FSBC - Five Star Bancorp Announces Third Quarter 2025 Results

RANCHO CORDOVA, Calif., Oct. 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 $16.3 million for the three months ended September 30, 2025, as compared to $14.5 million for the three months ended June 30, 2025 and $10.9 million for the three months ended September 30, 2024.

Third Quarter Highlights

Performance and operating highlights for the Company for the periods noted below included the following:

⁽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:

“Five Star Bank’s third quarter results include outstanding growth in loans and core deposits attributable to our successful organic growth strategy that continues to fuel momentum and drive demand for our differentiated customer experience. During the quarter, total loans held for investment increased by $129.2 million, or 3.44% (13.76% when annualized), and total deposits increased by $208.8 million, or 5.36% (21.45% when annualized). Wholesale deposits decreased by $150.2 million, or 22.87%, while non-wholesale deposits increased by $359.0 million, or 11.09% (44.34% when annualized), during the same period.

Cost of funds decreased two basis points to 2.51% during the third quarter, while net interest margin increased by three basis points to 3.56%, and our efficiency ratio decreased to 40.13% compared to 41.03% for the second quarter. This quarter, we are pleased to have declared another cash dividend to shareholders, which exemplifies our commitment to shareholder value.

In the third quarter, we opened our ninth full-service office in Walnut Creek, California, in response to the demand for our services in the San Francisco Bay Area. Total deposits from the San Francisco Bay Area were $548.9 million as of September 30, 2025. In addition to the new Walnut Creek office, we are pleased with the growth of our previously announced Food, Agribusiness, and Diversified Industries business, where clients benefit from our Global Trade Services and exceptional treasury management tools.

Five Star Bank’s success serves as a strong testimony to clients who value our team of committed professionals who provide authentic, relationship-based service. We will continue to ensure our technology stack, operating efficiencies, conservative underwriting practices, exceptional credit quality, and prudent approach to portfolio management benefit our customers, employees, community, and shareholders. As we look to the fourth quarter of 2025, we thank our employees for their outstanding commitment to ensuring Five Star Bank remains a safe, trusted, and steadfast banking partner.”

Financial highlights as of and during the three months ended September 30, 2025 included the following:

• The San Francisco Bay Area team increased from 34 to 36 employees and generated deposit balances totaling $548.9 million at September 30, 2025, an increase of $91.9 million from June 30, 2025.
• The number of Business Development Officers remained steady at 40 from June 30, 2025 to September 30, 2025.
• Cash and cash equivalents were $580.4 million, representing 14.15% of total deposits at September 30, 2025, as compared to 12.42% at June 30, 2025.
• Total deposits increased by $208.8 million, or 5.36%, during the three months ended September 30, 2025, with increases in non-wholesale deposits exceeding decreases in wholesale deposits. The Company defines wholesale deposits as brokered deposits and California Time Deposit Program deposits. During the three months ended September 30, 2025, non-wholesale deposits increased by $359.0 million, or 11.09%, and wholesale deposits decreased by $150.2 million, or 22.87%.
• The Company had no short-term borrowings at September 30, 2025 or June 30, 2025.
• Consistent, disciplined management of expenses contributed to our efficiency ratio of 40.13% for the three months ended September 30, 2025, as compared to 41.03% for the three months ended June 30, 2025 and 43.37% for the three months ended September 30, 2024.
• For the three months ended September 30, 2025, net interest margin was 3.56%, as compared to 3.53% for the three months ended June 30, 2025 and 3.37% for the three months ended September 30, 2024. The effective federal funds rate decreased to 4.09% as of September 30, 2025 from 4.33% at June 30, 2025 and 4.83% at September 30, 2024.
• Other comprehensive loss was $2.1 million during the three months ended September 30, 2025. Unrealized losses, net of tax effect, on available-for-sale securities were $9.9 million as of September 30, 2025. Total carrying value of held-to-maturity and available-for-sale securities represented 0.05% and 2.12% of total interest-earning assets, respectively, as of September 30, 2025.
• The Company’s common equity Tier 1 capital ratio was 10.77% and 10.85% as of September 30, 2025 and June 30, 2025, 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 September 30, 2025 was as follows:

• The ratio of nonperforming loans to loans held for investment at period end decreased from 0.06% at June 30, 2025 to 0.05% at September 30, 2025.
• The Company’s Board of Directors declared on July 17, 2025, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended September 30, 2025. The Company’s Board of Directors subsequently declared another cash dividend of $0.20 per share on October 16, 2025, which the Company expects to pay on November 10, 2025 to shareholders of record as of November 3, 2025.

Summary Results

Three months ended September 30, 2025, as compared to three months ended June 30, 2025

The Company’s net income was $16.3 million for the three months ended September 30, 2025, as compared to $14.5 million for the three months ended June 30, 2025. Net interest income increased by $2.8 million during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025, primarily due to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. The provision for credit losses remained at $2.5 million for the three months ended June 30, 2025 and September 30, 2025. Non-interest income increased by $0.2 million, primarily due to an increase in swap referral fees during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025. Non-interest expense increased by $0.9 million during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025, primarily due to salaries and employee benefits due to increased headcount.

Three months ended September 30, 2025, as compared to three months ended September 30, 2024

The Company’s net income was $16.3 million for the three months ended September 30, 2025, as compared to $10.9 million for the three months ended September 30, 2024. Net interest income increased by $9.0 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily due to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. The provision for credit losses decreased by $0.3 million, with decreases in net charge-offs during the three months ended September 30, 2025 as the leading driver. Non-interest income increased by $0.6 million, primarily due to an overall improvement in earnings related to investments in venture-backed funds, partially offset by a decrease in the volume of loans sold during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. Non-interest expense increased by $2.8 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily due to salaries and employee benefits due to increased headcount.

The following is a summary of the components of the Company’s operating results and performance ratios for the periods indicated:

Balance Sheet Summary

• Insured and collateralized deposits were approximately $2.7 billion, representing 65.25% of total deposits as of September 30, 2025, as compared to 67.06% as of June 30, 2025. Net uninsured and uncollateralized deposits were approximately $1.4 billion as of September 30, 2025, increasing from $1.3 billion at June 30, 2025.
• Non-wholesale deposit accounts constituted 87.66% of total deposits as of September 30, 2025, as compared to 83.14% at June 30, 2025. Deposit relationships of greater than $5 million represented 60.14% of total deposits as of September 30, 2025, as compared to 59.91% as of June 30, 2025, and had an average age of approximately 7.98 years as of September 30, 2025, as compared to 8.34 years as of June 30, 2025.
• Total deposits as of September 30, 2025 were $4.1 billion, an increase of $208.8 million, or 5.36%, from June 30, 2025, comprised of increases in both interest-bearing and non-interest-bearing deposits. Interest-bearing deposits added $171.6 million in growth, which was primarily due to the opening of new money market deposit accounts during the quarter, adding $141.3 million in new balances. Non-interest-bearing deposit growth was driven by new accounts opened during the quarter, adding $28.8 million in new balances.
• Cash and cash equivalents as of September 30, 2025 were $580.4 million, representing 14.15% of total deposits at September 30, 2025, as compared to 12.42% as of June 30, 2025.
• Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $2.3 billion as of September 30, 2025, as compared to $2.2 billion at June 30, 2025.

The increase in total assets from December 31, 2024 to September 30, 2025 was primarily comprised of a $354.6 million increase in total loans held for investment and a $228.1 million increase in cash and cash equivalents. The $354.6 million increase in total loans held for investment between December 31, 2024 and September 30, 2025 was a result of $931.8 million in loan originations and advances, partially offset by $219.8 million and $357.5 million in loan payoffs and paydowns, respectively. The $354.6 million increase in total loans held for investment included $70.7 million in purchases of loans within the consumer concentration of the loan portfolio. The $228.1 million increase in cash and cash equivalents primarily resulted from a $217.8 million increase in interest-bearing deposits in banks.

The increase in total liabilities from December 31, 2024 to September 30, 2025 was primarily due to an increase in deposits of $545.4 million. The increase in deposits was largely due to increases in money market and non-interest-bearing deposits of $446.9 million and $136.5 million, respectively.

The increase in total shareholders’ equity from December 31, 2024 to September 30, 2025 was primarily a result of net income recognized of $44.0 million and a $2.5 million increase in accumulated other comprehensive income, partially offset by $12.8 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:

The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:

Net interest income during the three months ended September 30, 2025 increased $2.8 million, or 7.76%, to $39.3 million compared to $36.5 million during the three months ended June 30, 2025. Net interest margin totaled 3.56% for the three months ended September 30, 2025, an increase of three basis points compared to the prior quarter. The increase in net interest income is primarily attributable to an additional $4.3 million in interest income, mainly due to a $140.2 million, or 3.80%, increase in the average balance of loans and a five basis point improvement in the average yield on loans during the three months ended September 30, 2025 compared to the prior quarter. The increase in interest income was partially offset by an additional $1.4 million in interest expense, which was mainly driven by a $225.7 million, or 6.04%, increase in the average balance of deposits at an average rate of two basis points lower than the prior quarter. In addition, the average balance of non-interest bearing deposits increased by $59.5 million, or 6.22%, compared to the prior quarter.

As compared to the three months ended September 30, 2024, net interest income during the three months ended September 30, 2025 increased by $9.0 million, or 29.49%, to $39.3 million from $30.4 million. Net interest margin totaled 3.56% for the three months ended September 30, 2025, an increase of 19 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $12.2 million in interest income, mainly due to a $477.8 million, or 14.25%, increase in the average balance of loans and a 16 basis point improvement in the average yield on loans during the three months ended September 30, 2025 compared to the same quarter of the prior year. The increase in interest income was partially offset by an additional $3.2 million in interest expense compared to the same quarter of the prior year. The increase in interest expense is mainly attributable to a $776.9 million, or 24.39%, increase in the average balance of deposits at an average rate of 19 basis points lower during the three months ended September 30, 2025 compared to the same quarter of the prior year. In addition, the average balance of non-interest-bearing deposits increased by $163.7 million, or 19.19%, compared to the same period of the prior year.

Loans by Type

The following table provides loan balances, excluding deferred loan fees, by type as of the dates shown:

Interest-bearing Deposits

The following table provides interest-bearing deposit balances by type as of the dates shown:

Asset Quality

Allowance for Credit Losses

At September 30, 2025, the Company’s allowance for credit losses was $42.1 million, as compared to $37.8 million at December 31, 2024. The $4.3 million increase in the allowance is due to a $7.1 million provision for credit losses recorded during the nine months ended September 30, 2025, partially offset by net charge-offs of $2.8 million, primarily attributable to commercial and industrial loans, during the same period.

The Company’s ratio of nonperforming loans to loans held for investment remained at 0.05% at September 30, 2025 and December 31, 2024. Loans designated as watch decreased from $123.4 million to $92.7 million between December 31, 2024 and September 30, 2025. As a result, loans designated as substandard increased from $2.6 million to $18.6 million between December 31, 2024 and September 30, 2025, primarily attributable to the downgrade of one special purpose commercial real estate loan whose borrower was experiencing financial difficulty. There were no loans with doubtful risk grades at September 30, 2025 or December 31, 2024.

A summary of the allowance for credit losses by loan class is as follows:

The ratio of allowance for credit losses to loans held for investment was 1.08% at September 30, 2025, as compared to 1.07% at December 31, 2024.

Non-interest Income

The following table presents the key components of non-interest income for the periods indicated:

Gain on sale of loans. The decrease related to an overall decline in the volume of loans sold. During the three months ended September 30, 2025, no loans were sold, as compared to approximately $1.6 million of loans sold with an effective yield of 7.60% during the three months ended June 30, 2025.

Loan-related fees. The increase resulted primarily from an increase of $0.2 million in swap referral fees recognized during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025.

The following table presents the key components of non-interest income for the periods indicated:

Gain on sale of loans. The decrease related to an overall decline in the volume of loans sold. During the three months ended September 30, 2025, no loans were sold, 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.

Loan-related fees. The increase resulted primarily from an increase of $0.3 million in swap referral fees recognized during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

Other income. The increase related primarily to an overall improvement in earnings related to investments in venture-backed funds during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Non-interest Expense

The following table presents the key components of non-interest expense for the periods indicated:

Salaries and employee benefits. The increase related primarily to: (i) a $0.8 million increase in salaries, benefits, and bonus expense, mainly related to a 1.38% increase in headcount between June 30, 2025 and September 30, 2025; and (ii) a $0.1 million increase in commissions paid.

Loan-related expenses. The decrease related primarily to decreases in expenses related to loans, including amortization of servicing assets, inspections, and legal fees.

The following table presents the key components of non-interest expense for the periods indicated:

Salaries and employee benefits. The increase related primarily to: (i) a $1.7 million increase in salaries, benefits, and bonus expense, mainly related to a 13.33% increase in headcount between September 30, 2024 and September 30, 2025; and (ii) a $0.5 million increase in commissions paid. This increase was partially offset by a $0.5 million increase in deferred loan origination costs due to a greater number of loan originations, 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 a $0.1 million increase in fees paid for business development consulting services.

Advertising and promotional. The increase related primarily to additional expenses incurred to support the expansion of the Bank’s business development teams, including a $0.1 million increase in expenses related to sponsored events and partnerships and a $0.1 million increase related to client and prospective client development expenses.

Other operating expenses. The increase was primarily due to: (i) a $0.1 million increase in administrative charges, including subscription services and bank charges; (ii) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; and (iii) a $0.1 million increase in armored car and courier expenses.

Provision for Income Taxes

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. These changes were not reflected in the income tax provision for the period ended September 30, 2025. The Company evaluated the impact on future periods and the legislation is not expected to have a significant impact on the Company's consolidated financial statements.

Three months ended September 30, 2025, as compared to three months ended June 30, 2025

Provision for income taxes increased to $5.9 million for the three months ended September 30, 2025 from $5.6 million for the three months ended June 30, 2025, which was primarily due to an increase in taxable income recognized during the three months ended September 30, 2025. The effective tax rates were 26.49% and 27.82% for the three months ended September 30, 2025 and June 30, 2025, respectively.

Three months ended September 30, 2025, as compared to three months ended September 30, 2024

Provision for income taxes increased by $1.6 million, or 36.98%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. This increase was primarily driven by an increase in taxable income. The effective tax rates were 26.49% and 28.21% for the three months ended September 30, 2025 and September 30, 2024, respectively.

Webcast Details

Five Star Bancorp will host a live webcast for analysts and investors on Tuesday, October 28, 2025 at 1:00 PM ET (10:00 AM PT) to discuss its third quarter 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 nine 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, 2024 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2025 and June 30, 2025, 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)

⁽¹⁾ See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of this non-GAAP financial measure.

⁽²⁾ Loan balance in loan to deposit ratio is total loans held for investment and sale at period end. Deposit balance in loan to deposit ratio is total deposits at period end.