RANCHO CORDOVA, Calif., July 24, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (NASDAQ:FSBC) ("Five Star" or the "Company"), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the "Bank"), today reported net income of $10.8 million for the three months ended June 30, 2024, as compared to $10.6 million for the three months ended March 31, 2024 and $12.7 million for the three months ended June 30, 2023. Second Quarter Highlights Performance and operating highlights for the Company for the periods noted below included the following:   Three months ended (in thousands, except per share and share data) June 30,2024   March 31,2024   June 30,2023 Return on average assets ("ROAA")   1.23 %     1.22 %     1.55 % Return on average equity ("ROAE")   11.72 %     14.84 %     19.29 % Pre-tax income $ 15,152     $ 14,961     $ 17,169   Pre-tax, pre-provision income(1)   17,152       15,861       18,419   Net income   10,782       10,631       12,729   Basic earnings per common share $ 0.51     $ 0.62     $ 0.74   Diluted earnings per common share   0.51       0.62       0.74   Weighted average basic common shares outstanding   21,039,798       17,190,867       17,165,344   Weighted average diluted common shares outstanding   21,058,085       17,272,994       17,168,995   Shares outstanding at end of period   21,319,583       17,353,251       17,257,357   (1) See the section entitled "Non-GAAP Reconciliation (Unaudited)" for a reconciliation of this non-GAAP financial measure.   James E. Beckwith, President and Chief Executive Officer, commented on the financial results: "We delivered strong second quarter results driven by continued momentum in the markets we serve. Total loans increased by $157.2 million, or 20.2% when annualized, and total deposits increased by $193.9 million, or 26.2% when annualized, which we attribute to the growing demand for our differentiated customer experience and the strength of our team. We are seeing a positive turn in net interest margin with a 25 basis point increase from 3.14% in the first quarter to 3.39% in the second quarter of 2024. We are pleased to have decreased short-term borrowings from $120.0 million to zero. We are also pleased that, in addition to a first quarter cash dividend in 2024, we declared a second quarter cash dividend of $0.20 per share, exemplifying our focus on shareholder value. To safeguard this value, we diligently monitor changing market conditions and are confident in the Bank's resilience in any interest rate environment. In the second quarter, our successful public offering resulted in the issuance of 3,967,500 additional shares of common stock with net proceeds of approximately $80.9 million, allowing us to execute on our organic growth strategy and maintain momentum in the San Francisco Bay Area. We now have 19 employees in the San Francisco Bay Area who have contributed $161.3 million in deposits since the expansion began in June 2023. We expect this momentum to continue and to benefit our shareholders, employees, clients, and community. In the first half of 2024, the Company and our employees received numerous awards and recognition. The employee awards include a: Sacramento Business Journal's Women Who Mean Business award Sacramento Business Journal C-Suite award National Association of Women Business Owners Outstanding Women Leader's Executive award Independent Community Bankers of American 40 Under 40: Emerging Community Bank Leaders award The Company awards include: The 2024 Greater Sacramento Economic Council's Sustainability award The 2023 Raymond James Community Bankers Cup Being listed among the S&P Global Market Intelligence 2023 Top 20 Best-Performing Community Banks in the nation (banks with assets between $3 billion and $10 billion)." Financial highlights during the quarter included the following: The Company sold an aggregate of 3,967,500 shares of its common stock at a public offering price of $21.75 per share in a public offering that closed in April 2024. The net proceeds to the Company, after deducting underwriting discounts, commissions, and offering expenses, were approximately $80.9 million. The Company's San Francisco Bay Area team increased from 15 to 19 employees who generated deposit balances totaling $161.3 million at June 30, 2024, an increase of $65.1 million from March 31, 2024. Cash and cash equivalents were $190.4 million, representing 6.04% of total deposits at June 30, 2024, as compared to 6.27% at March 31, 2024. Total deposits increased by $193.9 million, or 6.56%, during the three months ended June 30, 2024, due to increases in both non-wholesale and wholesale deposits, which the Company defines as brokered deposits and public time deposits. During the three months ended June 30, 2024, non-wholesale deposits increased by $118.3 million, or 4.26%, and wholesale deposits increased by $75.5 million. The Company had no short-term borrowings at June 30, 2024, a decrease from $120.0 million at March 31, 2024. Consistent, disciplined management of expenses contributed to our efficiency ratio of 44.07% for the three months ended June 30, 2024, as compared to 44.50% for the three months ended March 31, 2024. For the three months ended June 30, 2024, net interest margin was 3.39%, as compared to 3.14% for the three months ended March 31, 2024 and 3.45% for the three months ended June 30, 2023. The effective Federal Funds rate remained at 5.33% as of June 30, 2024 and March 31, 2024 and increased from 5.08% as of June 30, 2023. Other comprehensive income was $0.2 million during the three months ended June 30, 2024. Unrealized losses, net of tax effect, on available-for-sale securities were $12.2 million as of June 30, 2024. Total carrying value of held-to-maturity and available-for-sale securities represented 0.08% and 2.91% of total interest-earning assets, respectively, as of June 30, 2024. The Company's common equity Tier 1 capital ratio was 11.28% and 9.13% as of June 30, 2024 and March 31, 2024, respectively, with the additional common stock issued through the public offering that closed in April 2024 as the leading driver of the increase. The Bank continues to meet all requirements to be considered "well-capitalized" under applicable regulatory guidelines. Loan and deposit growth in the three and twelve months ended June 30, 2024 was as follows: (in thousands) June 30,2024   March 31,2024   $ Change   % Change Loans held for investment $ 3,266,291     $ 3,104,130     $ 162,161       5.22 % Non-interest-bearing deposits   825,733       817,388       8,345       1.02 % Interest-bearing deposits   2,323,898       2,138,384       185,514       8.68 %                 (in thousands) June 30,2024   June 30,2023   $ Change   % Change Loans held for investment $ 3,266,291     $ 2,927,411     $ 338,880       11.58 % Non-interest-bearing deposits   825,733       833,707       (7,974 )     (0.96 )% Interest-bearing deposits   2,323,898       2,096,032       227,866       10.87 %                                 The ratio of nonperforming loans to loans held for investment at period end remained at 0.06% at June 30, 2024 and March 31, 2024. The Company's Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended June 30, 2024. The Company's Board of Directors subsequently declared another cash dividend of $0.20 per share on July 18, 2024, which the Company expects to pay on August 12, 2024 to shareholders of record as of August 5, 2024. Summary Results Three months ended June 30, 2024, as compared to three months ended March 31, 2024 The Company's net income was $10.8 million for the three months ended June 30, 2024, as compared to $10.6 million for the three months ended March 31, 2024. Net interest income increased by $2.3 million, primarily due to an increase in interest income due to loan growth at higher yields bolstered by a decrease in interest expense due to lower average wholesale deposit balances, as compared to the three months ended March 31, 2024. The provision for credit losses increased by $1.1 million, with loan growth and increases in net charge-offs in the three months ended June 30, 2024 as the leading drivers. Non-interest income decreased by $0.3 million, primarily due to a reduction in gains from distributions received on equity investments in venture-backed funds during the three months ended June 30, 2024, as compared to the three months ended March 31, 2024. Non-interest expense increased by $0.8 million, primarily related to increases in: (i) commissions related primarily to higher loan production; (ii) travel, conferences, and professional membership fees; and (iii) sponsorships and donations, as compared to the three months ended March 31, 2024. Three months ended June 30, 2024, as compared to three months ended June 30, 2023 The Company's net income was $10.8 million for the three months ended June 30, 2024, as compared to $12.7 million for the three months ended June 30, 2023. Net interest income increased by $1.5 million as increases in interest income due to loan growth at higher yields more than offset increases in interest expense due to larger average deposit balances at higher rates. The provision for credit losses increased by $0.8 million primarily due to loan growth and increases in net charge-offs in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Non-interest income decreased by $1.2 million, primarily due to a reduction in gains from distributions received on equity investments in venture-backed funds during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Non-interest expense increased by $1.5 million, with an increase in salaries and employee benefits related to the Company's expansion into the San Francisco Bay Area as the leading driver. The following is a summary of the components of the Company's operating results and performance ratios for the periods indicated:   Three months ended         (in thousands, except per share data) June 30,2024   March 31,2024   $ Change   % Change Selected operating data:               Net interest income $ 29,092     $ 26,744     $ 2,348       8.78 % Provision for credit losses   2,000       900       1,100       122.22 % Non-interest income   1,573       1,833       (260 )     (14.18 )% Non-interest expense   13,513       12,716       797       6.27 % Pre-tax income   15,152       14,961       191       1.28 % Provision for income taxes   4,370       4,330       40       0.92 % Net income $ 10,782     $ 10,631     $ 151       1.42 % Earnings per common share:               Basic $ 0.51     $ 0.62     $ (0.11 )     (17.74 )% Diluted   0.51       0.62       (0.11 )     (17.74 )% Performance and other financial ratios:               ROAA   1.23 %     1.22 %         ROAE   11.72 %     14.84 %         Net interest margin   3.39 %     3.14 %         Cost of funds   2.56 %     2.62 %         Efficiency ratio   44.07 %     44.50 %                           Three months ended         (in thousands, except per share data) June 30,2024   June 30,2023   $ Change   % Change Selected operating data:               Net interest income $ 29,092     $ 27,578     $ 1,514       5.49 % Provision for credit losses   2,000       1,250       750       60.00 % Non-interest income   1,573       2,820       (1,247 )     (44.22 )% Non-interest expense   13,513       11,979       1,534       12.81 % Pre-tax income   15,152       17,169       (2,017 )     (11.75 )% Provision for income taxes   4,370       4,440       (70 )     (1.58 )% Net income $ 10,782     $ 12,729     $ (1,947 )     (15.30 )% Earnings per common share:                   Basic $ 0.51     $ 0.74     $ (0.23 )     (31.08 )% Diluted   0.51       0.74       (0.23 )     (31.08 )% Performance and other financial ratios:               ROAA   1.23 %     1.55 %         ROAE   11.72 %     19.29 %         Net interest margin   3.39 %     3.45 %         Cost of funds   2.56 %     2.04 %         Efficiency ratio   44.07 %     39.41 %         Balance Sheet Summary (in thousands) June 30,2024   December 31,2023   $ Change   % Change Selected financial condition data:               Total assets $ 3,634,217     $ 3,593,125     $ 41,092       1.14 % Cash and cash equivalents   190,359       321,576       (131,217 )     (40.80 )% Total loans held for investment   3,266,291       3,081,719       184,572       5.99 % Total investments   106,177       111,160       (4,983 )     (4.48 )% Total liabilities   3,253,747       3,307,351       (53,604 )     (1.62 )% Total deposits   3,149,631       3,026,896       122,735       4.05 % Subordinated notes, net   73,822       73,749       73       0.10 % Total shareholders' equity   380,470       285,774       94,696       33.14 %                                 Insured and collateralized deposits were approximately $2.0 billion, representing approximately 64.70% of total deposits as of June 30, 2024. Net uninsured and uncollateralized deposits were approximately $1.1 billion as of June 30, 2024. Commercial and consumer deposit accounts constituted approximately 78% of total deposits. Deposit relationships of at least $5 million represented approximately 60% of total deposits and had an average age of approximately 8.46 years as of June 30, 2024. Cash and cash equivalents as of June 30, 2024 were $190.4 million, representing 6.04% of total deposits at June 30, 2024, as compared to 6.27% as of March 31, 2024. Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $1.6 billion as of June 30, 2024.   June 30, 2024   Available (in thousands) Line of Credit   Letters of Credit Issued   Borrowings   FHLB advances $ 1,004,397     $ 571,500     $ —     $ 432,897   Federal Reserve Discount Window   829,179       —       —       829,179   Correspondent bank lines of credit   175,000       —       —       175,000   Cash and cash equivalents   —       —       —       190,359   Total $ 2,008,576     $ 571,500     $ —     $ 1,627,435     The increase in total assets from December 31, 2023 to June 30, 2024 was primarily due to a $184.6 million increase in total loans held for investment, partially offset by a $131.2 million decrease in cash and cash equivalents. The $184.6 million increase in total loans held for investment between December 31, 2023 and June 30, 2024 was a result of $539.9 million in loan originations and advances, partially offset by $150.0 million and $205.3 million in loan payoffs and paydowns, respectively. The $184.6 million increase in total loans held for investment included a purchase of loans within the consumer concentration of the loan portfolio, representing $73.3 million. The $131.2 million decrease in cash and cash equivalents primarily resulted from net cash outflows related to investing activities of $173.4 million, partially offset by net cash inflows related to financing and operating activities of $25.9 million and $16.3 million, respectively. The decrease in total liabilities from December 31, 2023 to June 30, 2024 was primarily due to a decrease in other borrowings of $170.0 million, partially offset by an increase in interest-bearing deposits of $128.1 million. The increase in interest-bearing deposits was largely due to an increase in money market deposits of $281.8 million, partially offset by decreases in time deposits and interest-bearing demand deposits of $133.1 million and $20.5 million, respectively. The increase in total shareholders' equity from December 31, 2023 to June 30, 2024 was primarily a result of $80.9 million of additional common stock outstanding and net income recognized of $21.4 million, partially offset by $7.7 million in cash distributions paid during the period. Net Interest Income and Net Interest Margin The following is a summary of the components of net interest income for the periods indicated:   Three months ended         (in thousands) June 30,2024   March 31,2024   $ Change   % Change Interest and fee income $ 48,998     $ 47,541     $ 1,457       3.06 % Interest expense   19,906       20,797       (891 )     (4.28 )% Net interest income $ 29,092     $ 26,744     $ 2,348       8.78 % Net interest margin   3.39 %     3.14 %                           Three months ended         (in thousands) June 30,2024   June 30,2023   $ Change   % Change Interest and fee income $ 48,998     $ 42,793     $ 6,205       14.50 % Interest expense   19,906       15,215       4,691       30.83