Five Star Bancorp Announces Quarterly and Annual Results

RANCHO CORDOVA, Calif., Jan. 27, 2025 (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”), today reported net income of $13.3 million for the three months ended December 31, 2024, as compared to $10.9 million for the three months ended September 30, 2024 and $10.8 million for the three months ended December 31, 2023. Net income for the year ended December 31, 2024 was $45.7 million, as compared to $47.7 million for the year ended December 31, 2023. Financial and Other Highlights Performance highlights and other developments for the Company for the periods noted below included the following: Three months ended(in thousands, except per share and share data)December 31, 2024 September 30, 2024 December 31, 2023Return on average assets (“ROAA”) 1.31% 1.18% 1.26%Return on average equity (“ROAE”) 13.48% 11.31% 15.45%Pre-tax income$19,367 $15,241 $15,151 Pre-tax, pre-provision income(1)$20,667 $17,991 $15,951 Net income$13,317 $10,941 $10,799 Basic earnings per common share$0.63 $0.52 $0.63 Diluted earnings per common share$0.63 $0.52 $0.63 Weighted average basic common shares outstanding 21,182,143 21,182,143 17,175,445 Weighted average diluted common shares outstanding 21,235,318 21,232,758 17,193,114 Shares outstanding at end of period 21,319,083 21,319,583 17,256,989 Year ended(in thousands, except per share and share data)December 31, 2024 December 31, 2023ROAA 1.23% 1.44%ROAE 12.72% 17.85%Pre-tax income$64,721 $66,616 Pre-tax, pre-provision income(1)$71,671 $70,616 Net income$45,671 $47,734 Basic earnings per common share$2.26 $2.78 Diluted earnings per common share$2.26 $2.78 Weighted average basic common shares outstanding 20,154,385 17,166,592 Weighted average diluted common shares outstanding 20,205,440 17,187,969 Shares outstanding at end of period 21,319,083 17,256,989 (1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure. James E. Beckwith, President and Chief Executive Officer, commented: “While we focus on the future and maintaining a position of distinction and respect in the markets we serve, we proudly look back at 2024 as another outstanding year of achievement. We experienced consistent, strong financial performance with year-over-year growth in loans and deposits, a consistent shareholder dividend, and stable net interest margin. We also continued our successful execution of our San Francisco market expansion and now have 27 employees in the San Francisco Bay Area who contributed $229.5 million in deposits from June 5, 2023 to December 31, 2024. We have managed expenses and executed on conservative underwriting practices, which are foundational to our success. Five Star Bank consistently executes on client and community-focused initiatives, and in 2024, we received a Super Premier rating from Findley Reports, an IDC Superior rating, and a Bauer Financial rating of 5 stars (out of five). We were also awarded the prestigious 2023 Raymond James Community Bankers Cup, were among S&P Global Market Intelligence’s 2023 Top 20 Best-Performing Community banks in the nation (with assets between $3 billion and $10 billion), and were ranked fifth on the 2024 Bank Director Magazine (RankingBanking) Best U.S. Banks with assets less than $5 billion. We also received the Greater Sacramento Economic Council’s Sustainability Award recognizing a company that has supported industry growth in the Greater Sacramento region. In 2024, our senior leadership was recognized by the Sacramento Business Journal with a C-Suite Award, a Women Who Mean Business honor, a 40 Under 40 recognition, and placement on the Power 100 list. Our senior leadership was also recognized on the San Francisco Business Times’ Newsmaker 100 list, as part of the Independent Community Bankers of America’s 40 Under 40: Emerging Community Bank Leaders, among the Association of Latino Professionals for America’s 50 Most Powerful Latinas, and with a National Association of Women Business Owners’ Sacramento Valley Outstanding Women Leaders’ Executive Woman award. Being recognized as community leaders ensures Five Star Bank remains top of mind in the markets we serve as we continue to build-out our market presence. I am humbled and proud of our team’s accomplishments and look forward to the future.” Financial highlights included the following: The San Francisco Bay Area team, which increased from 24 to 27 employees during the three months ended December 31, 2024, generated deposit balances totaling $229.5 million at December 31, 2024, an increase of $40.4 million from September 30, 2024.Cash and cash equivalents were $352.3 million, representing 9.90% of total deposits at December 31, 2024, as compared to 7.38% at September 30, 2024.Total deposits increased by $158.0 million, or 4.65%, during the three months ended December 31, 2024, due to increases in both non-wholesale and wholesale deposits, which the Company defines as brokered deposits and public time deposits. During the three months ended December 31, 2024, non-wholesale deposits increased by $8.0 million, or 0.27%, and wholesale deposits increased by $150.0 million, or 36.59%.Consistent, disciplined management of expenses contributed to our efficiency ratio of 41.21% for the three months ended December 31, 2024, as compared to 43.37% for the three months ended September 30, 2024.For the three months ended December 31, 2024, net interest margin was 3.36%, as compared to 3.37% for the three months ended September 30, 2024 and 3.19% for the three months ended December 31, 2023. For the year ended December 31, 2024, net interest margin was 3.32%, as compared to 3.42% for the year ended December 31, 2023. The effective Federal Funds rate fell to 4.33% as of December 31, 2024 from 4.83% as of September 30, 2024 and 5.33% as of December 31, 2023.Other comprehensive loss was $2.6 million during the three months ended December 31, 2024. Unrealized losses, net of tax effect, on available-for-sale securities were $12.4 million as of December 31, 2024. Total carrying value of held-to-maturity and available-for-sale securities represented 0.07% and 2.48% of total interest-earning assets, respectively, as of December 31, 2024.The Company’s common equity Tier 1 capital ratio was 11.02% and 10.93% as of December 31, 2024 and September 30, 2024, respectively. The Bank continues to meet all requirements to be considered “well-capitalized” under applicable regulatory guidelines.Loan and deposit growth in the three and twelve months ended December 31, 2024 was as follows: (in thousands)December 31, 2024 September 30, 2024 $ Change % ChangeLoans held for investment$3,532,686 $3,460,565 $72,121 2.08%Non-interest-bearing deposits 922,629 906,939 15,690 1.73%Interest-bearing deposits 2,635,365 2,493,040 142,325 5.71% (in thousands)December 31, 2024 December 31, 2023 $ Change % ChangeLoans held for investment$3,532,686 $3,081,719 $450,967 14.63%Non-interest-bearing deposits 922,629 831,101 91,528 11.01%Interest-bearing deposits 2,635,365 2,195,795 439,570 20.02% The ratio of nonperforming loans to loans held for investment at period end decreased from 0.06% at December 31, 2023 to 0.05% at December 31, 2024.The Company’s Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended December 31, 2024. The Company’s Board of Directors subsequently declared another cash dividend of $0.20 per share on January 16, 2025, which the Company expects to pay on February 10, 2025 to shareholders of record as of February 3, 2025. Summary Results Three months ended December 31, 2024, as compared to three months ended September 30, 2024 The Company’s net income was $13.3 million for the three months ended December 31, 2024, as compared to $10.9 million for the three months ended September 30, 2024. Net interest income increased by $3.1 million, primarily due to an increase in interest income driven by a larger average balance of interest-earning assets, partially offset by an increase in interest expense due to a larger average balance of deposits, as compared to September 30, 2024. The provision for credit losses decreased by $1.5 million, reflecting adjustments to expectations for credit losses based on economic trends and forecasts in the three months ended December 31, 2024 compared to the three months ended September 30, 2024. Non-interest income increased by $0.3 million, primarily due to income received on equity investments in venture-backed funds during the three months ended December 31, 2024, combined with a loss from equity investments in venture-backed funds during the three months ended September 30, 2024. Non-interest expense increased by $0.7 million, primarily due to: (i) increased salaries and employee benefits mainly resulting from increased loan production driving higher commissions expense period-over-period; and (ii) increased advertising and promotional expenses due to a larger number of events sponsored and attended period-over-period. Three months ended December 31, 2024, as compared to three months ended December 31, 2023 The Company’s net income was $13.3 million for the three months ended December 31, 2024, as compared to $10.8 million for the three months ended December 31, 2023. Net interest income increased by $6.8 million, primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances and rates on deposits. The provision for credit losses increased by $0.5 million, reflecting adjustments to expectations for credit losses based on economic trends and forecasts in the three months ended December 31, 2024 compared to the three months ended December 31, 2023. Non-interest income decreased by $0.3 million, primarily due to lower swap referral and rate lock fees during the three months ended December 31, 2024 compared to the same quarter of the prior year. Non-interest expense increased by $1.8 million with an increase in salaries and employee benefits related to the Company’s expansion into the San Francisco Bay Area as the leading driver. Year ended December 31, 2024, as compared to year ended December 31, 2023 The Company’s net income was $45.7 million for the year ended December 31, 2024, as compared to $47.7 million for the year ended December 31, 2023. Net interest income increased by $8.8 million, primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances and rates on deposits. The provision for credit losses increased by $3.0 million, or 73.75%, as loan originations in the year ended December 31, 2024 were almost double those for the year ended December 31, 2023. Non-interest income decreased by $1.1 million, primarily due to lower income received on equity investments in venture-backed funds during the year ended December 31, 2024 than during the year ended December 31, 2023. Non-interest expense increased by $6.7 million with an increase in salaries and employee benefits related to the Company’s expansion into the San Francisco Bay Area as the leading driver. The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated: Three months ended (in thousands, except per share data) December 31, 2024 September 30, 2024 $ Change % ChangeSelected operating data: Net interest income $33,489 $30,386 $3,103 10.21%Provision for credit losses 1,300 2,750 (1,450) (52.73)%Non-interest income 1,666 1,381 285 20.64%Non-interest expense 14,488 13,776 712 5.17%Pre-tax income 19,367 15,241 4,126 27.07%Provision for income taxes 6,050 4,300 1,750 40.70%Net income $13,317 $10,941 $2,376 21.72%Earnings per common share: Basic $0.63 $0.52 $0.11 21.15%Diluted $0.63 $0.52 $0.11 21.15%Performance and other financial ratios: ROAA 1.31% 1.18% ROAE 13.48% 11.31% Net interest margin 3.36% 3.37% Cost of funds 2.65% 2.72% Efficiency ratio 41.21% 43.37% Three months ended (in thousands, except per share data) December 31, 2024 December 31, 2023 $ Change % ChangeSelected operating data: Net interest income $33,489 $26,678 $6,811 25.53%Provision for credit losses 1,300 800 500 62.50%Non-interest income 1,666 1,936 (270) (13.95)%Non-interest expense 14,488 12,663 1,825 14.41%Pre-tax income 19,367 15,151 4,216 27.83%Provision for income taxes 6,050 4,352 1,698 39.02%Net income $13,317 $10,799 $2,518 23.32%Earnings per common share: Basic $0.63 $0.63 $— —%Diluted $0.63 $0.63 $— —%Performance and other financial ratios: ROAA 1.31% 1.26% ROAE 13.48% 15.45% Net interest margin 3.36% 3.19% Cost of funds 2.65% 2.50% Efficiency ratio 41.21% 44.25% Year ended (in thousands, except per share data) December 31, 2024 December 31, 2023 $ Change % ChangeSelected operating data: Net interest income $119,711 $110,880 $8,831 7.96%Provision for credit losses 6,950 4,000 2,950 73.75%Non-interest income 6,453 7,511 (1,058) (14.09)%Non-interest expense 54,493 47,775 6,718 14.06%Pre-tax income 64,721 66,616 (1,895) (2.84)%Provision for income taxes 19,050 18,882 168 0.89%Net income $45,671 $47,734 $(2,063) (4.32)%Earnings per common share: Basic $2.26 $2.78 $(0.52) (18.71)%Diluted $2.26 $2.78 $(0.52) (18.71)%Performance and other financial ratios: ROAA 1.23% 1.44% ROAE 12.72% 17.85% Net interest margin 3.32% 3.42% Cost of funds 2.64% 2.10% Efficiency ratio 43.19% 40.35% Balance Sheet Summary (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeSelected financial condition data: Total assets $4,053,278 $3,593,125 $460,153 12.81%Cash and cash equivalents 352,343 321,576 30,767 9.57%Total loans held for investment 3,532,686 3,081,719 450,967 14.63%Total investments 100,914 111,160 (10,246) (9.22)%Total liabilities 3,656,654 3,307,351 349,303 10.56%Total deposits 3,557,994 3,026,896 531,098 17.55%Subordinated notes, net 73,895 73,749 146 0.20%Total shareholders’ equity 396,624 285,774 110,850 38.79% Insured and collateralized deposits were approximately $2.4 billion, representing 66.92% of total deposits as of December 31, 2024. Net uninsured and uncollateralized deposits were approximately $1.2 billion as of December 31, 2024.Commercial and consumer deposit accounts constituted 77.00% of total deposits. Deposit relationships of greater than $5 million represented 61.13% of total deposits and had an average age of approximately 9.28 years as of December 31, 2024.Cash and cash equivalents as of December 31, 2024 were $352.3 million, representing 9.90% of total deposits at December 31, 2024, as compared to 10.62% as of December 31, 2023.Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $1.9 billion as of December 31, 2024. December 31, 2024(in thousands) Line of Credit Letters of Credit Issued Borrowings AvailableFederal Home Loan Bank of San Francisco (“FHLB”) advances $1,212,209 $701,500 $— $510,709Federal Reserve Discount Window 862,136 — — 862,136Correspondent bank lines of credit 175,000 — — 175,000Cash and cash equivalents — — — 352,343Total $2,249,345 $701,500 $— $1,900,188 The increase in total assets from December 31, 2023 to December 31, 2024 was primarily due to a $451.0 million increase in total loans held for investment and a $30.8 million increase in cash and cash equivalents, partially offset by a $10.2 million decrease in investments. The $451.0 million increase in total loans held for investment between December 31, 2023 and December 31, 2024 was the result of $1.1 billion in loan originations, partially offset by $263.0 million and $423.0 million in loan payoffs and paydowns, respectively. The $451.0 million increase in total loans held for investment included $281.4 million in purchased loans within the consumer concentration of the loan portfolio. The $30.8 million increase in cash and cash equivalents primarily resulted from net cash inflows related to financing and operating activities of $425.7 million and $52.3 million, respectively, partially offset by net cash outflows related to investing activities of $447.3 million. The increase in total liabilities from December 31, 2023 to December 31, 2024 was primarily attributable to an increase in deposits of $531.1 million, partially offset by a decrease in other borrowings of $170.0 million. The $531.1 million increase in deposits was largely due to increases in money market, time, and non-interest-bearing demand deposits of $242.9 million, $203.6 million, and $91.5 million, respectively, partially offset by decreases in interest-bearing demand and savings deposits of $5.1 million and $1.8 million, respectively. The increase in total shareholders’ equity from December 31, 2023 to December 31, 2024 was primarily a result of $80.9 million of additional common stock issued during the year and net income recognized of $45.7 million, partially offset by $16.2 million in cash dividends paid during the period. Net Interest Income and Net Interest Margin The following is a summary of the components of net interest income for the periods indicated: Three months ended (in thousands) December 31, 2024 September 30, 2024 $ Change % ChangeInterest and fee income $57,745 $52,667 $5,078 9.64%Interest expense 24,256 22,281 1,975 8.86%Net interest income $33,489 $30,386 $3,103 10.21%Net interest margin 3.36% 3.37% Three months ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeInterest and fee income $57,745 $46,180 $11,565 25.04%Interest expense 24,256 19,502 4,754 24.38%Net interest income $33,489 $26,678 $6,811 25.53%Net interest margin 3.36% 3.19% Year ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeInterest and fee income $206,951 $174,382 $32,569 18.68%Interest expense 87,240 63,502 23,738 37.38%Net interest income $119,711 $110,880 $8,831 7.96%Net interest margin 3.32% 3.42% The following table shows the components of net interest income and net interest margin for the quarterly periods indicated: Three months ended December 31, 2024 September 30, 2024 December 31, 2023(in thousands) Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/RateAssets Interest-earning deposits in banks $363,828 $4,335 4.74% $126,266 $1,657 5.22% $157,775 $2,100 5.28%Investment securities 103,930 607 2.33% 106,256 620 2.32% 106,483 651 2.43%Loans held for investment and sale 3,498,109 52,803 6.01% 3,354,050 50,390 5.98% 3,055,042 43,429 5.64%Total interest-earning assets 3,965,867 57,745 5.79% 3,586,572 52,667 5.84% 3,319,300 46,180 5.52%Interest receivable and other assets, net 91,736 91,965 80,360 Total assets $4,057,603 $3,678,537 $3,399,660 Liabilities and shareholders’ equity Interest-bearing transaction accounts $298,518 $1,249 1.66% $302,188 $1,237 1.63% $291,967 $1,091 1.48%Savings accounts 127,298 887 2.77% 124,851 979 3.12% 130,915 891 2.70%Money market accounts 1,596,116 13,520 3.37% 1,578,244 14,688 3.70% 1,347,111 10,824 3.19%Time accounts 617,596 7,438 4.79% 326,640 4,172 5.08% 417,434 5,322 5.06%Subordinated notes and other borrowings 73,872 1,162 6.25% 76,988 1,205 6.23% 88,401 1,374 6.16%Total interest-bearing liabilities 2,713,400 24,256 3.56% 2,408,911 22,281 3.68% 2,275,828 19,502 3.40%Demand accounts 921,881 852,872 821,651 Interest payable and other liabilities 29,234 32,062 24,886 Shareholders’ equity 393,088 384,692 277,295 Total liabilities & shareholders’ equity $4,057,603 $3,678,537 $3,399,660 Net interest spread 2.23% 2.16% 2.12%Net interest income/margin $33,489 3.36% $30,386 3.37% $26,678 3.19% Net interest income during the three months ended December 31, 2024 increased $3.1 million, or 10.21%, to $33.5 million compared to $30.4 million during the three months ended September 30, 2024. Net interest margin totaled 3.36% for the three months ended December 31, 2024, a decrease of one basis point compared to the prior quarter. The increase in net interest income is primarily attributable to an additional $5.1 million in interest income due to a $379.3 million, or 10.58%, increase in the average balance of interest-earning assets during the three months ended December 31, 2024 compared to the prior quarter. The increase in interest income was partially offset by a $2.0 million increase in deposit interest expense due to a $376.6 million, or 11.83%, increase in the average balance of deposits during the three months ended December 31, 2024 compared to the prior quarter. As compared to the three months ended December 31, 2023, net interest income increased $6.8 million, or 25.53%, to $33.5 million compared to $26.7 million. Net interest margin totaled 3.36% for the three months ended December 31, 2024, an increase of 17 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $9.4 million in loan interest income due to a $443.1 million, or 14.50%, increase in the average balance of loans and a 37 basis point improvement in the average yield on loans during the three months ended December 31, 2024 compared to the same quarter of the prior year. The increase in interest income was partially offset by a $5.0 million increase in deposit interest expense due to a $552.3 million, or 18.36%, increase in the average balance of deposits and a 19 basis point increase in the average cost of deposits during the three months ended December 31, 2024 compared to the same quarter of the prior year. The following table shows the components of net interest income and net interest margin for the annual periods indicated: Year ended December 31, 2024 December 31, 2023(in thousands) Average Balance Interest Income/Expense Yield/Rate Average Balance Interest Income/Expense Yield/RateAssets Interest-earning deposits in banks $218,156 $11,080 5.08% $184,103 $9,069 4.93%Investment securities 106,289 2,530 2.38% 113,515 2,600 2.29%Loans held for investment and sale 3,283,874 193,341 5.89% 2,947,603 162,713 5.52%Total interest-earning assets 3,608,319 206,951 5.74% 3,245,221 174,382 5.37%Interest receivable and other assets, net 90,061 75,741 Total assets $3,698,380 $3,320,962 Liabilities and shareholders’ equity Interest-bearing transaction accounts $298,137 $4,716 1.58% $312,944 $3,321 1.06%Savings accounts 124,208 3,584 2.89% 140,060 3,073 2.19%Money market accounts 1,533,405 53,750 3.51% 1,263,539 33,932 2.69%Time accounts 412,007 20,348 4.94% 372,557 17,535 4.71%Subordinated notes and other borrowings 77,335 4,842 6.26% 93,279 5,641 6.05%Total interest-bearing liabilities 2,445,092 87,240 3.57% 2,182,379 63,502 2.91%Demand accounts 858,789 844,057 Interest payable and other liabilities 35,331 27,127 Shareholders’ equity 359,168 267,399 Total liabilities & shareholders’ equity $3,698,380 $3,320,962 Net interest spread 2.17% 2.46%Net interest income/margin $119,711 3.32% $110,880 3.42% Net interest income during the year ended December 31, 2024 increased $8.8 million, or 7.96%, to $119.7 million compared to $110.9 million during the year ended December 31, 2023. Net interest margin totaled 3.32% for the year ended December 31, 2024, a decrease of 10 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $30.6 million in loan interest income due to a $336.3 million, or 11.41%, increase in the average balance of loans and a 37 basis point improvement in the average yield on loans as compared to the prior year. The increase in interest income was partially offset by an additional $24.5 million in deposit interest expense due to a $293.4 million, or 10.00%, increase in the average balance of deposits and a 58 basis point increase in the average cost of deposits compared to the prior year. Loans by Type The following table provides loan balances, excluding deferred loan fees, by type as of December 31, 2024: (in thousands) Real estate: Commercial $2,857,173 Commercial land and development 3,849 Commercial construction 111,318 Residential construction 4,561 Residential 32,774 Farmland 47,241 Commercial: Secured 170,548 Unsecured 27,558 Consumer and other 279,584 Net deferred loan fees (1,920)Total loans held for investment $3,532,686 Interest-bearing Deposits The following table provides interest-bearing deposit balances by type as of December 31, 2024: (in thousands) Interest-bearing demand accounts $315,217Money market accounts 1,525,293Savings accounts 124,702Time accounts 670,153Total interest-bearing deposits $2,635,365 Asset Quality Allowance for Credit Losses At December 31, 2024, the Company’s allowance for credit losses was $37.8 million, as compared to $34.4 million at December 31, 2023. The $3.4 million increase in the allowance is due to a $7.5 million provision for credit losses recorded during the twelve months ended December 31, 2024, partially offset by net charge-offs of $4.1 million, mainly attributable to commercial and industrial loans, during the same period. The Company’s ratio of nonperforming loans to loans held for investment decreased from 0.06% at December 31, 2023 to 0.05% at December 31, 2024. Loans designated as watch increased from $39.6 million to $123.4 million between December 31, 2023 and December 31, 2024. Loans designated as substandard increased from $2.0 million to $2.6 million between December 31, 2023 and December 31, 2024. There were no loans with doubtful risk grades at December 31, 2024 or December 31, 2023. A summary of the allowance for credit losses by loan class is as follows: December 31, 2024 December 31, 2023(in thousands) Amount % of Total Amount % of TotalReal estate: Commercial $25,864 68.44% $29,015 84.27%Commercial land and development 78 0.21% 178 0.52%Commercial construction 2,268 6.00% 718 2.08%Residential construction 64 0.17% 89 0.26%Residential 270 0.71% 151 0.44%Farmland 607 1.61% 399 1.16% 29,151 77.14% 30,550 88.73%Commercial: Secured 5,866 15.52% 3,314 9.62%Unsecured 278 0.74% 189 0.55% 6,144 16.26% 3,503 10.17%Consumer and other 2,496 6.60% 378 1.10%Total allowance for credit losses $37,791 100.00% $34,431 100.00% The ratio of allowance for credit losses to loans held for investment was 1.07% at December 31, 2024, as compared to 1.12% at December 31, 2023. Non-interest Income The following table presents the key components of non-interest income for the periods indicated: Three months ended (in thousands) December 31, 2024 September 30, 2024 $ Change % ChangeService charges on deposit accounts $179 $165 $14 8.48%Gain on sale of loans 150 306 (156) (50.98)%Loan-related fees 400 406 (6) (1.48)%FHLB stock dividends 332 327 5 1.53%Earnings on bank-owned life insurance 182 162 20 12.35%Other income 423 15 408 2,720.00%Total non-interest income $1,666 $1,381 $285 20.64% Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold during the three months ended December 31, 2024 compared to the three months ended September 30, 2024. During the three months ended December 31, 2024, approximately $2.0 million of loans were sold with an effective yield of 7.60%, as compared to approximately $4.4 million of loans sold with an effective yield of 7.03% during the three months ended September 30, 2024. Other income. The increase resulted primarily from $0.3 million of income received on equity investments in venture-backed funds during the three months ended December 31, 2024, combined with a $0.1 million loss from equity investments in venture-backed funds during the three months ended September 30, 2024. The following table presents the key components of non-interest income for the periods indicated: Three months ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeService charges on deposit accounts $179 $165 $14 8.48%Net gain (loss) on sale of securities — (167) 167 (100.00)%Gain on sale of loans 150 317 (167) (52.68)%Loan-related fees 400 667 (267) (40.03)%FHLB stock dividends 332 314 18 5.73%Earnings on bank-owned life insurance 182 155 27 17.42%Other income 423 485 (62) (12.78)%Total non-interest income $1,666 $1,936 $(270) (13.95)% Net gain (loss) on sale of securities. The decrease in the net loss on sale of securities related to the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the three months ended December 31, 2023, with no sales occurring during the three months ended December 31, 2024. Gain on sale of loans. The decrease resulted from an overall decline in the volume of loans sold during the three months ended December 31, 2024, as compared to the three months ended December 31, 2023. During the three months ended December 31, 2024, approximately $2.0 million of loans were sold with an effective yield of 7.60%, as compared to approximately $5.9 million of loans sold with an effective yield of 5.41% during the three months ended December 31, 2023. Loan-related fees. The decrease resulted from the recognition of $0.2 million lower rate lock fees and $0.1 million lower swap referral fees during the three months ended December 31, 2024 than the three months ended December 31, 2023. Non-interest income for the periods indicated: Year ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeService charges on deposit accounts $721 $575 $146 25.39%Net gain (loss) on sale of securities — (167) 167 (100.00)%Gain on sale of loans 1,274 1,952 (678) (34.73)%Loan-related fees 1,605 1,719 (114) (6.63)%FHLB stock dividends 1,320 970 350 36.08%Earnings on bank-owned life insurance 644 510 134 26.27%Other income 889 1,952 (1,063) (54.46)%Total non-interest income $6,453 $7,511 $(1,058) (14.09)% Service charges on deposit accounts. The increase resulted primarily from a $0.2 million increase in wire transfer fees recognized, partially offset by a small decrease in other fees recognized during the year ended December 31, 2024 compared to the year ended December 31, 2023. Net gain (loss) on sale of securities. The decrease in the net loss on sale of securities resulted from the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the year ended December 31, 2023, with no sales occurring during the year ended December 31, 2024. Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold during the year ended December 31, 2024 compared to the year ended December 31, 2023. During the year ended December 31, 2024, approximately $18.3 million of loans were sold with an effective yield of 6.96%, as compared to approximately $36.5 million of loans sold with an effective yield of 5.35% during the year ended December 31, 2023. Loan-related fees. The decrease was primarily a result of a $0.2 million net decrease in income earned from the credit card program, partially offset by a small increase in loan fee income earned on various loan types and services. FHLB stock dividends. The increase primarily relates to a 50 basis point increase in the annualized dividend rate earned year-over-year, while the average shares outstanding remained consistent. Earnings on bank-owned life insurance. The increase was primarily due to additional policies purchased between December 31, 2024 and December 31, 2023. Other income. The decrease resulted primarily from $0.5 million in income received on equity investments in venture-backed funds during the year ended December 31, 2024, as compared to $1.7 million in income received on equity investments in venture-back funds during the year ended December 31, 2023. Non-interest Expense The following table presents the key components of non-interest expense for the periods indicated: Three months ended (in thousands) December 31, 2024 September 30, 2024 $ Change % ChangeSalaries and employee benefits $8,360 $7,969 $391 4.91%Occupancy and equipment 649 626 23 3.67%Data processing and software 1,369 1,327 42 3.17%Federal Deposit Insurance Corporation (“FDIC”) insurance 440 405 35 8.64%Professional services 774 830 (56) (6.75)%Advertising and promotional 752 584 168 28.77%Loan-related expenses 321 292 29 9.93%Other operating expenses 1,823 1,743 80 4.59%Total non-interest expense $14,488 $13,776 $712 5.17% Salaries and employee benefits. The increase was primarily a result of: (i) a $0.1 million increase in salaries, benefits, and bonus expense; and (ii) a $0.5 million increase in commissions expense due to higher loan production, net of purchased consumer loans. These increases were partially offset by a $0.2 million increase in loan origination costs due to higher loan production, net of purchased consumer loans, period-over-period. Advertising and promotional. The increase was primarily due to the timing of events sponsored and attended during the three months ended December 31, 2024 compared to the three months ended September 30, 2024. The following table presents the key components of non-interest expense for the periods indicated: Three months ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeSalaries and employee benefits $8,360 $7,182 $1,178 16.40%Occupancy and equipment 649 583 66 11.32%Data processing and software 1,369 1,110 259 23.33%FDIC insurance 440 370 70 18.92%Professional services 774 658 116 17.63%Advertising and promotional 752 717 35 4.88%Loan-related expenses 321 268 53 19.78%Other operating expenses 1,823 1,775 48 2.70%Total non-interest expense $14,488 $12,663 $1,825 14.41% Salaries and employee benefits. The increase was primarily a result of: (i) a $1.0 million increase in salaries, benefits, and bonus expense, of which approximately $0.8 million related to employees hired to support expansion into the San Francisco Bay Area; and (ii) a $0.7 million increase in commissions expense due to higher loan production, net of purchased consumer loans. These increases were partially offset by a $0.5 million increase in loan origination costs due to higher loan production, net of purchased consumer loans, period-over-period. Data processing and software. The increase was primarily due to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system. Professional services. The increase was primarily due to increased audit and examination fees for services provided for the three months ended December 31, 2024 compared to the three months ended December 31, 2023. The following table presents the key components of non-interest expense for the periods indicated: Year ended (in thousands) December 31, 2024 December 31, 2023 $ Change % ChangeSalaries and employee benefits $31,709 $27,097 $4,612 17.02%Occupancy and equipment 2,547 2,218 329 14.83%Data processing and software 5,088 4,015 1,073 26.72%FDIC insurance 1,635 1,557 78 5.01%Professional services 3,078 2,575 503 19.53%Advertising and promotional 2,411 2,403 8 0.33%Loan-related expenses 1,207 1,192 15 1.26%Other operating expenses 6,818 6,718 100 1.49%Total non-interest expense $54,493 $47,775 $6,718 14.06% Salaries and employee benefits. The increase was the result of: (i) a $3.5 million increase in salaries, benefits, and bonus, of which approximately $3.3 million related to employees hired to support expansion into the San Francisco Bay Area; and (ii) a $1.4 million increase in commissions paid, primarily to employees in the San Francisco Bay Area. The increase was partially offset by a $0.3 million increase in loan origination costs due to higher loan production, net of purchased consumer loans, period-over-period. Occupancy and equipment. The increase related to rent expense for the San Francisco branch office and a new office lease to support back office staff during the year ended December 31, 2024, which did not exist for the full year ended December 31, 2023. Data processing and software. The increase related to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system. Professional services. The increase was due to an increase in audit, IT support, and other consulting fees for services provided for the year ended December 31, 2024 compared to the year ended December 31, 2023. Other operating expenses. The increase is primarily related to a $0.2 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network, partially offset by a $0.1 million decrease in conference and training expenses. Provision for Income Taxes Three months ended December 31, 2024, as compared to the three months ended September 30, 2024 Provision for income taxes for the quarter ended December 31, 2024 increased by $1.8 million, or 40.70%, to $6.1 million, as compared to $4.3 million for the quarter ended September 30, 2024, which was primarily due to: (i) the increase in taxable income recognized during the three months ended December 31, 2024; and (ii) a $0.6 million provision to return true-up recorded during the three months ended December 31, 2024 related primarily to the timing of recognition of low income housing tax credits, which did not occur during the three months ended September 30, 2024. The effective tax rate was 31.24% and 28.21% for the three months ended December 31, 2024 and September 30, 2024, respectively. Three months ended December 31, 2024, as compared to the three months ended December 31, 2023 Provision for income taxes increased by $1.7 million, or 39.02%, to $6.1 million for the three months ended December 31, 2024, as compared to $4.4 million for the three months ended December 31, 2023. This increase is due to: (i) the increase in taxable income for the three months ended December 31, 2024 compared to the three months ended December 31, 2023; and (ii) a $0.6 million provision to return true-up recorded during the three months ended December 31, 2024 related primarily to the timing of recognition of low income housing tax credits, which did not occur during the three months ended December 31, 2023. The effective tax rate was 31.24% and 28.72% for the three months ended December 31, 2024 and December 31, 2023, respectively. Year ended December 31, 2024, as compared to the year ended December 31, 2023 Provision for income taxes increased by $0.2 million, or 0.89%, to $19.1 million for the year ended December 31, 2024, as compared to $18.9 million for the year ended December 31, 2023. This increase is due to a $0.6 million provision to return true-up recorded during the year ended December 31, 2024, partially offset by a decline in taxable income year-over-year. The effective tax rate was 29.43% and 28.34% for the years ended December 31, 2024 and December 31, 2023, respectively. Webcast Details Five Star Bancorp will host a live webcast for analysts and investors on Tuesday, January 28, 2025, at 1:00 pm ET (10:00 am PT), to discuss its fourth quarter and annual financial results. To view the live webcast, visit the “News & Events” section of the Company’s website under “Events” at https://investors.fivestarbank.com/news-events/events. The webcast will be archived on the Company’s website for a period of 90 days. About Five Star Bancorp Five Star is a bank holding company headquartered in Rancho Cordova, California. Five Star operates through its wholly owned banking subsidiary, Five Star Bank. The Bank has eight branches in Northern California. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors, which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2024, June 30, 2024, and September 30, 2024, in each case under the section entitled “Risk Factors,” and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company disclaims any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law. Condensed Financial Data (Unaudited) Three months ended(in thousands, except per share and share data) December 31, 2024 September 30, 2024 December 31, 2023Revenue and Expense Data Interest and fee income $57,745 $52,667 $46,180 Interest expense 24,256 22,281 19,502 Net interest income 33,489 30,386 26,678 Provision for credit losses 1,300 2,750 800 Net interest income after provision 32,189 27,636 25,878 Non-interest income: Service charges on deposit accounts 179 165 165 Net gain (loss) on sale of securities — — (167)Gain on sale of loans 150 306 317 Loan-related fees 400 406 667 FHLB stock dividends 332 327 314 Earnings on bank-owned life insurance 182 162 155 Other income 423 15 485 Total non-interest income 1,666 1,381 1,936 Non-interest expense: Salaries and employee benefits 8,360 7,969 7,182 Occupancy and equipment 649 626 583 Data processing and software 1,369 1,327 1,110 FDIC insurance 440 405 370 Professional services 774 830 658 Advertising and promotional 752 584 717 Loan-related expenses 321 292 268 Other operating expenses 1,823 1,743 1,775 Total non-interest expense 14,488 13,776 12,663 Income before provision for income taxes 19,367 15,241 15,151 Provision for income taxes 6,050 4,300 4,352 Net income $13,317 $10,941 $10,799 Comprehensive Income Net income $13,317 $10,941 $10,799 Net unrealized holding (loss) gain on securities available-for-sale during the period (3,747) 3,549 5,744 Reclassification for net loss on sale of securities included in net income — — 167 Less: Income tax (benefit) expense related to other comprehensive (loss) income (1,108) 1,049 1,747 Other comprehensive (loss) income (2,639) 2,500 4,164 Total comprehensive income $10,678 $13,441 $14,963 Share and Per Share Data Earnings per common share: Basic $0.63 $0.52 $0.63 Diluted $0.63 $0.52 $0.63 Book value per share $18.60 $18.29 $16.56 Tangible book value per share(1) $18.60 $18.29 $16.56 Weighted average basic common shares outstanding 21,182,143 21,182,143 17,175,445 Weighted average diluted common shares outstanding 21,235,318 21,232,758 17,193,114 Shares outstanding at end of period 21,319,083 21,319,583 17,256,989 Credit Quality Allowance for credit losses to period end nonperforming loans 2,101.78% 2,041.44% 1,752.70%Nonperforming loans to loans held for investment 0.05% 0.05% 0.06%Nonperforming assets to total assets 0.05% 0.05% 0.05%Nonperforming loans plus performing loan modifications to loans held for investment 0.05% 0.05% 0.06% Selected Financial Ratios ROAA 1.31% 1.18% 1.26%ROAE 13.48% 11.31% 15.45%Net interest margin 3.36% 3.37% 3.19%Loan to deposit 99.38% 101.87% 102.19% (1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure. Year ended(in thousands, except per share and share data) December 31, 2024 December 31, 2023Revenue and Expense Data Interest and fee income $206,951 $174,382 Interest expense 87,240 63,502 Net interest income 119,711 110,880 Provision for credit losses 6,950 4,000 Net interest income after provision 112,761 106,880 Non-interest income: Service charges on deposit accounts 721 575 Net gain (loss) on sale of securities — (167)Gain on sale of loans 1,274 1,952 Loan-related fees 1,605 1,719 FHLB stock dividends 1,320 970 Earnings on bank-owned life insurance 644 510 Other income 889 1,952 Total non-interest income 6,453 7,511 Non-interest expense: Salaries and employee benefits 31,709 27,097 Occupancy and equipment 2,547 2,218 Data processing and software 5,088 4,015 FDIC insurance 1,635 1,557 Professional services 3,078 2,575 Advertising and promotional 2,411 2,403 Loan-related expenses 1,207 1,192 Other operating expenses 6,818 6,718 Total non-interest expense 54,493 47,775 Income before provision for income taxes 64,721 66,616 Provision for income taxes 19,050 18,882 Net income $45,671 $47,734 Comprehensive Income Net income $45,671 $47,734 Net unrealized holding (loss) gain on securities available-for-sale during the period (858) 2,228 Reclassification for net loss on sale of securities included in net income — 167 Less: Income tax (benefit) expense related to other comprehensive (loss) income (254) 708 Other comprehensive (loss) income (604) 1,687 Total comprehensive income $45,067 $49,421 Share and Per Share Data Earnings per common share: Basic $2.26 $2.78 Diluted $2.26 $2.78 Book value per share $18.60 $16.56 Tangible book value per share(1) $18.60 $16.56 Weighted average basic common shares outstanding 20,154,385 17,166,592 Weighted average diluted common shares outstanding 20,205,440 17,187,969 Shares outstanding at end of period 21,319,083 17,256,989 Credit Quality Allowance for credit losses to period end nonperforming loans 2,101.78% 1,752.70%Nonperforming loans to loans held for investment 0.05% 0.06%Nonperforming assets to total assets 0.05% 0.05%Nonperforming loans plus performing loan modifications to loans held for investment 0.05% 0.06% Selected Financial Ratios ROAA 1.23% 1.44%ROAE 12.72% 17.85%Net interest margin 3.32% 3.42%Loan to deposit 99.38% 102.19% (1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure. (in thousands) December 31, 2024 September 30, 2024 December 31, 2023Balance Sheet Data Cash and due from financial institutions $33,882 $44,531 $26,986 Interest-bearing deposits in banks 318,461 206,321 294,590 Time deposits in banks 4,121 4,118 5,858 Securities - available-for-sale, at fair value 98,194 104,238 108,083 Securities - held-to-maturity, at amortized cost 2,720 2,720 3,077 Loans held for sale 3,247 2,910 11,464 Loans held for investment 3,532,686 3,460,565 3,081,719 Allowance for credit losses (37,791) (37,583) (34,431)Loans held for investment, net of allowance for credit losses 3,494,895 3,422,982 3,047,288 FHLB stock 15,000 15,000 15,000 Operating leases, right-of-use asset 6,245 6,590 5,284 Premises and equipment, net 1,584 1,657 1,623 Bank-owned life insurance 19,375 19,192 17,180 Interest receivable and other assets 55,554 56,745 56,692 Total assets $4,053,278 $3,887,004 $3,593,125 Non-interest-bearing deposits $922,629 $906,939 $831,101 Interest-bearing deposits 2,635,365 2,493,040 2,195,795 Total deposits 3,557,994 3,399,979 3,026,896 Subordinated notes, net 73,895 73,859 73,749 Other borrowings — — 170,000 Operating lease liability 6,857 7,101 5,603 Interest payable and other liabilities 17,908 16,135 31,103 Total liabilities 3,656,654 3,497,074 3,307,351 Common stock 302,531 302,251 220,505 Retained earnings 106,464 97,411 77,036 Accumulated other comprehensive loss, net of taxes (12,371) (9,732) (11,767)Total shareholders’ equity 396,624 389,930 285,774 Total liabilities and shareholders’ equity $4,053,278 $3,887,004 $3,593,125 Quarterly Average Balance Data Average loans held for investment and sale $3,498,109 $3,354,050 $3,055,042 Average interest-earning assets 3,965,867 3,586,572 3,319,300 Average total assets 4,057,603 3,678,537 3,399,660 Average deposits 3,561,409 3,184,795 3,009,078 Average total equity 393,088 384,692 277,295 Capital Ratios Total shareholders’ equity to total assets 9.79% 10.03% 7.95%Tangible shareholders’ equity to tangible assets(1) 9.79% 10.03% 7.95%Total capital (to risk-weighted assets) 13.99% 13.94% 12.30%Tier 1 capital (to risk-weighted assets) 11.02% 10.93% 9.07%Common equity Tier 1 capital (to risk-weighted assets) 11.02% 10.93% 9.07%Tier 1 leverage ratio 10.05% 10.83% 8.73% (1) See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure. Non-GAAP Reconciliation (Unaudited) The Company uses financial information in its analysis of the Company’s performance that is not in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Company’s financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP. Additionally, these non-GAAP measures are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses, but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons. Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated. Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated. Pre-tax, pre-provision income is defined as pre-tax income plus provision for credit losses. The most directly comparable GAAP financial measure is pre-tax income. The following reconciliation tables provide a more detailed analysis of this non-GAAP financial measure: Three months ended(in thousands) December 31, 2024 September 30, 2024 December 31, 2023Pre-tax, pre-provision income Pre-tax income $19,367 $15,241 $15,151Add: provision for credit losses 1,300 2,750 800Pre-tax, pre-provision income $20,667 $17,991 $15,951 Year ended(in thousands) December 31, 2024 December 31, 2023Pre-tax, pre-provision income Pre-tax income $64,721 $66,616Add: provision for credit losses 6,950 4,000Pre-tax, pre-provision income $71,671 $70,616 Investor Contact:Heather C. Luck, Chief Financial OfficerFive Star Bancorp(916) 626-5008hluck@fivestarbank.com Media Contact:Shelley R. Wetton, Chief Marketing OfficerFive Star Bancorp(916) 284-7827swetton@fivestarbank.com

Five Star Bancorp Announces Quarterly and Annual Results

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