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 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-40379 FIVE STAR BANCORP (Exact name of Registrant as specified in its charter) California 75-3100966 (S ...

First Quarter Highlights "In the first quarter of 2024, we announced the launch and pricing of an underwritten public of ering of 3,450,000 shares of our common stock with the intention of using the net proceeds for general corporate purposes, to support our continued growth, and for working capital. We are very pleased that the of ering, which closed on April 2, 2024, was successful, which is a testimony to the strength of our organization and our reputation for providing a dif erentiated approach to purpo ...

RANCHO CORDOVA, Calif., April 19, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (NASDAQ:FSBC) ("Five Star" or the "Company"), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the "Bank"), announced today the declaration of a cash dividend of $0.20 per share on the Company's voting common stock. The dividend is expected to be paid on May 13, 2024, to shareholders of record as of May 6, 2024. About Five Star Bancorp Five Star is a bank holding company headquartered in ...

RANCHO CORDOVA, Calif., April 16, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (NASDAQ:FSBC) ("Five Star" or the "Company"), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the "Bank"), expects to report its financial results for the quarter ended March 31, 2024, after the stock market closes on Monday, April 29, 2024. Management will host a live webcast for analysts and investors to review this information at 1:00 PM ET (10:00 AM PT) on April 30, 2024. The live we ...

RANCHO CORDOVA, Calif., April 16, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (Nasdaq: FSBC) (“Five Star” or the “Company”), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the “Bank”), expects to report its financial results for the quarter ended March 31, 2024, after the stock market closes on Monday, April 29, 2024. Management will host a live webcast for analysts and investors to review this information at 1:00 PM ET (10:00 AM PT) on April 30, 2024. The live w ...

RANCHO CORDOVA, Calif., April 10, 2024 (GLOBE NEWSWIRE) -- Five Star Bancorp (NASDAQ:FSBC) ("Five Star" or the "Company"), a holding company that operates through its wholly owned banking subsidiary, Five Star Bank (the "Bank"), announced today the addition of Casey Grafeld, Senior Vice President / Managing Director, to Five Star Bank. Grafeld will help advance Five Star Bank's expansion strategy in the San Francisco Bay Area with personalized, concierge commercial banking service in Marin County.  "Casey G ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 001-40379 FIVE STAR BANCORP (Exact name of registrant as specified in its charter) California (State or other jurisdiction o ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements (unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) Presents unaudited consolidated financial statements, including balance sheets, income statements, comprehensive income, shareholders' equity, cash flows, and notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :------------------- | :------------------ | | Total assets | $3,505,040 | $3,227,159 | | Total deposits | $3,032,210 | $2,782,004 | | Total liabilities | $3,231,016 | $2,974,334 | | Total shareholders' equity | $274,024 | $252,825 | - Total assets increased by **$277.9 million (8.61%)** from December 31, 2022, to September 30, 2023, primarily driven by increases in loans held for investment and cash and cash equivalents[8](index=8&type=chunk)[9](index=9&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net interest income | $27,476 | $27,523 | $84,202 | $73,935 | | Provision for credit losses | $1,050 | $2,250 | $3,200 | $5,450 | | Non-interest income | $1,384 | $1,433 | $5,575 | $5,556 | | Non-interest expense | $12,015 | $10,172 | $35,112 | $29,952 | | Net income | $11,045 | $11,704 | $36,935 | $31,519 | | Basic earnings per common share | $0.64 | $0.68 | $2.15 | $1.84 | | Diluted earnings per common share | $0.64 | $0.68 | $2.15 | $1.84 | - Net income for the three months ended September 30, 2023, decreased to **$11.0 million** from **$11.7 million** in the prior year, while for the nine months, it increased to **$36.9 million** from **$31.5 million**[13](index=13&type=chunk) - Basic EPS followed a similar trend, decreasing to **$0.64** for the quarter but increasing to **$2.15** for the nine-month period[13](index=13&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $11,045 | $11,704 | $36,935 | $31,519 | | Other comprehensive (loss) | $(2,955) | $(3,323) | $(2,477) | $(15,504) | | Total comprehensive income | $8,090 | $8,381 | $34,458 | $16,015 | - Total comprehensive income for the nine months ended September 30, 2023, significantly increased to **$34.5 million** from **$16.0 million** in the prior year, primarily due to a much lower other comprehensive loss in 2023[15](index=15&type=chunk) [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) | Metric (in thousands) | Balance at Dec 31, 2022 | Balance at Sep 30, 2023 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock | $219,543 | $220,266 | | Retained Earnings | $46,736 | $69,689 | | Accumulated Other Comprehensive Loss, net | $(13,454) | $(15,931) | | Total Shareholders' Equity | $252,825 | $274,024 | - Total shareholders' equity increased by **$21.2 million** from December 31, 2022, to September 30, 2023, driven by net income of **$36.9 million**, partially offset by cash dividends paid of **$9.5 million** and an increase in accumulated other comprehensive loss[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $40,547 | $27,506 | | Net cash used in investing activities | $(207,705) | $(629,441) | | Net cash provided by financing activities | $230,715 | $494,275 | | Net change in cash and cash equivalents | $63,557 | $(107,660) | | Cash and cash equivalents at end of period | $323,548 | $317,669 | - Net cash provided by operating activities increased by **$13.0 million**, while net cash used in investing activities decreased significantly by **$421.7 million**, primarily due to decreased loan origination growth[24](index=24&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) - Net cash provided by financing activities decreased by **$263.6 million**, mainly due to lower deposit growth and borrowings[24](index=24&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1: Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201:%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the Company's organization, financial statement presentation, and significant accounting policies, including the adoption of the CECL model - The Company adopted ASC 326 (CECL model) on January 1, 2023, replacing the 'incurred loss' model with an 'expected loss' model for credit losses on loans, held-to-maturity debt securities, and unfunded loan commitments[35](index=35&type=chunk)[53](index=53&type=chunk) | Metric (in thousands) | Pre-ASC 326 Adoption | Impact of ASC 326 Adoption | Post-ASC 326 Adoption | | :-------------------- | :------------------- | :------------------------- | :-------------------- | | Allowance for Credit Losses | $(28,389) | $(5,282) | $(33,671) | | Deferred Tax Asset | $12,273 | $1,883 | $14,156 | | Reserve for Unfunded Commitments | $(125) | $(1,092) | $(1,217) | | Retained Earnings | $(46,736) | $4,491 | $(42,245) | - The adoption of ASC 326 resulted in a cumulative-effect adjustment to retained earnings of **$4.491 million** and increased the Allowance for Credit Losses by **$5.282 million** as of January 1, 2023[53](index=53&type=chunk)[56](index=56&type=chunk) [Note 2: Fair Value of Assets and Liabilities](index=14&type=section&id=Note%202:%20Fair%20Value%20of%20Assets%20and%20Liabilities) Details the Company's fair value measurements, categorizing assets and liabilities into a three-level hierarchy based on input observability - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[58](index=58&type=chunk)[59](index=59&type=chunk) | Asset/Liability (in thousands) | September 30, 2023 Carrying Value | September 30, 2023 Fair Value Hierarchy | December 31, 2022 Carrying Value | December 31, 2022 Fair Value Hierarchy | | :----------------------------- | :-------------------------------- | :-------------------------------------- | :------------------------------- | :------------------------------------- | | Securities available-for-sale | $104,086 | Level 2 | $115,988 | Level 2 | | Derivatives – interest rate swap (Asset) | $5 | Level 2 | $16 | Level 2 | | Derivatives – interest rate swap (Liability) | $5 | Level 2 | $16 | Level 2 | - As of September 30, 2023, all recurring fair value assets (Securities available-for-sale and Derivatives) were classified as **Level 2**, indicating valuation based on observable market data rather than quoted prices in active markets[62](index=62&type=chunk) [Note 3: Investment Securities](index=17&type=section&id=Note%203:%20Investment%20Securities) Details the Company's investment securities portfolio, comprising held-to-maturity (HTM) and available-for-sale (AFS) securities | Metric (in thousands) | Sep 30, 2023 Amortized Cost | Sep 30, 2023 Fair Value | Dec 31, 2022 Amortized Cost | Dec 31, 2022 Fair Value | | :-------------------- | :-------------------------- | :---------------------- | :-------------------------- | :---------------------- | | Total held-to-maturity | $3,104 | $2,811 | $3,756 | $3,432 | | Total available-for-sale | $126,703 | $104,086 | $135,087 | $115,988 | - Total investment securities decreased by **$12.5 million** from **$119.7 million** at December 31, 2022, to **$107.2 million** at September 30, 2023, primarily due to maturities, prepayments, and an unrealized loss on available-for-sale securities[221](index=221&type=chunk) | Pledged To (in thousands) | September 30, 2023 | December 31, 2022 | | :------------------------ | :----------------- | :---------------- | | State of California | $54,076 | $40,465 | | Federal Reserve Discount Window | $49,128 | — | | Total pledged investment securities | $103,204 | $40,465 | - As of September 30, 2023, **$103.2 million** of investment securities were pledged, a significant increase from **$40.5 million** at December 31, 2022, primarily due to pledging to the Federal Reserve Discount Window[83](index=83&type=chunk) [Note 4: Loans and Allowance for Credit Losses](index=22&type=section&id=Note%204:%20Loans%20and%20Allowance%20for%20Credit%20Losses) Details the Company's loan portfolio, underwriting practices, credit quality indicators, and the Allowance for Credit Losses (ACL) | Loan Type (in thousands) | September 30, 2023 | December 31, 2022 | | :----------------------- | :----------------- | :---------------- | | Commercial Real Estate | $2,599,616 | $2,394,674 | | Commercial Land & Development | $15,482 | $7,477 | | Commercial Construction | $95,352 | $88,669 | | Residential Construction | $13,922 | $6,693 | | Residential | $25,028 | $24,230 | | Farmland | $51,921 | $52,478 | | Commercial Secured | $157,273 | $165,186 | | Commercial Unsecured | $23,997 | $25,431 | | Consumer and Other | $29,604 | $28,628 | | Total Loans Held for Investment | $3,009,930 | $2,791,326 | - Total loans held for investment increased by **$218.6 million (7.83%)** to **$3.0 billion** at September 30, 2023, primarily driven by growth in commercial real estate loans[91](index=91&type=chunk)[165](index=165&type=chunk) | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Non-accrual loans | $2,002 | $404 | | Total nonperforming loans | $2,002 | $404 | | Allowance for credit losses - loans | $34,028 | $28,389 | | ACL to total loans held for investment | 1.13% | 1.02% | - Non-accrual loans increased significantly to **$2.0 million** at September 30, 2023, from **$0.4 million** at December 31, 2022[109](index=109&type=chunk)[242](index=242&type=chunk)[248](index=248&type=chunk)[250](index=250&type=chunk) - The Allowance for Credit Losses (ACL) increased by **$5.6 million** to **$34.0 million**, with the ACL to total loans held for investment ratio rising to **1.13%** from **1.02%**[109](index=109&type=chunk)[242](index=242&type=chunk)[248](index=248&type=chunk)[250](index=250&type=chunk) [Note 5: Interest-Bearing Deposits](index=29&type=section&id=Note%205:%20Interest-Bearing%20Deposits) Details the composition and cost of the Company's interest-bearing deposits, its primary funding source | Deposit Type (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------------- | :----------------- | :---------------- | | Non-interest-bearing | $833,434 | $968,749 | | Interest-bearing | $2,198,776 | $1,813,255 | | Total deposits | $3,032,210 | $2,782,004 | - Total deposits increased by **$250.2 million (8.99%)** to **$3.0 billion** at September 30, 2023[9](index=9&type=chunk)[165](index=165&type=chunk)[255](index=255&type=chunk) - Non-interest-bearing deposits decreased by **$135.3 million**, now representing **27.49%** of total deposits, down from **34.82%** at December 31, 2022[9](index=9&type=chunk)[165](index=165&type=chunk)[255](index=255&type=chunk) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total interest expense on interest-bearing deposits | $16,386 | $2,817 | $39,733 | $4,383 | - Interest expense on interest-bearing deposits significantly increased to **$16.4 million** for the three months and **$39.7 million** for the nine months ended September 30, 2023, compared to **$2.8 million** and **$4.4 million** respectively in the prior year, reflecting rising interest rates[123](index=123&type=chunk) [Note 6: Long Term Debt and Other Borrowings](index=30&type=section&id=Note%206:%20Long%20Term%20Debt%20and%20Other%20Borrowings) Outlines the Company's long-term debt and other borrowing arrangements, including subordinated notes and FHLB advances - The Company has **$75.0 million** in fixed-to-floating rate subordinated notes, issued in August 2022, maturing September 1, 2032, with an initial interest rate of **6.00%** until September 1, 2027, then adjusting to three-month Term SOFR plus **329.0 basis points**[124](index=124&type=chunk) | Borrowing Type (in thousands) | September 30, 2023 | December 31, 2022 | | :---------------------------- | :----------------- | :---------------- | | FHLB advances | $90,000 | $100,000 | | Subordinated debt, net | $73,713 | $73,606 | - FHLB advances decreased to **$90.0 million** at September 30, 2023, from **$100.0 million** at December 31, 2022[126](index=126&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - The Company also has unsecured federal funds lines of credit totaling **$175.0 million** and Federal Reserve Discount Window borrowing capacity of **$69.0 million**, with no outstanding amounts[126](index=126&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [Note 7: Shareholders' Equity](index=31&type=section&id=Note%207:%20Shareholders'%20Equity) Provides details on Earnings Per Share (EPS), dividends, and stock-based incentive arrangements | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic earnings per common share | $0.64 | $0.68 | $2.15 | $1.84 | | Diluted earnings per common share | $0.64 | $0.68 | $2.15 | $1.84 | - The Board of Directors declared a cash dividend of **$0.20 per common share** on July 20, 2023, totaling **$3.5 million**[132](index=132&type=chunk)[286](index=286&type=chunk) - Unrecognized compensation expense related to **82,324** unvested restricted shares was approximately **$1.4 million** as of September 30, 2023, with a weighted average remaining term of **2.67 years**[137](index=137&type=chunk) [Note 8: Commitments and Contingencies](index=32&type=section&id=Note%208:%20Commitments%20and%20Contingencies) Details the Company's off-balance sheet commitments, concentrations of credit and deposit risk, and legal contingencies | Commitment Type (in thousands) | September 30, 2023 | December 31, 2022 | | :----------------------------- | :----------------- | :---------------- | | Commercial lines of credit | $173,603 | $147,021 | | Undisbursed construction loans | $98,901 | $80,726 | | Undisbursed commercial real estate loans | $94,537 | $79,121 | | Total commitments and standby letters of credit | $401,934 | $329,148 | - Total off-balance sheet commitments and standby letters of credit increased to **$401.9 million** at September 30, 2023, from **$329.1 million** at December 31, 2022[141](index=141&type=chunk) - A significant concentration of loans exists in real estate-related loans, representing approximately **92.71%** of the loan portfolio at September 30, 2023[143](index=143&type=chunk)[144](index=144&type=chunk) - The Company also has **86** deposit relationships exceeding **$5.0 million**, totaling **$1.9 billion (61.64% of total deposits)**[143](index=143&type=chunk)[144](index=144&type=chunk) [Note 9: Subsequent Events](index=33&type=section&id=Note%209:%20Subsequent%20Events) Reports a subsequent event regarding the declaration of a cash dividend by the Company's Board of Directors - On October 19, 2023, the Board of Directors authorized a cash dividend of **$0.20 per common share**, payable on November 13, 2023[148](index=148&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, results of operations, asset quality, liquidity, capital, and regulatory developments [Company Overview](index=35&type=section&id=Company%20Overview) | Metric (in thousands) | September 30, 2023 | | :-------------------- | :----------------- | | Total assets | $3,500,000 | | Total loans held for investment, net of allowance for credit losses | $3,000,000 | | Total deposits | $3,000,000 | - Five Star Bancorp operates through its wholly-owned subsidiary, Five Star Bank, providing banking products and services primarily to small and medium-sized businesses, professionals, and individuals in Northern California[155](index=155&type=chunk) - The Company's mission is 'purpose-driven and integrity-centered banking,' focusing on real estate, agricultural, faith-based, and small to medium-sized enterprises[155](index=155&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) - There have been no significant changes concerning the Company's critical accounting estimates as described in its 2022 Annual Report on Form 10-K[159](index=159&type=chunk) - As an emerging growth company, the Company has elected not to opt out of the extended transition period for adopting new or revised accounting standards, allowing it to adopt standards on the application date for private companies[160](index=160&type=chunk) [Executive Summary](index=37&type=section&id=Executive%20Summary) | Metric (in thousands, except per share) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Total assets | $3,505,040 | $3,227,159 | | Total loans held for investment | $3,009,930 | $2,791,326 | | Total deposits | $3,032,210 | $2,782,004 | | Net income (9 months) | $36,935 | $31,519 | | Basic EPS (9 months) | $2.15 | $1.84 | | Net interest margin (3 months) | 3.31% | 3.86% | | Efficiency ratio (3 months) | 41.63% | 35.13% | | Total capital ratio | 12.37% | 12.46% | | Nonperforming loans to total loans | 0.07% | 0.01% | - Total deposits increased by **$250.2 million** to **$3.0 billion**, while non-interest-bearing deposits decreased to **27.49%** of total deposits[165](index=165&type=chunk) - Total loans held for investment grew by **$218.6 million (7.83%)** to **$3.0 billion**[165](index=165&type=chunk) - Net interest margin contracted to **3.31%** for the three months ended September 30, 2023, from **3.86%** in the prior year, primarily due to increased deposit costs[165](index=165&type=chunk) - The efficiency ratio increased to **41.63%** for the quarter[165](index=165&type=chunk) [RESULTS OF OPERATIONS](index=40&type=section&id=RESULTS%20OF%20OPERATIONS) [Net Interest Income](index=40&type=section&id=Net%20Interest%20Income) Net interest income remained consistent for the three months but increased for the nine-month period, though net interest margin contracted due to higher liability costs | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net interest income | $27,476 | $27,523 | $84,202 | $73,935 | | Net interest margin | 3.31% | 3.86% | 3.50% | 3.73% | | Cost of funds | 2.28% | 0.62% | 1.96% | 0.35% | - For the three months ended September 30, 2023, net interest income remained stable at **$27.5 million**, but net interest margin decreased by **55 basis points** to **3.31%**, primarily due to a **228 basis point** increase in the cost of interest-bearing deposits[172](index=172&type=chunk)[178](index=178&type=chunk) - For the nine months ended September 30, 2023, net interest income increased by **$10.3 million (13.89%)**, but net interest margin decreased by **23 basis points** to **3.50%**, as the cost of interest-bearing deposits rose by **219 basis points**[179](index=179&type=chunk)[185](index=185&type=chunk) [Provision for Credit Losses](index=44&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased for both the three and nine months ended September 30, 2023, influenced by loan growth, loan mix, macroeconomic conditions, and CECL adoption | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Provision for credit losses | $1,050 | $2,250 | $3,200 | $5,450 | - The provision for credit losses decreased to **$1.1 million** for the third quarter of 2023 from **$2.3 million** in the same period of 2022, and to **$3.2 million** for the first nine months of 2023 from **$5.5 million** in the prior year, influenced by loan growth and macroeconomic updates[188](index=188&type=chunk)[189](index=189&type=chunk) - The adoption of ASC 326 (CECL model) on January 1, 2023, impacts the comparability of credit loss provisions between 2022 and 2023, as the new model calculates reserves over the life of the loan[187](index=187&type=chunk) [Non-interest Income](index=45&type=section&id=Non-interest%20Income) Non-interest income saw a slight decrease for the three months but a marginal increase for the nine-month period, driven by changes in loan sale gains, loan-related fees, FHLB stock dividends, and other income | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total non-interest income | $1,384 | $1,433 | $5,575 | $5,556 | | Gain on sale of loans | $396 | $548 | $1,635 | $2,297 | | Loan-related fees | $355 | $447 | $1,052 | $1,800 | | FHLB stock dividends | $274 | $152 | $656 | $353 | | Other income | $74 | $52 | $1,467 | $438 | - Gain on sale of loans decreased by **$152 thousand** for the three months and **$662 thousand** for the nine months ended September 30, 2023, due to a decline in loan sale volume and yields[192](index=192&type=chunk)[195](index=195&type=chunk) - FHLB stock dividends increased by **$122 thousand** for the three months and **$303 thousand** for the nine months, driven by higher yields and an increase in FHLB shares outstanding[193](index=193&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Other income also saw a significant increase of **$1.029 million** for the nine months, primarily from venture-backed fund distributions[193](index=193&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Non-interest Expense](index=46&type=section&id=Non-interest%20Expense) Non-interest expense increased for both the three and nine months ended September 30, 2023, primarily due to higher salaries, employee benefits, data processing costs, and FDIC insurance premiums | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total non-interest expense | $12,015 | $10,172 | $35,112 | $29,952 | | Salaries and employee benefits | $6,876 | $5,645 | $19,915 | $16,873 | | Data processing and software | $1,020 | $797 | $2,905 | $2,252 | | FDIC insurance | $375 | $195 | $1,187 | $605 | - Salaries and employee benefits increased by **$1.2 million** for the three months and **$3.0 million** for the nine months, mainly due to an **8.72%** increase in headcount, partially offset by lower loan origination costs and commission expenses[202](index=202&type=chunk)[208](index=208&type=chunk) - Data processing and software expenses rose due to increased digital banking platform usage and higher transaction volumes[203](index=203&type=chunk)[204](index=204&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - FDIC insurance costs nearly doubled due to increased assessment rates and a larger assessment base[203](index=203&type=chunk)[204](index=204&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [Provision for Income Taxes](index=48&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes remained stable for the three months but increased for the nine months ended September 30, 2023, reflecting changes in pre-tax income and a state tax benefit | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Provision for income taxes | $4,750 | $4,830 | $14,530 | $12,570 | | Effective income tax rate | 30.07% | 29.21% | 28.23% | 28.51% | - The nine-month provision for income taxes increased by **$1.96 million** to **$14.5 million**, primarily due to higher pre-tax income, partially offset by a **$0.5 million** state tax benefit from the Company's transition to a C Corporation[214](index=214&type=chunk)[215](index=215&type=chunk) [FINANCIAL CONDITION SUMMARY](index=49&type=section&id=FINANCIAL%20CONDITION%20SUMMARY) [Total Assets](index=49&type=section&id=Total%20Assets) Total assets for Five Star Bancorp increased significantly from December 31, 2022, to September 30, 2023, primarily driven by growth in loans and cash | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Total assets | $3,505,040 | $3,227,159 | - Total assets increased by **$277.9 million (8.61%)** to **$3.5 billion** at September 30, 2023, primarily due to increases in cash and cash equivalents (**$63.6 million**) and loans held for investment (**$218.6 million**)[218](index=218&type=chunk) [Cash and Cash Equivalents](index=49&type=section&id=Cash%20and%20Cash%20Equivalents) The Company's cash and cash equivalents experienced a notable increase during the first nine months of 2023, driven by deposit growth and net income, partially offset by loan originations | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $323,548 | $259,991 | - Total cash and cash equivalents increased by **$63.5 million** to **$323.5 million** at September 30, 2023, primarily due to a **$250.2 million** increase in deposits and **$36.9 million** in net income, partially offset by **$212.1 million** in net loan originations[219](index=219&type=chunk) [Investment Portfolio](index=49&type=section&id=Investment%20Portfolio) The investment portfolio decreased in value due to maturities, prepayments, and unrealized losses, with a significant portion pledged as collateral | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Total investments | $107,190 | $119,744 | | Total available-for-sale | $104,086 | $115,988 | | Total held-to-maturity | $3,104 | $3,756 | - The investment portfolio decreased by **$12.5 million** to **$107.2 million** at September 30, 2023, primarily due to **$8.1 million** in maturities, prepayments, and calls, and a **$3.5 million** unrealized loss on securities[221](index=221&type=chunk) - Mortgage-backed securities and obligations of states and political subdivisions comprised **50.81%** and **33.91%** of the investment portfolio, respectively, at September 30, 2023[221](index=221&type=chunk) [Loan Portfolio](index=53&type=section&id=Loan%20Portfolio) The Company's loan portfolio continued to grow, maintaining a significant concentration in commercial real estate, with a high proportion of floating or adjustable rate loans sensitive to interest rate changes | Loan Type (in thousands) | September 30, 2023 Amount | September 30, 2023 % of Loans | December 31, 2022 Amount | December 31, 2022 % of Loans | | :----------------------- | :------------------------ | :---------------------------- | :----------------------- | :--------------------------- | | Commercial Real Estate | $2,599,616 | 86.03% | $2,394,674 | 85.44% | | Commercial Secured | $157,273 | 5.21% | $165,186 | 5.89% | | Total loans held for investment, gross | $3,012,195 | 99.69% | $2,793,466 | 99.66% | - The loan portfolio grew to **$3.0 billion** at September 30, 2023, with commercial real estate lending constituting **90.05%** of loans held for investment, indicating a significant concentration[225](index=225&type=chunk)[232](index=232&type=chunk) | Interest Rate Type (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :----------------- | :---------------- | | Fixed Interest Rates | $666,031 | $649,114 | | Floating or Adjustable Rates | $2,355,490 | $2,153,768 | | Total | $3,021,521 | $2,802,882 | - Approximately **78% ($2.355 billion)** of the loan portfolio was at floating or adjustable interest rates as of September 30, 2023, making the portfolio sensitive to interest rate changes[236](index=236&type=chunk) [Asset Quality](index=56&type=section&id=Asset%20Quality) The Company's asset quality remains a key focus, with management actively monitoring credit risk through a robust risk grading system, as nonperforming loans and classified loans increased, while the Allowance for Credit Losses (ACL) also grew | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Non-accrual loans | $2,002 | $404 | | Total nonperforming loans | $2,002 | $404 | | Nonperforming loans to loans held for investment | 0.07% | 0.01% | | Allowance for credit losses - loans | $34,028 | $28,389 | | ACL to loans held for investment | 1.13% | 1.02% | - Nonperforming loans increased to **$2.0 million (0.07% of total loans)** at September 30, 2023, from **$0.4 million (0.01%)** at December 31, 2022, due to financial challenges in a small subset of borrowers[242](index=242&type=chunk) - Loans designated as 'watch' and 'substandard' increased to **$35.6 million** at September 30, 2023, from **$22.3 million** at December 31, 2022[245](index=245&type=chunk)[248](index=248&type=chunk) - The Allowance for Credit Losses (ACL) increased by **$5.6 million** to **$34.0 million**, partly due to the ASC 326 adoption and a **$2.9 million** provision for credit losses[245](index=245&type=chunk)[248](index=248&type=chunk) [Liabilities](index=61&type=section&id=Liabilities) Total liabilities for the Company increased during the first nine months of 2023, primarily driven by a significant increase in total deposits | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Total liabilities | $3,231,016 | $2,974,334 | - Total liabilities increased by **$256.7 million** to **$3.2 billion** at September 30, 2023, primarily due to a **$250.2 million** increase in total deposits[253](index=253&type=chunk) [Deposits](index=61&type=section&id=Deposits) Deposits, the Company's primary funding source, increased overall, but there was a notable shift from non-interest-bearing to interest-bearing accounts, leading to higher interest expense | Deposit Type (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------------- | :----------------- | :---------------- | | Total deposits | $3,032,210 | $2,782,004 | | Non-interest-bearing deposits | $833,434 | $968,749 | | Interest-bearing deposits | $2,198,776 | $1,813,255 | - Total deposits increased by **$250.2 million (8.99%)** to **$3.0 billion**[9](index=9&type=chunk)[255](index=255&type=chunk) - Non-interest-bearing deposits decreased by **$135.3 million**, now representing **27.49%** of total deposits, down from **34.82%** at December 31, 2022[9](index=9&type=chunk)[255](index=255&type=chunk) - The Company's **42** largest deposit relationships (over **$10.0 million** each) totaled **$1.6 billion**, or **51.37%** of total deposits, with the largest single relationship being **$250.0 million (8.24% of total deposits)** from a government agency[258](index=258&type=chunk) [FHLB Advances and Other Borrowings](index=63&type=section&id=FHLB%20Advances%20and%20Other%20Borrowings) The Company utilizes FHLB advances and has issued subordinated notes to manage liquidity and capital, with FHLB advances decreasing while subordinated notes remained stable | Borrowing Type (in thousands) | September 30, 2023 | December 31, 2022 | | :---------------------------- | :----------------- | :---------------- | | FHLB advances | $90,000 | $100,000 | | Subordinated notes, net | $73,713 | $73,606 | - FHLB advances decreased by **$10.0 million** to **$90.0 million** at September 30, 2023[125](index=125&type=chunk)[126](index=126&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - The **$75.0 million** subordinated notes issued in 2022 remained outstanding at **$73.7 million**, qualifying as Tier 2 capital[125](index=125&type=chunk)[126](index=126&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) [Shareholders' Equity](index=63&type=section&id=Shareholders'%20Equity) Shareholders' equity increased during the first nine months of 2023, primarily driven by net income, partially offset by dividends and an increase in accumulated other comprehensive loss | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :-------------------- | :----------------- | :---------------- | | Total shareholders' equity | $274,024 | $252,825 | - Shareholders' equity increased by **$21.2 million** to **$274.0 million** at September 30, 2023, primarily due to **$36.9 million** in net income, partially offset by a **$2.5 million** increase in accumulated other comprehensive loss and **$9.5 million** in cash dividends paid[263](index=263&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) The Company actively manages its liquidity and capital to meet obligations and support growth, maintaining strong capital ratios above regulatory thresholds and relying on diverse funding sources - Total liquidity, comprising cash and cash equivalents and unused borrowing capacity, was approximately **$859.7 million** as of September 30, 2023[283](index=283&type=chunk) | Liquidity Source (in thousands) | Available Capacity | | :------------------------------ | :----------------- | | FHLB advances | $292,125 | | Federal Reserve Discount Window | $69,012 | | Correspondent bank lines of credit | $175,000 | | Cash and cash equivalents | $323,548 | | Total Liquidity | $859,685 | | Capital Ratio (Bancorp) | Sep 30, 2023 | Dec 31, 2022 | | :---------------------- | :----------- | :----------- | | Total capital | 12.37% | 12.46% | | Tier 1 capital | 9.07% | 8.99% | | Common equity Tier 1 capital | 9.07% | 8.99% | | Tier 1 leverage | 8.58% | 8.60% | - Both Bancorp and the Bank were in compliance with all applicable regulatory capital requirements as of September 30, 2023, with the Bank qualifying as 'well-capitalized' under the prompt corrective action framework[297](index=297&type=chunk)[298](index=298&type=chunk) [Non-GAAP Financial Measures](index=68&type=section&id=Non-GAAP%20Financial%20Measures) - The Company uses non-GAAP financial measures like 'tangible shareholders' equity to tangible assets' and 'tangible book value per share' to provide supplementary information to management and investors[305](index=305&type=chunk) - Since the Company had no goodwill or other intangible assets, its tangible shareholders' equity to tangible assets and tangible book value per share are identical to their GAAP counterparts (total shareholders' equity to total assets and book value per share, respectively)[303](index=303&type=chunk)[304](index=304&type=chunk) [Recent Legislative and Regulatory Developments](index=69&type=section&id=Recent%20Legislative%20and%20Regulatory%20Developments) - Recent bank failures may lead to regulatory changes, with federal banking agencies considering reforms to capital, interest rate, and liquidity risk supervision[306](index=306&type=chunk) - The Federal Reserve established the Bank Term Funding Program (BTFP) to provide liquidity to eligible depository institutions, though the Company had not utilized it as of September 30, 2023[307](index=307&type=chunk) - New rules include the CFPB's Small Business Lending Data Collection Rule (effective August 29, 2023, with compliance dates in 2024-2026) and revised Community Reinvestment Act (CRA) framework (effective April 1, 2024, with provisions applying in 2026-2027)[308](index=308&type=chunk)[309](index=309&type=chunk)[313](index=313&type=chunk) [Glossary of Acronyms, Abbreviations, and Terms](index=71&type=section&id=Glossary%20of%20Acronyms,%20Abbreviations,%20and%20Terms) [ITEM 3. Quantitative and Qualitative Disclosure About Market Risk](index=72&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Quantitative and qualitative disclosures about market risk are not applicable for the Company as it qualifies as a smaller reporting company - Quantitative and qualitative disclosures about market risk are not applicable for Five Star Bancorp as it is a smaller reporting company[316](index=316&type=chunk) [ITEM 4. Controls and Procedures](index=72&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were effective, with changes implemented to internal controls over financial reporting due to ASC 326 adoption - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[317](index=317&type=chunk) - Changes were made to internal controls over financial reporting to incorporate new policies, processes, and controls for estimating the allowance for credit losses following the adoption of ASC 326 on January 1, 2023[318](index=318&type=chunk) [PART II OTHER INFORMATION](index=73&type=section&id=PART%20II%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=73&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings in the ordinary course of business but does not anticipate any material adverse effects on its financial position or operations - The Company is subject to legal proceedings and claims arising in the ordinary course of business, but management believes the ultimate liability will not materially affect its consolidated financial position or results of operations[320](index=320&type=chunk)[147](index=147&type=chunk) [ITEM 1A. Risk Factors](index=73&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K and subsequent quarterly reports - No material changes have occurred to the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the three months ended March 31, 2023, and June 30, 2023[321](index=321&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities and no proceeds from such sales during the reporting period - There were no unregistered sales of equity securities and no use of proceeds from such sales during the period[322](index=322&type=chunk)[323](index=323&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=73&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[324](index=324&type=chunk) [ITEM 4. Mine Safety Disclosures](index=73&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[325](index=325&type=chunk) [ITEM 5. Other Information](index=73&type=section&id=ITEM%205.%20Other%20Information) The Company reported no other information requiring disclosure in this section - No other information was reported in this section[326](index=326&type=chunk) [ITEM 6. Exhibits](index=74&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of the report, including certifications from the CEO and CFO and XBRL interactive data - Exhibits filed include certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), as well as Inline XBRL Interactive Data[329](index=329&type=chunk) [SIGNATURES](index=75&type=section&id=SIGNATURES)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-40379 FIVE STAR BANCORP (Exact name of Registrant as specified in its charter) (State or other jurisdict ...