Sign in

You're signed outSign in or to get full access.

FS

FIVE STAR BANCORP (FSBC)·Q3 2025 Earnings Summary

Executive Summary

  • Strong sequential and year-over-year performance: diluted EPS rose to $0.77 (+13% q/q; +48% y/y), with NIM expanding to 3.56% and efficiency ratio improving to 40.13% .
  • Estimates context: EPS beat S&P Global consensus ($0.77 vs $0.708), while S&P-defined revenue missed ($38.8M vs $40.3M) — driven by loan growth and NIM expansion but offset by lower-than-consensus “Revenue” classification *.
  • Funding mix improved: non-wholesale deposits grew $359.0M while wholesale deposits fell $150.2M; cost of funds declined 2 bps to 2.51% .
  • Balance sheet growth remained robust: loans HFI +$129.2M q/q and deposits +$208.8M q/q; CET1 at 10.77%, well above requirements .
  • Near-term catalysts: management expects modest deposit growth (1–2%) in Q4, continued NIM expansion (1–3 bps), and ~+$0.85M quarterly NII sensitivity per 25 bps rate cut once fully repriced .

What Went Well and What Went Wrong

What Went Well

  • Core funding improved materially: non‑wholesale deposits +$359.0M q/q; wholesale deposits −$150.2M; cost of funds fell to 2.51% and NIM expanded 3 bps to 3.56% .
  • Bay Area expansion accelerating: deposits reached $548.9M with 36 employees; Walnut Creek office opened, supporting continued growth .
  • Credit quality remains strong: NPLs stable at 0.05% and ACL/loans ~1.08%; management emphasized conservative underwriting and robust monitoring .
  • CEO quote: “Outstanding growth in loans and core deposits… net interest margin increased… efficiency ratio decreased to 40.13%” .

What Went Wrong

  • Non‑interest expense increased $854K q/q, driven by salaries/benefits amid hiring; marketing and other operating costs remain elevated y/y .
  • Gain on sale of loans dropped to zero this quarter (strategic shift reducing wholesale SBA loan production/sales), reducing non‑interest income leverage .
  • Classified loans rose within CRE (substandard increased to $18.6M due to a single special purpose CRE downgrade), though overall NPLs remain low .

Financial Results

Income Statement and Profitability (sequential)

MetricQ1 2025Q2 2025Q3 2025
Net Interest Income ($USD)$33,977,000 $36,515,000 $39,348,000
Non-Interest Income ($USD)$1,359,000 $1,810,000 $1,966,000
Pre-tax Income ($USD)$18,391,000 $20,099,000 $22,234,000
Net Income ($USD)$13,111,000 $14,508,000 $16,344,000
Diluted EPS ($)$0.62 $0.68 $0.77
Net Interest Margin (%)3.45% 3.53% 3.56%
Cost of Funds (%)2.56% 2.53% 2.51%
Efficiency Ratio (%)42.58% 41.03% 40.13%

Year-over-Year (headline)

MetricQ3 2024Q3 2025
Net Interest Income ($USD)$30,386,000 $39,348,000
Non-Interest Income ($USD)$1,381,000 $1,966,000
Pre-tax Income ($USD)$15,241,000 $22,234,000
Net Income ($USD)$10,941,000 $16,344,000
Diluted EPS ($)$0.52 $0.77
Net Interest Margin (%)3.37% 3.56%
Cost of Funds (%)2.72% 2.51%
Efficiency Ratio (%)43.37% 40.13%

Balance Sheet (sequential)

MetricQ1 2025Q2 2025Q3 2025
Total Assets ($USD)$4,245,057,000 $4,413,473,000 $4,641,770,000
Loans HFI ($USD)$3,621,819,000 $3,758,025,000 $3,887,259,000
Total Deposits ($USD)$3,736,354,000 $3,894,622,000 $4,103,438,000
Common Equity Tier 1 (%)11.00% 10.85% 10.77%

KPIs and Mix

KPIQ1 2025Q2 2025Q3 2025
Loan-to-Deposit Ratio (%)97.01% 96.50% 94.73%
NPLs / Loans HFI (%)0.05% 0.06% 0.05%
Non-Interest-Bearing Deposits (% total)24.99% 25.78% 25.81%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Deposit growth (absolute)Q4 2025Not provided~1%–2% expectedNew
Net interest marginQ4 2025Not providedUp ~1–3 bpsNew
Rate sensitivity (per 25 bps cut)Next full quarter post-cutNot provided~+$0.85M NII once fully repricedNew
Money market and high-yield betasNear-termNot provided~30% overall; 100% beta cut for >225 bps priced accountsNew
Loan-to-deposit ratio targetOngoingNot provided~95% long-term comfort levelNew
Brokered depositsOngoingNot providedLong-term desire to eliminate; reduces headline deposit growthNew
DividendQ3 2025Prior quarters $0.20$0.20 per share, payable Nov 10Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Previous)Q2 2025 (Previous)Q3 2025 (Current)Trend
Funding mix & brokered depositsWholesale deposits +$130.0M; non-wholesale +$48.4M Non‑wholesale +$191.6M; wholesale −$33.4M Non‑wholesale +$359.0M; wholesale −$150.2M Improving core mix
Bay Area expansion31 employees; $379.8M deposits 34 employees; $456.9M deposits 36 employees; $548.9M deposits; Walnut Creek opened Accelerating
Margin trajectoryNIM 3.45% NIM 3.53% NIM 3.56%; guide +1–3 bps in Q4 Expansion
Credit qualityNPLs 0.05% NPLs 0.06% (one CRE nonaccrual) NPLs 0.05%; ACL/loans ~1.08% Stable
Loan growth+$89.1M q/q +$136.2M q/q +$129.2M q/q; CRE driver Strong
M&A stance——Lean organic; high bar; focus on deposits granularity and cost of funds if M&A Steady, organic-first
Deposit betas & rate strategy——~30% overall beta; targeted 100% cuts for >225 bps priced accounts Proactive repricing

Management Commentary

  • CEO: “Total loans held for investment increased by $129.2 million… total deposits increased by $208.8 million… net interest margin increased by three basis points to 3.56%, and our efficiency ratio decreased to 40.13%” .
  • CFO: “Net interest income increased $2.8 million… driven by new loan production at higher rates… partially offset by $1.4 million higher interest expense related to core deposit growth… strategic shift reduced wholesale SBA loan production/sales” .
  • CEO (strategy): “We will continue to ensure our technology stack, operating efficiencies, conservative underwriting practices, exceptional credit quality, and prudent approach to portfolio management…” .

Q&A Highlights

  • Core deposits sustainability and brokered reduction: management aims to eliminate brokered CDs over time; expects absolute deposit growth ~1–2% in Q4, tempered by brokered paydowns .
  • Payoffs/paydowns drivers: modeled nature of MHC/RV lending and five‑year resets; agency take‑outs and asset sales are expected; pipeline and hiring intended to outpace runoff .
  • NIM sensitivity and trajectory: ~+$0.85M per 25 bps cut on a full-quarter basis; NIM up 1–3 bps in Q4 given lagged indices (LAIF) and CD reset timing .
  • Deposit betas: ~30% overall; targeted 100% beta cuts for high-yield money market and similar accounts (>225 bps pricing), about $1.4B impacted .
  • Loan‑to‑deposit ratio: ~95% long-term target; willing to run slightly higher at times but not persistently ≥100% .
  • M&A posture: organic-first with a high bar; if pursued, priority would be deposit granularity and lower cost of funds .

Estimates Context

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 ActualQ3 2025 EstimateQ3 2025 Actual
Primary EPS Consensus Mean ($)0.59*0.62 0.635*0.68 0.708*0.77
Revenue Consensus Mean ($USD)35,269,500*33,436,000*37,636,250*35,825,000*40,348,250*38,814,000*
  • EPS: Beat each quarter; notably in Q3 2025, EPS $0.77 vs $0.708 consensus (bold beat).
  • Revenue (S&P-defined): Missed in Q3 ($38.8M vs $40.3M); note that S&P “Revenue” classification for banks may differ from company net interest income reporting *.
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Continued NIM expansion and declining cost of funds underpin earnings momentum; management guides further modest NIM improvement in Q4 as rate cuts flow through lagged indices .
  • Core deposit franchise strengthening (non‑wholesale inflows) reduces reliance on wholesale funding and supports margin resilience .
  • Asset quality remains a differentiator (NPLs 0.05%, ACL/loans ~1.08%) despite isolated CRE downgrades; underwriting remains conservative .
  • Sequential loan growth sustained across commercial real estate and targeted verticals; Bay Area expansion and sector lift-outs (ag, storage, MHC/RV) are contributing .
  • Near-term earnings sensitivity to rates is positive (about $0.85M per 25 bps cut), with planned deposit repricing and beta management unlocking incremental NII .
  • Long-term LDR target (~95%) and ongoing brokered CD reduction improve funding durability, though headline deposit growth may moderate in the near term .
  • Dividend maintained at $0.20 per share (payable Nov 10), reflecting capital strength and shareholder returns focus .