• Net Income (Q4 2024): $13.3 million
• Net Income (2024): $45.7 million
• Return on Average Assets (Q4 2024): 1.31%
• Return on Average Assets (2024): 1.23%
• Return on Average Equity (Q4 2024): 13.48%
• Return on Average Equity (2024): 12.72%
• Average Loan Yield (Q4 2024): 6.01%
• Average Loan Yield (2024): 5.89%
• Net Interest Margin (Q4 2024): 3.36%
• Net Interest Margin (2024): 3.32%
• Deposits Increase (Q4 2024): $158 million or 4.65%
• Deposits Increase (2024): $531.1 million or 17.55%
• Loan Originations (Q4 2024): $263.3 million
• Loan Originations (2024): $1.1 billion
• Allowance for Credit Losses (Dec 31, 2024): $37.8 million
• Provision for Credit Losses (Q4 2024): $1.3 million
• Provision for Credit Losses (2024): $7 million
• Non-Interest Income (Q4 2024): $1.7 million
• Non-Interest Income (2024): $6.5 million
• Non-Interest Expense (Q4 2024): $14.5 million
• Non-Interest Expense (2024): $54.5 million
• Common Equity Tier 1 Ratio (Dec 31, 2024): 11.2%

• Warning! GuruFocus has detected 2 Warning Signs with LMT.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Five Star Bancorp (NASDAQ:FSBC) successfully expanded into the San Francisco market, opening a full-service office and adding 18 seasoned professionals to support growth.
• The company achieved significant growth in non-wholesale deposits, increasing by $331.3 million during 2024.
• Asset quality remained strong with non-performing loans at 0.05% of loans held for investment, consistent with previous periods.
• FSBC maintained a conservative underwriting approach with a 49.92% loan-to-value ratio on commercial real estate.
• The company declared a consistent dividend of $0.20 per share for each quarter of 2024, reflecting strong shareholder value delivery.

Negative Points

• Net interest margin slightly decreased from 3.37% in the prior quarter to 3.36% in the fourth quarter of 2024.
• Non-interest income decreased from $7.5 million in 2023 to $6.5 million in 2024, primarily due to lower income from equity investments and venture-backed funds.
• Non-interest-bearing deposits as a percentage of total deposits decreased to 25.93% at the end of the fourth quarter from 27.46% at the end of the prior year.
• The allowance for credit losses increased to $37.8 million, with a $1.3 million provision recorded in the fourth quarter due to loan growth.
• Operating expenses increased, with non-interest expense rising from $47.8 million in 2023 to $54.5 million in 2024, driven by expansion-related costs.

Q & A Highlights

Q: Can you provide details on the growth of deposits, particularly the nature and cost of the new deposits? A: James Beckwith, President and CEO, explained that the growth was primarily on the wholesale side, with short-term certificates of deposits set up to reprice every three months. Heather Luck, CFO, added that the weighted average rate for these deposits is 4.59%, with a total of about $560 million.

Q: How do you view the competitive landscape for deposits in 2025, and what is your outlook for organic core deposit growth? A: James Beckwith noted that the banking industry is always competitive, and attracting core deposits remains challenging. The company targets an 8% annual growth rate for deposits, acknowledging that competition will likely increase as the industry grows.

Q: With the investments in San Francisco largely complete, do you expect operating leverage to improve in 2025? A: James Beckwith anticipates slight margin expansion and expects most of it to contribute to the bottom line. The company has invested in personnel and technology, which should drive growth and improve operating leverage.

Q: What factors are driving loan growth, and what trends are you seeing in payoffs and pay-downs? A: James Beckwith attributed loan growth to the active business development efforts of their team. Payoffs are often due to clients refinancing with agencies or life companies, which is a natural progression in their commercial real estate portfolio.

Q: Can you discuss the expansion plans in the Bay Area and the potential for market share gains? A: James Beckwith highlighted the Bay Area as a diverse and promising market, with plans to expand physically into the East Bay, particularly Walnut Creek. The company is focused on attracting experienced bankers to capitalize on market opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.