Five Star Bancorp(US:FSBC)2025-10-28 18:02Financial Data and Key Metrics Changes - The company reported net income of $16.3 million for Q3 2025, with earnings per share at $0.77, a return on average assets of 1.44%, and a return on average equity of 15.35% [3][4] - Net interest margin expanded by three basis points to 3.56%, while the cost of total deposits decreased by two basis points to 2.44% [3][4] - The efficiency ratio for the third quarter was 40.13% [4] Business Line Data and Key Metrics Changes - Loans held for investment grew by $129.2 million, or 14% on an annualized basis, while total deposits increased by approximately $208.8 million, or 21% on an annualized basis [4] - Non-wholesale deposits increased by $359 million, or 11%, whereas wholesale deposits decreased by $150.2 million, or 23% [4] - Non-performing loans represented only five basis points of total loans held for investment, indicating strong asset quality [4][5] Market Data and Key Metrics Changes - Total assets increased by $228.3 million, primarily driven by loan growth in the commercial real estate portfolio, which grew by $77.7 million [5] - Non-interest-bearing deposits remained consistent at 26% of total deposits as of September 30, 2025, with approximately 60% of deposit relationships totaling more than $5 million [6] Company Strategy and Development Direction - The company is focused on organic growth and maintaining a differentiated client experience, with a commitment to community partners throughout Northern California [3][4] - The opening of a new full-service office in Walnut Creek is part of the strategy to expand in the San Francisco Bay Area, which has shown significant growth potential [8] - The company aims to eliminate brokered deposits over time while optimizing its funding base through core deposit growth [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to adapt to changing economic conditions while focusing on long-term strategy execution [9] - The company anticipates deposit growth of 1%-2% in Q4 2025, acknowledging that replicating the strong growth seen in Q3 may be challenging [13] - Management highlighted the importance of maintaining strong credit quality and conservative underwriting practices to support future growth [5][8] Other Important Information - A cash dividend of $0.20 per share was declared by the board, expected to be paid in November [4] - The company recorded a $2.5 million provision for credit losses during the quarter, primarily due to loan growth [5] Q&A Session Summary Question: Core deposit growth and optimization - Management noted exceptional core deposit growth in Q3, driven by new clients across all platforms, but anticipates slower growth in Q4 due to efforts to reduce brokered deposits [12][13] Question: Loan payoffs and paydowns - Management explained that payoffs are influenced by the business model, particularly in MHC and RV park lending, and expect this trend to continue [18][21] Question: Growth opportunities and team expansion - Management highlighted growth in the ag team and other segments, with a focus on larger credits that significantly impact both deposits and loans [22][24] Question: Net interest margin outlook - Management expressed optimism about margin expansion in a down rate environment, with expectations of continued loan repricings contributing positively [31][33] Question: M&A landscape - Management indicated a preference for organic growth but remains open to opportunistic M&A if a compelling opportunity arises [60][61]