Executive Summary & Highlights [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Overview) Five Star Bancorp achieved strong financial performance in Q2 2025, with net income reaching $14.5 million and improvements in ROAA, ROAE, and EPS, alongside a lower efficiency ratio | Metric | June 30, 2025 (Q2) | March 31, 2025 (Q1) | June 30, 2024 (YoY) | | :--------------------------------- | :------------------- | :------------------- | :------------------- | | Net Income (Millions USD) | 14.5 | 13.1 | 10.8 | | Return on Average Assets (ROAA) | 1.37 % | 1.30 % | 1.23 % | | Return on Average Equity (ROAE) | 14.17 % | 13.28 % | 11.72 % | | Pre-tax Income (Thousands USD) | 20,099 | 18,391 | 15,152 | | Basic Earnings Per Share | $0.68 | $0.62 | $0.51 | | Diluted Earnings Per Share | $0.68 | $0.62 | $0.51 | | Efficiency Ratio | 41.03 % | 42.58 % | 44.07 % | [CEO Commentary and Strategic Initiatives](index=1&type=section&id=CEO%20Commentary%20and%20Strategic%20Initiatives) CEO James E. Beckwith expressed satisfaction with the quarter's results, highlighting organic growth in loans and deposits and plans for new market expansion - The company drove loan and deposit growth through an organic growth strategy, opening new accounts[3](index=3&type=chunk) - A new office is planned for the Walnut Creek market in Q3 2025, expanding the San Francisco Bay Area presence, where the team has grown to 34 employees with **$456.9 million in deposits**[5](index=5&type=chunk)[9](index=9&type=chunk) - The company will continue developing business verticals such as food, agribusiness, and diversified industries, offering global trade services and treasury management tools[5](index=5&type=chunk) [Key Financial and Operational Highlights](index=2&type=section&id=Key%20Financial%20and%20Operational%20Highlights) The company achieved growth in loans and deposits, improved its efficiency ratio, expanded net interest margin, and maintained low nonperforming loan levels Loan and Deposit Growth (QoQ) | Metric | June 30, 2025 (Thousands USD) | March 31, 2025 (Thousands USD) | Change (Thousands USD) | Change (%) | | :------------------- | :--------------------- | :--------------------- | :------------ | :------- | | Loans Held for Sale | 3,758,025 | 3,621,819 | 136,206 | 3.76 % | | Noninterest-bearing Deposits | 1,004,061 | 933,652 | 70,409 | 7.54 % | | Interest-bearing Deposits | 2,890,561 | 2,802,702 | 87,859 | 3.13 % | | Total Deposits | 3,894,622 | 3,736,354 | 158,268 | 4.24 % | Loan and Deposit Growth (YoY) | Metric | June 30, 2025 (Thousands USD) | June 30, 2024 (Thousands USD) | Change (Thousands USD) | Change (%) | | :------------------- | :--------------------- | :--------------------- | :------------ | :------- | | Loans Held for Sale | 3,758,025 | 3,266,291 | 491,734 | 15.05 % | | Noninterest-bearing Deposits | 1,004,061 | 825,733 | 178,328 | 21.60 % | | Interest-bearing Deposits | 2,890,561 | 2,323,898 | 566,663 | 24.38 % | | Total Deposits | 3,894,622 | 3,149,631 | 744,991 | 23.66 % | - The ratio of nonperforming loans to loans held for sale increased from **0.05%** on March 31, 2025, to **0.06%** on June 30, 2025, primarily due to one commercial real estate loan becoming nonaccrual[7](index=7&type=chunk) - The Board of Directors declared and paid a cash dividend of **$0.20 per share** on April 17, 2025, and again declared an equivalent dividend on July 17, 2025[8](index=8&type=chunk) - The efficiency ratio decreased from **42.58%** in Q1 2025 to **41.03%** in Q2 2025, demonstrating continued effective expense management[9](index=9&type=chunk) - Net interest margin increased from **3.45%** in Q1 2025 to **3.53%** in Q2 2025[9](index=9&type=chunk) - The company had no short-term borrowings as of June 30, 2025, and March 31, 2025[9](index=9&type=chunk) Summary of Operating Results [Q2 2025 vs. Q1 2025](index=3&type=section&id=Q2%202025%20vs.%20Q1%202025) Net income increased by 10.66% quarter-over-quarter in Q2 2025, driven by higher net interest income and improved noninterest income, partially offset by increased provision for credit losses and noninterest expense Q2 2025 vs. Q1 2025 Operating Data | Metric (Thousands USD) | June 30, 2025 | March 31, 2025 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Net Interest Income | 36,515 | 33,977 | 2,538 | 7.47 % | | Provision for Credit Losses | 2,500 | 1,900 | 600 | 31.58 % | | Noninterest Income | 1,810 | 1,359 | 451 | 33.19 % | | Noninterest Expense | 15,726 | 15,045 | 681 | 4.53 % | | Pre-tax Income | 20,099 | 18,391 | 1,708 | 9.29 % | | Net Income | 14,508 | 13,111 | 1,397 | 10.66 % | | Basic Earnings Per Share | $0.68 | $0.62 | $0.06 | 9.68 % | | Diluted Earnings Per Share | $0.68 | $0.62 | $0.06 | 9.68 % | - The increase in net interest income was primarily due to loan growth and a higher average yield on loans, partially offset by increased interest expense from deposit growth[10](index=10&type=chunk) - The increase in noninterest income was mainly due to an overall improvement in venture capital fund investment income[10](index=10&type=chunk) - The increase in noninterest expense was primarily related to higher travel, conference, training, and advertising expenses associated with the expansion of the business development team[10](index=10&type=chunk) [Q2 2025 vs. Q2 2024](index=3&type=section&id=Q2%202025%20vs.%20Q2%202024) Net income increased by 34.56% year-over-year in Q2 2025, driven by significant growth in net interest income and improved noninterest income, partially offset by higher noninterest expense and provision for credit losses Q2 2025 vs. Q2 2024 Operating Data | Metric (Thousands USD) | June 30, 2025 | June 30, 2024 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Net Interest Income | 36,515 | 29,092 | 7,423 | 25.52 % | | Provision for Credit Losses | 2,500 | 2,000 | 500 | 25.00 % | | Noninterest Income | 1,810 | 1,573 | 237 | 15.07 % | | Noninterest Expense | 15,726 | 13,513 | 2,213 | 16.38 % | | Pre-tax Income | 20,099 | 15,152 | 4,947 | 32.65 % | | Net Income | 14,508 | 10,782 | 3,726 | 34.56 % | | Basic Earnings Per Share | $0.68 | $0.51 | $0.17 | 33.33 % | | Diluted Earnings Per Share | $0.68 | $0.51 | $0.17 | 33.33 % | - The increase in net interest income was primarily due to loan growth and a higher average yield on loans, partially offset by increased interest expense from deposit growth[11](index=11&type=chunk) - The increase in noninterest income was mainly due to an overall improvement in venture capital fund investment income, partially offset by a decrease in loan sales volume[11](index=11&type=chunk) - The increase in noninterest expense was primarily due to higher salaries and employee benefits expenses resulting from an increase in headcount[11](index=11&type=chunk) Balance Sheet Analysis [Balance Sheet Overview (QoQ)](index=4&type=section&id=Balance%20Sheet%20Overview%20(QoQ)) Total assets and liabilities increased quarter-over-quarter as of June 30, 2025, primarily driven by growth in loans and deposits, with shareholder equity also growing Balance Sheet Data (June 30, 2025 vs. March 31, 2025) | Metric (Thousands USD) | June 30, 2025 | March 31, 2025 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Total Assets | 4,413,473 | 4,245,057 | 168,416 | 3.97 % | | Cash and Cash Equivalents | 483,810 | 452,571 | 31,239 | 6.90 % | | Total Loans Held for Sale | 3,758,025 | 3,621,819 | 136,206 | 3.76 % | | Total Liabilities | 3,996,731 | 3,838,606 | 158,125 | 4.12 % | | Total Deposits | 3,894,622 | 3,736,354 | 158,268 | 4.24 % | | Total Stockholders' Equity | 416,742 | 406,451 | 10,291 | 2.53 % | [Balance Sheet Overview (YoY)](index=5&type=section&id=Balance%20Sheet%20Overview%20(YoY)) Total assets, liabilities, and shareholder equity significantly increased as of June 30, 2025, compared to December 31, 2024, driven by growth in loans, cash, and interest-bearing deposits Balance Sheet Data (June 30, 2025 vs. December 31, 2024) | Metric (Thousands USD) | June 30, 2025 | December 31, 2024 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Total Assets | 4,413,473 | 4,053,278 | 360,195 | 8.89 % | | Cash and Cash Equivalents | 483,810 | 352,343 | 131,467 | 37.31 % | | Total Loans Held for Sale | 3,758,025 | 3,532,686 | 225,339 | 6.38 % | | Total Liabilities | 3,996,731 | 3,656,654 | 340,077 | 9.30 % | | Total Deposits | 3,894,622 | 3,557,994 | 336,628 | 9.46 % | | Total Stockholders' Equity | 416,742 | 396,624 | 20,118 | 5.07 % | - The increase in total assets was primarily composed of a **$225.3 million** increase in loans held for sale and a **$131.5 million** increase in cash and cash equivalents[17](index=17&type=chunk) - The increase in total liabilities was primarily due to a **$255.2 million** increase in interest-bearing deposits, with money market deposits and time deposits increasing by **$179.4 million** and **$101.9 million**, respectively[18](index=18&type=chunk) - The increase in stockholders' equity was primarily due to the recognition of **$27.6 million** in net income and a **$0.4 million** increase in accumulated other comprehensive income, partially offset by **$8.5 million** in cash dividends paid[19](index=19&type=chunk) [Deposit Composition and Trends](index=4&type=section&id=Deposit%20Composition%20and%20Trends) Total deposits reached $3.9 billion as of June 30, 2025, growing 4.24% quarter-over-quarter, driven by increases in both interest-bearing and noninterest-bearing deposits, with an improved non-wholesale deposit mix - Insured and collateralized deposits were approximately **$2.6 billion**, representing **67.06%** of total deposits as of June 30, 2025, with net uninsured and uncollateralized deposits at approximately **$1.3 billion**[14](index=14&type=chunk) - Non-wholesale deposit accounts constituted **83.14%** of total deposits, up from **81.53%** in the prior quarter[15](index=15&type=chunk) - Total deposits increased by **$158.3 million**, with interest-bearing deposits growing primarily from **$87.4 million** in new money market deposit accounts and noninterest-bearing deposits growing from **$68.7 million** in new accounts[16](index=16&type=chunk) [Liquidity Position](index=5&type=section&id=Liquidity%20Position) As of June 30, 2025, cash and cash equivalents represented 12.42% of total deposits, with total liquidity increasing to approximately $2.2 billion, indicating a robust liquidity profile Sources of Liquidity (June 30, 2025) | Source (Thousands USD) | Credit Line | Letters of Credit Issued | Borrowings | Available Line | | :----------------------- | :--------- | :----------- | :----- | :--------- | | Federal Home Loan Bank (FHLB) Advances | 1,290,446 | 732,500 | — | 557,946 | | Federal Reserve Discount Window | 926,573 | — | — | 926,573 | | Correspondent Bank Credit Lines | 185,000 | — | — | 185,000 | | Cash and Cash Equivalents | — | — | — | 483,810 | | **Total** | **2,402,019** | **732,500** | **—** | **2,153,329** | - Cash and cash equivalents totaled **$483.8 million**, representing **12.42%** of total deposits as of June 30, 2025[20](index=20&type=chunk) - Total liquidity, including cash and cash equivalents and unused immediate borrowing capacity, was approximately **$2.2 billion**, up from **$2.0 billion** as of March 31, 2025[20](index=20&type=chunk) Net Interest Income and Margin [Net Interest Income Trends (QoQ & YoY)](index=6&type=section&id=Net%20Interest%20Income%20Trends%20(QoQ%20%26%20YoY)) Net interest income increased by 7.47% quarter-over-quarter and 25.52% year-over-year in Q2 2025, primarily due to higher interest income, partially offset by increased interest expense, with net interest margin also rising Net Interest Income and Margin (QoQ) | Metric (Thousands USD) | June 30, 2025 | March 31, 2025 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Interest and Fee Income | 60,580 | 57,087 | 3,493 | 6.12 % | | Interest Expense | 24,065 | 23,110 | 955 | 4.13 % | | Net Interest Income | 36,515 | 33,977 | 2,538 | 7.47 % | | Net Interest Margin | 3.53 % | 3.45 % | - | +8 bps | Net Interest Income and Margin (YoY) | Metric (Thousands USD) | June 30, 2025 | June 30, 2024 | Change (Thousands USD) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :------- | | Interest and Fee Income | 60,580 | 48,998 | 11,582 | 23.64 % | | Interest Expense | 24,065 | 19,906 | 4,159 | 20.89 % | | Net Interest Income | 36,515 | 29,092 | 7,423 | 25.52 % | | Net Interest Margin | 3.53 % | 3.39 % | - | +14 bps | [Detailed Interest Income and Expense Analysis](index=7&type=section&id=Detailed%20Interest%20Income%20and%20Expense%20Analysis) Growth in net interest income was primarily driven by increased average loan balances and higher average loan yields, despite an increase in interest expense due to higher average deposit balances Interest Income and Expense Composition (Q2 2025) | Item | Average Balance (Thousands USD) | Income/Expense (Thousands USD) | Yield/Rate (%) | | :----------------------- | :---------------- | :----------------- | :-------------- | | **Assets** | | | | | Interest-bearing Deposits in Banks | 361,866 | 3,987 | 4.42 % | | Investment Securities | 97,886 | 577 | 2.37 % | | Loans Held for Sale | 3,691,616 | 56,016 | 6.09 % | | **Liabilities** | | | | | Interest-bearing Transaction Accounts | 283,369 | 1,043 | 1.48 % | | Savings Accounts | 121,692 | 801 | 2.64 % | | Money Market Accounts | 1,647,628 | 13,270 | 3.23 % | | Time Accounts | 726,295 | 7,790 | 4.30 % | | Subordinated Notes and Other Borrowings | 73,967 | 1,161 | 6.30 % | - Net interest income increased by **$2.5 million** quarter-over-quarter, primarily due to a **$123.6 million (3.46%)** increase in average loan balances and a **7 basis point** increase in the average yield on loans[23](index=23&type=chunk) - Net interest income increased by **$7.4 million** year-over-year, primarily due to a **$493.7 million (15.44%)** increase in average loan balances and a **26 basis point** increase in the average yield on loans[24](index=24&type=chunk) - The increase in interest expense was primarily driven by a **$150.2 million (4.19%)** increase in average deposit balances, though the average rate was **2 basis points lower** than the prior quarter[23](index=23&type=chunk) Loan and Deposit Portfolio [Loans by Type](index=8&type=section&id=Loans%20by%20Type) Commercial real estate loans remained the largest loan category as of June 30, 2025, showing quarter-over-quarter growth, while consumer and other loans also maintained stable growth Loan Balances by Type (Thousands USD) | Loan Type | June 30, 2025 | March 31, 2025 | | :----------------------- | :------------ | :------------ | | Real Estate: Commercial | 3,066,627 | 2,941,201 | | Real Estate: Commercial Land and Development | 1,422 | 3,556 | | Real Estate: Commercial Construction | 112,399 | 113,002 | | Real Estate: Residential Construction | 5,479 | 5,747 | | Real Estate: Residential | 33,132 | 34,053 | | Real Estate: Farmland | 51,579 | 43,643 | | Commercial: Secured | 173,855 | 170,525 | | Commercial: Unsecured | 37,568 | 34,970 | | Consumer and Other | 278,215 | 277,093 | | **Total Loans Held for Sale** | **3,758,025** | **3,621,819** | [Interest-bearing Deposits by Type](index=8&type=section&id=Interest-bearing%20Deposits%20by%20Type) Money market accounts were the largest interest-bearing deposit category as of June 30, 2025, experiencing significant growth, while time accounts and interest-bearing transaction accounts decreased Interest-bearing Deposit Balances by Type (Thousands USD) | Deposit Type | June 30, 2025 | March 31, 2025 | | :----------------------- | :------------ | :------------ | | Interest-bearing Transaction Accounts | 292,257 | 295,633 | | Money Market Accounts | 1,704,652 | 1,577,473 | | Savings Accounts | 121,567 | 128,210 | | Time Accounts | 772,085 | 801,386 | | **Total Interest-bearing Deposits** | **2,890,561** | **2,802,702** | Asset Quality [Allowance for Credit Losses](index=9&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses increased to $40.2 million as of June 30, 2025, primarily due to a $4.6 million provision for credit losses, partially offset by $2.2 million in net charge-offs Allowance for Credit Losses (Thousands USD) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :------------ | | Allowance for Credit Losses | 40,167 | 37,791 | | Allowance for Credit Losses to Loans Held for Sale | 1.07 % | 1.07 % | - The allowance for credit losses increased by **$2.4 million**, primarily due to a **$4.6 million** provision for credit losses during the period, partially offset by **$2.2 million** in net charge-offs, mainly attributable to commercial and industrial loans[27](index=27&type=chunk) [Nonperforming Assets](index=9&type=section&id=Nonperforming%20Assets) The ratio of nonperforming loans to loans held for sale slightly increased to 0.06% as of June 30, 2025, remaining at a low level, with a decrease in watch list loans and an increase in substandard loans Nonperforming Asset Metrics | Metric | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :------------ | | Nonperforming Loans to Loans Held for Sale | 0.06 % | 0.05 % | | Watch List Loans (Millions USD) | 106.5 | 123.4 | | Substandard Loans (Millions USD) | 4.2 | 2.6 | | Doubtful Risk Grade Loans | None | None | Non-Interest Income [Non-Interest Income Trends (QoQ)](index=9&type=section&id=Non-Interest%20Income%20Trends%20(QoQ)) Noninterest income increased by 33.19% quarter-over-quarter in Q2 2025, primarily driven by a significant increase in other income, mainly due to improved venture capital fund investment returns Non-Interest Income Composition (Q2 2025 vs. Q1 2025) | Item (Thousands USD) | June 30, 2025 | March 31, 2025 | Change (Thousands USD) | Change (%) | | :----------------------- | :------------ | :------------ | :------------ | :------- | | Deposit Account Service Charges | 196 | 215 | (19) | (8.84)% | | Gain on Sale of Loans | 119 | 125 | (6) | (4.80)% | | Loan Related Fees | 468 | 448 | 20 | 4.46 % | | FHLB Stock Dividends | 325 | 331 | (6) | (1.81)% | | Bank-Owned Life Insurance Income | 220 | 161 | 59 | 36.65 % | | Other Income | 482 | 79 | 403 | 510.13 % | | **Total Noninterest Income** | **1,810** | **1,359** | **451** | **33.19 %** | - The increase in other income primarily resulted from an overall improvement in venture capital fund investment income during Q2 2025[30](index=30&type=chunk) [Non-Interest Income Trends (YoY)](index=10&type=section&id=Non-Interest%20Income%20Trends%20(YoY)) Noninterest income increased by 15.07% year-over-year in Q2 2025, driven by higher other income and loan-related fees, but significantly impacted by a decrease in gain on sale of loans Non-Interest Income Composition (Q2 2025 vs. Q2 2024) | Item (Thousands USD) | June 30, 2025 | June 30, 2024 | Change (Thousands USD) | Change (%) | | :----------------------- | :------------ | :------------ | :------------ | :------- | | Deposit Account Service Charges | 196 | 189 | 7 | 3.70 % | | Gain on Sale of Loans | 119 | 449 | (330) | (73.50)% | | Loan Related Fees | 468 | 370 | 98 | 26.49 % | | FHLB Stock Dividends | 325 | 329 | (4) | (1.22)% | | Bank-Owned Life Insurance Income | 220 | 158 | 62 | 39.24 % | | Other Income | 482 | 78 | 404 | 517.95 % | | **Total Noninterest Income** | **1,810** | **1,573** | **237** | **15.07 %** | - The decrease in gain on sale of loans was primarily associated with a general decrease in loan sales volume, despite an improved effective yield on loans sold[31](index=31&type=chunk) - The increase in other income primarily resulted from an overall improvement in venture capital fund investment income during Q2 2025[32](index=32&type=chunk) Non-Interest Expense [Non-Interest Expense Trends (QoQ)](index=10&type=section&id=Non-Interest%20Expense%20Trends%20(QoQ)) Noninterest expense increased by 4.53% quarter-over-quarter in Q2 2025, driven by higher advertising, loan-related fees, and other operating expenses, while salaries and employee benefits slightly decreased Non-Interest Expense Composition (Q2 2025 vs. Q1 2025) | Item (Thousands USD) | June 30, 2025 | March 31, 2025 | Change (Thousands USD) | Change (%) | | :----------------------- | :------------ | :------------ | :------------ | :------- | | Salaries and Employee Benefits | 8,910 | 9,134 | (224) | (2.45)% | | Advertising | 865 | 522 | 343 | 65.71 % | | Loan Related Expenses | 423 | 319 | 104 | 32.60 % | | Other Operating Expenses | 1,975 | 1,608 | 367 | 22.82 % | | **Total Noninterest Expense** | **15,726** | **15,045** | **681** | **4.53 %** | - The decrease in salaries and employee benefits was primarily due to an increase in deferred loan origination costs, partially offset by higher commission expense[33](index=33&type=chunk) - The increase in advertising expense was primarily to support the expansion of the banking business development team[34](index=34&type=chunk) - The increase in other operating expenses was primarily due to higher travel and conference training expenses[35](index=35&type=chunk) [Non-Interest Expense Trends (YoY)](index=11&type=section&id=Non-Interest%20Expense%20Trends%20(YoY)) Noninterest expense increased by 16.38% year-over-year in Q2 2025, driven by higher salaries and employee benefits, data processing and software, professional services, and advertising expenses Non-Interest Expense Composition (Q2 2025 vs. Q2 2024) | Item (Thousands USD) | June 30, 2025 | June 30, 2024 | Change (Thousands USD) | Change (%) | | :----------------------- | :------------ | :------------ | :------------ | :------- | | Salaries and Employee Benefits | 8,910 | 7,803 | 1,107 | 14.19 % | | Data Processing and Software | 1,508 | 1,235 | 273 | 22.11 % | | FDIC Insurance | 470 | 390 | 80 | 20.51 % | | Professional Services | 918 | 767 | 151 | 19.69 % | | Advertising | 865 | 615 | 250 | 40.65 % | | Loan Related Expenses | 423 | 297 | 126 | 42.42 % | | Other Operating Expenses | 1,975 | 1,760 | 215 | 12.22 % | | **Total Noninterest Expense** | **15,726** | **13,513** | **2,213** | **16.38 %** | - The increase in salaries and employee benefits was primarily due to a **16.58%** increase in headcount and higher commission payments[36](index=36&type=chunk) - Data processing and software expenses increased due to higher usage of digital banking platforms, increased transaction volumes from a greater number of loan and deposit accounts, and more licenses required for new users[37](index=37&type=chunk) - Professional services expenses increased primarily due to higher compensation and business development consulting services[37](index=37&type=chunk) Provision for Income Taxes [Impact of New Tax Legislation](index=11&type=section&id=Impact%20of%20New%20Tax%20Legislation) The "One Big Beautiful Bill Act," signed on July 4, 2025, introduces federal tax law changes, including immediate expensing of domestic R&D and 100% bonus depreciation, with the company currently assessing their future impact - The "One Big Beautiful Bill Act" was signed into law on July 4, 2025, including several federal tax law changes such as the restoration of immediate expensing for domestic R&D expenditures and 100% bonus depreciation[40](index=40&type=chunk) - These changes are not reflected in the provision for income taxes as of June 30, 2025, and the company is evaluating their impact on future periods[40](index=40&type=chunk) [Tax Provision Analysis (QoQ & YoY)](index=11&type=section&id=Tax%20Provision%20Analysis%20(QoQ%20%26%20YoY)) The provision for income taxes increased both quarter-over-quarter and year-over-year in Q2 2025 due to higher taxable income, partially offset by a decrease in the effective tax rate from California tax law changes Income Tax Provision and Effective Tax Rate | Metric | June 30, 2025 (Q2) | March 31, 2025 (Q1) | June 30, 2024 (YoY) | | :------------------- | :------------------- | :------------------- | :------------------- | | Income Tax Provision (Thousands USD) | 5,591 | 5,280 | 4,370 | | Effective Tax Rate | 27.82 % | 28.71 % | 28.84 % | - The increase in income tax provision was primarily due to higher taxable income, partially offset by a net **$0.2 million** reduction in the provision due to California tax law changes (transition from a three-factor apportionment formula to a single sales factor formula)[41](index=41&type=chunk)[42](index=42&type=chunk) Company Information [Webcast Details](index=12&type=section&id=Webcast%20Details) Five Star Bancorp will host a webcast on July 24, 2025, to discuss its second-quarter financial results, with a 90-day replay available - The company will host a webcast on July 24, 2025, at 1:00 PM ET (10:00 AM PT) to discuss its second-quarter financial results[43](index=43&type=chunk) - The webcast will be archived on the company's website for 90 days[43](index=43&type=chunk) [About Five Star Bancorp](index=12&type=section&id=About%20Five%20Star%20Bancorp) Five Star Bancorp is a bank holding company headquartered in Rancho Cordova, California, operating through its wholly-owned subsidiary, Five Star Bank, with eight branches in Northern California - Five Star Bancorp is a bank holding company headquartered in Rancho Cordova, California[44](index=44&type=chunk) - The company operates through its wholly-owned bank subsidiary, Five Star Bank, with eight branches in Northern California[44](index=44&type=chunk) [Forward-Looking Statements](index=12&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements, based on company expectations and subject to known and unknown risks and uncertainties, where actual results may differ materially from expectations, with no obligation to update unless legally required - This press release contains forward-looking statements, representing the company's expectations and beliefs regarding future events, business plans, and operating results[45](index=45&type=chunk) - Forward-looking statements are based on company expectations and are subject to known and unknown risks and uncertainties, where actual results may differ materially from expectations[45](index=45&type=chunk) - The company undertakes no obligation to revise or update forward-looking statements unless expressly required by law[46](index=46&type=chunk) [Investor and Media Contacts](index=17&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor relations and media inquiries, including names, titles, company, phone numbers, and email addresses, is provided for further assistance - Investor Contact: Heather C. Luck, Chief Financial Officer, Phone: (916) 626-5008, Email: hluck@fivestarbank.com[55](index=55&type=chunk) - Media Contact: Shelley R. Wetton, Chief Marketing Officer, Phone: (916) 284-7827, Email: swetton@fivestarbank.com[55](index=55&type=chunk) Condensed Financial Data (Unaudited) [Revenue and Expense Data](index=13&type=section&id=Revenue%20and%20Expense%20Data) This section provides detailed revenue and expense data for Q2 2025, Q1 2025, and Q2 2024, including key financial metrics such as interest income, interest expense, net interest income, provision for credit losses, noninterest income, and noninterest expense Revenue and Expense Data (Thousands USD) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Interest and Fee Income | 60,580 | 57,087 | 48,998 | | Interest Expense | 24,065 | 23,110 | 19,906 | | Net Interest Income | 36,515 | 33,977 | 29,092 | | Provision for Credit Losses | 2,500 | 1,900 | 2,000 | | Total Noninterest Income | 1,810 | 1,359 | 1,573 | | Total Noninterest Expense | 15,726 | 15,045 | 13,513 | | Net Income | 14,508 | 13,111 | 10,782 | [Share and Per Share Data](index=14&type=section&id=Share%20and%20Per%20Share%20Data) This section lists key per-share data for the reporting period, including earnings per share, book value per share, and weighted average common shares outstanding, reflecting shareholder value and share structure changes Share and Per Share Data | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Basic Earnings Per Share | $0.68 | $0.62 | $0.51 | | Diluted Earnings Per Share | $0.68 | $0.62 | $0.51 | | Book Value Per Share | $19.51 | $19.06 | $17.85 | | Weighted Average Basic Common Shares | 21,225,831 | 21,209,881 | 21,039,798 | | Period-End Shares Outstanding | 21,360,991 | 21,329,235 | 21,319,583 | [Balance Sheet Data](index=15&type=section&id=Balance%20Sheet%20Data) This section provides detailed balance sheet data at the end of the reporting period, including cash, investment securities, loans, deposits, liabilities, and stockholders' equity, illustrating the company's financial position Balance Sheet Data (Thousands USD) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Total Assets | 4,413,473 | 4,245,057 | 3,634,217 | | Loans Held for Sale | 3,758,025 | 3,621,819 | 3,266,291 | | Allowance for Credit Losses | (40,167) | (39,224) | (35,406) | | Total Deposits | 3,894,622 | 3,736,354 | 3,149,631 | | Total Liabilities | 3,996,731 | 3,838,606 | 3,253,747 | | Total Stockholders' Equity | 416,742 | 406,451 | 380,470 | [Quarterly Average Balance Data](index=15&type=section&id=Quarterly%20Average%20Balance%20Data) This section lists the company's average loans, average interest-earning assets, average total assets, average deposits, and average total equity for the reporting period, providing a basis for analyzing asset-liability structure and profitability Quarterly Average Balance Data (Thousands USD) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Average Loans Held for Sale | 3,691,616 | 3,567,992 | 3,197,921 | | Average Interest-Earning Assets | 4,151,368 | 3,997,037 | 3,452,676 | | Average Total Assets | 4,253,000 | 4,090,580 | 3,537,230 | | Average Deposits | 3,736,018 | 3,585,782 | 3,049,919 | | Average Total Equity | 410,609 | 400,501 | 370,135 | [Credit Quality Ratios](index=15&type=section&id=Credit%20Quality%20Ratios) This section presents the company's credit quality ratios at the end of the reporting period, including allowance for credit losses to nonperforming loans, nonperforming loans to loans held for sale, and nonperforming assets to total assets, reflecting asset quality Credit Quality Ratios | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Allowance for Credit Losses to Nonperforming Loans | 1,763.26 % | 2,222.32 % | 1,882.30 % | | Nonperforming Loans to Loans Held for Sale | 0.06 % | 0.05 % | 0.06 % | | Nonperforming Assets to Total Assets | 0.05 % | 0.04 % | 0.05 % | [Capital Ratios](index=16&type=section&id=Capital%20Ratios) This section lists the company's capital ratios at the end of the reporting period, including total stockholders' equity to total assets, total capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, common equity Tier 1 capital to risk-weighted assets, and Tier 1 leverage ratio, demonstrating capital adequacy Capital Ratios | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | :------------ | | Total Stockholders' Equity to Total Assets | 9.44 % | 9.57 % | 10.47 % | | Total Capital (to Risk-Weighted Assets) | 13.72 % | 13.97 % | 14.38 % | | Tier 1 Capital (to Risk-Weighted Assets) | 10.85 % | 11.00 % | 11.27 % | | Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 10.85 % | 11.00 % | 11.27 % | | Tier 1 Leverage Ratio | 10.03 % | 10.17 % | 11.05 % | Non-GAAP Reconciliation (Unaudited) [Explanation of Non-GAAP Measures](index=17&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company uses non-GAAP financial measures to supplement GAAP analysis, finding them useful for management and investors, while acknowledging their limitations and advising against their use as GAAP substitutes - The company uses non-GAAP financial measures to supplement its analysis of GAAP financial condition, operating results, and cash flows[51](index=51&type=chunk) - Non-GAAP measures have limitations and should not be considered a substitute for GAAP results, and may not be comparable to non-GAAP measures used by other banking companies[51](index=51&type=chunk) - Tangible stockholders' equity to tangible assets and tangible book value per share are the same as their corresponding GAAP measures, as the company had no goodwill or other intangible assets during the periods presented[52](index=52&type=chunk)[53](index=53&type=chunk) [Pre-tax, Pre-provision Income Reconciliation](index=17&type=section&id=Pre-tax%2C%20Pre-provision%20Income%20Reconciliation) Pre-tax, pre-provision income, defined as pre-tax income plus provision for credit losses, is a metric management uses to assess the company's ability to generate operating earnings and capital - Pre-tax, pre-provision income is defined as pre-tax income plus the provision for credit losses[54](index=54&type=chunk) - Management believes this metric is useful for evaluating the company's ability to generate operating earnings and capital[54](index=54&type=chunk) Pre-tax, Pre-provision Income Reconciliation (Thousands USD) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------- | :------------ | :------------ | :------------ | | Pre-tax Income | 20,099 | 18,391 | 15,152 | | Add: Provision for Credit Losses | 2,500 | 1,900 | 2,000 | | **Pre-tax, Pre-provision Income** | **22,599** | **20,291** | **17,152** |

Core Viewpoint - Five Star Bancorp reported strong financial performance for the second quarter of 2025, with significant increases in net income, loans, and deposits, reflecting the success of its organic growth strategy and operational efficiencies [1][3][8]. Financial Performance - Net income for the three months ended June 30, 2025, was $14.5 million, up from $13.1 million in the previous quarter and $10.8 million in the same quarter last year [1][8]. - Return on average assets (ROAA) improved to 1.37% from 1.30% in the previous quarter and 1.23% a year ago [2][12]. - Return on average equity (ROAE) increased to 14.17% from 13.28% in the previous quarter and 11.72% a year ago [2][12]. Loan and Deposit Growth - Total loans held for investment rose by $136.2 million, or 3.76% (15.04% annualized), reaching $3.76 billion [3][7]. - Total deposits increased by $158.3 million, or 4.24% (16.94% annualized), totaling $3.89 billion [3][9]. - Non-wholesale deposits grew by $191.6 million, or 6.29%, while wholesale deposits decreased by $33.4 million, or 4.84% [9][16]. Interest Income and Margin - Net interest income increased by $2.5 million, or 7.47%, to $36.5 million compared to the previous quarter, driven by loan growth and improved yields [12][20]. - Net interest margin improved to 3.53%, up from 3.45% in the previous quarter and 3.39% a year ago [2][12]. Expense Management - Non-interest expense rose by $0.7 million during the quarter, attributed to increased business development activities [8][11]. - The efficiency ratio improved to 41.03% from 42.58% in the previous quarter and 44.07% a year ago, indicating better cost management [9][12]. Capital and Asset Quality - The common equity Tier 1 capital ratio was 10.85%, maintaining the "well-capitalized" status under regulatory guidelines [9][14]. - The allowance for credit losses increased to $40.2 million, with a ratio of nonperforming loans to loans held for investment rising slightly to 0.06% [26][27]. Future Outlook - The company plans to expand its services to the Walnut Creek market with a new office expected to open in the third quarter of 2025 [5][6]. - Continued growth is anticipated in business verticals such as Food, Agribusiness, and Diversified Industries, leveraging global trade services and treasury management tools [5][6].

Core Insights - Five Star Bancorp reported a net income of $14.5 million for Q2 2025, an increase from $13.1 million in Q1 2025 and $10.8 million in Q2 2024 [1][8][9] Financial Performance - Return on average assets (ROAA) improved to 1.37% in Q2 2025 from 1.30% in Q1 2025 and 1.23% in Q2 2024 [2][12] - Return on average equity (ROAE) increased to 14.17% in Q2 2025 from 13.28% in Q1 2025 and 11.72% in Q2 2024 [2][12] - Pre-tax income rose to $20.1 million in Q2 2025, up from $18.4 million in Q1 2025 and $15.2 million in Q2 2024 [2][12] - Basic and diluted earnings per share were both $0.68 in Q2 2025, compared to $0.62 in Q1 2025 and $0.51 in Q2 2024 [2][12] Loan and Deposit Growth - Total loans held for investment increased by $136.2 million, or 3.76% (15.04% annualized), from Q1 2025 to Q2 2025 [3][7] - Total deposits rose by $158.3 million, or 4.24% (16.94% annualized), during the same period [3][7] - Non-wholesale deposits increased by $191.6 million, or 6.29%, while wholesale deposits decreased by $33.4 million, or 4.84% [6][7] Interest Income and Margin - Net interest income for Q2 2025 was $36.5 million, an increase of $2.5 million, or 7.47%, from Q1 2025 [2][21] - Net interest margin improved to 3.53% in Q2 2025 from 3.45% in Q1 2025 [2][12] Expense Management - Non-interest expense increased by $0.7 million in Q2 2025 compared to Q1 2025, primarily due to higher business travel and promotional expenses [8][9] - The efficiency ratio improved to 41.03% in Q2 2025 from 42.58% in Q1 2025 [10][12] Asset Quality - The ratio of nonperforming loans to loans held for investment increased slightly from 0.05% at the end of Q1 2025 to 0.06% at the end of Q2 2025 [11][27] - The allowance for credit losses was $40.2 million as of June 30, 2025, up from $37.8 million at the end of 2024 [26][28] Market Expansion - The company plans to open a new office in Walnut Creek in Q3 2025, expanding its presence in the San Francisco Bay Area [5][6] - The team in the Bay Area has grown to 34 employees, with deposits totaling $456.9 million as of June 30, 2025 [5][6]

Core Viewpoint - Five Star Bancorp is set to announce its financial results for the quarter ending June 30, 2025, on July 23, 2025, after market close, with a subsequent live webcast scheduled for July 24, 2025 [1]. Group 1 - Five Star Bancorp operates through its wholly owned banking subsidiary, Five Star Bank, which has eight branches located in Northern California [3]. - The live webcast for analysts and investors will be available on the Company's website, and pre-registration is required [2]. - The archived version of the webcast will be accessible for 90 days following the event [2]. Group 2 - The Company is headquartered in Rancho Cordova, California, and provides banking services through its subsidiary [3]. - Investor and media contacts are provided for further inquiries, including the Chief Financial Officer and Chief Marketing Officer [4].

Core Insights - Five Star Bancorp is expanding its presence in the Bay Area with a new office in Walnut Creek, reflecting its commitment to providing concierge commercial banking services to local businesses and non-profits [1][2][3] Group 1: Expansion Strategy - The new Walnut Creek office, approximately 4,128 square feet, is set to open in the third quarter of 2025, enhancing Five Star Bank's ability to serve a growing client portfolio in the East Bay [2][3] - This expansion follows the opening of a San Francisco office in September 2024, indicating a broader growth strategy in Northern California [2][3] Group 2: Market Opportunity - Walnut Creek has seen steady commercial growth and increased demand for high-tech financial services, driven by post-pandemic migration and a vibrant small business sector [2] - Existing client relationships in Walnut Creek, including local businesses like Original Joe's and Calicraft Brewing Co., position Five Star Bank to effectively meet the needs of East Bay clients [2] Group 3: Community Commitment - The new office is described as a natural extension of Five Star Bank's commitment to the East Bay communities, emphasizing personalized, relationship-based banking [3] - The location is chosen for its thriving business landscape, skilled workforce, and strong community values, aligning with the bank's strategic investment goals [3]

Core Viewpoint - Five Star Bancorp is expanding its presence in the Bay Area by opening a new office in Walnut Creek, which reflects the company's commitment to strategic growth in Northern California [1][2][3] Company Expansion - The new Walnut Creek office will be approximately 4,128 square feet and is expected to open in the third quarter of 2025 [2] - This expansion follows the opening of a San Francisco office in September 2024, indicating a broader growth strategy [2] Market Opportunity - Walnut Creek has seen steady commercial growth and increased demand for financial services, driven by post-pandemic migration and a vibrant small business sector [2] - The new office aims to serve a diverse client base, including family-owned businesses and professional service firms [2][3] Community Commitment - The location is chosen for its thriving business landscape, skilled workforce, and strong community values, aligning with the company's goal of delivering personalized banking solutions [3] - Approximately one-third of Five Star Bank's Bay Area employees are already based in the East Bay, highlighting the regional focus [2]

Part I: Financial Information [Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) The company reported increased assets and net income in Q1 2025, driven by loan growth and higher net interest income [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet reflects significant asset growth, primarily in loans and cash, funded by increased deposits and shareholders' equity Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$4,245,057** | **$4,053,278** | **+4.7%** | | Cash and cash equivalents | $452,571 | $352,343 | +28.4% | | Loans held for investment, net | $3,582,595 | $3,494,895 | +2.5% | | **Total Liabilities** | **$3,838,606** | **$3,656,654** | **+5.0%** | | Total deposits | $3,736,354 | $3,557,994 | +5.0% | | **Total Shareholders' Equity** | **$406,451** | **$396,624** | **+2.5%** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income increased significantly due to higher net interest income, despite increased provision for credit losses and non-interest expenses - Net income for Q1 2025 increased by **23.3%** to **$13,111 thousand**, primarily due to a **27.1%** increase in net interest income to **$33,977 thousand**, with diluted EPS remaining flat at **$0.62** year-over-year[12](index=12&type=chunk) Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $33,977 | $26,744 | +27.1% | | Provision for credit losses | $1,900 | $900 | +111.1% | | Non-interest Income | $1,359 | $1,833 | -25.9% | | Non-interest Expense | $15,045 | $12,716 | +18.3% | | **Net Income** | **$13,111** | **$10,631** | **+23.3%** | | Diluted EPS | $0.62 | $0.62 | 0.0% | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased significantly, primarily driven by financing activities offsetting cash used in investing - Cash and cash equivalents increased by **$100,228 thousand** for Q1 2025, primarily due to **$174,094 thousand** from financing activities, offsetting **$89,338 thousand** used in investing activities[19](index=19&type=chunk) Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,472 | $247 | | Net cash used in investing activities | ($89,338) | ($11,923) | | Net cash provided by (used in) financing activities | $174,094 | ($124,575) | | **Net change in cash and cash equivalents** | **$100,228** | **($136,251)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, loan and deposit composition, credit quality, and capital adequacy, confirming the company's well-capitalized status - The company operates as a single banking segment, primarily serving small to medium-sized businesses and individuals in Northern California[25](index=25&type=chunk) - The loan portfolio is heavily concentrated in real estate, comprising **86.62%** of total loans as of March 31, 2025[126](index=126&type=chunk) - As of March 31, 2025, **104** deposit relationships exceeded **$5.0 million** each, totaling **$2.3 billion** and representing **60.87%** of total deposits[127](index=127&type=chunk) - A cash dividend of **$0.20 per share** was declared and paid in Q1 2025, with another **$0.20 per share** declared in April 2025[113](index=113&type=chunk)[133](index=133&type=chunk) [Management's Discussion and Analysis (MD&A)](index=31&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights strong Q1 2025 performance driven by loan and deposit growth, improved net interest margin, robust credit quality, and strong capital ratios [Executive Summary & Highlights](index=35&type=section&id=Executive%20Summary) The executive summary outlines key financial achievements including asset growth, strong credit quality, improved net interest margin, and robust capital - Total assets grew by **4.73%** to **$4.2 billion** in Q1 2025, driven by a **$89.1 million (2.52%)** increase in loans and a **$178.4 million (5.01%)** increase in deposits[150](index=150&type=chunk) - Credit quality remains strong, with non-accrual loans at **0.05%** of total loans and the allowance for credit losses stable at **1.08%**[150](index=150&type=chunk) - Net interest margin improved to **3.45%** for Q1 2025, up from **3.14%** in Q1 2024, driven by higher loan balances and yields[150](index=150&type=chunk) - All capital ratios exceed well-capitalized regulatory thresholds, with a Tier 1 leverage ratio of **10.17%** as of March 31, 2025[150](index=150&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Operating results show increased net interest income driven by loan growth and yields, offset by higher provision for credit losses and non-interest expenses Change in Net Interest Income (Q1 2025 vs Q1 2024, in thousands) | Component | Change due to Volume | Change due to Yield/Rate | Total Change | | :--- | :--- | :--- | :--- | | **Interest Income** | **$7,858** | **$1,688** | **$9,546** | | Loans | $6,916 | $2,229 | $9,145 | | **Interest Expense** | **$3,605** | **($1,292)** | **$2,313** | | **Change in Net Interest Income** | **$4,253** | **$2,980** | **$7,233** | - The provision for credit losses increased to **$1,900 thousand** in Q1 2025 from **$900 thousand** in Q1 2024, reflecting loan growth and economic forecast adjustments[164](index=164&type=chunk) - Non-interest income decreased by **$500 thousand (25.9%)** year-over-year, mainly due to lower gains on loan sales and reduced income from equity investments[167](index=167&type=chunk)[168](index=168&type=chunk) - Salaries and employee benefits increased by **$1,600 thousand (20.6%)**, driven by a **13.19%** increase in headcount and higher commissions[172](index=172&type=chunk)[173](index=173&type=chunk) [Financial Condition](index=42&type=section&id=Financial%20Condition%20Summary) Financial condition shows asset and loan portfolio growth, strong asset quality, increased deposits, and higher shareholders' equity Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | % of Total | | :--- | :--- | :--- | | Commercial Real Estate | $2,941,201 | 81.11% | | Commercial Construction | $113,002 | 3.12% | | Commercial (Secured & Unsecured) | $205,495 | 5.66% | | Consumer and other | $277,093 | 7.64% | | Other Real Estate & Farmland | $83,443 | 2.30% | | **Total Loans Held for Investment** | **$3,623,790** | **99.93%** | - Commercial real estate loan concentration was **576.23%** of risk-based capital as of March 31, 2025, remaining within internal limits[199](index=199&type=chunk) - Asset quality remains strong with nonperforming loans at **$1,800 thousand**, or **0.05%** of total loans, and an allowance for credit losses to nonperforming loans of **2,222%**[213](index=213&type=chunk) - Total deposits grew by **$178.4 million** in Q1 2025, with non-interest-bearing deposits increasing by **$11.0 million** to **$933.7 million**, representing **24.99%** of total deposits[228](index=228&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity and capital, with available liquidity of **$2.0 billion** and capital ratios exceeding well-capitalized thresholds Total Liquidity as of March 31, 2025 (in thousands) | Source | Available Amount | | :--- | :--- | | FHLB advances | $544,572 | | Federal Reserve Discount Window | $856,366 | | Correspondent bank lines of credit | $175,000 | | Cash and cash equivalents | $452,571 | | **Total** | **$2,028,509** | Capital Ratios as of March 31, 2025 | Ratio | Bancorp | Bank | Well-Capitalized Minimum (Bank) | | :--- | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 13.97% | 13.50% | 10.00% | | Tier 1 capital (to risk-weighted assets) | 11.00% | 12.48% | 8.00% | | Common equity tier 1 capital | 11.00% | 12.48% | 6.50% | | Tier 1 leverage | 10.17% | 11.52% | 5.00% | - The company's primary parent company liquidity source is Bank dividends, subject to regulatory limitations, which management believes will not impact its ability to meet obligations[244](index=244&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=63&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company manages interest rate risk by monitoring NII and EVE sensitivity, showing a liability-sensitive position in rising rate scenarios Interest Rate Sensitivity Analysis as of March 31, 2025 | Change in Interest Rates (bps) | Estimated Change in NII (%) | Estimated Change in EVE (%) | | :--- | :--- | :--- | | +300 | (5.26)% | (10.22)% | | +200 | (3.52)% | (7.04)% | | +100 | (1.95)% | (3.55)% | | -100 | 2.03% | 3.16% | | -200 | 4.29% | 5.87% | | -300 | 7.61% | 8.99% | - Interest rate risk management policies are overseen by the Management and Director Asset Liability Committees[294](index=294&type=chunk) [Controls and Procedures](index=64&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[299](index=299&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2025[300](index=300&type=chunk) Part II: Other Information [Other Disclosures (Items 1-5)](index=65&type=section&id=ITEM%201.%20Legal%20Proceedings) This section confirms no material legal proceedings, no changes to risk factors, and no unregistered equity sales or issuer purchases - The company is not a party to any pending legal proceedings expected to have a material adverse effect on its business[302](index=302&type=chunk) - No material changes to risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K have occurred[303](index=303&type=chunk) - No unregistered sales or issuer purchases of equity securities occurred during the quarter[304](index=304&type=chunk)[306](index=306&type=chunk)

Core Insights - Five Star Bancorp has expanded its food and agribusiness vertical to enhance support for clients across the nation, reflecting its commitment to the food supply chain [1][2] - The new vertical, named Food, Agribusiness & Diversified Industries, will focus on various sectors including production agriculture, wholesale distribution, retail, manufacturing, food processing, and food distribution services [2] - The initiative is led by a team of experienced professionals, including Cliff Cooper, who has over 35 years of banking expertise in the food and agribusiness sector [2][3] Company Strategy - The enhanced vertical aligns with Five Star Bank's organic growth strategy, emphasizing a high-tech and high-touch approach to business banking [3] - The company aims to build strong relationships with clients in the agricultural community, recognizing the importance of trust and in-person interactions [4] - Five Star Bank is dedicated to honoring the work of those involved in the food supply chain, ensuring they receive exceptional banking services [4] Company Overview - Five Star Bancorp is headquartered in Rancho Cordova, California, and operates through its wholly owned banking subsidiary, Five Star Bank [5] - The bank currently has eight branches located in Northern California [5]

Company Overview - Five Star Bancorp's asset size reached $4245 million as of March 31, 2025 [20] - Loans held for investment (HFI) totaled $3600 million [20] - Total deposits amounted to $3700 million [20] Financial Highlights - Loans held for investment increased by $891 million since December 31, 2024 [29] - Non-wholesale deposits increased by $484 million since December 31, 2024 [29] - Non-interest-bearing deposits comprised 2499% of total deposits [29] - Insured and collateralized deposits represented 6755% of total deposits [29] - Cash and cash equivalents were $4526 million, representing 1211% of total deposits [29] Loan Portfolio - Commercial real estate loans accounted for 8111% of the loan portfolio [36] - Manufactured home community loans within CRE totaled $918864 thousand, representing 3124% of CRE loans [37] - RV Park loans within CRE totaled $378525 thousand, representing 1287% of CRE loans [37] Financial Performance - Net income for the three months ended March 31, 2025, was $13111 thousand [77] - Return on average assets (ROAA) was 130% [77] - Net interest margin was 345% [77]

Financial Data and Key Metrics Changes - Net income for Q1 2025 was $13.1 million, with a return on average assets of 1.3% and return on average equity of 13.28% [11] - Total loans held for investment increased by $89.1 million or 2.52% from the prior quarter, with average loan yields rising by one basis point to 6.02% [4][11] - Net interest margin improved by nine basis points to 3.45% from 3.36% in the previous quarter, primarily due to lower average cost of deposits [11] - Non-interest income decreased to $1.4 million from $1.7 million in the previous quarter, mainly due to reduced income from equity investments [12] Business Line Data and Key Metrics Changes - The commercial real estate segment of the loan portfolio increased from 80.75% to 81.11% quarter over quarter, indicating a strong focus on this area [5] - Loan originations for the first quarter were $259.3 million, while payoffs and pay downs were $65.6 million and $104.6 million respectively [5] - Non-performing loans remained stable at 0.05% of loans held for investment [6] Market Data and Key Metrics Changes - Deposits increased by $178.4 million or 5% compared to the previous quarter, driven by increases in non-interest bearing demand and various types of interest-bearing deposits [6][9] - Non-interest bearing deposits as a percentage of total deposits decreased slightly to 24.99% from 25.93% in the prior quarter [8] - Wholesale deposits increased by $130 million or 23.21% quarter over quarter, while non-wholesale deposits rose by $48.4 million or 1.61% [9] Company Strategy and Development Direction - The company is focused on organic growth and disciplined business practices, aiming to benefit customers, employees, community, and shareholders [14] - Expansion into the San Francisco Bay Area is a key strategic initiative, supported by the addition of seasoned professionals [4][14] - The company aims to maintain a fortress balance sheet with a target of 10% in cash and a loan-to-deposit ratio of less than 100% [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to adapt to changing economic conditions, projecting loan growth of 10% to 12% for the remainder of the year [20][21] - Concerns regarding tariffs and economic slowdown were acknowledged, but management believes the bank is well-positioned due to the composition of its loan portfolio [30] - The company remains optimistic about the demand for loans, particularly in the mobile home park and RV park sectors, which have historically performed well [30] Other Important Information - The company declared a cash dividend of $0.20 per share, expected to be paid on May 12, 2025 [10] - Five Star Bancorp was ranked third on the S&P Global Market Intelligence List of best-performing community banks in the nation for banks with assets between $3 billion and $10 billion [64] Q&A Session Summary Question: Loan growth outlook for the year - Management is bullish on loan growth, projecting 10% to 12% for the rest of the year, supported by a strong sales force [20][21] Question: Reason for higher cost wholesale funding - Management indicated that core deposit growth is expected to match loan growth, and they do not anticipate additional wholesale funding [22][23] Question: Impact of tariffs on RV manufactured housing business - Management feels comfortable with their portfolio's performance in the face of tariffs, citing historical resilience during economic downturns [30] Question: Changes in allowance for loan losses - The increase in allowance was driven by portfolio growth and revised economic forecasts from the FOMC [36][37] Question: Loan pricing competition - Management acknowledged competitive pricing but remains satisfied with their current loan spreads [40][41] Question: Small business borrowers' response to economic uncertainty - Management noted that small business borrowers face high costs of borrowing, but they maintain a high level of reserves against this book [55][57]