UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company If an emerging growth company, indicate
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| Item 2.02 | Results of Operations and Financial Condition |
On October 25, 2021, Five Star Bancorp (the “Company”) issued a press release announcing its results of operations and financial condition for the quarter ended September 30, 2021. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
This information (including Exhibit 99.1) is being furnished under Item 2.02 hereof and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 7.01 | Regulation FD Disclosure |
The Company is conducting an earnings call on October 26, 2021 at 10:00am PT/1:00pm ET to discuss its third quarter 2021 financial results. A copy of the investor presentation to be used during the earnings call is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.
This information (including Exhibit 99.2) is being furnished under Item 7.01 hereof and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
|
Number |
Description | |
| 99.1 | ||
| 99.2 | Third Quarter 2021 Investor Presentation, dated October 26, 2021 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FIVE STAR BANCORP | ||
| By: | /s/ Heather Luck | |
| Name: Heather Luck | ||
| Title: Senior Vice President and Chief Financial Officer | ||
| Date: October 25, 2021 | ||
| PRESS RELEASE | FOR IMMEDIATE RELEASE |
Five Star Bancorp Announces Quarterly Results
RANCHO CORDOVA, Calif. October 25, 2021 (GLOBE NEWSWIRE) – Five Star Bancorp (Nasdaq: FSBC) (the “Company” or “Five Star”), the holding company for Five Star Bank, today reported net income of $11.0 million for the quarter ended September 30, 2021, compared to $9.8 million during the quarter ended June 30, 2021 and $9.3 million during the quarter ended September 30, 2020.
Financial Highlights
During the second quarter of 2021, the Company terminated its status as a “Subchapter S” corporation in connection with its initial public offering (“IPO”). As such, results presented for the three months ended September 30, 2020 have been calculated using a 3.50% S Corporation tax rate, while results presented for the three months ended June 30, 2021 and September 30, 2021 have been calculated using a weighted average tax rate of 20.77% as noted in the section titled “Provision for Income Taxes” herein. Performance highlights and other developments for the Company as of and for the three months ended September 30, 2021 included the following:
| · | Diluted earnings per share was $0.64 for the third quarter of 2021, compared to $0.67 for the second quarter of 2021 and $0.94 for the third quarter of 2020. Earnings per share was as follows: |
| For the three months ended | ||||||||||||
| Sep 30, 2021 | Jun 30, 2021 | Sep 30, 2020 | ||||||||||
| Basic earnings per common share | $ | 0.64 | $ | 0.67 | $ | 0.94 | ||||||
| Diluted earnings per common share | $ | 0.64 | $ | 0.67 | $ | 0.94 | ||||||
| Weighted average basic common shares outstanding | 17,095,957 | 14,650,208 | 9,902,952 | |||||||||
| Weighted average diluted common shares | 17,123,182 | 14,667,804 | 9,902,952 | |||||||||
| · | Loan and deposit growth as of September 30, 2021, as compared to June 30, 2021, were as follows: |
| As of | ||||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Jun 30, 2021 | $ Change | % Change | ||||||||||||
| Total loans, excluding Paycheck Protection Program (“PPP”) loans | $ | 1,648,483 | $ | 1,466,866 | $ | 181,617 | 12.38 | % | ||||||||
| PPP loans | 61,499 | 120,936 | (59,437 | ) | (49.15 | )% | ||||||||||
| PPP deferred fees | 1,706 | 3,534 | (1,828 | ) | (51.73 | )% | ||||||||||
| Non-interest-bearing deposits | 895,468 | 829,036 | 66,432 | 8.01 | % | |||||||||||
| Interest-bearing deposits | 1,272,926 | 1,237,249 | 35,677 | 2.88 | % | |||||||||||
| · | PPP fee income recognized during the quarter ended September 30, 2021 totaled $1.8 million, as compared to $1.4 million and $1.0 million for the quarters ended June 30, 2021 and September 30, 2020, respectively. |
| · | As of September 30, 2021, the Company reported total loans, total assets, and total deposits of $1.7 billion, $2.4 billion, and $2.2 billion, respectively, as compared to $1.5 billion, $2.0 billion, and $1.8 billion, respectively, at December 31, 2020. |
| · | During the three months ended September 30, 2021 and the three months ended June 30, 2021, the Company did not record a provision for loan losses, as compared to a provision of $1.9 million recorded during the three months ended September 30, 2020. |
| · | As of September 30, 2021, the ratio of nonperforming loans to period end loans of 0.03% remained unchanged, as compared to December 31, 2020. |
| · | For the quarter ended September 30, 2021, net interest margin was 3.60%, as compared to 3.48% for the quarter ended June 30, 2021 and 3.30% for the quarter ended September 30, 2020. |
| · | The Company’s Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.15 per share during the three months ended September 30, 2021. |
| · | For the three months ended September 30, 2021, the Company’s return on average assets (“ROAA”) was 1.85% and the return on average equity (“ROAE”) was 19.26%, as compared to ROAA and ROAE of 1.75% and 24.25%, respectively for the three months ended June 30, 2021, and 1.81% and 32.33%, respectively, for the three months ended September 30, 2020. |
President and Chief Executive Officer James Beckwith commented, “We delivered strong earnings this quarter through the execution of our organic growth strategy following our IPO in May 2021, which gained momentum with the planned addition of new staff and seized market opportunities. We continue to manage expenses, execute on conservative underwriting practices, and onboard customers who appreciate a differentiated customer experience based on our commitment to their success. Building and sustaining trust with our customers and community partners resulted in both deposit and loan growth. This quarter, we also declared another dividend to shareholders which exemplifies our focus on shareholder value. As we benefit from an improved economic outlook which drives consumer confidence, we will continue to expand our verticals to meet the increased demand in the markets we serve. We expect the acceleration of our growth and our disciplined business practices, to benefit our customers, employees, and shareholders.”
Summary Results
For the three months ended September 30, 2021, the Company’s ROAA was 1.85% and the ROAE was 19.26%, as compared to 1.81% and 32.33%, respectively, for the three months ended September 30, 2020. The increase in ROAA is the result of 18.09% higher net income despite the higher effective tax rate used in the three months ended September 30, 2021. The decline in ROAE is the result of increased average equity balance during the quarter ended September 30, 2021, as compared to the quarter ended September 30, 2020.
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
| For the three months ended | ||||||||||||||||
| (dollars in thousands, except per share data) | Sep 30, 2021 | Jun 30, 2021 | $ Change | % Change | ||||||||||||
| Selected operating data: | ||||||||||||||||
| Net interest income | $ | 19,909 | $ | 18,296 | $ | 1,613 | 8.82 | % | ||||||||
| Provision for loan losses | — | — | — | 0.00 | % | |||||||||||
| Non-interest income | 2,028 | 1,846 | 182 | 9.86 | % | |||||||||||
| Non-interest expense | 8,641 | 9,580 | (939 | ) | (9.80 | )% | ||||||||||
| Net income | 11,026 | 9,828 | 1,198 | 12.19 | % | |||||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.64 | $ | 0.67 | $ | (0.03 | ) | (4.48 | )% | |||||||
| Diluted | 0.64 | 0.67 | (0.03 | ) | (4.48 | )% | ||||||||||
| Performance and other financial ratios: | ||||||||||||||||
| ROAA | 1.85 | % | 1.75 | % | ||||||||||||
| ROAE | 19.26 | % | 24.25 | % | ||||||||||||
| Net interest margin | 3.60 | % | 3.48 | % | ||||||||||||
| Cost of funds | 0.17 | % | 0.20 | % | ||||||||||||
| For the three months ended | ||||||||||||||||
| (dollars in thousands, except per share data) | Sep 30, 2021 | Sep 30, 2020 | $ Change | % Change | ||||||||||||
| Selected operating data: | ||||||||||||||||
| Net interest income | $ | 19,909 | $ | 16,227 | $ | 3,682 | 22.69 | % | ||||||||
| Provision for loan losses | — | 1,850 | (1,850 | ) | (100.00 | )% | ||||||||||
| Non-interest income | 2,028 | 2,535 | (507 | ) | (20.00 | )% | ||||||||||
| Non-interest expense | 8,641 | 7,234 | 1,407 | 19.45 | % | |||||||||||
| Net income | 11,026 | 9,337 | 1,689 | 18.09 | % | |||||||||||
| Earnings per common share: | ||||||||||||||||
| Basic | $ | 0.64 | $ | 0.94 | $ | (0.30 | ) | (31.91 | )% | |||||||
| Diluted | 0.64 | 0.94 | (0.30 | ) | (31.91 | )% | ||||||||||
| Performance and other financial ratios: | ||||||||||||||||
| ROAA | 1.85 | % | 1.81 | % | ||||||||||||
| ROAE | 19.26 | % | 32.33 | % | ||||||||||||
| Net interest margin | 3.60 | % | 3.30 | % | ||||||||||||
| Cost of funds | 0.17 | % | 0.46 | % | ||||||||||||
Balance Sheet Summary
Total assets at September 30, 2021 were $2.4 billion, an increase of $480.7 million from $2.0 billion at December 31, 2020. The increase was primarily due to a $240.3 million increase in cash and cash equivalents, a $201.9 million increase in loans, net of allowance for loan losses, and a $35.8 million increase in total investments. The increase in cash and cash equivalents since December 30, 2020 was primarily a result of net income recognized of $31.1 million, proceeds from the sale of securities of $40.8 million, an increase in deposits of $384.4 million, and net proceeds of $111.2 million from the issuance of 6,054,750 shares of common stock in our IPO. These increases were partially offset by a decrease of $92.1 million related to sales of securities, total loan originations and advances, net of principal collected, of $201.9 million, and cash distributions of $49.4 million during the same period. Of the $201.9 million increase in total loans between December 31, 2020 and September 30, 2021, $102.5 million was related to PPP loan originations and $580.4 million was related to non-PPP loan originations, partially offset by $197.1 million in PPP loan forgiveness and $284.0 million in non-PPP loan payoffs and paydowns.
Total liabilities were $2.2 billion at September 30, 2021, an increase of $387.9 million from $1.8 billion at December 31, 2020. The increase in total liabilities was primarily attributable to growth in deposits of $384.4 million, largely due to increases in money market and non-interest-bearing deposits of $139.7 million and $199.8 million, respectively.
Total shareholders’ equity increased by $92.9 million, from $133.8 million at December 31, 2020 to $226.6 million at September 30, 2021, primarily as a result of net income recognized of $31.1 million and net proceeds of $111.2 million from the issuance of 6,054,750 shares of common stock in our IPO, partially offset by $49.4 million in cash distributions paid during the nine months ended September 30, 2021.
| Balance Sheet Change | ||||||||||||||||
| Ending Balances | As of | |||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Dec 31, 2020 | $ Change | % Change | ||||||||||||
| Selected financial condition data: | ||||||||||||||||
| Total assets | $ | 2,434,493 | $ | 1,953,765 | $ | 480,728 | 24.61 | % | ||||||||
| Cash and cash equivalents | 530,832 | 290,493 | 240,339 | 82.73 | % | |||||||||||
| Total loans, net | 1,682,868 | 1,480,970 | 201,898 | 13.63 | % | |||||||||||
| Total investments | 158,776 | 122,928 | 35,848 | 29.16 | % | |||||||||||
| Total liabilities | 2,207,855 | 1,819,990 | 387,865 | 21.31 | % | |||||||||||
| Total deposits | 2,168,394 | 1,784,001 | 384,393 | 21.55 | % | |||||||||||
| Subordinated notes, net | 28,370 | 28,320 | 50 | 0.18 | % | |||||||||||
| Total shareholders’ equity | 226,638 | 133,775 | 92,863 | 69.42 | % | |||||||||||
Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
| For the three months ended | ||||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Jun 30, 2021 | $ Change | % Change | ||||||||||||
| Interest income | $ | 20,832 | $ | 19,308 | $ | 1,524 | 7.89 | % | ||||||||
| Interest expense | 923 | 1,012 | (89 | ) | (8.79 | )% | ||||||||||
| Net interest income | 19,909 | 18,296 | 1,613 | 8.82 | % | |||||||||||
| Net interest margin | 3.60 | % | 3.48 | % | ||||||||||||
| For the three months ended | ||||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Sep 30, 2020 | $ Change | % Change | ||||||||||||
| Interest income | $ | 20,832 | $ | 18,434 | $ | 2,398 | 13.01 | % | ||||||||
| Interest expense | 923 | 2,207 | (1,284 | ) | (58.18 | )% | ||||||||||
| Net interest income | 19,909 | 16,227 | 3,682 | 22.69 | % | |||||||||||
| Net interest margin | 3.60 | % | 3.30 | % | ||||||||||||
The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:
| Three months ended September 30, 2021 | Three months ended June 30, 2021 | Three months ended September 30, 2020 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | Average Balance | Interest Income/ Expense | Yield/ Rate | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||
| Interest-earning deposits with banks | $ | 412,953 | $ | 175 | 0.17 | % | $ | 378,000 | $ | 125 | 0.13 | % | $ | 311,349 | $ | 199 | 0.25 | % | ||||||||||||||||||
| Investment securities | 157,305 | 571 | 1.44 | % | 149,814 | 557 | 1.49 | % | 102,820 | 501 | 1.94 | % | ||||||||||||||||||||||||
| Loans | 1,625,995 | 20,086 | 4.90 | % | 1,578,438 | 18,626 | 4.73 | % | 1,539,239 | 17,734 | 4.58 | % | ||||||||||||||||||||||||
| Total interest-earning assets | 2,196,253 | 20,832 | 3.76 | % | 2,106,252 | 19,308 | 3.68 | % | 1,953,408 | 18,434 | 3.75 | % | ||||||||||||||||||||||||
| Other assets, net | 168,906 | 140,757 | 94,412 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 2,365,159 | $ | 2,247,009 | $ | 2,047,820 | ||||||||||||||||||||||||||||||
| Liability and Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Interest-bearing transaction accounts | $ | 149,479 | $ | 38 | 0.10 | % | $ | 150,852 | $ | 37 | 0.10 | % | $ | 146,700 | $ | 98 | 0.27 | % | ||||||||||||||||||
| Savings accounts | 76,669 | 19 | 0.10 | % | 75,424 | 19 | 0.10 | % | 41,063 | 17 | 0.17 | % | ||||||||||||||||||||||||
| Money market accounts | 966,629 | 389 | 0.16 | % | 949,448 | 475 | 0.20 | % | 1,018,594 | 1,476 | 0.58 | % | ||||||||||||||||||||||||
| Time accounts including CDARS | 54,314 | 34 | 0.25 | % | 36,773 | 37 | 0.40 | % | 94,896 | 173 | 0.73 | % | ||||||||||||||||||||||||
| Subordinated debenture | 28,359 | 443 | 6.20 | % | 28,339 | 444 | 6.27 | % | 28,292 | 443 | 6.23 | % | ||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,275,450 | 923 | 0.29 | % | 1,240,836 | 1,012 | 0.33 | % | 1,329,545 | 2,207 | 0.67 | % | ||||||||||||||||||||||||
| Demand accounts | 853,017 | 827,992 | 597,097 | |||||||||||||||||||||||||||||||||
| Interest payable and other liabilities | 9,537 | 15,621 | 6,289 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 227,155 | 162,560 | 114,889 | |||||||||||||||||||||||||||||||||
| Total liabilities & shareholders’ equity | $ | 2,365,159 | $ | 2,247,009 | $ | 2,047,820 | ||||||||||||||||||||||||||||||
| Net interest spread | 3.48 | % | 3.35 | % | 3.09 | % | ||||||||||||||||||||||||||||||
| Net interest income/margin | $ | 19,909 | 3.60 | % | $ | 18,296 | 3.48 | % | $ | 16,227 | 3.30 | % | ||||||||||||||||||||||||
During the three months ended September 30, 2021, net interest income increased $1.6 million, or 8.82%, to $19.9 million, compared to $18.3 million during the three months ended June 30, 2021. Additionally, net interest margin increased 12 basis points to 3.60% during the three months ended September 30, 2021, as compared to 3.48% during the three months ended June 30, 2021. The increase in net interest margin was due primarily to an improving yield on interest-earning assets related to income earned, including origination fees, from PPP loans forgiven during the quarter, which was 3.76% for the quarter ended September 30, 2021, representing an increase of 8 basis points from 3.68% for the quarter ended June 30, 2021. Average loan yields increased 17 basis points from 4.73% during the three months ended June 30, 2021 to 4.90% during the three months ended September 30, 2021. Average loan yields, excluding PPP loans, decreased 10 basis points from 4.76% during the three months ended June 30, 2021 to 4.66% during the three months ended September 30, 2021. A reconciliation of this non-GAAP measure is set forth in the “Non-GAAP Reconciliation (Unaudited)” table included herein. The decline in interest expense is primarily attributed to the reduction in the cost of interest-bearing liabilities, which decreased by four basis points to 0.29% as of September 30, 2021 from 0.33% at June 30, 2021, as a direct result of the declining interest rate environment.
During the three months ended September 30, 2021, net interest income increased $3.7 million, or 22.68%, to $19.9 million, compared to $16.2 million during the three months ended September 30, 2020. Additionally, net interest margin increased 30 basis points to 3.60% during the three months ended September 30, 2021, as compared to 3.30% during the three months ended September 30, 2020. The increase in net interest margin was due primarily to an increase in interest-earning assets, which increased from an average balance of $2.0 billion for the three months ended September 30, 2020 to an average balance of $2.2 billion for the three months ended September 30, 2021. Average loan yields increased 32 basis points from 4.58% during the three months ended September 30, 2020 to 4.90% during the three months ended September 30, 2021. Average loan yields, excluding PPP loans, decreased 31 basis points from 4.97% during the three months ended September 30, 2020 to 4.66% during the three months ended September 30, 2021. A reconciliation of this non-GAAP measure is set forth in the “Non-GAAP Reconciliation (Unaudited)” table included herein. The decline in interest expense is primarily attributed to the reduction in the cost of interest-bearing liabilities, which decreased by 37 basis points to 0.29% as of September 30, 2021 from 0.67% at September 30, 2020, as a direct result of the declining interest rate environment.
Asset Quality
Small Business Administration (“SBA”) PPP
In March 2020, the SBA PPP was created to help small businesses keep workers employed during the COVID-19 pandemic. As an SBA Preferred Lender, the Company was able to provide PPP loans to small business customers. As of September 30, 2021, there were 183 PPP loans outstanding totaling $61.5 million, which included 180 loans totaling $54.4 million funded during the first nine months of 2021 under the second round of the PPP stimulus plan. Approximately 72 of these PPP loans, or 39.34% of total PPP loans as of September 30, 2021, totaling $4.3 million, were less than or equal to $0.15 million and had access to streamlined forgiveness processing. As of September 30, 2021, 1,258 PPP loan forgiveness applications had been submitted to the SBA and forgiveness payments had been received on 1,245 of these PPP loans, totaling $292.7 million in principal and interest. We expect full forgiveness of the first round of PPP loans to be completed in the near term.
COVID-19 Deferments
Following the passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)” was issued by federal bank regulators, which offers temporary relief from troubled debt restructuring (“TDR”) accounting for loan payment deferrals for certain customers whose businesses are experiencing economic hardship due to COVID-19. The Company is closely monitoring the effects of the pandemic on our loan and deposit customers. Our management team continues to be focused on assessing the risks in our loan portfolio and working with our customers to mitigate where possible the risk of potential losses. The Company implemented loan programs to allow certain consumers and businesses impacted by the pandemic to defer loan principal and interest payments. As of September 30, 2021, eight borrowing relationships with eight loans totaling $12.2 million were on COVID-19 deferment. All loans that ended COVID-19 deferments in the quarter ended September 30, 2021 returned to their contractual payment structures prior to the COVID-19 pandemic with no risk rating downgrades to classified nor any TDR, and we anticipate that the remaining loans on COVID-19 deferment will return to their pre-COVID-19 contractual payment status after their COVID-19 deferments end.
Allowance for Loan Losses
At September 30, 2021, the Company’s allowance for loan losses was $21.8 million, as compared to $22.2 million at December 31, 2020. At September 30, 2021, the Company’s ratio of nonperforming loans to period end loans of 0.03% remained unchanged compared to December 31, 2020. At September 30, 2021, eight loans totaling $12.2 million, or 0.72% of the loan portfolio, were in a COVID-19 deferment period and six loans totaling $0.7 million had been in a COVID-19 deferment in the second quarter of 2021 but were not in such deferment as of September 30, 2021. Loans designated as watch and substandard decreased slightly to $57.9 million at September 30, 2021 from $60.1 million at December 31, 2020, which did not have an impact to the reserve overall. There were no loans with doubtful risk grades at September 30, 2021 or December 31, 2020. A summary of the allowance for loan losses by loan class is as follows:
| September 30, 2021 | December 31, 2020 | |||||||||||||||
| (dollars in thousands) | Amount | % of Total | Amount | % of Total | ||||||||||||
| Collectively evaluated for impairment: | ||||||||||||||||
| Real Estate: | ||||||||||||||||
| Commercial | $ | 11,695 | 53.53 | % | $ | 9,358 | 42.17 | % | ||||||||
| Commercial land and development | 112 | 0.51 | % | 77 | 0.35 | % | ||||||||||
| Commercial construction | 343 | 1.57 | % | 821 | 3.70 | % | ||||||||||
| Residential construction | 60 | 0.27 | % | 87 | 0.39 | % | ||||||||||
| Residential | 207 | 0.95 | % | 220 | 0.99 | % | ||||||||||
| Farmland | 666 | 3.05 | % | 615 | 2.77 | % | ||||||||||
| Commercial: | ||||||||||||||||
| Secured | 7,260 | 33.23 | % | 9,476 | 42.71 | % | ||||||||||
| Unsecured | 218 | 1.00 | % | 179 | 0.81 | % | ||||||||||
| PPP | — | 0.00 | % | — | 0.00 | % | ||||||||||
| Consumer and other | 638 | 2.92 | % | 632 | 2.85 | % | ||||||||||
| Unallocated | 515 | 2.36 | % | 724 | 3.26 | % | ||||||||||
| 21,714 | 99.39 | % | 22,189 | 100.0 | % | |||||||||||
| Individually evaluated for impairment: | ||||||||||||||||
| Commercial Secured | 134 | 0.61 | % | — | 0.00 | % | ||||||||||
| Total allowance for loan losses | $ | 21,848 | 100.00 | % | $ | 22,189 | 100.00 | % | ||||||||
The ratio of allowance for loan losses to total loans was 1.28% at September 30, 2021, compared to 1.47% at December 31, 2020. Excluding SBA-guaranteed PPP loans, the ratio of the allowance for loan losses to total loans was 1.33% and 1.63% at September 30, 2021 and December 31, 2020, respectively. A reconciliation of this non-GAAP measure is set forth in the “Non-GAAP Reconciliation (Unaudited)” table included herein.
Non-interest Income
The following table presents the key components of non-interest income for the periods indicated:
| For the three months ended | $ | % | ||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Jun 30, 2021 | Change | Change | ||||||||||||
| Service charges on deposit accounts | $ | 112 | $ | 106 | $ | 6 | 5.66 | % | ||||||||
| Gain on sale of securities | 435 | 92 | 343 | 372.83 | % | |||||||||||
| Gain on sale of loans | 988 | 1,091 | (103 | ) | (9.44 | )% | ||||||||||
| Loan-related fees | 87 | 211 | (124 | ) | (58.77 | )% | ||||||||||
| Dividends on FHLB stock | 100 | 92 | 8 | 8.70 | % | |||||||||||
| Earnings on bank-owned life insurance | 68 | 60 | 8 | 13.33 | % | |||||||||||
| Other income | 238 | 194 | 44 | 22.68 | % | |||||||||||
| Total non-interest income | $ | 2,028 | $ | 1,846 | $ | 182 | 9.86 | % | ||||||||
Non-interest income during the three months ended September 30, 2021 increased $0.2 million, or 9.86%, to $2.0 million, compared to $1.8 million during the three months ended June 30, 2021. Gain on sale of securities increased by $0.3 million, or 372.83%, during the quarter, totaling $0.4 million during the three months ended September 30, 2021, as compared to $0.1 million during the three months ended June 30, 2021. This increase was primarily due to the sale of approximately $24.6 million of municipal securities, mortgage-backed securities, and U.S. government treasuries during the three months ended September 30, 2021. This increase was partially offset by a decrease in gain on sale of loans of $0.1 million, or 9.44%, and a decrease in loan-related fees of $0.1 million, or 58.77%, for the quarter ended September 30, 2021, as compared to the quarter ended June 30, 2021. The decline in gain on sale of loans related to a change in the fiscal transfer agent in the SBA’s 7a loan guarantee program, effective August 30, 2021. The change in transfer agent slowed the Company’s ability to sell loans in September 2021, thus resulting in a decline in gain on sale of loans. The decrease in loan-related fees resulted primarily from a decrease in swap referral fees recognized in the quarter ended September 30, 2021, as compared to the quarter ended June 30, 2021.
The following table presents the key components of non-interest income for the periods indicated:
| For the three months ended | $ | % | ||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Sep 30, 2020 | Change | Change | ||||||||||||
| Service charges on deposit accounts | $ | 112 | $ | 93 | $ | 19 | 20.43 | % | ||||||||
| Gain on sale of securities | 435 | 275 | 160 | 58.18 | % | |||||||||||
| Gain on sale of loans | 988 | 1,194 | (206 | ) | (17.25 | )% | ||||||||||
| Loan-related fees | 87 | 710 | (623 | ) | (87.75 | )% | ||||||||||
| Dividends on FHLB stock | 100 | 74 | 26 | 35.14 | % | |||||||||||
| Earnings on bank-owned life insurance | 68 | 59 | 9 | 15.25 | % | |||||||||||
| Other income | 238 | 130 | 108 | 83.08 | % | |||||||||||
| Total non-interest income | $ | 2,028 | $ | 2,535 | $ | (507 | ) | (20.00 | )% | |||||||
Non-interest income during the three months ended September 30, 2021 decreased $0.5 million, or 20.00%, to $2.0 million, compared to $2.5 million during the three months ended September 30, 2020. Gain on sale of loans decreased by $0.2 million, or 17.25%, to $1.0 million for the three months ended September 30, 2021, as compared to $1.2 million for the three months ended September 30, 2020. The decline in gain on sale of loans related to a change in the fiscal transfer agent in the SBA’s 7a loan guarantee program, effective August 30, 2021. The change in transfer agent slowed the Company’s ability to sell loans in September 2021, thus resulting in a decline in gain on sale of loans. Additionally, the decline in gain on sale of loans resulted from lower volumes period over period. Loan-related fees decreased by $0.6 million, or 87.75%, to $0.1 million for the three months ended September 30, 2021, as compared to $0.7 million for the three months ended September 30, 2020. The decrease in loan-related fees resulted primarily from a $0.3 million decrease in swap referral fees recognized in the quarter ended September 30, 2021, as compared to the quarter ended September 30, 2020, combined with $0.4 million of loan-related fees earned during the quarter ended September 30, 2020 for processing micro-loans to businesses in the local area in response to COVID-19, which did not recur in the quarter ended September 30, 2021. These declines were partially offset by an increase in gain on sale of securities of approximately $0.2 million, or 58.18%, to $0.4 million for the three months ended September 30, 2021, as compared to $0.3 million for the three months ended September 30, 2020. This increase was primarily due to the sale of approximately $24.6 million of municipal securities, mortgage-backed securities, and U.S. government treasuries during the three months ended September 30, 2021, as compared to sales of approximately $7.7 million of municipal and mortgage-backed securities during the quarter ended September 30, 2020.
Non-interest Expense
The following table presents the key components of non-interest expense for the periods indicated:
| For the three months ended | $ | % | ||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Jun 30, 2021 | Change | Change | ||||||||||||
| Salaries and employee benefits | $ | 4,980 | $ | 4,939 | $ | 41 | 0.83 | % | ||||||||
| Occupancy and equipment | 502 | 441 | 61 | 13.83 | % | |||||||||||
| Data processing and software | 611 | 598 | 13 | 2.17 | % | |||||||||||
| Federal Deposit Insurance Corporation (“FDIC”) insurance | 110 | 150 | (40 | ) | (26.67 | )% | ||||||||||
| Professional services | 505 | 1,311 | (806 | ) | (61.48 | )% | ||||||||||
| Advertising and promotional | 366 | 265 | 101 | 38.11 | % | |||||||||||
| Loan-related expenses | 462 | 218 | 244 | 111.93 | % | |||||||||||
| Other operating expenses | 1,105 | 1,658 | (553 | ) | (33.35 | )% | ||||||||||
| Total non-interest expense | $ | 8,641 | $ | 9,580 | $ | (939 | ) | 9.80 | % | |||||||
Non-interest expense for the quarter ended September 30, 2021 decreased $0.9 million, or 9.80%, to $8.6 million, as compared to $9.6 million during the quarter ended June 30, 2021, primarily as a result of a $0.8 million, or 61.48%, decrease in professional services and a $0.6 million, or 33.35%, decrease in other operating expenses, partially offset by an increase of $0.2 million, or 111.93%, in loan-related expenses. The $0.8 million decrease in professional services was primarily a result of $0.7 million of audit, consulting, and legal costs incurred in the quarter ended June 30, 2021 to support corporate organizational matters leading up to the Company’s IPO in May 2021, which did not recur in the quarter ended September 30, 2021. Other operating expenses, which are comprised of travel, insurance, postage and supplies, director fees, other employee expenses, armored car expenses, courier services, and other miscellaneous administrative expenses, decreased by $0.6 million, primarily due to stock compensation expense recognized in the quarter ended June 30, 2021 for director grants of $0.8 million, which did not recur in the quarter ended September 30, 2021. Loan-related expenses increased by $0.2 million, primarily as a result of a $0.2 million accrual for an SBA matter in the normal course of business.
The following table presents the key components of non-interest expense for the periods indicated:
| For the three months ended | $ | % | ||||||||||||||
| (dollars in thousands) | Sep 30, 2021 | Sep 30, 2020 | Change | Change | ||||||||||||
| Salaries and employee benefits | $ | 4,980 | $ | 3,969 | $ | 1,011 | 25.47 | % | ||||||||
| Occupancy and equipment | 502 | 447 | 55 | 12.30 | % | |||||||||||
| Data processing and software | 611 | 529 | 82 | 15.50 | % | |||||||||||
| FDIC insurance | 110 | 320 | (210 | ) | (65.63 | )% | ||||||||||
| Professional services | 505 | 447 | 58 | 12.98 | % | |||||||||||
| Advertising and promotional | 366 | 264 | 102 | 38.64 | % | |||||||||||
| Loan-related expenses | 462 | 185 | 277 | 149.73 | % | |||||||||||
| Other operating expenses | 1,105 | 1,073 | 32 | 2.98 | % | |||||||||||
| Total non-interest expense | $ | 8,641 | $ | 7,234 | $ | 1,407 | 19.45 | % | ||||||||
Non-interest expense increased by $1.4 million, or 19.45%, to $8.6 million during the three months ended September 30, 2021, as compared to $7.2 million for the three months ended September 30, 2020, primarily as a result of a $1.0 million, or 25.47%, increase in salaries and employee benefits and a $0.3 million, or 149.73%, increase in loan-related expenses, partially offset by a $0.2 million, or 65.63%, decrease in FDIC insurance. Salaries and employee benefits increased by $1.0 million to $5.0 million during the three months ended September 30, 2021, as compared to $4.0 million for the three months ended September 30, 2020. This increase was primarily related to an increase of full-time equivalent employees, increased commissions related to our loan and deposit growth for the quarter ended September 30, 2021, compared to September 30, 2020, and restricted stock compensation expense recognized for employee grants of $0.2 million during the three months ended September 30, 2021. Loan-related expenses increased by $0.3 million period-over-period to $0.5 million for the quarter ended September 30, 2021, due to a $0.2 million accrual for an SBA matter in the normal course of business. FDIC insurance decreased from $0.3 million for the three months ended September 30, 2020 to $0.1 million for the three months ended September 30, 2021, primarily due to an improvement in the leverage ratio used in the FDIC assessment as a result of the Company’s IPO in May 2021.
Provision for Income Taxes
The Company terminated its status as a “Subchapter S” corporation as of May 5, 2021, in connection with the Company’s IPO and became a C Corporation. Prior to that date, as an S Corporation, the Company had no U.S. federal income tax expense. The provision recorded for the three months ended September 30, 2021 was calculated using an effective tax rate of 20.77%, representing the weighted average rate between the S Corporation tax rate of 3.50% and the C Corporation tax rate of 29.56% based on the number of days as each type of corporation during 2021. Refer to the section entitled “Pro Forma C Corporation Income Tax Expense” below for a discussion on what the Company’s income tax expense and net income would have been had the Company been taxed as a C Corporation for the quarters ended June 30, 2021 and September 30, 2020.
In conjunction with the termination of the Subchapter S corporation status as of May 5, 2021, the C Corporation deferred tax assets and liabilities were estimated for future tax consequences attributable to differences between the financial statement carrying amounts of the Company’s existing assets and liabilities and their respective tax bases. The deferred tax assets and liabilities were measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a C Corporation was recognized as a net deferred tax asset of $5.4 million and a reduction to the provision for income taxes of $4.6 million during the three months ended June 30, 2021.
Provision for income taxes for the quarter ended September 30, 2021 increased by $1.5 million, or 209.26%, to $2.3 million, as compared to $0.7 million during the quarter ended June 30, 2021. This increase is due to the change in the annual effective tax rate used from 3.50% prior to the IPO to 20.77% after the IPO, as noted above, as applied to estimated taxable income during the quarter ended September 30, 2021. During the quarter ended June 30, 2021, the provision for income taxes was partially offset by the $4.6 million reduction to the provision for income taxes for the adjustment of the net deferred tax assets due to the termination of the Company’s S Corporation status.
Provision for income taxes increased by $1.9 million, or 565.69%, to $2.3 million during the three months ended September 30, 2021, as compared to $0.3 million for the three months ended September 30, 2020. This increase is due to the change in the effective tax rate used from 3.50% to 20.77%, as noted above, and as applied to estimated taxable income during the quarter ended September 30, 2021, as noted above.
Pro Forma C Corporation Income Tax Expense
Because of the Company’s status as a Subchapter S Corporation prior to May 5, 2021, no U.S. federal income tax expense was recorded for the S Corporation period of the three months ended June 30, 2021 and for the entirety of the three months ended September 30, 2020. Had the Company been taxed as a C Corporation and paid U.S. federal income tax for such periods, the combined statutory income tax rate would have been 29.56% in each period. These pro forma statutory rates reflect a U.S. federal income tax rate of 21.00% and a California income tax rate of 8.56%, after adjustment for the federal tax benefit, on corporate taxable income. Had the Company been subject to U.S. federal income tax for each of these periods, on a statutory income tax rate pro forma basis, the provision for combined federal and state income tax would have been $3.1 million and $2.9 million, for the three months ended June 30, 2021 and September 30, 2020, respectively. As a result of the foregoing factors, the Company’s pro forma net income (after U.S. federal and California state income tax) for the three months ended June 30, 2021 and September 30, 2020 would have been $7.4 million and $6.8 million, respectively.
Webcast Details
Five Star Bancorp will host a webcast on Tuesday, October 26, 2021, at 10:00 a.m. PT (1:00 p.m. ET), to discuss its third quarter results. To view the live webcast, visit the “News & Events” section of the Company’s website under “Events” at https://investors.fivestarbank.com/news-events/events. The webcast will be archived on the Company’s website for a period of 90 days.
About Five Star Bancorp
Five Star is a bank holding company headquartered in Rancho Cordova, California. Five Star operates through its wholly owned banking subsidiary, Five Star Bank. Five Star has seven branches and two loan production offices throughout Northern California.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time.
The Company disclaims any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law.
Condensed Financial Data (Unaudited)
| For the three months ended | ||||||||||||
| (dollars in thousands, except share and per share data) | September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||
| Revenue and Expense Data | ||||||||||||
| Interest income | $ | 20,832 | $ | 19,308 | $ | 18,434 | ||||||
| Interest expense | 923 | 1,012 | 2,207 | |||||||||
| Net interest income | 19,909 | 18,296 | 16,227 | |||||||||
| Provision for loan losses | — | — | 1,850 | |||||||||
| Net interest income after provision | 19,909 | 18,296 | 14,377 | |||||||||
| Non-interest income: | ||||||||||||
| Service charges on deposit accounts | 112 | 106 | 93 | |||||||||
| Gain on sale of securities | 435 | 92 | 275 | |||||||||
| Gain on sale of loans | 988 | 1,091 | 1,194 | |||||||||
| Loan-related fees | 87 | 211 | 710 | |||||||||
| Dividends on FHLB stock | 100 | 92 | 74 | |||||||||
| Earnings on bank-owned life insurance | 68 | 60 | 59 | |||||||||
| Other income | 238 | 194 | 130 | |||||||||
| Total non-interest income | 2,028 | 1,846 | 2,535 | |||||||||
| Non-interest expense: | ||||||||||||
| Salaries and employee benefits | 4,980 | 4,939 | 3,969 | |||||||||
| Occupancy and equipment | 502 | 441 | 447 | |||||||||
| Data processing and software | 611 | 598 | 529 | |||||||||
| FDIC insurance | 110 | 150 | 320 | |||||||||
| Professional services | 505 | 1,311 | 447 | |||||||||
| Advertising and promotional | 366 | 265 | 264 | |||||||||
| Loan-related expenses | 462 | 218 | 185 | |||||||||
| Other operating expenses | 1,105 | 1,658 | 1,073 | |||||||||
| Total non-interest expense | 8,641 | 9,580 | 7,234 | |||||||||
| Total income before taxes | 13,296 | 10,562 | 9,678 | |||||||||
| Provision for income taxes | 2,270 | 734 | 341 | |||||||||
| Net income | $ | 11,026 | $ | 9,828 | $ | 9,337 | ||||||
| Share Data | ||||||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.64 | $ | 0.67 | $ | 0.94 | ||||||
| Diluted | $ | 0.64 | $ | 0.67 | $ | 0.94 | ||||||
| Weighted average basic common shares outstanding | 17,095,957 | 14,650,208 | 9,902,952 | |||||||||
| Weighted average diluted common shares | 17,123,182 | 14,667,804 | 9,902,952 | |||||||||
| Credit Quality | ||||||||||||
| Allowance for loan losses to period end nonperforming loans | 3923.67 | % | 5139.91 | % | 1319.30 | % | ||||||
| Nonperforming loans to period end loans | 0.03 | % | 0.03 | % | 0.10 | % | ||||||
| Nonperforming assets to total assets | 0.02 | % | 0.02 | % | 0.07 | % | ||||||
| Nonperforming loans plus performing TDRs to total loans | 0.03 | % | 0.03 | % | 0.11 | % | ||||||
| COVID-19 deferments to period end loans | 0.72 | % | 0.81 | % | 2.51 | % | ||||||
| Selected Financial Ratios | ||||||||||||
| ROAA | 1.85 | % | 1.75 | % | 1.81 | % | ||||||
| ROAE | 19.26 | % | 24.25 | % | 32.33 | % | ||||||
| Net interest margin | 3.60 | % | 3.48 | % | 3.30 | % | ||||||
| Loan to deposit | 78.86 | % | 76.84 | % | 82.73 | % | ||||||
| (dollars in thousands) | September 30, 2021 | June 30, 2021 | December 31, 2020 | |||||||||
| Balance Sheet Data | ||||||||||||
| Cash and due from financial institutions | $ | 89,951 | $ | 165,927 | $ | 46,028 | ||||||
| Interest-bearing deposits | 440,881 | 370,677 | 244,465 | |||||||||
| Time deposits in banks | 17,204 | 19,451 | 23,705 | |||||||||
| Securities - available-for-sale, at fair value | 153,821 | 160,074 | 114,949 | |||||||||
| Securities - held-to-maturity, at amortized cost | 4,955 | 6,473 | 7,979 | |||||||||
| Loans held for sale | 5,267 | 2,340 | 4,820 | |||||||||
| Loans, gross | 1,704,716 | 1,585,462 | 1,503,159 | |||||||||
| Allowance for loan losses | (21,848 | ) | (22,153 | ) | (22,189 | ) | ||||||
| Loans, net | 1,682,868 | 1,563,309 | 1,480,970 | |||||||||
| Federal Home Loan Bank stock | 6,723 | 6,723 | 6,232 | |||||||||
| Premises and equipment, net | 1,630 | 1,649 | 1,663 | |||||||||
| Bank owned life insurance | 11,142 | 11,074 | 8,662 | |||||||||
| Interest receivable and other assets | 20,052 | 20,170 | 14,292 | |||||||||
| Total assets | $ | 2,434,493 | $ | 2,327,867 | $ | 1,953,765 | ||||||
| Non-interest-bearing deposits | $ | 895,468 | $ | 829,036 | $ | 695,687 | ||||||
| Interest-bearing deposits | 1,272,926 | 1,237,249 | 1,088,314 | |||||||||
| Total deposits | 2,168,394 | 2,066,285 | 1,784,001 | |||||||||
| Subordinated notes, net | 28,370 | 28,353 | 28,320 | |||||||||
| Interest payable and other liabilities | 11,091 | 14,915 | 7,669 | |||||||||
| Total liabilities | 2,207,855 | 2,109,553 | 1,819,990 | |||||||||
| Common stock | 218,026 | 218,026 | 110,082 | |||||||||
| Retained earnings | 8,442 | — | 22,348 | |||||||||
| Accumulated other comprehensive income (loss), net | (20 | ) | 288 | 1,345 | ||||||||
| Total shareholders’ equity | $ | 226,638 | $ | 218,314 | $ | 133,775 | ||||||
| Quarterly Average Balance Data | ||||||||||||
| Average loans | $ | 1,625,995 | $ | 1,578,438 | $ | 1,530,227 | ||||||
| Average interest-earning assets | $ | 2,196,253 | $ | 2,106,252 | $ | 1,866,372 | ||||||
| Average total assets | $ | 2,365,159 | $ | 2,247,009 | $ | 1,983,049 | ||||||
| Average deposits | $ | 2,100,108 | $ | 2,040,489 | $ | 1,818,360 | ||||||
| Average borrowings and subordinated debt | $ | 28,364 | $ | 28,339 | $ | 28,311 | ||||||
| Average total equity | $ | 227,155 | $ | 162,560 | $ | 129,762 | ||||||
| Capital Ratio Data | ||||||||||||
| Total shareholders’ equity to total assets | 9.31 | % | 9.38 | % | 6.85 | % | ||||||
| Tangible common equity to tangible assets(1) | 9.31 | % | 9.38 | % | 6.85 | % | ||||||
| Total capital (to risk-weighted assets) | 15.70 | % | 16.41 | % | 12.18 | % | ||||||
| Tier 1 capital (to risk-weighted assets) | 12.84 | % | 13.39 | % | 8.98 | % | ||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 12.84 | % | 13.39 | % | 8.98 | % | ||||||
| Tier 1 leverage ratio | 9.54 | % | 9.59 | % | 6.58 | % | ||||||
(1) See “Non-GAAP Reconciliation (Unaudited)” table for reconciliation of non-GAAP measure.
Non-GAAP Reconciliation (Unaudited)
The Company uses financial information in its analysis of the Company’s performance that are not in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons.
Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets as of each of the dates indicated.
Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding SBA-guaranteed PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP financial measure is average loan yield.
Allowance for loan losses to total loans, excluding SBA-guaranteed PPP loans, is defined as allowance for loan losses, divided by total loans less SBA-guaranteed PPP loans. The most directly comparable GAAP financial measure is allowance for loan losses to total loans.
The following reconciliation tables provide a more detailed analysis of these non-GAAP financial measures.
| Tangible shareholders’ equity to tangible assets (dollars in thousands) | September 30, 2021 | June 30, 2021 | December 31, 2020 | |||||||||
| Tangible shareholders’ equity (numerator) | $ | 226,638 | $ | 218,314 | $ | 133,775 | ||||||
| Tangible assets (denominator) | 2,434,493 | 2,327,867 | 1,953,765 | |||||||||
| Tangible shareholders’ equity to tangible assets | 9.31 | % | 9.38 | % | 6.85 | % | ||||||
| Average loan yield, excluding SBA PPP loans (dollars in thousands) | September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||
| Interest income on loans | $ | 20,085 | $ | 18,626 | $ | 17,735 | ||||||
| Less: interest income on SBA PPP loans | 2,054 | 1,771 | 1,663 | |||||||||
| Interest income on loans, excluding SBA PPP loans | 18,031 | 16,855 | 16,072 | |||||||||
| Annualized interest income on loans, excluding SBA PPP loans (numerator) | 71,536 | 67,605 | 63,939 | |||||||||
| Average total loans | $ | 1,625,995 | $ | 1,578,438 | $ | 1,539,239 | ||||||
| Less: average SBA PPP loans | 89,436 | 158,568 | 253,366 | |||||||||
| Average total loans, excluding SBA PPP loans (denominator) | 1,536,559 | 1,419,870 | 1,285,873 | |||||||||
| Average loan yield, excluding SBA PPP loans | 4.66 | % | 4.76 | % | 4.97 | % | ||||||
| Allowance for loan losses to total loans, excluding SBA PPP loans (dollars in thousands) | September 30, 2021 | December 31, 2020 | ||||||
| Allowance for loan losses (numerator) | $ | 21,848 | $ | 22,189 | ||||
| Total loans | 1,709,982 | 1,507,979 | ||||||
| Less: SBA PPP loans | 61,499 | 147,965 | ||||||
| Total loans, excluding SBA PPP loans (denominator) | 1,648,483 | 1,360,014 | ||||||
| Allowance for loan losses to total loans, excluding SBA PPP loans | 1.33 | % | 1.63 | % | ||||
Media Contact:
Heather Luck, CFO
Five Star Bancorp
(916) 626-5008
hluck@fivestarbank.com
Shelley Wetton, CMO
Five Star Bancorp
(916) 284-7827
swetton@fivestarbank.com
Investor Presentation Third Quarter 2021
Safe Harbor Statement and Disclaimer Forward - Looking Statements In this presentation, “we,” “our,” “us,” “Five Star" or “the Company” refers to Five Star Bancorp, a California corporation, and our consolidated subsidiaries, including Five Star Bank, a California state - chartered bank, unless the context indicates that we refer only to the parent company, Five Star Bancorp . This presentation contains forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 . These forward - looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based . Forward - looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan” or words or phases of similar meaning . The Company cautions that the forward - looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control . Such forward - looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated . New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company . If one or more of the factors affecting the Company’s forward - looking information and statements proves incorrect, then the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward - looking information and statements contained in this press release . Therefore, the Company cautions you not to place undue reliance on the Company’s forward - looking information and statements . Important factors that could cause actual results to differ materially from those in the forward - looking statements are set forth in the Company’s Quarterly Report on Form 10 - Q for the quarter ended June 30 , 2021 under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time . The Company disclaims any duty to revise or update the forward - looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward - looking statements, except as specifically required by law . Industry Information This presentation includes statistical and other industry and market data that we obtained from government reports and other third - party sources . Our internal data, estimates, and forecasts are based on information obtained from government reports, trade, and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions . Although we believe that this information (including the industry publications and third - party research, surveys, and studies) is accurate and reliable, we have not independently verified such information . In addition, estimates, forecasts, and assumptions are necessarily subject to a high degree of uncertainty and risk due to a variety of factors . Finally, forward - looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward - looking statements in this presentation . Unaudited Financial Data Numbers contained in this presentation for the quarter ended September 30, 2021 and for other quarterly periods are unaudited . A dditionally, all figures presented as year - to - date, except for periods that represent a full fiscal year ended December 31, represent unaudited results. As a result, subsequent information may cause a ch ange in certain accounting estimates and other financial information, including the Company’s allowance for loan losses, fair values, and income taxes. Non - GAAP Financial Measures We present average loan yields, excluding SBA PPP loans, to help us describe our operating performance. Our presentation of t his non - GAAP measure is intended as a supplemental measure of our performance that is not required by, or presented with, U.S. generally accepted accounting principles ("GAAP"). This non - GAAP me asure should not be considered as an alternative to performance measures derived in accordance with U.S. GAAP. Our presentation of this non - GAAP measure should not be construed to imply that o ur future results will be unaffected by this item. See the appendix to this presentation for a reconciliation of this non - GAAP measure to the most directly comparable GAAP financial measure. October 2021 Investor Presentation | 2
Agenda • Company Overview • Most Recent Quarter Highlights • Loans and Credit Quality • Deposit and Capital Overview • Financial Results October 2021 Investor Presentation | 3
Company Overview October 2021 Investor Presentation | 4
Company Overview Nasdaq: Headquarters: Asset Size: Loans: Deposits: Bank Branches: October 2021 Investor Presentation | 5 CA Redding 5 5 Chico 6 Yuba City 80 7 Roseville 1 Elk Grove 4 Sacramento Santa Rosa Rancho Cordova 3 2 Bank Branch (7) Non - Depository Office (2) 505 FSBC Rancho Cordova, California $2.4 Billion $1.7 Billion (1) $2.2 Billion 7 Note: Balances are as of September 30, 2021. (1) Loans are presented net of allowance for loan losses and include loans held for sale. Five Star is a community business bank that was founded to serve the commercial real estate industry. Today, the markets we serve have expanded to meet customer demand and now include manufactured housing and storage, faith lending, government, nonprofits, and more.
Executive Team October 2021 Investor Presentation | 6 James Beckwith President and Chief Executive Officer Five Star since 2003 John Dalton Senior Vice President and Chief Credit Officer Five Star since 2011 Mike Lee Senior Vice President and Chief Regulatory Officer Five Star since 2005 Michael Rizzo Senior Vice President and Chief Banking Officer Five Star since 2005 Brett Wait Senior Vice President and Chief Information Officer Five Star since 2011 Lydia Ramirez Senior Vice President and Chief Operations and Chief DE&I Officer Five Star since 2017 Kristine Hyde Senior Vice President and Chief Human Resources Officer Five Star since 2020 Heather Luck Senior Vice President and Chief Financial Officer Five Star since 2018 Shelley Wetton Senior Vice President and Chief Marketing Officer Five Star since 2015
$440 $547 $565 $604 $811 $840 $973 $1,272 $1,480 $1,954 $2,151 $2,328 $2,434 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Core PPP Loans (2) Consistent and Organic Asset Growth October 2021 Investor Presentation | 7 CAGR (1) 5 years 10 years Total Assets 23.71% 18.67% Excluding PPP (2) 23.07% 18.37% Note: Dollars are in millions. Balances are end of period. (1) CAGR is based upon balances as of September 30, 2021. (2) References to PPP are to the Paycheck Protection Program.
Most Recent Quarter Highlights October 2021 Investor Presentation | 8 Profitability • Net income was $11.0 million for the quarter ended September 30, 2021, compared to $9.8 million for the quarter ended June 30 , 2021. • Return on average assets (“ROAA”) and return on average equity (“ROAE”) were 1.85% and 19.26%, respectively, for the quarter end ed September 30, 2021, and 1.75% and 24.25%, respectively, for the quarter ended June 30, 2021. Growth • Continued balance sheet growth with $181.6 million in non - PPP (2) loan growth and $102.1 million in deposit growth since June 30, 2021. • Increase of four employees since June 30, 2021 to 160 as of September 30, 2021. Net Interest Margin • Net interest margin was 3.60% for Q3 2021, compared to 3.48% for Q2 2021 and 3.30% for Q3 2020. • Average loan yield was 4.90% for Q3 2021, compared to 4.73% for Q2 2021 and 4.58% for Q3 2020. • Average yield, excluding Small Business Administration (“SBA”) PPP loans (2) was 4.66% for Q3 2021, compared to 4.76% for Q2 2021 and 4.97% for Q3 2020. (1) • $1.8 million of PPP (2) fee income was recognized on $59.4 million of PPP (2) loans forgiven during the most recent quarter. • Total cost of funds was 0.17% in Q3 2021, compared to 0.20% in Q2 2021. Asset Quality • The ratio of nonperforming loans to period end loans remained stable at 0.03% from December 31, 2020. • The ratio of llowance for loan losses to total loans was 1.28% as of September 30, 2021, compared to 1.47% as of December 31, 2020. • 183 PPP (2) loans remain outstanding totaling $61.5 million as of September 30, 2021. • Eight loans totaling $12.2 million, or 0.72% of total loans, were in a COVID - 19 deferral period as of September 30, 2021. Funding • For the most recent quarter ended, non - interest - bearing deposits comprise 41.30% of total deposits, compared to 40.12% at the en d of the trailing quarter. • Deposits comprise 98.21% of total liabilities as of September 30, 2021. Capital • All capital ratios remain above well - capitalized regulatory thresholds as of September 30, 2021. • The board of directors declared a cash dividend of $0.15 per share on July 6 th , 2021. Note: 2021 financial results are unaudited. (1) A reconciliation of this non - GAAP measure is set forth in the appendix. (2) References to PPP are to the Paycheck Protection Program.
Loans and Credit Quality October 2021 Investor Presentation | 9
Consistent Loan Growth October 2021 Investor Presentation | 10 Note: Balances are end of period, net of fees, and exclude loans held for sale. Yields are based on average balance and annualized quarterly interest income. References to PPP are to the Paycheck Protection Program. (1) CAGR is based upon balances as of September 30, 2021. (2) A reconciliation of this non - GAAP measure is set forth in the appendix. $253 $253 $148 $183 $121 $61 4.86% 4.93% 5.28% 5.45% 5.28% 4.82% 4.58% 5.22% 4.95% 4.73% 4.90% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2016 2017 2018 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Total Loans (Millions) Non-PPP Loans PPP Loans Average Loan Yield Average Loan Yield Excl PPP CAGR (1) 5 years Total Loans 21.59% (2)
Loan Portfolio Composition October 2021 Investor Presentation | 11 Note: Dollars are in millions. Balances are net book value at period end and exclude loans held for sale. References to PPP a re to the Paycheck Protection Program. (1) Types of collateral in the “all other types” category are those that individually make up less than 5% CRE concentration. Commercial 77% Commercial land and development 1% Commercial construction 3% Residential construction 0% Residential 2% Farmland 3% Secured 8% Unsecured 1% PPP 4% Consumer and other 1% Types of collateral securing commercial real estate ("CRE") loans Loan Balance # of Loans % of CRE Manufactured home community 391$ 206 30% Multifamily 143$ 65 11% Retail 117$ 50 9% Office 114$ 85 9% Faith based 99$ 69 8% Industrial 92$ 96 6% Mini storage 82$ 23 6% Mixed use 78$ 35 6% All other types (1) 201$ 88 15% Total 1,317$ 717 100%
CRE Collateral Values October 2021 Investor Presentation | 12 30% 11% 9% 9% 8% 6% 6% 6% 15% 14% 5% 8% 2% 5% 2% 21% 1% 8% 78% 75% 75% 75% 81% 94% 69% 73% 95% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Manufactured home community Multifamily Retail Office Faith based Industrial Mini storage Mixed use All other types(2) % of CRE Min LTV Max LTV Note: Dollars are in millions. Balances are net book value at period end and exclude loans held for sale. (1) Types of collateral in the “all other types” category are those that individually make up less than 5% CRE concentration. Types of collateral securing CRE loans Loan Balance Collateral Value % of CRE # of Loans Manufactured home community 391$ 645$ 30% 206 Multifamily 143$ 327$ 11% 65 Retail 117$ 221$ 9% 50 Office 114$ 241$ 9% 85 Faith based 99$ 247$ 8% 69 Industrial 92$ 227$ 6% 96 Mini storage 82$ 153$ 6% 23 Mixed use 78$ 144$ 6% 35 All other types (1) 201$ 453$ 15% 88 Total 1,317$ 2,658$ 100% 717
Loan Portfolio Diversification We focus primarily on commercial lending, with an emphasis on commercial real estate . We offer a variety of loans to small and medium - sized businesses, professionals, and individuals, including commercial real estate, commercial land and construction, and farmland loans . To a lesser extent, we also offer residential real estate, construction real estate, and consumer loans . October 2021 Investor Presentation | 13 Real Estate Loans by Geography Loans by Type Loans by Purpose Note: Balances are net book value at September 30, 2021 and exclude loans held for sale. References to PPP are to the Paycheck Protection Program. CRE Manufactured Home , 22.9% CRE Other , 10.1% Commercial SBA 7A PPP , 3.6% CRE Office , 6.7% CRE Multifamily , 8.4% CRE Retail , 6.9% CRE Faith Based , 5.8% Commercial Other , 9.4% Commercial Construction , 3.3% CRE Industrial , 5.4% CRE Mixed Use , 4.6% CRE Mini Storage , 4.8% Commercial SBA 7A , 3.0% CRE Agricultural , 3.2% Others , 1.9% CML Term Multifamily , 31.2% CML Term CRE NOO , 26.9% CML Term CRE OO , 18.8% SBA 7A PPP , 3.6% CML Const CRE , 2.8% CML Secured , 4.1% SBA 7A Secured , 2.7% CML Term Ag RE , 3.2% Others , 6.7%
Loan Rollforward October 2021 Investor Presentation | 14 Note: Dollars are in millions. Period end loan balances are net of allowance for loan losses and exclude loans held for sale. References to PPP are to the Paycheck Protection Program. Column1 Q1 2021 Q2 2021 Q3 2021 Beginning Balance 1,481$ 1,521$ 1,563$ Non PPP Originations 120$ 181$ 280$ PPP Originations 99$ 3$ -$ Non PPP Payoffs and Paydowns (107)$ (76)$ (101)$ PPP Forgiveness (72)$ (66)$ (59)$ Ending Balance 1,521$ 1,563$ 1,683$
Asset Quality Our primary objective is to maintain a high level of asset quality in our loan portfolio. In order to maintain our strong asset quality, we: - Place emphasis on our commercial portfolio, where we reevaluate risk assessments as a result of reviewing commercial property operating statements and borrower financials - Monitor payment performance, delinquencies, and tax and property insurance compliance - Design our practices to facilitate the early detection and remediation of problems within our loan portfolio - Employ the use of an outside, independent consulting firm to evaluate our underwriting and risk assessment process October 2021 Investor Presentation | 15 $1.5 $3.1 $2.1 $0.8 $0.5 $0.5 $0.4 $0.6 0.23% 0.41% 0.22% 0.07% 0.03% 0.03% 0.03% 0.03% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Nonperforming Assets Nonperforming Assets to Total Loans 1.30% 1.25% 1.21% 1.26% 1.47% 1.44% 1.39% 1.28% - 0.01% 0.03% 0.23% 0.21% 0.12% 0.01% 0.01% 0.02% -0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 ALLL to Total Loans Net Charge-offs to Total Loans Nonperforming Asset Trend ALLL and Net Charge - off Trend Note: Dollars are in thousands. Values are as of period end. 2021 financial results are unaudited.
Allocation of Allowance for Loan Losses October 2021 Investor Presentation | 16 Note: Data is in thousands. 2021 financial results are unaudited. (dollars in thousands) Allowance for Loan Losses Amount % of Total Amount % of Total Amount % of Total Amount % of Total Collectively evaluated for impairment Real estate: Commercial 9,358$ 42.18% 10,219$ 45.88% 10,108$ 45.63% 11,695$ 53.53% Commercial land & development 77 0.35% 80 0.36% 75 0.34% 112 0.51% Commercial construction 821 3.70% 504 2.26% 491 2.22% 343 1.57% Residential construction 87 0.39% 57 0.26% 46 0.21% 60 0.27% Residential 220 0.99% 188 0.84% 188 0.85% 207 0.95% Farmland 615 2.77% 578 2.60% 594 2.68% 666 3.05% Total real estate loans 11,178 50.38% 11,626 52.20% 11,502 51.93% 13,083 59.88% Commercial: Secured 9,476 42.70% 8,918 40.04% 9,194 41.50% 7,260 33.23% Unsecured 179 0.81% 195 0.88% 209 0.94% 218 1.00% Paycheck Protection Program (PPP) - 0.00% - 0.00% - 0.00% - 0.00% Total commercial loans 9,655 43.51% 9,113 40.92% 9,403 42.44% 7,478 34.23% Consumer and other 632 2.85% 528 2.38% 484 2.18% 638 2.92% Unallocated 724 3.26% 932 4.18% 764 3.45% 515 2.36% Individually evaluated for impairment Commercial secured - 0.00% - 0.00% - 0.00% 134 0.61% Consumer and other - 0.00% 72 0.32% - 0.00% - 0.00% Total allowance for loan losses 22,189$ 100.00% 22,271$ 100.00% 22,153$ 100.00% 21,848$ 100.00% December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021
98.94% 96.01% 96.09% 96.36% 96.60% 0.92% 1.61% 1.53% 1.33% 1.24% 0.14% 2.38% 2.38% 2.31% 2.16% Q4 2019 Q4 2020 Q1 2021 Q2 2021 Q3 2021 % of Loan Portfolio Outstanding, by Risk Grade Pass Watch Substandard Doubtful Risk Grade Migration October 2021 Investor Presentation | 17 Note: 2021 financial results are unaudited. (1) Dollars are in thousands. Column1 Q4 2019 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Real Estate: Commercial 859$ 35,543$ 35,531$ 35,519$ 35,488$ Commercial land & development - - - - - Commercial construction - - - - - Residential construction - - - - - Residential - 183 182 181 179 Farmland - - - - - Commercial: Secured 772 132 1,037 1,026 1,154 Unsecured - - - - - Paycheck Protection Program (PPP) - - - - - Consumer and other 50 - 71 - - Total 1,681$ 35,858$ 36,821$ 36,726$ 36,821$ Classified Loans (1) (Loans Rated Substandard or Doubtful)
Deposit and Capital Overview October 2021 Investor Presentation | 18
30.9% 30.5% 28.9% 29.5% 39.0% 40.3% 40.1% 41.3% 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 84.3% 89.7% 83.2% 90.5% 84.5% 78.0% 76.8% 78.9% 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Diversified Funding October 2021 Investor Presentation | 19 Total Deposits (1) = $2.2 Billion 98.2% of Total Liabilities Liability Mix Money Market and Savings 48.1% Non - Interest - Bearing Demand 40.6% Interest - Bearing Demand 7.1% Time Deposits 2.4% Borrowings & Subordinated Debt 1.3% Other liabilities 0.5% Loan to Deposit Ratio Non - Interest - Bearing Deposits to Total Deposits Note: 2021 financial results are unaudited. (1) Balances as of September 30, 2021.
Strong Deposit Growth and Cost of Funds October 2021 Investor Presentation | 20 CAGR (1) 5 years Total Deposits 23.30% Note: Dollars are in millions and balances are end of period. Cost of funds is based on average balance and annualized quarterly interest expense. 2021 financial results are unaudited. (1) CAGR is based upon balances as of September 30, 2021.
Capital Ratios October 2021 Investor Presentation | 21 Tier 1 Leverage Ratio Common Equity Tier 1 to Risk - Weighted Assets (“RWA”) Total Capital to RWA Tier 1 Capital to RWA 9.66% 8.26% 6.81% 7.51% 6.58% 9.54% 2016 2017 2018 2019 2020 Q3 2021 10.81% 9.32% 7.48% 8.21% 8.98% 12.84% 2016 2017 2018 2019 2020 Q3 2021 10.81% 9.32% 7.48% 8.21% 8.98% 12.84% 2016 2017 2018 2019 2020 Q3 2021 11.97% 13.23% 10.79% 11.52% 12.18% 15.70% 2016 2017 2018 2019 2020 Q3 2021 Note: All 2021 figures are for the quarter ending September 30, 2021. 2021 financial results are unaudited.
Financial Results October 2021 Investor Presentation | 22
Earnings Track Record October 2021 Investor Presentation | 23 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Net Income ($MM) $7.0 $10.1 $9.3 $9.5 $10.3 $9.8 $11.0 Qrtrly Basic Earnings Per Share ("EPS") $0.72 $1.05 $0.94 $0.86 $0.93 $0.67 $0.64 Qrtrly Diluted EPS $0.72 $1.05 $0.94 $0.86 $0.93 $0.67 $0.64 $- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $- $2 $4 $6 $8 $10 $12 Quarterly EPS (basic) Earnings (in Millions) Note: All quarterly financial results are unaudited.
Operating Metrics October 2021 Investor Presentation | 24 Efficiency Ratio Return on Average Assets Total Income Before Taxes Net Interest Margin 3.72% 3.99% 3.93% 3.98% 3.68% 3.63% 2016 2017 2018 2019 2020 2021 YTD 40.32% 37.94% 42.27% 38.63% 37.92% 43.77% 2016 2017 2018 2019 2020 2021 YTD $16.4M $22.1M $23.4M $30.4M $37.3M $34.5M 2016 2017 2018 2019 2020 2021 YTD 1.99% 2.34% 1.99% 2.15% 1.95% 1.88% 2016 2017 2018 2019 2020 2021 YTD Note: All 2021 figures are through September 30, 2021. 2021 financial results are unaudited.
$2.60 $2.92 $3.08 $3.40 $3.57 $2.18 2016 2017 2018 2019 2020 2021 YTD 1.99% 2.34% 1.99% 2.15% 1.95% 1.88% 2016 2017 2018 2019 2020 2021 YTD Shareholder Returns October 2021 Investor Presentation | 25 Note: All 2021 figures are through September 30, 2021. 2021 financial results are unaudited. ROAE EPS (diluted) ROAA 24.57% 27.80% 29.28% 31.40% 31.16% 24.01% 2016 2017 2018 2019 2020 2021 YTD
We strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and custome r e mpathy. We are dedicated to serving real estate, agricultural, faith - based, and small to medium - sized enterprises. We aim to consistentl y deliver value that meets or exceeds the expectations of our shareholders, customers, employees, business partners, and community.
Appendix: Non - GAAP Reconciliation (Unaudited) The Company uses financial information in its analysis of the Company's performance that are not in conformity with GAAP . The Company believes that this non - GAAP financial measure provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations, and cash flows computed in accordance with GAAP . However, the Company acknowledges that its non - GAAP financial measure has a number of limitations . As such, investors should not view this disclosure as a substitute for results determined in accordance with GAAP, and it is not necessarily comparable to non - GAAP financial measures that other banking companies use . Other banking companies may use names similar to those the Company uses for the non - GAAP financial measure the Company discloses, but may calculate it differently . Investors should understand how the Company and other companies each calculate their non - GAAP financial measures when making comparisons . Average loan yield, excluding SBA PPP loans, is defined as the daily average loan yield, excluding SBA - guaranteed PPP loans, and includes both performing and nonperforming loans . The most directly comparable GAAP financial measure is average loan yield . Third Quarter 2021 Investor Presentation | 27 (dollars in thousands) Average loan yield, excluding SBA PPP loans 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Interst income on loans 16,061$ 17,522$ 17,735$ 20,087$ 18,613$ 18,626$ 20,085$ Less: interest income on SBA PPP loans - 1,312 1,663 3,561 2,400 1,771 2,054 Interest income on loans, excluding SBA PPP loans 16,061 16,210 16,072 16,526 16,213 16,855 18,031 Annualized interest income on loans, excluding SBA PPP loans (numerator) 64,597 65,196 63,939 65,745 65,753 67,605 71,536 Average total loans 1,224,426$ 1,461,437$ 1,539,239$ 1,530,227$ 1,526,001$ 1,578,438$ 1,625,995$ Less: average SBA PPP loans - 206,396 253,366 200,541 176,255 158,568 89,436 Average total loans, excluding SBA PPP loans (denominator) 1,224,426 1,255,041 1,285,873 1,329,686 1,349,746 1,419,870 1,536,559 Average loan yield, excluding SBA PPP loans 5.28% 5.19% 4.97% 4.94% 4.87% 4.76% 4.66% For the three months ended Note: References to PPP are to the Paycheck Protection Program.