• Net Income: $10.9 million for the third quarter.
• Return on Average Assets: 1.18% for the quarter.
• Return on Average Equity: 11.31% for the quarter.
• Average Loan Yield: 5.98%, an increase of 15 basis points over the prior quarter.
• Net Interest Margin: 3.37% for the quarter, slightly down from 3.39% in the prior quarter.
• Nonperforming Loans: Decreased to 0.05% of loans held for investment.
• Allowance for Credit Losses: $37.6 million at quarter end.
• Provision for Credit Losses: $2.8 million recorded during the quarter.
• Deposits: Increased by $250.3 million or 7.95% compared to the previous quarter.
• Noninterest-bearing Deposits: Increased to 26.67% of total deposits.
• Cost of Total Deposits: 253 basis points, an increase of 16 basis points from the previous quarter.
• Common Equity Tier 1 Ratio: Decreased from 11.27% to 10.93% between June 30, 2024, and September 30, 2024.
• Non-interest Income: Decreased to $1.4 million from $1.6 million in the previous quarter.
• Non-interest Expense: Increased by $0.3 million due to higher salaries and employee benefits.

• Warning! GuruFocus has detected 3 Warning Sign with BMRN.

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 (NASDAQ:FSBC) 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 (NASDAQ: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.