8-K
FIVE STAR BANCORP (FSBC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest eventreported): April 25, 2022
FIVE STAR BANCORP
(Exact Name of Registrant as Specified in Charter)
| California | 001-40379 | 75-3100966 |
|---|---|---|
| (State or Other Jurisdiction<br><br> <br>of Incorporation) | (Commission<br><br> <br>File Number) | (I.R.S. Employer<br><br> <br>Identification No.) |
3100 Zinfandel Drive, Suite 100, Rancho Cordova, California,
95670
(Address of Principal Executive Offices, and ZipCode)
(916) 626-5000
Registrant’s Telephone Number, Including AreaCode
Not Applicable
(Former Name or FormerAddress, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange<br> Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, no par value per share | FSBC | The Nasdaq Stock Market LLC |
| Indicate by check mark whether the registrant<br> 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<br> Exchange Act of 1934 (17 CFR §240.12b-2).<br><br> <br>Emerging growth company x<br><br> <br>If an emerging growth company, indicate<br> by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial<br> accounting standards provided pursuant to Section 13(a) of the Exchange Act. o | ||
| --- | ||
| Item 2.02 | Results of Operations and Financial Condition | |
| --- | --- |
On April 25, 2022, Five Star Bancorp (the “Company”) issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2022. 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 April 26, 2022 at 10:00am PT/1:00pm ET to discuss its first quarter 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
| ****<br><br> <br>Number | Description |
|---|---|
| 99.1 | Press Release dated April 25, 2022 |
| 99.2 | First Quarter 2022 Investor Presentation, dated April 26, 2022 |
| 104 | Cover Page Interactive Data File<br> (embedded within the Inline XBRL) |
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<br> Financial Officer | ||
| Date: April 26, 2022 |
Exhibit 99.1
| PRESS RELEASE | FOR IMMEDIATE RELEASE |
|---|
Five Star Bancorp Announces Quarterly Results
RANCHO CORDOVA, Calif. April 25, 2022 (GLOBE NEWSWIRE) – Five Star Bancorp (Nasdaq: FSBC) (the “Company” or “Five Star”), the holding company for Five Star Bank, today reported net income of $9.9 million for the quarter ended March 31, 2022, as compared to $11.3 million for the quarter ended December 31, 2021 and $10.3 million for the quarter ended March 31, 2021.
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 March 31, 2022 and December 31, 2021 were calculated using the actual effective tax rates of 27.07% and 10.43%, respectively, while the results for the three months ended March 31, 2021 have been calculated using a 3.50% S Corporation tax rate. Performance highlights and other developments for the Company for the periods noted below included the following:
| • | Pre-tax net income for the three months ended March 31, 2022, as compared<br>to the three months ended December 31, 2021 and the three months ended March 31, 2021 were as follows: | |||||
|---|---|---|---|---|---|---|
| Three months ended | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| March 31,<br><br> 2022 | December 31,<br><br> 2021 | March 31,<br><br> 2021 | ||||
| Pre-tax net income | $ | 13,522 | $ | 12,630 | $ | 10,660 |
| • | Earnings per share for the three months ended March 31, 2022, as compared<br>to the three months ended December 31, 2021 and three months ended March 31, 2021 were as follows: | |||||
| --- | --- | |||||
| Three months ended | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| March 31, <br> 2022 | December 31, <br> 2021 | March 31, <br> 2021 | ||||
| Basic earnings per common share | $ | 0.58 | $ | 0.66 | $ | 0.93 |
| Diluted earnings per common share | $ | 0.58 | $ | 0.66 | $ | 0.93 |
| Weighted average basic common shares outstanding | 17,102,508 | 17,096,230 | 10,998,041 | |||
| Weighted average diluted common shares outstanding | 17,164,519 | 17,139,693 | 10,998,041 | |||
| Shares outstanding at end of period | 17,246,199 | 17,224,848 | 11,007,005 |
| 1 |
| --- | | • | Loan and deposit growth at March 31, 2022, as compared to December 31,<br>2021 and March 31, 2021, were as follows: | | --- | --- | | (dollars in thousands) | March 31,<br> 2022 | | December 31,<br> 2021 | | Change | | % Change | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Loans held for investment | $ | 2,080,158 | $ | 1,934,460 | | | | 7.53 | % | | Loans held for investment, excluding Paycheck Protection Program (“PPP”) loans^(1)^ | | 2,078,630 | | 1,912,336 | | | | 8.70 | % | | PPP loans | | 1,528 | | 22,124 | | ) | | (93.09 | )% | | PPP deferred fees | | 42 | | 628 | | ) | | (93.31 | )% | | Non-interest-bearing deposits | | 941,285 | | 902,118 | | | | 4.34 | % | | Interest-bearing deposits | | 1,561,807 | | 1,383,772 | | | | 12.87 | % |
All values are in US Dollars.
| (dollars in thousands) | March 31,<br> 2022 | March 31,<br> 2021 | Change | % Change | |||||
|---|---|---|---|---|---|---|---|---|---|
| Loans held for investment | $ | 2,080,158 | $ | 1,543,493 | 34.77 | % | |||
| Loans held for investment, excluding PPP loans^(1)^ | 2,078,630 | 1,360,617 | 52.77 | % | |||||
| PPP loans | 1,528 | 182,876 | ) | (99.16 | )% | ||||
| PPP deferred fees | 42 | 4,761 | ) | (99.12 | )% | ||||
| Non-interest-bearing deposits | 941,285 | 804,044 | 17.07 | % | |||||
| Interest-bearing deposits | 1,561,807 | 1,179,066 | 32.46 | % |
All values are in US Dollars.
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
| • | PPP income recognized for the quarter ended March 31, 2022 totaled<br>$0.6 million, as compared to $1.1 million for the quarter ended December 31, 2021 and and $2.0 million for the quarter ended March 31,<br>2021. |
|---|---|
| • | At March 31, 2022, the Company reported total loans held for investment,<br>total assets, and total deposits of $2.1 billion, $2.8 billion, and $2.5 billion, respectively, as compared to $1.9 billion, $2.6 billion,<br>and $2.3 billion, respectively, at December 31, 2021. |
| --- | --- |
| • | For the three months ended March 31, 2022, the Company recorded a provision<br>for loan losses of $1.0 million, as compared to $1.5 million for the three months ended December 31, 2021 and $0.2 million for the<br>three months ended March 31, 2021. |
| --- | --- |
| • | At March 31, 2022, the ratio of nonperforming loans to loans held for<br>investment, or total loans at period end, of 0.06% increased from 0.03% at December 31, 2021. |
| --- | --- |
| • | For the quarter ended March 31, 2022, net interest margin was 3.60%,<br>as compared to 3.67% for the quarter ended December 31, 2021 and 3.83% for the quarter ended March 31, 2021. |
| --- | --- |
| • | The Company’s Board of Directors declared, and the Company subsequently<br>paid, a cash dividend of $0.15 per share during the three months ended March 31, 2022. Additionally, based on the filing of the Company's<br>final S Corporation tax return during the quarter ended March 31, 2022, the Company paid an additional distribution, representing the<br>remaining balance of the Company's accumulated adjustments account, of an aggregate balance of approximately $4.9 million, or $0.45 per<br>share, to S Corporation shareholders of record as of May 3, 2021, in connection with the IPO. |
| --- | --- |
| • | For the three months ended March 31, 2022, the Company’s return<br>on average assets (“ROAA”) was 1.53% and the return on average equity (“ROAE”) was 17.07%, as compared to ROAA<br>and ROAE of 1.82% and 19.15%, respectively, for the three months ended December 31, 2021, and 2.05% and 32.08%, respectively, for<br>the three months ended March 31, 2021. |
| --- | --- |
| • | Effective January 1, 2022, the Company adopted Accounting Standards Update<br>("ASU") 2016-02, Leases, ultimately recording a lease liability of approximately $5.2 million on its consolidated balance<br>sheet upon adoption, along with a corresponding right-of-use asset. |
| --- | --- |
“The strength of the Company's first quarter financial results is emblematic of a reputation built on an unwavering commitment to customers and community partners who rely on our speed to serve and certainty of execution for their own successes,” said President and Chief Executive Officer, James Beckwith. “This differentiated customer experience has led to great demand for our services and seized market opportunities evidenced by substantial growth in loans and deposits in the first quarter. Our people, technology, operating efficiencies, conservative underwriting practices, and expense management have also contributed to our robust organic growth. As we execute on the expansion of industry verticals and our presence in new geographies to meet customer demand, we expect the ongoing acceleration of our growth to benefit our customers, employees, and shareholders. We also expect our proven ability to adapt to changing economic conditions to serve us well into the future.”
| 2 |
| --- |
Summary Results
For the three months ended March 31, 2022, the Company’s ROAA and ROAE were 1.53% and 17.07%, respectively, as compared to 1.82% and 19.15%, respectively, for the three months ended December 31, 2021, and 2.05% and 32.08%, respectively, for the three months ended March 31, 2021.
As compared to the three months ended December 31, 2021, net income for the three months ended March 31, 2022 decreased, while average assets increased and average equity remained largely unchanged. The decrease in net income from the three months ended December 31, 2021 to the three months ended March 31, 2022 was due to an increase in the provision for income taxes of $2.3 million as a result of a higher effective tax rate than that of the three months ended December 31, 2021. As compared to the three months ended December 31, 2021, the increase in average assets was largely the result of an increase in average loans held for investment and sale due to loan growth, while average equity remained stable due to offsetting impacts from the recognition of net income, distributions of cash during the period, and the recognition of other comprehensive loss during the period.
As compared to the three months ended March 31, 2021, net income for the three months ended March 31, 2022 decreased, while average assets and average equity increased. The decrease in net income was due to an increase in the provision for income taxes of $3.3 million as a result of the Company’s conversion to a C Corporation during the second quarter of 2021. As compared to the three months ended March 31, 2021, the increase in average assets was largely the result of an increase in average loans held for investment and sale due to loan growth, and the increase in average equity was primarily the result of net proceeds received from the issuance of additional shares of common stock in the Company’s IPO during the second quarter of 2021.
| 3 |
| --- |
The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:
| Three months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands, except per share data) | March 31,<br> 2022 | December 31,<br> 2021 | Change | % Change | |||||||
| Selected operating data: | |||||||||||
| Net interest income | $ | 21,862 | $ | 21,358 | 2.36 | % | |||||
| Provision for loan losses | 950 | 1,500 | ) | (36.67 | )% | ||||||
| Non-interest income | 2,185 | 1,790 | 22.07 | % | |||||||
| Non-interest expense | 9,575 | 9,018 | 6.18 | % | |||||||
| Pre-tax net income | 13,522 | 12,630 | 7.06 | % | |||||||
| Provision for income taxes | 3,660 | 1,321 | 177.06 | % | |||||||
| Net income | 9,862 | 11,309 | ) | (12.80 | )% | ||||||
| Earnings per common share: | |||||||||||
| Basic | $ | 0.58 | $ | 0.66 | ) | (12.12 | )% | ||||
| Diluted | $ | 0.58 | $ | 0.66 | ) | (12.12 | )% | ||||
| Performance and other financial ratios: | |||||||||||
| ROAA | 1.53 | % | 1.82 | % | |||||||
| ROAE | 17.07 | % | 19.15 | % | |||||||
| Net interest margin | 3.60 | % | 3.67 | % | |||||||
| Cost of funds | 0.17 | % | 0.16 | % |
All values are in US Dollars.
| Three months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands, except per share data) | March 31,<br><br> 2022 | March 31,<br><br> 2021 | Change | % Change | |||||||
| Selected operating data: | |||||||||||
| Net interest income | $ | 21,862 | $ | 18,048 | 21.13 | % | |||||
| Provision for loan losses | 950 | 200 | 375.00 | % | |||||||
| Non-interest income | 2,185 | 1,616 | 35.21 | % | |||||||
| Non-interest expense | 9,575 | 8,804 | 8.76 | % | |||||||
| Pre-tax net income | 13,522 | 10,660 | 26.85 | % | |||||||
| Provision for income taxes | 3,660 | 382 | 858.12 | % | |||||||
| Net income | 9,862 | 10,278 | ) | (4.05 | )% | ||||||
| Earnings per common share: | |||||||||||
| Basic | $ | 0.58 | $ | 0.93 | ) | (37.63 | )% | ||||
| Diluted | $ | 0.58 | $ | 0.93 | ) | (37.63 | )% | ||||
| Performance and other financial ratios: | |||||||||||
| ROAA | 1.53 | % | 2.05 | % | |||||||
| ROAE | 17.07 | % | 32.08 | % | |||||||
| Net interest margin | 3.60 | % | 3.83 | % | |||||||
| Cost of funds | 0.17 | % | 0.24 | % |
All values are in US Dollars.
Balance Sheet Summary
Total assets at March 31, 2022 were $2.8 billion, an increase of $221.5 million from $2.6 billion at December 31, 2021. The increase was primarily due to a $79.6 million increase in cash and cash equivalents and a $145.7 million increase in total loans held for investment. The $145.7 million increase in total loans held for investment between December 31, 2021 and March 31, 2022 was a result of $312.5 million in non-PPP loan originations, partially offset by $20.6 million in PPP loan forgiveness, $146.6 million in non-PPP loan payoffs and paydowns, and a decrease in deferred loan fees of $0.4 million.
| 4 |
| --- |
Total liabilities were $2.5 billion at March 31, 2022, an increase of $225.5 million from $2.3 billion at December 31, 2021. The increase in total liabilities was primarily attributable to an increase in deposits of $217.2 million, largely due to increases in interest checking, time deposits over $250 thousand, and non-interest-bearing deposits of $92.7 million, $75.0 million, and $39.2 million, respectively.
Total shareholders’ equity decreased by $4.0 million from $235.0 million at December 31, 2021 to $231.1 million at March 31, 2022, primarily as a result of net income recognized of $9.9 million, offset by a net decline of $6.7 million in other comprehensive income and $7.5 million in cash distributions paid during the three months ended March 31, 2022.
| (dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | Change | % Change | |||||
|---|---|---|---|---|---|---|---|---|---|
| Selected financial condition data: | |||||||||
| Total assets | $ | 2,778,249 | $ | 2,556,761 | 8.66 | % | |||
| Cash and cash equivalents | 504,964 | 425,329 | 18.72 | % | |||||
| Total loans held for investment | 2,080,158 | 1,934,460 | 7.53 | % | |||||
| Total investments | 139,299 | 153,753 | ) | (9.40 | )% | ||||
| Total liabilities | 2,547,188 | 2,321,715 | 9.71 | % | |||||
| Total deposits | 2,503,092 | 2,285,890 | 9.50 | % | |||||
| Subordinated notes, net | 28,403 | 28,386 | 0.06 | % | |||||
| Total shareholders’ equity | 231,061 | 235,046 | ) | (1.70 | )% |
All values are in US Dollars.
Net Interest Income and Net InterestMargin
The following is a summary of the components of net interest income for the periods indicated:
| Three months ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | Change | % Change | ||||||
| Interest and fee income | $ | 22,850 | $ | 22,253 | 2.68 | % | ||||
| Interest expense | 988 | 895 | 10.39 | % | ||||||
| Net interest income | 21,862 | 21,358 | 2.36 | % | ||||||
| Net interest margin | 3.60 | % | 3.67 | % |
All values are in US Dollars.
| Three months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | March 31,<br> 2021 | Change | % Change | |||||||
| Interest and fee income | $ | 22,850 | $ | 19,190 | 19.07 | % | |||||
| Interest expense | 988 | 1,142 | ) | (13.49 | )% | ||||||
| Net interest income | 21,862 | 18,048 | 21.13 | % | |||||||
| Net interest margin | 3.60 | % | 3.83 | % |
All values are in US Dollars.
| 5 |
| --- |
The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:
| Three months ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||
| (dollars in thousands) | Average <br>Balance | Interest <br>Income/ <br>Expense | Yield/ Rate | Average <br>Balance | Interest <br>Income/ <br>Expense | Yield/ Rate | Average <br>Balance | Interest <br>Income/ <br>Expense | Yield/ Rate | ||||||||||||
| Assets | |||||||||||||||||||||
| Interest-earning deposits with banks | $ | 339,737 | $ | 192 | 0.23 | % | $ | 330,825 | $ | 143 | 0.17 | % | $ | 263,120 | $ | 104 | 0.16 | % | |||
| Investment securities | 148,736 | 567 | 1.54 | % | 160,315 | 541 | 1.34 | % | 121,862 | 473 | 1.57 | % | |||||||||
| Loans held for investment and sale | 1,977,509 | 22,091 | 4.53 | % | 1,815,627 | 21,569 | 4.71 | % | 1,526,130 | 18,613 | 4.95 | % | |||||||||
| Total interest-earning assets | 2,465,982 | 22,850 | 3.76 | % | 2,306,767 | 22,253 | 3.83 | % | 1,911,112 | 19,190 | 4.07 | % | |||||||||
| Interest receivable and other assets, net | 150,116 | 159,123 | 125,981 | ||||||||||||||||||
| Total assets | $ | 2,616,098 | $ | 2,465,890 | $ | 2,037,093 | |||||||||||||||
| Liabilities and shareholders’ equity | |||||||||||||||||||||
| Interest-bearing transaction accounts | $ | 276,690 | $ | 70 | 0.10 | % | $ | 165,709 | $ | 42 | 0.10 | % | $ | 154,678 | $ | 38 | 0.10 | % | |||
| Savings accounts | 90,815 | 25 | 0.11 | % | 84,290 | 21 | 0.10 | % | 60,885 | 16 | 0.11 | % | |||||||||
| Money market accounts | 920,767 | 367 | 0.16 | % | 957,030 | 351 | 0.15 | % | 867,374 | 581 | 0.27 | % | |||||||||
| Time accounts | 128,183 | 83 | 0.26 | % | 75,332 | 38 | 0.20 | % | 46,171 | 64 | 0.56 | % | |||||||||
| Subordinated debt | 28,393 | 443 | 6.33 | % | 28,376 | 443 | 6.20 | % | 28,326 | 443 | 6.36 | % | |||||||||
| Total interest-bearing liabilities | 1,444,848 | 988 | 0.28 | % | 1,310,737 | 895 | 0.27 | % | 1,157,434 | 1,142 | 0.40 | % | |||||||||
| Demand accounts | 922,128 | 914,821 | 745,605 | ||||||||||||||||||
| Interest payable and other liabilities | 14,800 | 5,988 | 5,418 | ||||||||||||||||||
| Shareholders’ equity | 234,322 | 234,344 | 128,636 | ||||||||||||||||||
| Total liabilities & shareholders’ equity | $ | 2,616,098 | $ | 2,465,890 | $ | 2,037,093 | |||||||||||||||
| Net interest spread | 3.48 | % | 3.56 | % | 3.67 | % | |||||||||||||||
| Net interest income/margin | $ | 21,862 | 3.60 | % | $ | 21,358 | 3.67 | % | $ | 18,048 | 3.83 | % |
| 6 |
| --- |
Net interest income increased during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021 and the three months ended March 31, 2021. Net interest margin decreased 7 basis points to 3.60%, as compared to 3.67% in the quarter ended December 31, 2021, and decreased 23 basis points as compared to 3.83% in the quarter ended March 31, 2021. A key driver in the decrease in net interest margin during the periods indicated was a decrease in average loan yields. Loan yields decreased from 4.95% during the three months ended March 31, 2021, to 4.71% during the three months ended December 31, 2021, and to 4.53% during the three months ended March 31, 2022. Average loan yields, excluding PPP loans, decreased from 4.87% during the three months ended March 31, 2021, to 4.56% during the three months ended December 31, 2021, and to 4.43% during the three months ended March 31, 2022. These decreases were primarily due to changes in the macroeconomic environment, which caused a majority of the Company’s fixed-rate loans funded in the aforementioned quarters to recognize yields lower than those recognized in prior quarters. Average loan yields, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. The rates associated with the index utilized for a significant portion of the Company’s variable rate loans, the United States 5 Year Treasury index, were higher during the three months ended March 31, 2022, as compared to the prior quarter and the three months ended March 31, 2021, but a majority of these loans were not scheduled to reprice during the three months ended March 31, 2022, also contributing to the downward trend in average loan yields. New loan originations drove increases in the average daily balance of loans from the three months ended March 31, 2021 to the three months ended December 31, 2021 and the three months ended March 31, 2022, which partially offset the aforementioned declining average loan yields. Additionally, yields on PPP loans increased from 5.51%, to 10.72%, to 27.85%, for the quarters ended March 31, 2021, December 31, 2021, and March 31, 2022, respectively, due to an acceleration of deferred fee accretion resulting from PPP loans being forgiven by the Small Business Administration (“SBA”) and repaid, also helping to offset declining average loan yields.
Interest expense increased for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021, and decreased as compared to the three months ended March 31, 2021. Increased average daily balances and increased rates paid on interest-bearing liabilities during the quarter ended March 31, 2022, as compared to the quarter ended December 31, 2021, drove the increase in interest expense during the most recent quarter as compared to the previous quarter. The decline in interest expense for the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily attributed to reductions in the rates offered on money market and maturing deposit products during that period. As a result, the cost of interest-bearing liabilities decreased to 0.28% for the quarter ended March 31, 2022 from 0.40% for the quarter ended March 31, 2021. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the cost of funds decreased from 0.24% for the quarter ended March 31, 2021 to 0.16% for the quarter ended December 31, 2021, with a slight increase to 0.17% for the quarter ended March 31, 2022.
Asset Quality
SBA PPP
At March 31, 2022, there were five PPP loans outstanding totaling $1.5 million. Two of these PPP loans, or 40.00% of the total number of PPP loans outstanding at March 31, 2022, totaling $0.1 million, were less than or equal to $0.15 million and had access to streamlined forgiveness processing. At March 31, 2022, 1,424 PPP loan forgiveness applications had been submitted to the SBA and forgiveness payments had been received on 1,422 of these PPP loans, totaling $353.2 million in principal and interest. The Company has submitted all forgiveness applications on the first round of PPP loans and all but three forgiveness applications on the second round of PPP loans. We expect full forgiveness, or repayment by the borrower, on all PPP loans to be completed in the near future.
COVID-19 Deferments
Pursuant to federal guidance, the Company implemented loan programs to allow certain consumers and businesses impacted by the COVID-19 pandemic to defer loan principal and interest payments. At March 31, 2022, six borrowing relationships with six loans totaling $12.2 million were on COVID-19 deferment. All loans that ended COVID-19 deferments in the quarter ended March 31, 2022 have returned to their pre-COVID-19 contractual payment structures with no risk rating downgrades to classified, nor any troubled debt restructuring (“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.
| 7 |
| --- |
Allowance for Loan Losses
At March 31, 2022, the Company’s allowance for loan losses was $23.9 million, as compared to $23.2 million at December 31, 2021. The $0.7 million increase is due to a $1.0 million provision for loan losses recorded during the quarter ended March 31, 2022, offset by net charge-offs of $0.3 million during the quarter. At March 31, 2022, the Company’s ratio of nonperforming loans to loans held for investment increased from 0.03% at December 31, 2021 to 0.06%, primarily due to an increase in the Company’s commercial secured nonperforming loans. At March 31, 2022, six loans totaling $12.2 million, or 0.59% of loans held for investment, were in a COVID-19 deferment period, and one loan totaling $0.1 million had been in a COVID-19 deferment in the fourth quarter of 2021 but was not in such deferment at March 31, 2022. Loans designated as watch increased to $14.0 million and loans designated as substandard decreased to $3.0 million at March 31, 2022 from $8.6 million and $10.6 million, respectively, at December 31, 2021, which resulted in a net reduction of $0.1 million in reserves related to classified and watch loans that was offset by an additional provision for loan growth during the quarter. There were no loans with doubtful risk grades at March 31, 2022 or December 31, 2021. A summary of the allowance for loan losses by loan class is as follows:
| March 31, 2022 | December 31, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | Amount | % of Total | Amount | % of Total | ||||||
| Collectively evaluated for impairment: | ||||||||||
| Real estate: | ||||||||||
| Commercial | $ | 13,868 | 58.01 | % | $ | 12,869 | 55.37 | % | ||
| Commercial land and development | 66 | 0.28 | % | 50 | 0.22 | % | ||||
| Commercial construction | 430 | 1.80 | % | 371 | 1.60 | % | ||||
| Residential construction | 40 | 0.17 | % | 50 | 0.22 | % | ||||
| Residential | 208 | 0.87 | % | 192 | 0.83 | % | ||||
| Farmland | 611 | 2.56 | % | 645 | 2.78 | % | ||||
| Commercial: | ||||||||||
| Secured | 6,400 | 26.77 | % | 6,687 | 28.77 | % | ||||
| Unsecured | 246 | 1.03 | % | 207 | 0.89 | % | ||||
| PPP | — | — | % | — | — | % | ||||
| Consumer and other | 1,088 | 4.55 | % | 889 | 3.82 | % | ||||
| Unallocated | 308 | 1.29 | % | 1,111 | 4.78 | % | ||||
| $ | 23,265 | 97.33 | % | $ | 23,071 | 99.28 | % | |||
| Individually evaluated for impairment: | ||||||||||
| Commercial secured | 639 | 2.67 | % | 172 | 0.72 | % | ||||
| Total allowance for loan losses | $ | 23,904 | 100.00 | % | $ | 23,243 | 100.00 | % |
The ratio of allowance for loan losses to loans held for investment, or total loans at period end, was 1.15% at March 31, 2022, as compared to 1.20% at December 31, 2021. Excluding PPP loans, the ratio of the allowance for loan losses to loans held for investment was 1.15% and 1.22% at March 31, 2022 and December 31, 2021, respectively. The decline in the ratio of allowance to loans held for investment period-over-period is primarily due to a significant decline in classified loans and improvement in the risk level for retail loans, offset by increased reserves based on economic conditions and loan growth realized during the three months ended March 31, 2022. The ratio of the allowance for loan losses to loans held for investment, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
| 8 |
| --- |
Non-interest Income
Three months ended March 31, 2022, as comparedto three months ended December 31, 2021
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | Change | % Change | |||||
| Service charges on deposit accounts | $ | 108 | $ | 116 | ) | (6.90 | )% | ||
| Net gain on sale of securities | 5 | 15 | ) | (66.67 | )% | ||||
| Gain on sale of loans | 918 | 1,072 | ) | (14.37 | )% | ||||
| Loan-related fees | 617 | 391 | 57.80 | % | |||||
| FHLB stock dividends | 102 | 102 | — | % | |||||
| Earnings on bank-owned life insurance | 90 | 57 | 57.89 | % | |||||
| Other income | 345 | 37 | 832.43 | % | |||||
| Total non-interest income | $ | 2,185 | $ | 1,790 | 22.07 | % |
All values are in US Dollars.
Gain on sale of loans. The decrease in gain on sale of loans was primarily due to a $0.2 million gain recognized during the three months ended December 31, 2021 on the sale of a $1.8 million consumer loan portfolio, which did not recur during the three months ended March 31, 2022. During the three months ended March 31, 2022, approximately $11.7 million of loans were sold with an effective yield of 7.84%, compared to approximately $9.7 million of loans sold with an effective yield of 9.38% during the three months ended December 31, 2021. The overall decline in the effective yields recorded quarter over quarter related primarily to declining premiums paid in the secondary market due to uncertain timing of rising interest rates.
Loan-related fees. The increase in loan-related fees resulted primarily from the recognition of $0.3 million in swap referral fees during the three months ended March 31, 2022, compared to $0.1 million of swap referral fees recognized during the three months ended December 31, 2021.
Other income. The increase in other income resulted primarily from a $0.3 million gain recorded on a distribution received on an investment in a venture-backed fund, which did not occur during the quarter ended December 31, 2021.
Three months ended March 31, 2022,as compared to three months ended March 31, 2021
The following table presents the key components of non-interest income for the periods indicated:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | March 31,<br> 2021 | Change | % Change | |||||
| Service charges on deposit accounts | $ | 108 | $ | 90 | 20.00 | % | |||
| Net gain on sale of securities | 5 | 182 | ) | (97.25 | )% | ||||
| Gain on sale of loans | 918 | 931 | ) | (1.40 | )% | ||||
| Loan-related fees | 617 | 260 | 137.31 | % | |||||
| FHLB stock dividends | 102 | 78 | 30.77 | % | |||||
| Earnings on bank-owned life insurance | 90 | 52 | 73.08 | % | |||||
| Other income | 345 | 23 | 1400.00 | % | |||||
| Total non-interest income | $ | 2,185 | $ | 1,616 | 35.21 | % |
All values are in US Dollars.
Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to the sale of one $1.5 million municipal security for a gain of $5.3 thousand during the three months ended March 31, 2022, compared to $11.5 million of municipal securities sold in the three months ended March 31, 2021 for a total gain recognized of $0.2 million.
Loan-related fees. The increase in loan-related fees primarily related to $0.3 million of swap referral fees recognized during the three months ended March 31, 2022, which did not occur in the three months ended March 31, 2021.
Other income. The increase in other income resulted primarily from a $0.3 million gain recorded on a distribution received on an investment in a venture-backed fund, which did not occur during the three months ended March 31, 2021.
| 9 |
| --- |
Non-interest Expense
Three months ended March 31, 2022,as compared to three months ended December 31, 2021
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | Change | % Change | |||||
| Salaries and employee benefits | $ | 5,675 | $ | 5,209 | 8.95 | % | |||
| Occupancy and equipment | 520 | 544 | ) | (4.41 | )% | ||||
| Data processing and software | 716 | 656 | 9.15 | % | |||||
| Federal Deposit Insurance Corporation (“FDIC”) insurance | 165 | 160 | 3.13 | % | |||||
| Professional services | 554 | 444 | 24.77 | % | |||||
| Advertising and promotional | 344 | 499 | ) | (31.06 | )% | ||||
| Loan-related expenses | 278 | 136 | 104.41 | % | |||||
| Other operating expenses | 1,323 | 1,370 | ) | (3.43 | )% | ||||
| Total non-interest expense | $ | 9,575 | $ | 9,018 | 6.18 | % |
All values are in US Dollars.
Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of a $0.4 million increase in salaries and benefits related to a 4.17% increase in headcount during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. In addition, the Company recognized a $0.2 million increase in employer taxes incurred for commission and executive bonus payments made during the three months ended March 31, 2022, and a decrease in deferred loan origination costs of $0.6 million during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. These increases were partially offset by a reduction of $0.4 million of commissions related to loan and deposit growth for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.
Professional services. The increase in professional services primarily related to a $0.1 million increase in audit fees recorded for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.
Advertising and promotional. The decrease in advertising and promotional is primarily related to slight declines in donations and sponsorships due to the timing of events held during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.
Loan-related expenses. Loan-related expenses increased, primarily as a result of a net overall increase in loan expenses incurred to support loan production in the three months ended March 31, 2022, as compared to the three months ended December 31, 2021, including increased expenses for insurance, taxes, and UCC fees.
Three months ended March 31, 2022,as compared to three months ended March 31, 2021
The following table presents the key components of non-interest expense for the periods indicated:
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) | March 31,<br> 2022 | March 31,<br> 2021 | Change | % Change | |||||
| Salaries and employee benefits | $ | 5,675 | $ | 4,697 | 20.82 | % | |||
| Occupancy and equipment | 520 | 451 | 15.30 | % | |||||
| Data processing and software | 716 | 629 | 13.83 | % | |||||
| FDIC insurance | 165 | 280 | ) | (41.07 | )% | ||||
| Professional services | 554 | 1,532 | ) | (63.84 | )% | ||||
| Advertising and promotional | 344 | 170 | 102.35 | % | |||||
| Loan-related expenses | 278 | 229 | 21.40 | % | |||||
| Other operating expenses | 1,323 | 816 | 62.13 | % | |||||
| Total non-interest expense | $ | 9,575 | $ | 8,804 | 8.76 | % |
All values are in US Dollars.
| 10 |
| --- |
Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of a $1.1 million increase related to an 18.24% increase in headcount during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 combined with a $0.6 million increase in commissions when comparing the quarter ended March 31, 2022 to the three months ended March 31, 2021. These increases were partially offset by a $0.6 million increase in deferred loan origination costs when comparing the three months ended March 31, 2022 to March 31, 2021.
FDIC insurance. FDIC insurance decreased, primarily due to an improvement in the leverage ratio used in the FDIC assessment calculation as a result of the Company’s IPO in May 2021.
Professional services. Professional services decreased, primarily as a result of expenses recognized during the three months ended March 31, 2021 related to the increased audit, consulting, and legal costs incurred to support corporate organizational matters leading up to the IPO. These expenses did not recur during the three months ended March 31, 2022.
Advertising and promotional. The increase in advertising and promotional was primarily related to increases in business development, marketing, and sponsorship expenses due to more in-person participation in events held during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.
Other operating expenses. Other operating expenses increased, primarily due to $0.1 million of stock compensation expense recorded for restricted stock granted to members of the Board of Directors during the three months ended March 31, 2022, combined with the net effect of individually immaterial items, including increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees period-over-period.
Provision for Income Taxes
The Company terminated its status as a “Subchapter S” corporation effective 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 March 31, 2022 yielded an effective tax rate of 27.07%.
Three months ended March 31, 2022,as compared to three months ended December 31, 2021
Provision for income taxes for the quarter ended March 31, 2022 increased by $2.3 million, or 177.06%, to $3.7 million, as compared to $1.3 million for the quarter ended December 31, 2021. This increase was primarily due to the application of the full statutory income tax rate of 29.56% to taxable income for the quarter ended March 31, 2022, partially offset by a return-to-provision true up adjustment of approximately $0.3 million related to tax-exempt loan interest income. Additionally, the Company recorded a true up of certain permanent items in the quarter ended December 31, 2021, including tax-exempt municipal security interest income, which did not recur in the quarter ended March 31, 2022.
Three months ended March 31, 2022, ascompared to three months ended March 31, 2021
Provision for income taxes increased by $3.3 million, or 858.12%, to $3.7 million for the three months ended March 31, 2022, as compared to $0.4 million for the three months ended March 31, 2021. This increase is due to the change in the effective tax rate from 3.50% to 27.07%.
Webcast Details
Five Star Bancorp will host a webcast on Tuesday, April 26, 2022, at 1:00 p.m. ET (10:00 a.m. PT), to discuss its first 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.
| 11 |
| --- |
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 Annual Report on Form 10-K for the year ended December 31, 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.
| 12 |
| --- |
Condensed Financial Data (Unaudited)
| Three months ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands, except share and per share data) | March 31,<br> 2022 | December 31,<br> 2021 | March 31,<br> 2021 | ||||||
| Revenue and Expense Data | |||||||||
| Interest and fee income | $ | 22,850 | $ | 22,253 | $ | 19,190 | |||
| Interest expense | 988 | 895 | 1,142 | ||||||
| Net interest income | 21,862 | 21,358 | 18,048 | ||||||
| Provision for loan losses | 950 | 1,500 | 200 | ||||||
| Net interest income after provision | 20,912 | 19,858 | 17,848 | ||||||
| Non-interest income: | |||||||||
| Service charges on deposit accounts | 108 | 116 | 90 | ||||||
| Gain on sale of securities | 5 | 15 | 182 | ||||||
| Gain on sale of loans | 918 | 1,072 | 931 | ||||||
| Loan-related fees | 617 | 391 | 260 | ||||||
| FHLB stock dividends | 102 | 102 | 78 | ||||||
| Earnings on bank-owned life insurance | 90 | 57 | 52 | ||||||
| Other income | 345 | 37 | 23 | ||||||
| Total non-interest income | 2,185 | 1,790 | 1,616 | ||||||
| Non-interest expense: | |||||||||
| Salaries and employee benefits | 5,675 | 5,209 | 4,697 | ||||||
| Occupancy and equipment | 520 | 544 | 451 | ||||||
| Data processing and software | 716 | 656 | 629 | ||||||
| FDIC insurance | 165 | 160 | 280 | ||||||
| Professional services | 554 | 444 | 1,532 | ||||||
| Advertising and promotional | 344 | 499 | 170 | ||||||
| Loan-related expenses | 278 | 136 | 229 | ||||||
| Other operating expenses | 1,323 | 1,370 | 816 | ||||||
| Total non-interest expense | 9,575 | 9,018 | 8,804 | ||||||
| Total income before taxes | 13,522 | 12,630 | 10,660 | ||||||
| Provision for income taxes | 3,660 | 1,321 | 382 | ||||||
| Net income | $ | 9,862 | $ | 11,309 | $ | 10,278 | |||
| Share and Per Share Data | |||||||||
| Earnings per common share: | |||||||||
| Basic | $ | 0.58 | $ | 0.66 | $ | 0.93 | |||
| Diluted | $ | 0.58 | $ | 0.66 | $ | 0.93 | |||
| Book value per share | $ | 13.40 | $ | 13.65 | $ | 11.94 | |||
| Tangible book value per share^(1)^ | $ | 13.40 | $ | 13.65 | $ | 11.94 | |||
| Weighted average basic common shares outstanding | 17,102,508 | 17,096,230 | 10,998,041 | ||||||
| Weighted average diluted common shares outstanding | 17,164,519 | 17,139,693 | 10,998,041 | ||||||
| Shares outstanding at end of period | 17,246,199 | 17,224,848 | 11,007,005 | ||||||
| Credit Quality | |||||||||
| Allowance for loan losses to period end nonperforming loans | 1,799.99 | % | 3,954.30 | % | 4,341.52 | % | |||
| Nonperforming loans to loans held for investment | 0.06 | % | 0.03 | % | 0.03 | % | |||
| Nonperforming assets to total assets | 0.05 | % | 0.02 | % | 0.02 | % | |||
| Nonperforming loans plus performing TDRs to loans held for investment | 0.06 | % | 0.03 | % | 0.03 | % | |||
| COVID-19 deferments to loans held for investment | 0.59 | % | 0.63 | % | 1.11 | % | |||
| Selected Financial Ratios | |||||||||
| ROAA | 1.53 | % | 1.82 | % | 2.05 | % | |||
| ROAE | 17.07 | % | 19.15 | % | 32.08 | % | |||
| Net interest margin | 3.60 | % | 3.67 | % | 3.83 | % | |||
| Loan to deposit | 83.52 | % | 85.09 | % | 77.99 | % |
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
| 13 |
| --- | | (dollars in thousands) | March 31,<br> 2022 | | | December 31,<br> 2021 | | | March 31,<br> 2021 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Balance Sheet Data | | | | | | | | | | | Cash and due from financial institutions | $ | 66,747 | | $ | 136,074 | | $ | 44,720 | | | Interest-bearing deposits | | 438,217 | | | 289,255 | | | 389,872 | | | Time deposits in banks | | 14,464 | | | 14,464 | | | 25,696 | | | Securities - available-for-sale, at fair value | | 134,813 | | | 148,807 | | | 127,251 | | | Securities - held-to-maturity, at amortized cost | | 4,486 | | | 4,946 | | | 6,486 | | | Loans held for sale | | 10,386 | | | 10,671 | | | 3,060 | | | Loans held for investment | | 2,080,158 | | | 1,934,460 | | | 1,543,493 | | | Allowance for loan losses | | (23,904 | ) | | (23,243 | ) | | (22,271 | ) | | Loans held for investment, net of allowance for loan losses | | 2,056,254 | | | 1,911,217 | | | 1,521,222 | | | Federal Home Loan Bank stock | | 6,667 | | | 6,723 | | | 6,232 | | | Operating leases, right-of-use asset | | 4,718 | | | — | | | — | | | Premises and equipment, net | | 1,836 | | | 1,773 | | | 1,645 | | | Bank-owned life insurance | | 14,343 | | | 11,203 | | | 8,714 | | | Interest receivable and other assets | | 25,318 | | | 21,628 | | | 15,839 | | | Total assets | $ | 2,778,249 | | $ | 2,556,761 | | $ | 2,150,737 | | | Non-interest-bearing deposits | $ | 941,285 | | $ | 902,118 | | $ | 804,044 | | | Interest-bearing deposits | | 1,561,807 | | | 1,383,772 | | | 1,179,066 | | | Total deposits | | 2,503,092 | | | 2,285,890 | | | 1,983,110 | | | Subordinated notes, net | | 28,403 | | | 28,386 | | | 28,336 | | | Operating lease liability | | 4,987 | | | — | | | — | | | Interest payable and other liabilities | | 10,706 | | | 7,439 | | | 7,914 | | | Total liabilities | | 2,547,188 | | | 2,321,715 | | | 2,019,360 | | | Common stock | | 218,721 | | | 218,444 | | | 110,144 | | | Retained earnings | | 19,558 | | | 17,168 | | | 21,623 | | | Accumulated other comprehensive loss, net | | (7,218 | ) | | (566 | ) | | (390 | ) | | Total shareholders’ equity | $ | 231,061 | | $ | 235,046 | | $ | 131,377 | | | Quarterly Average Balance Data | | | | | | | | | | | Average loans held for investment and sale | $ | 1,977,509 | | $ | 1,815,627 | | $ | 1,526,130 | | | Average interest-earning assets | $ | 2,465,982 | | $ | 2,306,767 | | $ | 1,911,112 | | | Average total assets | $ | 2,616,098 | | $ | 2,465,890 | | $ | 2,037,093 | | | Average deposits | $ | 2,338,583 | | $ | 2,197,183 | | $ | 1,874,713 | | | Average total equity | $ | 234,322 | | $ | 234,344 | | $ | 128,636 | | | Capital Ratio Data | | | | | | | | | | | Total shareholders’ equity to total assets | | 8.32 | % | | 9.19 | % | | 6.11 | % | | Tangible shareholders’ equity to tangible assets^(1)^ | | 8.32 | % | | 9.19 | % | | 6.11 | % | | Total capital (to risk-weighted assets) | | 13.09 | % | | 13.98 | % | | 12.09 | % | | Tier 1 capital (to risk-weighted assets) | | 10.71 | % | | 11.44 | % | | 8.89 | % | | Common equity Tier 1 capital (to risk-weighted assets) | | 10.71 | % | | 11.44 | % | | 8.89 | % | | Tier 1 leverage ratio | | 9.02 | % | | 9.47 | % | | 6.37 | % |
(1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.
| 14 |
| --- |
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. Additionally, these non-GAAP measures 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 at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated.
Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.
Total loans held for investment, excluding PPP loans, is defined as total loans held for investment less PPP loans. The most directly comparable GAAP financial measure is total loans held for investment.
Average loans held for investment and sale, excluding PPP loans, is defined as the daily average loans held for investment and sale, excluding the daily average PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP measure is average loans held for investment and sale.
Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding 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 held for investment, excluding PPP loans, is defined as allowance for loan losses, divided by total loans held for investment less PPP loans. The most directly comparable GAAP financial measure is allowance for loan losses to total loans held for investment.
The following reconciliation tables provide a more detailed analysis of these non-GAAP financial measures.
| Total loans held for investment, excluding PPP loans<br> <br>(dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | March 31,<br> 2021 | |||
|---|---|---|---|---|---|---|
| Total loans held for investment | $ | 2,080,158 | $ | 1,934,460 | $ | 1,543,493 |
| Less: PPP loans | 1,528 | 22,124 | 182,876 | |||
| Total loans held for investment, excluding PPP loans | $ | 2,078,630 | $ | 1,912,336 | $ | 1,360,617 |
| Three months ended | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Average loans held for investment and sale, excluding PPP loans<br> <br>(dollars in thousands) | March 31,<br> 2022 | December 31,<br> 2021 | March 31,<br> 2021 | |||
| Average loans held for investment and sale | $ | 1,977,509 | $ | 1,815,627 | $ | 1,526,130 |
| Less: average PPP loans | 8,886 | 44,101 | 176,384 | |||
| Average loans held for investment and sale, excluding PPP loans | $ | 1,968,623 | $ | 1,771,526 | $ | 1,349,746 |
| 15 |
| --- | | | Three months ended | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Average loan yield, excluding PPP loans<br> <br>(dollars in thousands) | March 31, <br> 2022 | | | December 31,<br> 2021 | | | March 31, <br> 2021 | | | | Interest and fee income on loans | $ | 22,091 | | $ | 21,569 | | $ | 18,613 | | | Less: interest and fee income on PPP loans | | 610 | | | 1,192 | | | 2,400 | | | Interest and fee income on loans, excluding PPP loans | $ | 21,481 | | $ | 20,377 | | $ | 16,213 | | | Annualized interest and fee income on loans, excluding PPP loans (numerator) | $ | 87,117 | | $ | 80,844 | | $ | 65,753 | | | Average loans held for investment and sale | $ | 1,977,509 | | $ | 1,815,627 | | $ | 1,526,130 | | | Less: average PPP loans | | 8,886 | | | 44,101 | | | 176,384 | | | Average loans held for investment and sale, excluding PPP loans (denominator) | $ | 1,968,623 | | $ | 1,771,526 | | $ | 1,349,746 | | | Average loan yield, excluding PPP loans | | 4.43 | % | | 4.56 | % | | 4.87 | % | | Allowance for loan losses to total loans held for investment, excluding PPP loans<br> <br>(dollars in thousands) | March 31,<br> 2022 | | | December 31,<br> 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | Allowance for loan losses (numerator) | $ | 23,904 | | $ | 23,243 | | | Total loans held for investment | $ | 2,080,158 | | $ | 1,934,460 | | | Less: PPP loans | | 1,528 | | | 22,124 | | | Total loans held for investment, excluding PPP loans (denominator) | $ | 2,078,630 | | $ | 1,912,336 | | | Allowance for loan losses to total loans held for investment, excluding PPP loans | | 1.15 | % | | 1.22 | % |
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
| 16 |
| --- |
Exhibit 99.2
Investor Presentation First Quarter 2022
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 Annual Report on Form 10 - K for the year ended December 31 , 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 March 31, 2022 and for other quarterly periods are unaudited. Addit ionally, 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 cha nge 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 The Company uses financial information in its analysis of the Company’s performance that are not in conformity with accountin g p rinciples 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 suppl ementary 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 n umber of limitations. See the appendix to this presentation for a reconciliation of these non - GAAP measures to the most directly comparable GAAP financial measures. First Quarter 2022 Investor Presentation | 2
Agenda First Quarter 2022 Investor Presentation | 3 • Company Overview • Financial Highlights • Loans and Credit Quality • Deposit and Capital Overview • Financial Results
Company Overview First Quarter 2022 Investor Presentation | 4
Company Overview Nasdaq: Headquarters: Asset Size: Loans Held for Investment: Deposits: Bank Branches: First Quarter 2022 Investor Presentation | 5 FSBC Rancho Cordova, California $2.8 billion $2.1 billion $2.5 billion 7 Note: Balances are as of March 31, 2022. 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 - based, government, nonprofits, and more.
Executive Team First Quarter 2022 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 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
Financial Highlights First Quarter 2022 Investor Presentation | 7
Consistent and Organic Asset Growth First Quarter 2022 Investor Presentation | 8 Note: Dollars are in millions. Balances are end of period. References to PPP are the Paycheck Protection Program. 1. CAGR is based upon balances as of March 31, 2022. 2. A reconciliation of this non - GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years 10 years Total Assets 23.35 % 17.65 %
Financial Highlights First Quarter 2022 Investor Presentation | 9 (dollars in millions) For the three months ended 3/31/2022 12/31/2021 3/31/2021 Profitability Net income $ 9.9 $ 11.3 $ 10.3 Return on average assets ("ROAA") 1.53 % 1.82 % 2.05 % Return on average equity ("ROAE") 17.07 % 19.15 % 32.08 % Net Interest Margin Net interest margin 3.60 % 3.67 % 3.83 % Average loan yield 4.53 % 4.71 % 4.95 % Average loan yield, excluding PPP loans (1) 4.43 % 4.56 % 4.87 % PPP income $ 0.6 $ 1.1 $ 2.0 PPP loans forgiven $ 20.6 $ 39.4 $ 74.5 Total cost of funds 0.17 % 0.16 % 0.24 % 3/31/2022 12/31/2021 Asset Quality Nonperforming loans to loans held for investment (2) 0.06 % 0.03 % Allowance for loan losses to loans held for investment (2) 1.15 % 1.20 % # of PPP loans outstanding 5 60 Balance of PPP loans outstanding $ 1.5 $ 22.1 # of loans in a COVID - 19 deferment period 6 6 Balance of loans in a COVID - 19 deferment period $ 12.2 $ 12.2 Note: Yields are based on average balance and annualized quarterly interest income. 1. A reconciliation of this non - GAAP measure is set forth in the appendix. 2. Loans held for investment are the equivalent of total loans outstanding at each period end.
Financial Highlights First Quarter 2022 Investor Presentation | 10 Growth • Continued balance sheet growth with $166.0 million of growth in non - PPP loans held for investment (1) and $217.2 million in deposit growth since December 31, 2021. Funding • For the most recent quarter ended, non - interest - bearing deposits comprised 37.60% of total deposits, compared to 39.46% for the year ended December 31, 2021. • Deposits comprised 98.27% of total liabilities as of March 31, 2022, as compared to 98.46% of total liabilities as of December 31, 2021. Capital • All capital ratios were above well - capitalized regulatory thresholds as of March 31, 2022 and December 31, 2021. • On January 21, 2022, the Company announced a cash dividend of $0.15 per share. 1. A reconciliation of this non - GAAP measure is set forth in the appendix.
Loans and Credit Quality First Quarter 2022 Investor Presentation | 11
Consistent Loan Growth First Quarter 2022 Investor Presentation | 12 Note: Loan balances are end of period loans held for investment. Yields are based on average balance and annualized quarterly interest income. 1. CAGR is based upon balances as of March 31, 2022. 2. A reconciliation of this non - GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years Total Loans 21.94 %
Loan Portfolio Composition First Quarter 2022 Investor Presentation | 13 Types of collateral securing commercial real estate ("CRE") loans Loan Balance ($000s) # of Loans % of CRE Manufactured home community $ 598,014 278 33.97 % Retail $ 192,575 65 10.94 % Multifamily $ 167,103 70 9.49 % Industrial $ 145,598 102 8.27 % Office $ 141,318 90 8.03 % Faith - based $ 130,036 79 7.39 % Mini storage $ 95,172 29 5.41 % All other types (1) $ 290,735 133 16.50 % Total $ 1,760,551 846 100.00 % Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. 1. Types of collateral in “all other types” are those that individually make up less than 5% CRE concentration.
CRE Collateral Values First Quarter 2022 Investor Presentation | 14 (1) Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. 1. Types of collateral in “all other types” are those that individually make up less than 5% CRE concentration.
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 . First Quarter 2022 Investor Presentation | 15 Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. Loans by Type Loans by Purpose Real Estate Loans by Geography
Loan Rollforward First Quarter 2022 Investor Presentation | 16 Note: Dollars are in millions. Beginning and ending balances are as of period end, before allowance for loan losses, including deferred loan fees, and excluding loans held for sale. Q4 2021 Q1 2022 Beginning Balance $ 1,707 $ 1,936 Non PPP Originations 462 313 PPP Originations — — Non PPP Payoffs and Paydowns (194) (147) PPP Forgiveness and Repayments (39) (21) Ending Balance $ 1,936 $ 2,081
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 op erating 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 First Quarter 2022 Investor Presentation | 17 Nonperforming Loan Trend Allowance for Loan Losses and Net Charge - off Trend Note: References to loans HFI are loans held for investment which are the equivalent of total loans outstanding at each period end. References to average loans HFI are average loans held for investment during the period.
Allocation of Allowance for Loan Losses First Quarter 2022 Investor Presentation | 18 (dollars in thousands) March 31, 2022 December 31, 2021 Allowance for Loan Losses Amount % of Total Amount % of Total Collectively evaluated for impairment Real estate: Commercial $ 13,868 58.01 % $ 12,869 55.37 % Commercial land & development 66 0.28 % 50 0.22 % Commercial construction 430 1.80 % 371 1.60 % Residential construction 40 0.17 % 50 0.22 % Residential 208 0.87 % 192 0.83 % Farmland 611 2.56 % 645 2.78 % Total real estate loans 15,223 63.69 % 14,177 61.02 % Commercial: Secured 6,400 26.77 % 6,687 28.77 % Unsecured 246 1.03 % 207 0.89 % PPP — — % — — % Total commercial loans 6,646 27.80 % 6,894 29.66 % Consumer and other 1,088 4.55 % 889 3.82 % Unallocated 308 1.29 % 1,111 4.78 % Individually evaluated for impairment Commercial secured 639 2.67 % 172 0.72 % Total allowance for loan losses $ 23,904 100.00 % $ 23,243 100.00 %
Risk Grade Migration First Quarter 2022 Investor Presentation | 19 Classified Loans (Loans Rated Substandard or Doubtful) (dollars in thousands) 2020 2021 Q1 2022 Real estate: Commercial $ 35,543 $ 9,256 $ 901 Commercial land & development — — — Commercial construction — — — Residential construction — — — Residential 183 178 177 Farmland — — — Commercial: Secured 132 1,180 1,921 Unsecured — — — Paycheck Protection Program (PPP) — — — Consumer and other — — 12 Total $ 35,858 $ 10,614 $ 3,011 Note: Loan portfolio outstanding is the total balance of loans outstanding at period end, before deferred loan fees, before allowance for loan losses, excluding loans held for sale.
Deposit and Capital Overview First Quarter 2022 Investor Presentation | 20
Diversified Funding First Quarter 2022 Investor Presentation | 21 Total Deposits (1) = $2.5 billion 98.3% of Total Liabilities Liability Mix 1. Balance as of March 31, 2022. 2. Loan balance in loan to deposit ratio is total loans held for investment and sale at period end. Loan (2) to Deposit Ratio Non - Interest - Bearing Deposits to Total Deposits
Strong Deposit Growth First Quarter 2022 Investor Presentation | 22 Note: Balances are end of period. Cost of total deposits is based on total average balance of interest - bearing and non - interest - bearing deposits and annualized quarterly deposit interest expense. 1. CAGR is based upon balances as of March 31, 2022. Cost of Total Deposits 0.55% 0.81% 0.44% 0.11% 0.09% CAGR (1) 4 years Total Deposits 21.17 %
Capital Ratios First Quarter 2022 Investor Presentation | 23 Tier 1 Leverage Ratio Tier 1 Capital to RWA Total Capital to RWA Common Equity Tier 1 to RWA Note: References to RWA are risk - weighted assets.
Financial Results First Quarter 2022 Investor Presentation | 24
Earnings Track Record First Quarter 2022 Investor Presentation | 25 Note: References to EPS are Earnings Per Share. Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income $ 10.3 M $ 9.8 M $ 11.0 M $ 11.3 M $ 9.9 M Quarterly Basic EPS $ 0.93 $ 0.67 $ 0.64 $ 0.66 $ 0.58 Quarterly Diluted EPS $ 0.93 $ 0.67 $ 0.64 $ 0.66 $ 0.58
Operating Metrics First Quarter 2022 Investor Presentation | 26 Efficiency Ratio Net Interest Margin Note: All 2022 figures are through March 31, 2022. Total Income Before Taxes
Non - interest Income and Expense Comparison First Quarter 2022 Investor Presentation | 27 (dollars in thousands) For the three months ended 3/31/2022 12/31/2021 3/31/2021 Non - interest Income Service charges on deposit accounts $ 108 $ 116 $ 90 Net gain on sale of securities 5 15 182 Gain on sale of loans 918 1,072 931 Loan - related fees 617 391 260 FHLB stock dividends 102 102 78 Earnings on bank - owned life insurance 90 57 52 Other income 345 37 23 Total non - interest income $ 2,185 $ 1,790 $ 1,616 Non - interest Expense Salaries and employee benefits $ 5,675 $ 5,209 $ 4,697 Occupancy and equipment 520 544 451 Data processing and software 716 656 629 Federal Deposit Insurance Corporation insurance 165 160 280 Professional services 554 444 1,532 Advertising and promotional 344 499 170 Loan - related expenses 278 136 229 Other operating expenses 1,323 1,370 816 Total non - interest expense $ 9,575 $ 9,018 $ 8,804
Shareholder Returns First Quarter 2022 Investor Presentation | 28 ROAA ROAE EPS (basic and diluted) Value per Share (book and tangible book (1) ) Note: All 2022 figures are through March 31, 2022. 1. A reconciliation of this non - GAAP measure is set forth in the appendix.
We strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith - based, and small to medium - sized enterprises. We aim to consistently 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 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 . Additionally, these non - GAAP measures 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 . Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding PPP loans, and includes both performing and nonperforming loans . The most directly comparable GAAP financial measure is average loan yield . Total assets, excluding PPP loans, is defined as total assets less PPP loans . The most directly comparable GAAP financial measure is total assets . Growth in non - PPP loans held for investment, is defined as growth in loans held for investment less PPP loans . The most directly comparable GAAP financial measure is growth in total loans held for investment . Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period . The most directly comparable GAAP financial measure is book value per share . We had no goodwill or other intangible assets at the end of any period indicated . As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated . First Quarter 2022 Investor Presentation | 30 (dollars in thousands) Twelve months ended Three months ended Average loan yield, excluding PPP loans 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 Interest and fee income on loans $ 71,405 $ 18,613 $ 18,626 $ 20,085 $ 21,569 $ 22,091 Less: interest and fee income on PPP loans 6,535 2,400 1,771 2,054 1,192 610 Interest and fee income on loans, excluding PPP loans 64,870 16,213 16,855 18,031 20,377 21,481 Annualized interest and fee income on loans, excluding PPP loans (numerator) 64,870 65,753 67,605 71,536 80,844 87,117 Average loans held for investment and sale 1,439,380 1,526,130 1,578,438 1,625,995 1,815,627 1,977,509 Less: average PPP loans 165,414 176,384 158,568 89,436 44,101 8,886 Average loans held for investment and sale, excluding PPP loans (denominator) 1,273,966 1,349,746 1,419,870 1,536,559 1,771,526 1,968,623 Average loan yield, excluding PPP loans 5.09 % 4.87 % 4.76 % 4.66 % 4.56 % 4.43 %
Appendix: Non - GAAP Reconciliation (Unaudited) First Quarter 2022 Investor Presentation | 31 (dollars in millions) Total assets, excluding PPP loans 12/31/2020 12/31/2021 3/31/2022 Total assets $ 1,954 $ 2,557 $ 2,778 Less: PPP loans 148 22 2 Total assets, excluding PPP loans $ 1,806 $ 2,535 $ 2,776 (dollars in millions) Growth in non - PPP loans held for investment 3/31/2022 12/31/2021 $ Change Total loans held for investment $ 2,080 $ 1,934 $ 146 Less: PPP loans 2 22 (20) Total loans held for investment, excluding PPP loans $ 2,078 $ 1,912 $ 166