Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Five Star Bancorp (FSBC, Financial) successfully opened a new full-service office in San Francisco's Financial District, enhancing its presence in the Bay Area.
- The company reported a significant increase in non-wholesale deposits by $92.9 million during the third quarter.
- Asset quality remains strong with nonperforming loans decreasing to 0.05% of loans held for investment.
- Five Star Bancorp (FSBC) maintained a stable net interest margin, which decreased by only 2 basis points.
- The company declared a consistent dividend of $0.20 per share for the first three quarters of 2024, reflecting shareholder value.
Negative Points
- Net interest margin slightly decreased from 3.39% to 3.37% compared to the previous quarter.
- Non-interest income decreased to $1.4 million from $1.6 million in the previous quarter, primarily due to reduced gains from loans sold.
- Non-interest expense increased by $0.3 million, driven by higher salaries and employee benefits.
- The cost of total deposits rose by 16 basis points to 253 basis points during the quarter.
- The common equity Tier 1 ratio decreased from 11.27% to 10.93% between June 30, 2024, and September 30, 2024.
Q & A Highlights
Q: Can you elaborate on the impressive noninterest-bearing deposit growth this quarter? Was it widespread across your customer base, and do you expect these balances to continue increasing?
A: We had one long-term relationship that contributed significantly, accounting for about 20% of the increase, while the rest was quite granular. We believe we're hitting our stride in growing noninterest-bearing deposits and expect further increases in the fourth quarter, although perhaps not as substantial as in the third quarter. - James Beckwith, President and CEO
Q: What is your strategy regarding loan purchases, and how does the pipeline look for the fourth quarter?
A: Our purchase strategy involved loans from Bankers Health Group, capped at $300 million. We are currently at that cap, so future purchases will maintain this balance. Our loan pipeline is strong, and we anticipate mid-single-digit loan growth in the fourth quarter. - James Beckwith, President and CEO
Q: With the recent 50 basis point rate cut, what are your expectations for the net interest margin (NIM) in the near term?
A: We financed our loan purchases with short-term broker and state deposits, which will reprice in line with Fed moves. While we may not see much impact in Q4, we expect a noticeable effect in Q1 and Q2 of 2025. - James Beckwith, President and CEO
Q: Can you provide details on the cost of CDs added during the quarter and their impact on the margin?
A: We added a large CD with the state at a rate below 4.60%. As CDs reprice, particularly $275 million of broker CDs in December at a 5.01% rate, we anticipate a significant rate reduction, depending on Fed actions. - James Beckwith, President and CEO; Heather Luck, CFO
Q: Regarding your Bay Area expansion, how is the talent market, and what are your hiring expectations?
A: The hiring landscape has evolved, and we are now a recognized entity in the Bay Area, attracting high-quality talent. We have a strong hiring pipeline with several business development and support roles in focus. - James Beckwith, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
