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FS

FIVE STAR BANCORP (FSBC)·Q2 2025 Earnings Summary

Executive Summary

  • EPS of $0.68 beat Wall Street consensus by $0.045, driven by stronger net interest income and higher average loan yields, while S&P-defined “Revenue” missed by ~$1.8M; NIM expanded 8 bps to 3.53% and efficiency improved to 41.03% . EPS Actual vs Consensus: $0.68 vs $0.635*; Revenue Actual vs Consensus: $35.83M* vs $37.64M* (definitions differ; see Estimates Context) [GetEstimates]*.
  • Organic growth continued: loans +$136.2M QoQ (+3.76%) and deposits +$158.3M (+4.24%); non-interest-bearing deposits rose to 25.78% of total, and short-term borrowings remained zero .
  • Asset quality remained strong (NPLs/loans 0.06%), capital ratios well above well-capitalized thresholds, and liquidity ~$2.15B immediately available .
  • Catalysts: Bay Area expansion (Walnut Creek opening in Q3), new Food & Agribusiness vertical, and management guidance for Q3 expense run-rate (+$0.5–$0.75M) and lower effective tax rate (~26.65%) .

Values retrieved from S&P Global for all items marked with an asterisk (*).

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose 7.47% QoQ to $36.515M on loan growth and loan yield improvement; NIM increased to 3.53% (+8 bps QoQ; +14 bps YoY) .
  • Deposits grew +$158.3M QoQ (+4.24%) led by new money market accounts (+$87.4M) and new non-interest-bearing accounts (+$68.7M); non-wholesale deposits increased +$191.6M .
  • CEO: “exceptional quarter… organic growth strategy fueled new account openings” and highlighted technology, operating efficiencies, conservative underwriting, and concierge banking approach .

What Went Wrong

  • S&P-defined “Revenue” missed consensus despite strong NIM expansion (actual $35.83M* vs $37.64M*), reflecting differences in revenue definitions versus bank-reported components [GetEstimates]* .
  • Provision for credit losses increased QoQ to $2.5M due to loan growth and higher net charge-offs, with one CRE loan placed on nonaccrual (NPLs/loans 0.06%) .
  • Non-interest expense rose +$0.68M QoQ (+4.53%) driven by business travel, conferences, training, and promotional expenses tied to expansion .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
EPS ($)$0.51 $0.62 $0.68
Revenue ($USD Millions, S&P)$28.67*$33.44*$35.83*
Net Interest Income ($USD Millions)$29.09 $33.98 $36.52
Total Non-Interest Income ($USD Millions)$1.57 $1.36 $1.81
Net Interest Margin %3.39% 3.45% 3.53%
Efficiency Ratio %44.07% 42.58% 41.03%
ROAA %1.23% 1.30% 1.37%
ROAE %11.72% 13.28% 14.17%

Values retrieved from S&P Global for Revenue (*).

Estimate comparison and surprise:

MetricQ2 2024 Consensus*Q2 2024 ActualSurpriseQ1 2025 Consensus*Q1 2025 ActualSurpriseQ2 2025 Consensus*Q2 2025 ActualSurprise
EPS ($)$0.49*$0.51 +$0.02$0.59*$0.62 +$0.03$0.635*$0.68 +$0.045
Revenue ($USD Millions)$30.36*$28.67*-$1.69*$35.27*$33.44*-$1.83*$37.64*$35.83*-$1.81*

Values retrieved from S&P Global for all consensus and “Revenue” actuals (*).

Segment/KPI details:

Loans Held for Investment ($USD Thousands)Mar 31, 2025Jun 30, 2025
Commercial Real Estate$2,941,201 $3,066,627
Commercial Land & Development$3,556 $1,422
Commercial Construction$113,002 $112,399
Residential Construction$5,747 $5,479
Residential$34,053 $33,132
Farmland$43,643 $51,579
Commercial Secured$170,525 $173,855
Commercial Unsecured$34,970 $37,568
Consumer & Other$277,093 $278,215
Net Deferred Loan Fees$(1,971) $(2,251)
Total Loans HFI$3,621,819 $3,758,025
Interest-Bearing Deposits ($USD Thousands)Mar 31, 2025Jun 30, 2025
Interest-Bearing Transaction$295,633 $292,257
Money Market$1,577,473 $1,704,652
Savings$128,210 $121,567
Time Accounts$801,386 $772,085
Total Interest-Bearing$2,802,702 $2,890,561
KPIsQ2 2024Q1 2025Q2 2025
Average Loan Yield %5.83% 6.02% 6.09%
Avg Cost of Interest-Bearing Deposits %3.37% 3.33% 3.31%
Avg Cost of Total Deposits %2.47% 2.48% 2.46%
Total Cost of Funds %2.56% 2.56% 2.53%
Loan-to-Deposit Ratio %103.87% 97.01% 96.50%
NPLs / Loans %0.06% 0.05% 0.06%
ACL / Loans %1.07% 1.08% 1.07%
Cash & Equivalents ($M)$161.79 $452.57 $483.81
Cash & Equivalents / Deposits %5.14% 12.11% 12.42%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Balance Sheet Growth (Loans/Deposits)FY 2025~10–12% growth (prior quarter commentary) Low-teens growth reaffirmed; pipelines “very strong” Maintained
Expense Run-Rate (Walnut Creek)Q3 2025Not specified+$0.5M to +$0.75M QoQ Raised
Tax Rate2H 2025+Effective ~28.7% recent actual (context) Statutory ~26.83%; Effective ~26.65% outlook Lowered
DividendQ2 2025Ongoing quarterly $0.20 common dividend $0.20 declared 7/17; payable 8/11 to holders of record 8/4 Maintained
Market Expansion2H 2025Bay Area expansion ongoing Walnut Creek opening in Q3; South Bay expansion under evaluation Expanded Focus

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Deposit Growth & MixDeposits +$158M in Q4; non-wholesale +$8M; NIBD ~26% by Q4 +$158.3M QoQ; NIBD 25.78%; new MM accounts +$87.4M; non-wholesale +$191.6M Positive; improving mix
NIM & Loan YieldNIM 3.36% (Q4); 3.45% (Q1); loan yield rising NIM 3.53%; loan yield +7 bps QoQ, driven by repricing and new production at 7.03% Positive expansion
Bay Area ExpansionTeam 27 employees (Q4), 31 (Q1); deposits ramping 34 employees; $456.9M deposits; Walnut Creek opening in Q3; South Bay eyed Accelerating
CRE Exposure & OfficeCRE growth; conservative underwriting Office loans with fresh equity at lower $/sq ft; leverage ~50–60% deemed safe Managed risk; cautiously constructive
New VerticalsExpansion into Food & Agribusiness (Q1) Building out team; targeting middle-market processors ($50M–$500M rev) Strategic diversification
Tax & MacroQ1 effective tax 28.71%; Fed rate decline mention CA tax change lowers effective rate; not relying on Fed cuts; funding cost may tick down with mix Favorable tax; disciplined macro stance

Management Commentary

  • CEO: “We are very pleased to report an exceptional quarter… growth in loans and deposits. Net interest margin increased by eight basis points to 3.53%, while our efficiency ratio decreased to 41.03%” .
  • CEO: Bay Area momentum—“We look forward to… Walnut Creek… team has grown to 34 employees with $456.9 million in deposits” .
  • CFO: “Net interest income increased $2.5 million… due to a $3.5 million increase in interest income… partially offset by a $1 million increase in interest expense” .

Q&A Highlights

  • Core deposit growth sustainability: Management views non-interest-bearing growth as sustainable, driven by new relationships across geographies and verticals .
  • Bay Area strategy: Walnut Creek opening; potential South Bay expansion; improving business environment in San Francisco .
  • Efficiency ratio outlook: Sub-40% possible given operating leverage; continued investments in talent and back-office support .
  • Expense run-rate: Expect +$0.5–$0.75M in Q3 with Walnut Creek bringing incremental costs .
  • Loan purchases: Maintaining ~$300M average outstanding in purchased consumer loans; ~$44M purchases in Q2 to sustain balance .
  • Loan yield expansion: Repricing of 2020 vintages and new production at 7.03% drove 7 bps loan yield improvement QoQ .

Estimates Context

  • EPS: FSBC beat consensus for Q2 2025 (Actual $0.68 vs $0.635*) and prior quarter Q1 2025 (Actual $0.62 vs $0.59*), with drivers including higher net interest income and margin expansion [GetEstimates]*.
  • Revenue: Using S&P’s “Revenue” definition, Q2 2025 actual $35.83M* missed consensus $37.64M*; note that bank-reported net interest income plus non-interest income totals $38.33M, indicating definitional differences between S&P “Revenue” and FSBC’s reported components [GetEstimates]*.
  • Implications: Sell-side models may raise EPS and NIM assumptions; revenue line may require reconciliation to definition (net interest income vs total revenue) and could constrain top-line prints despite margin strength.

Values retrieved from S&P Global for all items marked with an asterisk (*).

Key Takeaways for Investors

  • Margin expansion and operating leverage are intact: NIM 3.53% with efficiency ratio 41.03% suggest earnings power supports upside to EPS even with modest opex growth .
  • Deposit franchise strengthening: Core deposit growth and improved non-interest-bearing mix reduce funding costs and support future NIM resilience .
  • Credit quality robust: NPLs at 6 bps of loans and ACL at 1.07% reflect conservative underwriting amid active CRE and diversified growth .
  • Strategic growth vectors: Bay Area footprint (Walnut Creek Q3) and Food & Agribusiness vertical broaden revenue sources and potentially rebalance CRE concentration over time .
  • Near-term modeling updates: Bake in Q3 incremental opex (+$0.5–$0.75M) and lower effective tax rate (~26.65%)—EPS sensitivity favorable despite higher opex .
  • Liquidity and capital provide flexibility: ~$2.15B immediate liquidity and CET1 10.85% support growth and dividend continuity ($0.20 declared) .
  • Watch for definitional nuances in “Revenue”: Use EPS/NIM/Net Interest Income as core performance indicators; reconcile S&P revenue with bank-reported line items when comparing to consensus [GetEstimates]*.