Five Star Bancorp(FSBC) - 2025 Q1 - Quarterly Results

Q1 2025 Financial Performance Overview This section provides a comprehensive overview of Five Star Bancorp's Q1 2025 financial results, including income statement analysis and key performance drivers Q1 2025 Performance Highlights Five Star Bancorp reported a strong Q1 2025 with net income of $13.1 million, a significant 23.3% increase year-over-year, though slightly down from the previous quarter, driven by robust loan and deposit growth, an expanded net interest margin of 3.45%, and continued expansion in the San Francisco Bay Area, while maintaining a stable dividend of $0.20 per share and earning recognition as a top-performing bank by S&P Global Market Intelligence | (in thousands, except per share data) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income | $13,111 | $13,317 | $10,631 | | Diluted EPS | $0.62 | $0.63 | $0.62 | | ROAA | 1.30% | 1.31% | 1.22% | | ROAE | 13.28% | 13.48% | 14.84% | | Net Interest Margin | 3.45% | 3.36% | 3.14% | - Total loans held for investment grew by $89.1 million (2.52% QoQ) and total deposits increased by $178.4 million (5.01% QoQ)[4] - The company declared a cash dividend of $0.20 per share, consistent with the previous quarter[5][7] - Expansion in the San Francisco Bay Area continues, with the team growing to 31 employees and generating $379.8 million in total deposits as of March 31, 2025[3][8] Income Statement Analysis Net income for Q1 2025 was $13.1 million, decreasing slightly by 1.55% QoQ due to higher non-interest expenses and provision for credit losses, while growing strongly by 23.33% YoY, primarily driven by a $7.2 million increase in net interest income QoQ Performance Comparison (Q1 2025 vs. Q4 2024) Net income decreased by $0.2 million to $13.1 million from Q4 2024, driven by increased provision for credit losses and non-interest expense, partially offset by higher net interest income from lower deposit interest costs | (in thousands) | Q1 2025 | Q4 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $33,977 | $33,489 | $488 | 1.46% | | Provision for credit losses | $1,900 | $1,300 | $600 | 46.15% | | Non-interest income | $1,359 | $1,666 | ($307) | (18.43)% | | Non-interest expense | $15,045 | $14,488 | $557 | 3.84% | | Net income | $13,111 | $13,317 | ($206) | (1.55)% | YoY Performance Comparison (Q1 2025 vs. Q1 2024) Net income increased by $2.5 million (23.3%) to $13.1 million from Q1 2024, primarily fueled by a $7.2 million increase in net interest income, partially offset by higher provision for credit losses and non-interest expenses | (in thousands) | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $33,977 | $26,744 | $7,233 | 27.05% | | Provision for credit losses | $1,900 | $900 | $1,000 | 111.11% | | Non-interest expense | $15,045 | $12,716 | $2,329 | 18.32% | | Net income | $13,111 | $10,631 | $2,480 | 23.33% | Net Interest Income and Margin Net interest income (NII) for Q1 2025 was $34.0 million, with a net interest margin (NIM) of 3.45%, showing QoQ growth due to lower deposit interest costs and YoY expansion driven by increased loan balances and yields - QoQ, NII increased by 1.46% to $34.0 million, and NIM rose to 3.45% from 3.36% in Q4 2024, primarily due to a $1.1 million decrease in interest expense[20][22] - YoY, NII increased by 27.05% from $26.7 million, and NIM expanded to 3.45% from 3.14% in Q1 2024, driven by a $485.7 million increase in average loan balance and a 31 basis point improvement in loan yields[20][23] | (in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Average Interest-Earning Assets | $3,997,037 | $3,965,867 | $3,424,469 | | Net Interest Income | $33,977 | $33,489 | $26,744 | | Net Interest Margin | 3.45% | 3.36% | 3.14% | | Cost of Funds | 2.56% | 2.65% | 2.62% | Non-Interest Income Total non-interest income for Q1 2025 was $1.4 million, decreasing both QoQ and YoY primarily due to the non-recurrence of income from equity investments in venture-backed funds and lower gain on sale of loans - QoQ, non-interest income fell by $0.3 million, mainly because $0.3 million income from venture-backed fund investments in Q4 2024 did not recur[29][31] - YoY, non-interest income fell by $0.5 million, also due to non-recurring income from venture-backed funds and a $0.2 million decrease in gain on sale of loans[31][32] Non-Interest Expense Non-interest expense totaled $15.0 million in Q1 2025, increasing both QoQ and YoY primarily due to higher salaries and employee benefits reflecting increased headcount for company expansion - QoQ, non-interest expense increased by $0.6 million, with salaries and benefits rising by $0.8 million due to higher salary, bonus, and lower deferred loan origination costs[33] - YoY, non-interest expense increased by $2.3 million, with salaries and benefits rising by $1.6 million largely due to a 13.19% increase in headcount, alongside a $0.3 million increase in data processing and software costs[36][37] Provision for Income Taxes The provision for income taxes was $5.3 million in Q1 2025, with an effective tax rate of 28.71%, decreasing QoQ due to a non-recurring true-up adjustment and increasing YoY due to higher pre-tax income - The effective tax rate was 28.71% in Q1 2025, compared to 31.24% in Q4 2024 and 28.94% in Q1 2024[40][41] - The QoQ decrease in tax provision was due to slightly lower taxable income and a $0.6 million provision true-up in Q4 2024 that did not recur[40] Balance Sheet and Asset Quality This section analyzes the company's balance sheet structure, loan and deposit portfolio composition, and asset quality metrics as of Q1 2025 Balance Sheet Analysis As of March 31, 2025, total assets grew to $4.25 billion, a 4.73% increase QoQ, driven by strong loan and cash growth, with total deposits increasing by 5.01% to $3.74 billion, while maintaining approximately $2.0 billion in liquidity and no short-term borrowings | (in thousands) | Mar 31, 2025 | Dec 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $4,245,057 | $4,053,278 | 4.73% | | Total Loans Held for Investment | $3,621,819 | $3,532,686 | 2.52% | | Total Deposits | $3,736,354 | $3,557,994 | 5.01% | | Total Shareholders' Equity | $406,451 | $396,624 | 2.48% | - Total liquidity, including cash and available borrowing capacity, was approximately $2.0 billion[16][17] - Insured and collateralized deposits represented 67.55% of total deposits, up slightly from 66.92% in the prior quarter[13] - The company had no short-term borrowings at the end of Q1 2025, consistent with the prior quarter[8] Loan and Deposit Portfolio Composition The loan portfolio as of March 31, 2025, totaled $3.62 billion, heavily concentrated in commercial real estate at $2.94 billion, while the $2.80 billion interest-bearing deposit base is dominated by money market and time accounts Loan Composition (in thousands) | Loan Type | Amount | | :--- | :--- | | Commercial Real Estate | $2,941,201 | | Commercial (Secured & Unsecured) | $205,495 | | Consumer and other | $277,093 | | Other Real Estate & Construction | $199,948 | | Total Loans Held for Investment | $3,621,819 | Interest-Bearing Deposit Composition (in thousands) | Deposit Type | Amount | | :--- | :--- | | Money market accounts | $1,577,473 | | Time accounts | $801,386 | | Interest-bearing transaction accounts | $295,633 | | Savings accounts | $128,210 | | Total Interest-Bearing Deposits | $2,802,702 | Asset Quality and Allowance for Credit Losses Asset quality remained strong in Q1 2025, with nonperforming loans to total loans held for investment stable at 0.05%, and the allowance for credit losses increasing to $39.2 million (1.08% of loans) reflecting provisions partially offset by net charge-offs - The ratio of nonperforming loans to loans held for investment remained stable at 0.05%[27] - The allowance for credit losses increased by $1.4 million to $39.2 million, representing 1.08% of loans held for investment[26][28] - Loans designated as 'watch' decreased from $123.4 million to $112.0 million, while 'substandard' loans increased slightly from $2.6 million to $3.7 million[27] Supplementary and Non-GAAP Information This section presents unaudited condensed financial data and reconciliations of non-GAAP financial measures to their GAAP equivalents Condensed Financial Data (Unaudited) This section provides detailed unaudited financial statements for the quarter ended March 31, 2025, with comparative data, including the income statement, balance sheet, and key financial ratios - Provides detailed breakdowns of the income statement, balance sheet, per share data, financial ratios, and credit quality metrics[47][48][49] Non-GAAP Reconciliation The company provides reconciliations for non-GAAP financial measures, such as Pre-tax, pre-provision income, which was $20.3 million for Q1 2025, to their most directly comparable GAAP measures - The company uses non-GAAP measures like Tangible Book Value Per Share and Pre-tax, Pre-provision Income to supplement GAAP results[51] Pre-tax, pre-provision income reconciliation (in thousands) | | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Pre-tax income (GAAP) | $18,391 | $19,367 | $14,961 | | Add: provision for credit losses | $1,900 | $1,300 | $900 | | Pre-tax, pre-provision income (Non-GAAP) | $20,291 | $20,667 | $15,861 |