly owned banking subsidiary, Five Star Bank. The Bank has seven branches in Northern California.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors, which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in 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 September 30, 2023, in each case under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time.

The Company disclaims any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law.


Condensed Financial Data (Unaudited)

  Three months ended
(in thousands, except per share and share data) December 31,
2023		 September 30,
2023		 December 31,
2022
Revenue and Expense Data      
Interest and fee income $46,180  $45,098  $37,402 
Interest expense  19,502   17,622   8,267 
Net interest income  26,678   27,476   29,135 
Provision for credit losses  800   1,050   1,250 
Net interest income after provision  25,878   26,426   27,885 
Non-interest income:      
Service charges on deposit accounts  165   158   97 
Net gain (loss) on sale of securities  (167)  —   — 
Gain on sale of loans  317   396   637 
Loan-related fees  667   355   407 
FHLB stock dividends  314   274   193 
Earnings on bank-owned life insurance  155   127   119 
Other income  485   74   148 
Total non-interest income  1,936   1,384   1,601 
Non-interest expense:      
Salaries and employee benefits  7,182   6,876   5,698 
Occupancy and equipment  583   561   511 
Data processing and software  1,110   1,020   839 
FDIC insurance  370   375   245 
Professional services  658   700   553 
Advertising and promotional  717   535   568 
Loan-related expenses  268   345   358 
Other operating expenses  1,775   1,603   1,945 
Total non-interest expense  12,663   12,015   10,717 
Income before provision for income taxes  15,151   15,795   18,769 
Provision for income taxes  4,352   4,750   5,487 
Net income $10,799  $11,045  $13,282 
       
Comprehensive Income      
Net income $10,799  $11,045  $13,282 
Net unrealized holding gain (loss) on securities available-for-sale during the period  5,744   (4,195)  3,714 
Reclassification for net (gain) loss on sale of securities included in net income  167   —   — 
Less: Income tax expense (benefit) related to other comprehensive income (loss)  1,747   (1,240)  1,098 
Other comprehensive income (loss)  4,164   (2,955)  2,616 
Total comprehensive income $14,963  $8,090  $15,898 
       
Share and Per Share Data      
Earnings per common share:      
Basic $0.63  $0.64  $0.77 
Diluted $0.63  $0.64  $0.77 
Book value per share $16.56  $15.88  $14.66 
Tangible book value per share(1) $16.56  $15.88  $14.66 
Weighted average basic common shares outstanding  17,175,445   17,175,034   17,143,920 
Weighted average diluted common shares outstanding  17,193,114   17,194,825   17,179,863 
Shares outstanding at end of period  17,256,989   17,257,357   17,241,926 
       
Credit Quality      
Allowance for credit losses to period end nonperforming loans  1,752.70%  1,699.35%  7,026.98%
Nonperforming loans to loans held for investment  0.06%  0.07%  0.01%
Nonperforming assets to total assets  0.05%  0.06%  0.01%
Nonperforming loans plus performing loan modifications to loans held for investment  0.06%  0.07%  0.01%
       
Selected Financial Ratios      
ROAA  1.26%  1.30%  1.70%
ROAE  15.45%  16.09%  21.50%
Net interest margin  3.19%  3.31%  3.83%
Loan to deposit  102.19%  99.57%  100.67%

(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.



  Year ended
(in thousands, except per share and share data) December 31,
2023		 December 31,
2022
Revenue and Expense Data    
Interest and fee income $174,382  $117,918 
Interest expense  63,502   14,848 
Net interest income  110,880   103,070 
Provision for credit losses  4,000   6,700 
Net interest income after provision  106,880   96,370 
Non-interest income:    
Service charges on deposit accounts  575   467 
Net gain (loss) on sale of securities  (167)  5 
Gain on sale of loans  1,952   2,934 
Loan-related fees  1,719   2,207 
FHLB stock dividends  970   546 
Earnings on bank-owned life insurance  510   412 
Other income  1,952   586 
Total non-interest income  7,511   7,157 
Non-interest expense:    
Salaries and employee benefits  27,097   22,571 
Occupancy and equipment  2,218   2,059 
Data processing and software  4,015   3,091 
FDIC insurance  1,557   850 
Professional services  2,575   2,467 
Advertising and promotional  2,403   1,908 
Loan-related expenses  1,192   1,287 
Other operating expenses  6,718   6,436 
Total non-interest expense  47,775   40,669 
Income before provision for income taxes  66,616   62,858 
Provision for income taxes  18,882   18,057 
Net income $47,734  $44,801 
     
Comprehensive Income    
Net income $47,734  $44,801 
Net unrealized holding gain (loss) on securities available-for-sale during the period  2,228   (18,291)
Reclassification for net (gain) loss on sale of securities included in net income  167   (5)
Less: Income tax expense (benefit) related to other comprehensive income (loss)  708   (5,408)
Other comprehensive income (loss)  1,687   (12,888)
Total comprehensive income $49,421  $31,913 
     
Share and Per Share Data    
Earnings per common share:    
Basic $2.78  $2.61 
Diluted $2.78  $2.61 
Book value per share $16.56  $14.66 
Tangible book value per share(1) $16.56  $14.66 
Weighted average basic common shares outstanding  17,166,592   17,128,282 
Weighted average diluted common shares outstanding  17,187,969   17,165,610 
Shares outstanding at end of period  17,256,989   17,241,926 
     
Credit Quality    
Allowance for credit losses to period end nonperforming loans  1,752.70%  7,026.98%
Nonperforming loans to loans held for investment  0.06%  0.01%
Nonperforming assets to total assets  0.05%  0.01%
Nonperforming loans plus performing loan modifications to loans held for investment  0.06%  0.01%
     
Selected Financial Ratios    
ROAA  1.44%  1.57%
ROAE  17.85%  18.80%
Net interest margin  3.42%  3.75%
Loan to deposit  102.19%  100.67%

(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.



(in thousands) December 31,
2023		 September 30,
2023		 December 31,
2022
Balance Sheet Data      
Cash and due from financial institutions $26,986  $26,744  $32,561 
Interest-bearing deposits in banks  294,590   296,804   227,430 
Time deposits in banks  5,858   6,971   9,849 
Securities - available-for-sale, at fair value  108,083   104,086   115,988 
Securities - held-to-maturity, at amortized cost  3,077   3,104   3,756 
Loans held for sale  11,464   9,326   9,416 
Loans held for investment  3,081,719   3,009,930   2,791,326 
Allowance for credit losses - loans  (34,431)  (34,028)  (28,389)
Loans held for investment, net of allowance for credit losses  3,047,288   2,975,902   2,762,937 
FHLB stock  15,000   15,000   10,890 
Operating leases, right-of-use asset  5,284   4,799   3,981 
Premises and equipment, net  1,623   1,564   1,605 
Bank-owned life insurance  17,180   17,023   14,669 
Interest receivable and other assets  56,692   43,717   34,077 
Total assets $3,593,125  $3,505,040  $3,227,159 
       
Non-interest-bearing deposits $831,101  $833,434  $971,246 
Interest-bearing deposits  2,195,795   2,198,776   1,810,758 
Total deposits  3,026,896   3,032,210   2,782,004 
Subordinated notes, net  73,749   73,713   73,606 
FHLB advances  170,000   90,000   100,000 
Operating lease liability  5,603   5,043   4,243 
Interest payable and other liabilities  31,103   30,050   14,481 
Total liabilities  3,307,351   3,231,016   2,974,334 
       
Common stock  220,505   220,266   219,543 
Retained earnings  77,036   69,689   46,736 
Accumulated other comprehensive loss, net  (11,767)  (15,931)  (13,454)
Total shareholders’ equity  285,774   274,024   252,825 
Total liabilities and shareholders’ equity $3,593,125  $3,505,040  $3,227,159 
       
Quarterly Average Balance Data      
Average loans held for investment and sale $3,055,042  $2,982,140  $2,703,865 
Average interest-earning assets  3,319,300   3,293,045   3,021,624 
Average total assets  3,399,660   3,370,802   3,095,288 
Average deposits  3,009,078   2,984,208   2,718,409 
Average total equity  277,295   272,386   245,019 
       
Capital Ratios      
Total shareholders’ equity to total assets  7.95%  7.82%  7.83%
Tangible shareholders’ equity to tangible assets(1)  7.95%  7.82%  7.83%
Total capital (to risk-weighted assets)  12.30%  12.37%  12.46%
Tier 1 capital (to risk-weighted assets)  9.07%  9.07%  8.99%
Common equity Tier 1 capital (to risk-weighted assets)  9.07%  9.07%  8.99%
Tier 1 leverage ratio  8.73%  8.58%  8.60%

(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.



Non-GAAP Reconciliation (Unaudited)

The Company uses financial information in its analysis of the Company’s performance that is not in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP. Additionally, these non-GAAP measures are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses, but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons.

Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated.

Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.

Pre-tax, pre-provision income is defined as pre-tax income plus provision for credit losses. The most directly comparable GAAP financial measure is pre-tax income.

The following reconciliation tables provide a more detailed analysis of this non-GAAP financial measure:

  Three months ended
(in thousands) December 31,
2023		 September 30,
2023		 December 31,
2022
Pre-tax, pre-provision income      
Pre-tax income $15,151  $15,795  $18,769 
Add: provision for credit losses  800   1,050   1,250 
Pre-tax, pre-provision income $15,951  $16,845  $20,019 


  Year ended
(in thousands) December 31,
2023		 December 31,
2022
Pre-tax, pre-provision income    
Pre-tax income $66,616  $62,858 
Add: provision for credit losses  4,000   6,700 
Pre-tax, pre-provision income $70,616  $69,558 


Media Contact:
Heather C. Luck, Chief Financial Officer
Five Star Bancorp
(916) 626-5008
hluck@fivestarbank.com

Shelley R. Wetton, Chief Marketing Officer
Five Star Bancorp
(916) 284-7827
swetton@fivestarbank.com

 


FAQ

What is the ticker symbol for Five Star Bancorp?

The ticker symbol for Five Star Bancorp is FSBC.

What was the net income for Five Star Bancorp in Q4 2023?

The net income for Five Star Bancorp in Q4 2023 was $10.8 million.

How did the net income for 2023 compare to 2022 for Five Star Bancorp?

The net income for 2023 was $47.7 million, compared to $44.8 million for 2022.

What is the return on average assets for Five Star Bancorp in Q4 2023?

The return on average assets for Five Star Bancorp in Q4 2023 was 1.26%.

What was the net interest margin for Five Star Bancorp in Q4 2023?

The net interest margin for Five Star Bancorp in Q4 2023 was 3.19%.

Stock FSBC logo
Five Star Bancorp

NASDAQ:FSBC

FSBC Rankings

#2932 Ranked by Market Cap
#1181 Ranked by Dividends

FSBC Latest News

Oct 28, 2024
Five Star Bancorp Announces Third Quarter 2024 Results
Oct 18, 2024
Five Star Bancorp Declares Third Quarter Cash Dividend
Oct 15, 2024
Five Star Bancorp Announces Third Quarter 2024 Earnings Release Date and Webcast
Sep 3, 2024
Five Star Bancorp opens San Francisco office, bringing personalized, concierge banking services to the San Francisco Bay Area
Jul 24, 2024
Five Star Bancorp Announces Second Quarter 2024 Results

FSBC Stock Data

627.42M
15.57M
26.6%
56.19%
0.79%
Banks - Regional
State Commercial Banks
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United States of America
RANCHO CORDOVA