Five Star Bancorp(FSBC) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2025, Five Star Bancorp achieved a year-over-year growth in total loans held for investments of 15%, total deposit growth of 18%, net income growth of 35%, and an increase in earnings per share of 28% to $2.90 per share [5][6] - Financial highlights for the fourth quarter include $17.6 million in net income, earnings per share of $0.83, return on average assets of 1.50%, and return on average equity of 15.97% [5] - The net interest margin expanded 10 basis points to 3.66%, and the total cost of deposits declined by 21 basis points to 2.23% [5][6] Business Line Data and Key Metrics Changes - Loans held for investment grew by $187.7 million, or 19% on an annualized basis in the fourth quarter, and total deposits increased by $97.6 million, or 10% on an annualized basis [6] - The commercial real estate portfolio saw significant growth, increasing by $161.4 million in the fourth quarter and $448.5 million for the year [7] Market Data and Key Metrics Changes - The company expanded its footprint in the San Francisco Bay Area through the opening of a new office in Walnut Creek, contributing to overall growth [4] - Non-wholesale deposits increased by $139.1 million during the fourth quarter and $738.1 million during the year, indicating strong market demand [8] Company Strategy and Development Direction - The company is committed to further developing all business verticals while expanding into new markets, blending technology with personalized service [16] - Five Star Bancorp aims to maintain a high-tech and high-touch approach to business, focusing on innovation and service excellence [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve a 10% growth rate in both loans and deposits for 2026, despite acknowledging the challenges of maintaining such growth [24][25] - The competitive landscape for deposits is described as very competitive, with a focus on core deposit growth as a competitive advantage [22][23] Other Important Information - The company successfully reduced its balance of wholesale deposits by $95 million, or 17%, in 2025, while growing non-wholesale deposits significantly [6][8] - The efficiency ratio was reported at 40.62% for the fourth quarter and 41.03% for the year, reflecting ongoing investments in business development [5][13] Q&A Session Summary Question: Drivers behind the acceleration in loan originations - Management noted that all verticals performed well, with significant contributions from the food and agribusiness sector, particularly during the fourth quarter [21] Question: Competitive landscape for deposits - Management highlighted the competitive nature of the deposit market and emphasized the importance of their business development team in driving core deposit growth [22][23] Question: Expense growth outlook for 2026 - Management indicated that expenses are expected to grow at a rate of 148%-155% of total assets, accommodating growth and regular maintenance [35][36] Question: Capital comfortability and outlook - Management expressed confidence in maintaining capital positions with a 10% growth rate, while acknowledging that higher growth rates would necessitate a capital event [44][46]