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On Wednesday, Raymond (NSE:RYMD) James analyst David Feaster adjusted the price target for Five Star Bancorp (NASDAQ:FSBC) shares, reducing it from $35.00 to $31.00, while maintaining an Outperform rating. Currently trading at $27.70, the stock has attracted positive attention from analysts, with InvestingPro data showing two analysts recently revising their earnings estimates upward. Feaster highlighted the bank’s strong quarterly results, noting an acceleration in the bank’s organic growth engine and a stronger than anticipated pace of growth due to its origination capacity.
The bank’s expansion into the San Francisco Bay Area has been particularly noteworthy, with four new hires in the first quarter of 2025 alone, and plans for further growth in the East Bay. This expansion has led to significant deposit growth and new loan opportunities, reflected in the bank’s impressive 11.14% revenue growth over the last twelve months. Consequently, management has revised its loan growth guidance upward to 10-12% or more, which is expected to be primarily funded by deposit growth.
Feaster also pointed out the favorable repricing dynamics for both loans and deposits at Five Star Bancorp, which should contribute to further net interest margin (NIM) expansion. This aspect, according to the analyst, is not fully appreciated by the market. He also emphasized the bank’s defensive position in the face of economic uncertainty, citing its low level of non-performing assets (NPAs), well-controlled net charge-offs (NCOs), solid loan loss reserve (LLR) ratio, and strong capital levels with ample liquidity. InvestingPro’s analysis supports this view, assigning the bank a "GOOD" Financial Health Score of 2.93, particularly strong in profitability metrics.
Despite a more conservative credit outlook, Raymond James projects that Five Star Bancorp will achieve a return on average assets (ROAA) of over 1.4% and a mid-teens return on average tangible common equity (ROATCE). This performance is expected to lead to high-single digit tangible book value growth and high-teens to low-20% pre-provision net revenue (PPNR) growth. Feaster concluded that the combination of the bank’s above-peer profitability and below-peer price-to-earnings ratio of 12.2x presents a favorable risk-reward scenario. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, part of the extensive analysis covering over 1,400 US stocks.
In other recent news, Five Star Bancorp reported its financial results for the first quarter of 2025, revealing a mixed performance. The company exceeded earnings per share (EPS) expectations with $0.62, surpassing the projected $0.58, but fell short on revenue, reporting $33.44 million against a forecast of $35.22 million. Despite the revenue miss, the company showed strong financial health, with a net income of $13.1 million and improvements in its net interest margin to 3.45%. Additionally, the company announced an expansion into the San Francisco Bay Area, which is expected to bolster growth. Five Star Bancorp also projected a loan growth of 10-12% for the remainder of 2025. In terms of analyst activity, there were no specific upgrades or downgrades reported. The company’s CEO, James Beckwith, expressed optimism about future performance, highlighting the expansion and strong market presence as key drivers. The company continues to focus on its strategic initiatives, including growing its verticals and geographies.
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