Five Star Bancorp (FSBC) Bundle
Understanding Five Star Bancorp (FSBC) Revenue Streams
Understanding Five Star Bancorp’s Revenue Streams
Five Star Bancorp generates revenue primarily through net interest income and non-interest income. This section delves into the breakdown of these revenue sources, year-over-year growth rates, and contributions from various segments.
Revenue Breakdown
The revenue for the three months ended September 30, 2024, was largely derived from the following sources:
- Net Interest Income: $30,386,000
- Non-Interest Income: $1,381,000
Year-over-Year Revenue Growth Rate
Historically, Five Star Bancorp has exhibited significant growth in revenue. The following table details the year-over-year revenue changes:
| Period | Net Interest Income | Non-Interest Income | Total Revenue |
|---|---|---|---|
| September 30, 2024 | $30,386,000 | $1,381,000 | $31,767,000 |
| September 30, 2023 | $27,476,000 | $1,384,000 | $28,860,000 |
| Year-over-Year Change (%) | 10.59% | -0.22% | 10.48% |
Contribution of Different Business Segments
The breakdown of loans held for investment as of September 30, 2024, highlights the contribution from various business segments:
| Loan Type | Amount (in thousands) |
|---|---|
| Commercial Real Estate | $2,812,600 |
| Commercial Land and Development | $4,709 |
| Commercial Construction | $92,841 |
| Residential Construction | $3,452 |
| Residential Loans | $33,415 |
| Farmland | $47,907 |
| Consumer and Other Loans | $270,760 |
| Total Loans Held for Investment | $3,460,565 |
Analysis of Significant Changes in Revenue Streams
Between September 30, 2023, and September 30, 2024, net interest income saw an increase of $2,910,000, reflecting a robust demand for loans and higher yields on new and repriced loans. Conversely, non-interest income experienced a slight decline of $3,000, primarily due to a decrease in gains from loan sales.
Overall, the total revenue increased by $2,907,000, demonstrating strong performance in the bank's core lending activities despite fluctuations in non-interest income sources.
Conclusion on Revenue Trends
As of September 30, 2024, Five Star Bancorp's financial health appears solid, with a marked increase in net interest income contributing to overall revenue growth. The company's strategic focus on expanding its loan portfolio and enhancing customer relationships continues to drive financial performance.
A Deep Dive into Five Star Bancorp (FSBC) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company reveals crucial insights into its financial health. The following metrics are essential: gross profit, operating profit, and net profit margins.
Gross Profit Margin:As of September 30, 2024, the gross profit margin stood at 3.37%, reflecting a slight decrease from 3.39% as of June 30, 2024. This margin is an indicator of the efficiency of the company in managing its production costs relative to its revenue.
Operating Profit Margin:The operating profit margin for the third quarter of 2024 was reported at 15.17%, slightly down from 15.47% in the previous quarter. This decline indicates a modest increase in operating expenses relative to revenues.
Net Profit Margin:For the same period, the net profit margin was recorded at 11.31%, down from 11.72% in the second quarter of 2024. This reduction highlights the impact of increased expenses on overall profitability.
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | 3.37% | 15.17% | 11.31% |
| Q2 2024 | 3.39% | 15.47% | 11.72% |
| Q1 2024 | 3.31% | 15.00% | 16.09% |
Over the past year, there have been notable trends in profitability:
- Net income for Q3 2024 was $10.9 million, compared to $11.0 million in Q3 2023, indicating a marginal decline.
- Net interest income increased by $2.9 million year-over-year, reaching $30.386 million in Q3 2024.
- Return on average assets (ROAA) decreased to 1.18% from 1.30% year-over-year.
- Return on average equity (ROAE) also saw a decrease to 11.31% from 16.09% in the same quarter of the prior year.
When comparing profitability ratios with industry averages, the company performs as follows:
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 3.37% | 3.50% |
| Operating Profit Margin | 15.17% | 16.00% |
| Net Profit Margin | 11.31% | 12.00% |
Operational efficiency can be analyzed through the efficiency ratio, which indicates how well the company manages its operating expenses relative to its income. As of September 30, 2024, the efficiency ratio was reported at 43.37%, a slight improvement from 44.07% in the previous quarter. This demonstrates effective cost management strategies employed by the company.
In conclusion, the profitability metrics of the company indicate a stable financial performance with room for improvement in net margins and operational efficiencies. The ongoing management of costs and expenses will be critical in enhancing profitability moving forward.
Debt vs. Equity: How Five Star Bancorp (FSBC) Finances Its Growth
Debt vs. Equity: How Five Star Bancorp Finances Its Growth
The company's financial structure consists of both debt and equity, which play critical roles in its growth strategy. This section analyzes the current debt levels, debt-to-equity ratio, recent debt activities, and how the company balances between debt financing and equity funding.
Overview of Debt Levels
As of September 30, 2024, the total liabilities of the company were $3,497,074 thousand, which reflects an increase of $189,723 thousand or 5.74% from December 31, 2023. The total long-term debt, specifically subordinated notes, stood at $73,859 thousand. Notably, there were no short-term borrowings reported as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the total shareholders' equity was $389,930 thousand. This results in a debt-to-equity ratio of approximately 8.97 (calculated as total liabilities divided by total equity), indicating a high reliance on debt compared to equity. This ratio is significantly higher than the industry average, which typically ranges between 1.0 and 3.0, suggesting a more aggressive financing strategy.
Recent Debt Issuances and Credit Ratings
In the latest financial period, the company maintained its subordinated notes at $73,859 thousand, with no new issuances reported. The credit quality remains robust, with an allowance for credit losses amounting to $37,583 thousand, reflecting a ratio of allowance for credit losses to loans held for investment of 1.09%. The nonperforming loans to loans held for investment ratio was recorded at 0.05%.
Balancing Debt Financing and Equity Funding
The company has consistently focused on maintaining a balanced approach between debt and equity financing. As of September 30, 2024, total deposits reached $3,399,979 thousand, with a mix of interest-bearing and non-interest-bearing accounts. The total interest-bearing deposits amounted to $2,493,040 thousand.
| Financial Metrics | September 30, 2024 | December 31, 2023 | Change ($) | % Change |
|---|---|---|---|---|
| Total Liabilities | $3,497,074 | $3,307,351 | $189,723 | 5.74% |
| Long-term Debt (Subordinated Notes) | $73,859 | $73,749 | $110 | 0.15% |
| Total Shareholders' Equity | $389,930 | $285,774 | $104,156 | 36.45% |
| Debt-to-Equity Ratio | 8.97 | N/A | N/A | N/A |
| Nonperforming Loans Ratio | 0.05% | 0.06% | -0.01% | -16.67% |
This comprehensive analysis of the company's debt versus equity structure highlights its current financial health and strategic approach to financing growth initiatives.
Assessing Five Star Bancorp (FSBC) Liquidity
Assessing Five Star Bancorp's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
- Current Assets: $250,852,000 (Cash and cash equivalents)
- Current Liabilities: $3,497,074,000 (Total liabilities)
- Current Ratio = Current Assets / Current Liabilities = 0.072
Quick Ratio: The quick ratio is calculated using only the most liquid assets:
- Quick Assets: $250,852,000 (Cash and cash equivalents)
- Quick Liabilities: $3,497,074,000 (Total liabilities)
- Quick Ratio = Quick Assets / Quick Liabilities = 0.072
Analysis of Working Capital Trends
As of September 30, 2024, working capital is as follows:
- Total Current Assets: $250,852,000
- Total Current Liabilities: $3,497,074,000
- Working Capital = Current Assets - Current Liabilities = -$3,246,222,000
Cash Flow Statements Overview
The cash flow statements for the three months ended September 30, 2024 are summarized below:
| Cash Flow Category | Amount (in thousands) |
|---|---|
| Operating Cash Flow | $33,800 |
| Investing Cash Flow | -$376,500 |
| Financing Cash Flow | $272,000 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total liquidity is approximately:
- Total Liquidity: $1,839,991,000
- Cash and cash equivalents: $250,852,000
- Available FHLB advances: $1,123,388,000
- Federal Reserve Discount Window: $858,251,000
- Correspondent bank lines of credit: $175,000,000
Cash and cash equivalents represent 7.38% of total deposits as of September 30, 2024. This is an increase from 6.04% as of June 30, 2024. The ratio of nonperforming loans to loans held for investment decreased to 0.05% from 0.06% during the same period, indicating improved asset quality.
Is Five Star Bancorp (FSBC) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA), along with stock price trends, dividend yield, and analyst consensus.
Key Financial Ratios
The following table summarizes the key valuation ratios as of September 30, 2024:
| Ratio | Value |
|---|---|
| Price-to-Earnings (P/E) | 13.65 |
| Price-to-Book (P/B) | 1.00 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | 8.25 |
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- September 2023: $16.00
- December 2023: $18.25
- March 2024: $20.50
- June 2024: $19.75
- September 2024: $21.00
Dividend Yield and Payout Ratios
The company declared a cash dividend of $0.20 per share for the third quarter of 2024. The calculated dividend yield is:
Dividend Yield = (Annual Dividend / Stock Price) = ($0.80 / $21.00) = 3.81%
The payout ratio based on the most recent net income of $10.94 million and total dividends paid is:
Payout Ratio = (Dividends Paid / Net Income) = ($4.27 million / $10.94 million) = 39.0%
Analyst Consensus on Stock Valuation
As of October 2024, the analyst consensus is:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Overall, the majority of analysts recommend a "Buy" rating based on strong financial performance and growth prospects.
Key Risks Facing Five Star Bancorp (FSBC)
Key Risks Facing Five Star Bancorp
Five Star Bancorp, operating in a competitive financial services landscape, faces several internal and external risks that can significantly impact its financial health.
Industry Competition
The banking sector is characterized by intense competition, particularly among regional banks. As of September 30, 2024, the company reported a total of $3,399,979 million in total deposits, reflecting a 12.33% increase from the previous year . This competitive pressure can lead to reduced margins and increased customer acquisition costs.
Regulatory Changes
Changes in regulatory frameworks can affect operational costs and compliance requirements. The common equity Tier 1 capital ratio stood at 10.93% as of September 30, 2024 . Maintaining compliance with evolving regulations is crucial, and any changes may require adjustments in capital allocation or operational strategies.
Market Conditions
Market conditions, including interest rate fluctuations, can affect profitability. The effective Federal Funds rate decreased to 4.83% as of September 30, 2024, compared to 5.33% at June 30, 2024 . Such changes impact net interest margins, which were reported at 3.37% .
Operational Risks
Operational risks encompass system failures, fraud, and other disruptions. The company noted a 37.50% increase in the provision for credit losses, amounting to $2,750 million for the three months ended September 30, 2024 . This increase may indicate heightened risk exposure in the loan portfolio, necessitating robust risk management strategies.
Financial Risks
Financial risks include credit risk and liquidity risk. The allowance for credit losses increased to $37.6 million as of September 30, 2024, up from $34.4 million at the end of 2023 . The ratio of nonperforming loans to loans held for investment decreased to 0.05% , indicating effective management of credit quality, but sustained vigilance is essential.
Strategic Risks
Strategic risks arise from poor business decisions or failure to adapt to market changes. The expansion into the San Francisco Bay Area resulted in a deposit growth of $189.0 million . While the expansion strategy shows promise, it also introduces risks associated with new market dynamics and operational integration.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks. For instance, effective management of interest rates and diversification of the loan portfolio are crucial. The efficiency ratio improved to 43.37% , reflecting disciplined expense management amid expansion efforts.
| Risk Factor | Current Status | Mitigation Strategy |
|---|---|---|
| Industry Competition | Total Deposits: $3,399,979 million | Enhance customer acquisition strategies |
| Regulatory Changes | Common Equity Tier 1 Ratio: 10.93% | Regular compliance reviews |
| Market Conditions | Net Interest Margin: 3.37% | Interest rate risk management |
| Operational Risks | Provision for Credit Losses: $2,750 million | Robust risk management frameworks |
| Financial Risks | Nonperforming Loans Ratio: 0.05% | Continuous monitoring of credit quality |
| Strategic Risks | San Francisco Deposit Growth: $189.0 million | Market analysis and adaptive strategies |
Future Growth Prospects for Five Star Bancorp (FSBC)
Growth Opportunities
Future growth prospects for the company are bolstered by several key growth drivers, including product innovations, market expansions, and strategic initiatives.
Key Growth Drivers
- Product Innovations: The company has developed new loan products, enhancing its offerings in consumer and commercial lending, which are expected to attract a broader customer base.
- Market Expansions: The recent opening of a full-service office in San Francisco's Financial District is a vital expansion, contributing to a total of $189 million in deposits since June 2023.
- Acquisitions: The company has actively sought to acquire loan portfolios, with $254.7 million in purchases noted in the consumer loan sector during the current fiscal year.
Future Revenue Growth Projections
Revenue growth projections indicate a strong upward trend, with total loans held for investment increasing by $378.8 million or 12.29% from December 31, 2023, to September 30, 2024. Additionally, the company reported $873.7 million in loan originations during the same period, reflecting robust demand for its lending services.
Earnings Estimates
For the third quarter of 2024, the company's net interest income reached $30.386 million, a 10.59% increase from the previous year. Earnings per common share were reported at $0.52, demonstrating consistent profitability despite market fluctuations.
Strategic Initiatives
The company’s strategic initiatives include enhancing its digital banking platform to improve customer experience and operational efficiency. This initiative has resulted in a 4.28% increase in headcount to support this expansion, which is expected to drive further customer acquisition and retention.
Competitive Advantages
Competitive advantages that position the company favorably for growth include:
- Strong Market Position: With insured and collateralized deposits of approximately $2.2 billion, the company commands a significant share of the market.
- High Efficiency Ratio: The efficiency ratio improved to 43.37% in the latest quarter, indicating effective cost management alongside revenue growth.
- Robust Asset Quality: The ratio of nonperforming loans to loans held for investment decreased to 0.05%, reflecting solid credit quality.
Financial Summary Table
| Financial Metrics | September 30, 2024 | June 30, 2024 | September 30, 2023 |
|---|---|---|---|
| Total Loans Held for Investment | $3,460.57 million | $3,266.29 million | $3,009.93 million |
| Total Deposits | $3,399.98 million | $3,026.90 million | $3,026.90 million |
| Net Interest Income | $30.39 million | $29.09 million | $27.48 million |
| Earnings Per Share | $0.52 | $0.51 | $0.64 |
| Efficiency Ratio | 43.37% | 44.07% | 41.63% |
| Allowance for Credit Losses | $37.58 million | $35.41 million | $34.03 million |
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Article updated on 8 Nov 2024
Resources:
- Five Star Bancorp (FSBC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Five Star Bancorp (FSBC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Five Star Bancorp (FSBC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.