FIVE STAR BANCORP Q4 FY2024 earnings call

• Expansion: Opened a full-service office in San Francisco's financial district on September 3, 2024, and added 18 professionals in 2024 to support expansion.
• Deposit Growth: Non-wholesale deposits grew $331.3 million in 2024.
• Underwriting and Efficiency: Conservatively underwrote with a 49.92% LTV on commercial real estate and a 41.21% efficiency ratio.
• Dividend: Paid $0.20 per share dividend each quarter in 2024.
• Loan Performance: Loans held for investment increased, average loan yields improved, and the pipeline remained solid.
• Asset Quality: Non-performing loans were 0.05%, and the allowance for credit losses totaled $37.8 million.
• Deposit Composition: Deposit relationships greater than $5 million constituted 61.13% of total deposits, with an average age of ~9.28 years; local agency deposits accounted for 23% of deposits.

Loans: Loans held for investment increased by $72.1 million (2.08%) quarter-over-quarter and $451 million (14.63%) year-over-year. Consumer and other concentrations of the loan portfolio increased from 1.2% as of December 31, 2023 to 7.9% as of December 31, 2024; commercial real estate concentration decreased from 86.76% to 80.75%. Deposits: Non-wholesale deposits grew by $331.3 million in 2024. Fourth quarter deposits increased by $158 million (4.65%). Wholesale deposits increased $150 million quarter-over-quarter. Non-wholesale deposits increased $8 million. Cost of total deposits was 258 basis points in Q4 2024. Net Interest Margin: Decreased by one basis point in Q4 2024, ending at 3.36%; for the year, 3.32%. Income: Net income for Q4 was $13.3 million, and for the year was $45.7 million. Non-interest income in Q4 was $1.7 million, and for the year was $6.5 million. Non-interest expense in Q4 was $14.5 million, and for the year was $54.5 million.

• Target 8% growth for both loans and deposits in 2025.
• Expect margin expansion as investments made in 2024 begin to pay off, leading to operating leverage.
• Plan to keep BHG balances around $300 million and roll wholesale CDs consistently throughout 2025.

Q: Please give flavor for tender deposits, duration, cost of incremental deposits and competitive landscape for 2025.

A: Wholesale deposits are short-term CDs repricing every three months, cost ~4.59% weighted average rate. Competition is intense, and targeting 8% growth for deposits.

Q: How much loan growth is function of demand vs market share, and trends in payoffs?

A: Loan growth is driven by active business development with 31 professionals. Payoffs in commercial real estate are due to debt structures being taken to agency/life companies or CMBS market, a natural progression.

Q: Seasonal impact on non-wholesale deposits, loan/deposit growth parameters, and expense growth in 2025?

A: Seasonal distributions by commercial customers in late December impacted non-wholesale deposits. Target 8% growth for loans and deposits. Expect expense growth to remain similar to Q4 2024 in first half of 2025 with potential reassessment later.