RANCHO CORDOVA, Calif., July 23, 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 $14.5 million for the three months ended June 30, 2025, as compared to $13.1 million for the three months ended March 31, 2025 and $10.8 million for the three months ended June 30, 2024.

Second Quarter Highlights

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

		Three months ended
(in thousands, except per share and share data)		June 30, 2025			March 31, 2025			June 30, 2024
Return on average assets ("ROAA")		1.37	%		1.30	%		1.23	%
Return on average equity ("ROAE")		14.17	%		13.28	%		11.72	%
Pre-tax income	$	20,099		$	18,391		$	15,152
Pre-tax, pre-provision income⁽¹⁾	$	22,599		$	20,291		$	17,152
Net income	$	14,508		$	13,111		$	10,782
Basic earnings per common share	$	0.68		$	0.62		$	0.51
Diluted earnings per common share	$	0.68		$	0.62		$	0.51
Weighted average basic common shares outstanding		21,225,831			21,209,881			21,039,798
Weighted average diluted common shares outstanding		21,269,265			21,253,588			21,058,085
Shares outstanding at end of period		21,360,991			21,329,235			21,319,583

⁽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:

"We are very pleased to report an exceptional quarter where the continuation of our organic growth strategy fueled new account openings and resulted in growth in loans and deposits. Total loans held for investment increased by $136.2 million, or 3.76% (15.04% when annualized), and total deposits increased by $158.3 million, or 4.24% (16.94% when annualized). Net interest margin increased by eight basis points to 3.53%, while our efficiency ratio decreased to 41.03% compared to 42.58% for the first quarter of 2025. Short-term borrowings remained at zero as of June 30, 2025 and December 31, 2024. This quarter, we declared another dividend to shareholders, which exemplifies our commitment to shareholder value.

This success serves as a strong testimony to our people, technology, operating efficiencies, conservative underwriting practices, exceptional credit quality, and prudent approach to portfolio management, which we believe will continue to benefit our clients, employees, community, and shareholders. It is also attributable to our relationship-based banking approach, where clients receive high-tech and high-touch concierge business banking services.

We look forward to bringing these services to the Walnut Creek market, where we expect to open an office in the third quarter of 2025. Since our expansion in the San Francisco Bay Area began in June 2023, the team has grown to 34 employees with $456.9 million in deposits as of June 30, 2025. We also look forward to the continued growth of business verticals, including Food, Agribusiness, and Diversified Industries where we believe clients will benefit from our global trade services and exceptional treasury management tools.

As we look to the second half of 2025, we are humbled and proud of our team's accomplishments. We also 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 June 30, 2025 included the following:

The San Francisco Bay Area team increased from 31 to 34 employees and generated deposit balances totaling $456.9 million at June 30, 2025, an increase of $77.2 million from March 31, 2025.
The Company hired five new Business Development Officers, increasing from 35 at March 31, 2025 to 40 at June 30, 2025.
Cash and cash equivalents were $483.8 million, representing 12.42% of total deposits at June 30, 2025, as compared to 12.11% at March 31, 2025.
Total deposits increased by $158.3 million, or 4.24%, during the three months ended June 30, 2025, due to increases in non-wholesale deposits that exceeded decreases in wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits. During the three months ended June 30, 2025, non-wholesale deposits increased by $191.6 million, or 6.29%, and wholesale deposits decreased by $33.4 million, or 4.84%.
The Company had no short-term borrowings at June 30, 2025 or March 31, 2025.
Consistent, disciplined management of expenses contributed to our efficiency ratio of 41.03% for the three months ended June 30, 2025, as compared to 42.58% for the three months ended March 31, 2025 and 44.07% for the three months ended June 30, 2024.
For the three months ended June 30, 2025, net interest margin was 3.53%, as compared to 3.45% for the three months ended March 31, 2025 and 3.39% for the three months ended June 30, 2024. The effective Federal Funds rate was 4.33% as of June 30, 2025, remaining constant from March 31, 2025 and decreasing from 5.33% at June 30, 2024.
Other comprehensive loss was $0.3 million during the three months ended June 30, 2025. Unrealized losses, net of tax effect, on available-for-sale securities were $12.0 million as of June 30, 2025. Total carrying value of held-to-maturity and available-for-sale securities represented 0.06% and 2.22% of total interest-earning assets, respectively, as of June 30, 2025.
The Company's common equity Tier 1 capital ratio was 10.85% and 11.00% as of June 30, 2025 and March 31, 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 June 30, 2025 was as follows:

(in thousands)	June 30, 2025		March 31, 2025		$ Change		% Change
Loans held for investment	$	3,758,025	$	3,621,819	$	136,206		3.76	%
Non-interest-bearing deposits		1,004,061		933,652		70,409		7.54	%
Interest-bearing deposits		2,890,561		2,802,702		87,859		3.13	%

(in thousands)	June 30, 2025		June 30, 2024		$ Change		% Change
Loans held for investment	$	3,758,025	$	3,266,291	$	491,734		15.05	%
Non-interest-bearing deposits		1,004,061		825,733		178,328		21.60	%
Interest-bearing deposits		2,890,561		2,323,898		566,663		24.38	%

The ratio of nonperforming loans to loans held for investment at period end increased from 0.05% at March 31, 2025 to 0.06% at June 30, 2025. The increase was due to one commercial real estate loan being put on nonaccrual status during the quarter.
The Company's Board of Directors declared on April 17, 2025, and the Company subsequently paid, a cash dividend of $0.20 per share during the three months ended June 30, 2025. The Company's Board of Directors subsequently declared another cash dividend of $0.20 per share on July 17, 2025, which the Company expects to pay on August 11, 2025 to shareholders of record as of August 4, 2025.

Summary Results

Three months ended June 30, 2025, as compared to three months ended March 31, 2025

The Company's net income was $14.5 million for the three months ended June 30, 2025, as compared to $13.1 million for the three months ended March 31, 2025. Net interest income increased by $2.5 million during the three months ended June 30, 2025, as compared to the three months ended March 31, 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 increased by $0.6 million, with loan growth and increases in net charge-offs during the three months ended June 30, 2025 as the leading drivers. Non-interest income increased by $0.5 million, primarily due to an overall improvement in the estimated earnings related to investments in venture-backed funds during the three months ended June 30, 2025, as compared to the three months ended March 31, 2025. Non-interest expense increased by $0.7 million during the three months ended June 30, 2025, as compared to the three months ended March 31, 2025, primarily related to increases in business travel, conferences, training, and advertising and promotional expenses associated with expansion of the Bank's business development teams, partially offset by an increase in deferred loan origination costs.

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

The Company's net income was $14.5 million for the three months ended June 30, 2025, as compared to $10.8 million for the three months ended June 30, 2024. Net interest income increased by $7.4 million during the three months ended June 30, 2025, as compared to the three months ended June 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 increased by $0.5 million, with increases in net charge-offs during the three months ended June 30, 2025 as the leading driver. Non-interest income increased by $0.2 million, primarily due to an overall improvement in the estimated earnings related to investments in venture-backed funds, partially offset by a decrease in the volume of loans sold during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Non-interest expense increased by $2.2 million during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, with an increase in salaries and employee benefits related to increased headcount 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)	June 30, 2025			March 31, 2025			$ Change		% Change
Selected operating data:
Net interest income	$	36,515		$	33,977		$	2,538		7.47	%
Provision for credit losses		2,500			1,900			600		31.58	%
Non-interest income		1,810			1,359			451		33.19	%
Non-interest expense		15,726			15,045			681		4.53	%
Pre-tax income		20,099			18,391			1,708		9.29	%
Provision for income taxes		5,591			5,280			311		5.89	%
Net income	$	14,508		$	13,111		$	1,397		10.66	%
Earnings per common share:
Basic	$	0.68		$	0.62		$	0.06		9.68	%
Diluted	$	0.68		$	0.62		$	0.06		9.68	%
Performance and other financial ratios:
ROAA		1.37	%		1.30	%
ROAE		14.17	%		13.28	%
Net interest margin		3.53	%		3.45	%
Cost of funds		2.53	%		2.56	%
Efficiency ratio		41.03	%		42.58	%

	Three months ended
(in thousands, except per share data)	June 30, 2025			June 30, 2024				$ Change	% Change
Selected operating data:
Net interest income	$	36,515		$	29,092		$	7,423		25.52	%
Provision for credit losses		2,500			2,000			500		25.00	%
Non-interest income		1,810			1,573			237		15.07	%
Non-interest expense		15,726			13,513			2,213		16.38	%
Pre-tax income		20,099			15,152			4,947		32.65	%
Provision for income taxes		5,591			4,370			1,221		27.94	%
Net income	$	14,508		$	10,782		$	3,726		34.56	%
Earnings per common share:
Basic	$	0.68		$	0.51		$	0.17		33.33	%
Diluted	$	0.68		$	0.51		$	0.17		33.33	%
Performance and other financial ratios:
ROAA		1.37	%		1.23	%
ROAE		14.17	%		11.72	%
Net interest margin		3.53	%		3.39	%
Cost of funds		2.53	%		2.56	%
Efficiency ratio		41.03	%		44.07	%

Balance Sheet Summary

(in thousands)	June 30, 2025		March 31, 2025		$ Change			% Change
Selected financial condition data:
Total assets	$	4,413,473	$	4,245,057	$	168,416			3.97	%
Cash and cash equivalents		483,810		452,571		31,239			6.90	%
Total loans held for investment		3,758,025		3,621,819		136,206			3.76	%
Total investments		97,575		99,696		(2,121	)		(2.13	)%
Total liabilities		3,996,731		3,838,606		158,125			4.12	%
Total deposits		3,894,622		3,736,354		158,268			4.24	%
Subordinated notes, net		73,968		73,932		36			0.05	%
Total shareholders' equity		416,742		406,451		10,291			2.53	%

Insured and collateralized deposits were approximately $2.6 billion, representing 67.06% of total deposits as of June 30, 2025, as compared to 67.55% as of March 31, 2025. Net uninsured and uncollateralized deposits were approximately $1.3 billion as of June 30, 2025, increasing from $1.2 billion at March 31, 2025.
Non-wholesale deposit accounts constituted 83.14% of total deposits as of June 30, 2025, as compared to 81.53% at March 31, 2025. Deposit relationships of greater than $5 million represented 59.91% of total deposits, as compared to 60.87% as of March 31, 2025, and had an average age of approximately 8.34 years as of June 30, 2025, as compared to 8.80 years as of March 31, 2025.
Total deposits as of June 30, 2025 were $3.9 billion, an increase of $158.3 million, or 4.24%, from March 31, 2025 comprised of increases in both interest-bearing and non-interest-bearing deposits. The primary driver of interest-bearing deposit growth was new money market deposit accounts opened during the quarter, adding $87.4 million in new balances. Non-interest-bearing deposit growth was driven by new accounts opened during the quarter, adding $68.7 million in new balances.
Cash and cash equivalents as of June 30, 2025 were $483.8 million, representing 12.42% of total deposits at June 30, 2025, as compared to 12.11% as of March 31, 2025.
Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth below) was approximately $2.2 billion as of June 30, 2025, as compared to $2.0 billion at March 31, 2025.

	June 30, 2025
(in thousands)	Line of Credit		Letters of Credit Issued		Borrowings		Available
Federal Home Loan Bank of San Francisco ("FHLB") advances	$	1,290,446	$	732,500	$	—	$	557,946
Federal Reserve Discount Window		926,573		—		—		926,573
Correspondent bank lines of credit		185,000		—		—		185,000
Cash and cash equivalents		—		—		—		483,810
Total	$	2,402,019	$	732,500	$	—	$	2,153,329


(in thousands)	June 30, 2025		December 31, 2024		$ Change			% Change
Selected financial condition data:
Total assets	$	4,413,473	$	4,053,278	$	360,195			8.89	%
Cash and cash equivalents		483,810		352,343		131,467			37.31	%
Total loans held for investment		3,758,025		3,532,686		225,339			6.38	%
Total investments		97,575		100,914		(3,339	)		(3.31	)%
Total liabilities		3,996,731		3,656,654		340,077			9.30	%
Total deposits		3,894,622		3,557,994		336,628			9.46	%
Subordinated notes, net		73,968		73,895		73			0.10	%
Total shareholders' equity		416,742		396,624		20,118			5.07	%

The increase in total assets from December 31, 2024 to June 30, 2025 was primarily comprised of a $225.3 million increase in total loans held for investment and a $131.5 million increase in cash and cash equivalents. The $225.3 million increase in total loans held for investment between December 31, 2024 and June 30, 2025 was a result of $578.8 million in loan originations and advances, partially offset by $130.3 million and $223.1 million in loan payoffs and paydowns, respectively. The $225.3 million increase in total loans held for investment included $43.9 million in purchases of loans within the consumer concentration of the loan portfolio. The $131.5 million increase in cash and cash equivalents primarily resulted from net cash inflows related to financing and operating activities of $328.1 million and $28.1 million, respectively, partially offset by net cash outflows related to investing activities of $224.7 million.

The increase in total liabilities from December 31, 2024 to June 30, 2025 was primarily due to an increase in interest-bearing deposits of $255.2 million. The increase in interest-bearing deposits was largely due to increases in money market and time deposits of $179.4 million and $101.9 million, respectively.

The increase in total shareholders' equity from December 31, 2024 to June 30, 2025 was primarily a result of net income recognized of $27.6 million and a $0.4 million increase in accumulated other comprehensive income, partially offset by $8.5 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)	June 30, 2025			March 31, 2025			$ Change		% Change
Interest and fee income	$	60,580		$	57,087		$	3,493		6.12	%
Interest expense		24,065			23,110			955		4.13	%
Net interest income	$	36,515		$	33,977		$	2,538		7.47	%
Net interest margin		3.53	%		3.45	%

	Three months ended
(in thousands)	June 30, 2025			June 30, 2024			$ Change		% Change
Interest and fee income	$	60,580		$	48,998		$	11,582		23.64	%
Interest expense		24,065			19,906			4,159		20.89	%
Net interest income	$	36,515		$	29,092		$	7,423		25.52	%
Net interest margin		3.53	%		3.39	%

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

	Three months ended
	June 30, 2025							March 31, 2025							June 30, 2024
(in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate			Average Balance		Interest Income/ Expense		Yield/ Rate			Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning deposits in banks	$	361,866	$	3,987		4.42	%	$	328,571	$	3,575		4.41	%	$	148,936	$	1,986		5.36	%
Investment securities		97,886		577		2.37	%		100,474		581		2.34	%		105,819		650		2.47	%
Loans held for investment and sale		3,691,616		56,016		6.09	%		3,567,992		52,931		6.02	%		3,197,921		46,362		5.83	%
Total interest-earning assets		4,151,368		60,580		5.85	%		3,997,037		57,087		5.79	%		3,452,676		48,998		5.71	%
Interest receivable and other assets, net		101,632							93,543							84,554
Total assets	$	4,253,000						$	4,090,580						$	3,537,230

Liabilities and shareholders' equity
Interest-bearing transaction accounts	$	283,369	$	1,043		1.48	%	$	303,822	$	1,112		1.48	%	$	291,470	$	1,104		1.52	%
Savings accounts		121,692		801		2.64	%		123,599		772		2.53	%		120,080		856		2.87	%
Money market accounts		1,647,628		13,270		3.23	%		1,540,879		12,435		3.27	%		1,547,814		13,388		3.48	%
Time accounts		726,295		7,790		4.30	%		706,528		7,629		4.38	%		272,887		3,369		4.96	%
Subordinated notes and other borrowings		73,967		1,161		6.30	%		73,908		1,162		6.37	%		75,747		1,189		6.31	%
Total interest-bearing liabilities		2,852,951		24,065		3.38	%		2,748,736		23,110		3.41	%		2,307,998		19,906		3.47	%
Demand accounts		957,034							910,954							817,668
Interest payable and other liabilities		32,406							30,389							41,429
Shareholders' equity		410,609							400,501							370,135
Total liabilities & shareholders' equity	$	4,253,000						$	4,090,580						$	3,537,230

Net interest spread						2.47	%						2.38	%						2.24	%
Net interest income/margin			$	36,515		3.53	%			$	33,977		3.45	%			$	29,092		3.39	%

Net interest income during the three months ended June 30, 2025 increased $2.5 million, or 7.47%, to $36.5 million compared to $34.0 million during the three months ended March 31, 2025. Net interest margin totaled 3.53% for the three months ended June 30, 2025, an increase of eight basis points compared to the prior quarter. The increase in net interest income is primarily attributable to an additional $3.5 million in interest income, mainly due to a $123.6 million, or 3.46%, increase in the average balance of loans and a seven basis point improvement in the average yield on loans during the three months ended June 30, 2025 compared to the prior quarter. The increase in interest income was partially offset by an additional $1.0 million in interest expense, which was mainly driven by a $150.2 million, or 4.19%, increase in the average balance of deposits at an average rate of two basis points lower than the prior quarter.

As compared to the three months ended June 30, 2024, net interest income increased $7.4 million, or 25.52%, to $36.5 million from $29.1 million. Net interest margin totaled 3.53% for the three months ended June 30, 2025, an increase of 14 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $11.6 million in interest income, mainly due to a $493.7 million, or 15.44%, increase in the average balance of loans and a 26 basis point improvement in the average yield on loans during the three months ended June 30, 2025 compared to the same quarter of the prior year. The increase in interest income was partially offset by an additional $4.2 million in interest expense compared to the same quarter of the prior year. The increase in interest expense is mainly attributable to a $686.1 million, or 22.50%, increase in the average balance of deposits at an average rate of one basis point lower during the three months ended June 30, 2025 compared to the same quarter of the prior year.

Loans by Type

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

(in thousands)	June 30, 2025			March 31, 2025
Real estate:
Commercial	$	3,066,627		$	2,941,201
Commercial land and development		1,422			3,556
Commercial construction		112,399			113,002
Residential construction		5,479			5,747
Residential		33,132			34,053
Farmland		51,579			43,643
Commercial:
Secured		173,855			170,525
Unsecured		37,568			34,970
Consumer and other		278,215			277,093
Net deferred loan fees		(2,251	)		(1,971	)
Total loans held for investment	$	3,758,025		$	3,621,819

Interest-bearing Deposits

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

(in thousands)	June 30, 2025		March 31, 2025
Interest-bearing transaction accounts	$	292,257	$	295,633
Money market accounts		1,704,652		1,577,473
Savings accounts		121,567		128,210
Time accounts		772,085		801,386
Total interest-bearing deposits	$	2,890,561	$	2,802,702

Asset Quality

Allowance for Credit Losses

At June 30, 2025, the Company's allowance for credit losses was $40.2 million, as compared to $37.8 million at December 31, 2024. The $2.4 million increase in the allowance is due to a $4.6 million provision for credit losses recorded during the six months ended June 30, 2025, partially offset by net charge-offs of $2.2 million, primarily attributable to commercial and industrial loans, during the same period.

The Company's ratio of nonperforming loans to loans held for investment increased from 0.05% at December 31, 2024 to 0.06% at June 30, 2025. Loans designated as watch decreased from $123.4 million to $106.5 million between December 31, 2024 and June 30, 2025. Loans designated as substandard increased from $2.6 million to $4.2 million between December 31, 2024 and June 30, 2025. There were no loans with doubtful risk grades at June 30, 2025 or December 31, 2024.

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

	June 30, 2025					December 31, 2024
(in thousands)	Amount		% of Total			Amount		% of Total
Real estate:
Commercial	$	27,792		69.19	%	$	25,864		68.44	%
Commercial land and development		33		0.08	%		78		0.21	%
Commercial construction		2,575		6.41	%		2,268		6.00	%
Residential construction		75		0.19	%		64		0.17	%
Residential		334		0.83	%		270		0.71	%
Farmland		723		1.80	%		607		1.61	%
		31,532		78.50	%		29,151		77.14	%
Commercial:
Secured		5,623		14.00	%		5,866		15.52	%
Unsecured		417		1.04	%		278		0.74	%
		6,040		15.04	%		6,144		16.26	%
Consumer and other		2,595		6.46	%		2,496		6.60	%
Total allowance for credit losses	$	40,167		100.00	%	$	37,791		100.00	%

The ratio of allowance for credit losses to loans held for investment remained at 1.07% at June 30, 2025 and December 31, 2024.

Non-interest Income

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

	Three months ended
(in thousands)	June 30, 2025		March 31, 2025		$ Change			% Change
Service charges on deposit accounts	$	196	$	215	$	(19	)		(8.84	)%
Gain on sale of loans		119		125		(6	)		(4.80	)%
Loan-related fees		468		448		20			4.46	%
FHLB stock dividends		325		331		(6	)		(1.81	)%
Earnings on bank-owned life insurance		220		161		59			36.65	%
Other income		482		79		403			510.13	%
Total non-interest income	$	1,810	$	1,359	$	451			33.19	%

Other income. The increase resulted primarily from an overall improvement in the estimated earnings related to investments in venture-backed funds during the three months ended June 30, 2025 compared to the three months ended March 31, 2025.

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

	Three months ended
(in thousands)	June 30, 2025		June 30, 2024		$ Change			% Change
Service charges on deposit accounts	$	196	$	189	$	7			3.70	%
Gain on sale of loans		119		449		(330	)		(73.50	)%
Loan-related fees		468		370		98			26.49	%
FHLB stock dividends		325		329		(4	)		(1.22	)%
Earnings on bank-owned life insurance		220		158		62			39.24	%
Other income		482		78		404			517.95	%
Total non-interest income	$	1,810	$	1,573	$	237			15.07	%

Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold, partially offset by an improvement in the effective yield of loans sold. During the three months ended June 30, 2025, approximately $1.6 million of loans were sold with an effective yield of 7.60%, as compared to approximately $6.8 million of loans sold with an effective yield of 6.60% during the three months ended June 30, 2024.

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

Non-interest Expense

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

	Three months ended
(in thousands)	June 30, 2025		March 31, 2025		$ Change			% Change
Salaries and employee benefits	$	8,910	$	9,134	$	(224	)		(2.45	)%
Occupancy and equipment		657		637		20			3.14	%
Data processing and software		1,508		1,457		51			3.50	%
Federal Deposit Insurance Corporation ("FDIC") insurance		470		455		15			3.30	%
Professional services		918		913		5			0.55	%
Advertising and promotional		865		522		343			65.71	%
Loan-related expenses		423		319		104			32.60	%
Other operating expenses		1,975		1,608		367			22.82	%
Total non-interest expense	$	15,726	$	15,045	$	681			4.53	%

Salaries and employee benefits. The decrease related primarily to: (i) a $0.6 million increase in deferred loan origination costs due to greater loan originations, net of purchased consumer loans; and (ii) $0.1 million decrease in salaries, benefits, and bonus expense. The decrease was partially offset by a $0.5 million increase in commissions expense due to greater loan originations, net of purchased consumer loans, period-over-period.

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 related to business development expenses, a $0.1 million increase in expenses related to sponsored events and partnerships, and a $0.1 million increase in expenses related to donations.

Loan-related expenses. The increase related primarily to a $0.1 million increase in expenses related to inspections to support the increase in loan originations and annual loan reviews.

Other operating expenses. The increase was primarily due to a $0.2 million increase in business travel expenses and a $0.1 million increase in expenses related to conferences and trainings attended.

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

	Three months ended
(in thousands)	June 30, 2025		June 30, 2024		$ Change		% Change
Salaries and employee benefits	$	8,910	$	7,803	$	1,107		14.19	%
Occupancy and equipment		657		646		11		1.70	%
Data processing and software		1,508		1,235		273		22.11	%
FDIC insurance		470		390		80		20.51	%
Professional services		918		767		151		19.69	%
Advertising and promotional		865		615		250		40.65	%
Loan-related expenses		423		297		126		42.42	%
Other operating expenses		1,975		1,760		215		12.22	%
Total non-interest expense	$	15,726	$	13,513	$	2,213		16.38	%

Salaries and employee benefits. The increase related primarily to: (i) a $1.2 million increase in salaries, benefits, and bonus expense, mainly related to a 16.58% increase in headcount between June 30, 2024 and June 30, 2025; and (ii) a $0.1 million increase in commissions paid. This increase was partially offset by a $0.2 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 compensation and 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 business development expenses.

Loan-related expenses. The increase related primarily to a $0.1 million increase in expenses related to inspections to support the increase in loan originations and annual loan reviews.

Other operating expenses. The increase was primarily due to a $0.1 million increase in travel expense and a $0.1 million increase in expenses related to conferences, trainings, and professional association memberships.

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 Dec. 31, 2025. These changes were not reflected in the income tax provision for the period ended June 30, 2025, as enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods.

Three months ended June 30, 2025, as compared to three months ended March 31, 2025

Provision for income taxes increased to $5.6 million for the three months ended June 30, 2025 from $5.3 million for the three months ended March 31, 2025, which was primarily due to an increase in taxable income recognized during the three months ended June 30, 2025. This increase was partially offset by a net $0.2 million reduction to the provision recorded during the three months ended June 30, 2025. This adjustment related to a tax law change for the state of California effective as of June 30, 2025, which requires a transition from a three-factor apportionment formula to a single-sales-factor formula for determining state income tax. As such, the Company recorded a net benefit of approximately $0.9 million relating to the current year provision, which was partially offset by a $0.7 million expense relating to the remeasuring of the deferred tax assets and liabilities as of June 30, 2025. The effective tax rates were 27.82% and 28.71% for the three months ended June 30, 2025 and March 31, 2025, respectively.

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

Provision for income taxes increased by $1.2 million, or 27.94%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase was primarily driven by an increase in taxable income. This increase was partially offset by a net $0.2 million reduction to the provision recorded during the three months ended June 30, 2025. This adjustment related to a tax law change for the state of California effective as of June 30, 2025, which requires a transition from a three-factor apportionment formula to a single-sales-factor formula for determining state income tax. As such, the Company recorded a net benefit of approximately $0.9 million relating to the current year provision, which was partially offset by a $0.7 million expense relating to the remeasuring of the deferred tax assets and liabilities as of June 30, 2025. The effective tax rates were 27.82% and 28.84% for the three months ended June 30, 2025 and June 30, 2024, respectively.

Webcast Details

Five Star Bancorp will host a live webcast for analysts and investors on Thursday, July 24, 2025 at 1:00 PM ET (10:00 AM PT) to discuss its second 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 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, 2024 and Quarterly Report on Form 10-Q for the three months ended March 31, 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)

	Three months ended
(in thousands, except per share and share data)	June 30, 2025			March 31, 2025			June 30, 2024
Revenue and Expense Data
Interest and fee income	$	60,580		$	57,087		$	48,998
Interest expense		24,065			23,110			19,906
Net interest income		36,515			33,977			29,092
Provision for credit losses		2,500			1,900			2,000
Net interest income after provision		34,015			32,077			27,092
Non-interest income:
Service charges on deposit accounts		196			215			189
Gain on sale of loans		119			125			449
Loan-related fees		468			448			370
FHLB stock dividends		325			331			329
Earnings on bank-owned life insurance		220			161			158
Other income		482			79			78
Total non-interest income		1,810			1,359			1,573
Non-interest expense:
Salaries and employee benefits		8,910			9,134			7,803
Occupancy and equipment		657			637			646
Data processing and software		1,508			1,457			1,235
FDIC insurance		470			455			390
Professional services		918			913			767
Advertising and promotional		865			522			615
Loan-related expenses		423			319			297
Other operating expenses		1,975			1,608			1,760
Total non-interest expense		15,726			15,045			13,513
Income before provision for income taxes		20,099			18,391			15,152
Provision for income taxes		5,591			5,280			4,370
Net income	$	14,508		$	13,111		$	10,782

Comprehensive Income
Net income	$	14,508		$	13,111		$	10,782
Net unrealized holding gain on securities available-for-sale during the period		190			1,030			295
Less: Income tax expense related to other comprehensive (loss) income		502			305			87
Other comprehensive (loss) income		(312	)		725			208
Total comprehensive income	$	14,196		$	13,836		$	10,990

Share and Per Share Data
Earnings per common share:
Basic	$	0.68		$	0.62		$	0.51
Diluted	$	0.68		$	0.62		$	0.51
Book value per share	$	19.51		$	19.06		$	17.85
Tangible book value per share⁽¹⁾	$	19.51		$	19.06		$	17.85
Weighted average basic common shares outstanding		21,225,831			21,209,881			21,039,798
Weighted average diluted common shares outstanding		21,269,265			21,253,588			21,058,085
Shares outstanding at end of period		21,360,991			21,329,235			21,319,583

Selected Financial Ratios
ROAA		1.37	%		1.30	%		1.23	%
ROAE		14.17	%		13.28	%		11.72	%
Net interest margin		3.53	%		3.45	%		3.39	%
Loan to deposit⁽²⁾		96.50	%		97.01	%		103.87	%

⁽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.

(in thousands)	June 30, 2025			March 31, 2025			June 30, 2024
Balance Sheet Data
Cash and due from financial institutions	$	53,724		$	42,473		$	28,572
Interest-bearing deposits in banks		430,086			410,098			161,787
Time deposits in banks		849			4,024			4,097
Securities - available-for-sale, at fair value		94,990			97,111			103,204
Securities - held-to-maturity, at amortized cost		2,585			2,585			2,973
Loans held for sale		309			2,669			5,322
Loans held for investment		3,758,025			3,621,819			3,266,291
Allowance for credit losses		(40,167	)		(39,224	)		(35,406	)
Loans held for investment, net of allowance for credit losses		3,717,858			3,582,595			3,230,885
FHLB stock		15,000			15,000			15,000
Operating leases, right-of-use asset		7,094			5,944			6,630
Premises and equipment, net		1,606			1,524			1,610
Bank-owned life insurance		23,466			23,246			19,030
Interest receivable and other assets		65,906			57,788			55,107
Total assets	$	4,413,473		$	4,245,057		$	3,634,217

Non-interest-bearing deposits	$	1,004,061		$	933,652		$	825,733
Interest-bearing deposits		2,890,561			2,802,702			2,323,898
Total deposits		3,894,622			3,736,354			3,149,631
Subordinated notes, net		73,968			73,932			73,822
Other borrowings		—			—			—
Operating lease liability		7,744			6,591			7,077
Interest payable and other liabilities		20,397			21,729			23,217
Total liabilities		3,996,731			3,838,606			3,253,747

Common stock		303,155			302,788			301,968
Retained earnings		125,545			115,309			90,734
Accumulated other comprehensive loss, net of taxes		(11,958	)		(11,646	)		(12,232	)
Total shareholders' equity		416,742			406,451			380,470
Total liabilities and shareholders' equity	$	4,413,473		$	4,245,057		$	3,634,217

Quarterly Average Balance Data
Average loans held for investment and sale	$	3,691,616		$	3,567,992		$	3,197,921
Average interest-earning assets		4,151,368			3,997,037			3,452,676
Average total assets		4,253,000			4,090,580			3,537,230
Average deposits		3,736,018			3,585,782			3,049,919
Average total equity		410,609			400,501			370,135

Credit Quality
Allowance for credit losses to nonperforming loans		1,763.26	%		2,222.32	%		1,882.30	%
Nonperforming loans to loans held for investment		0.06	%		0.05	%		0.06	%
Nonperforming assets to total assets		0.05	%		0.04	%		0.05	%
Nonperforming loans plus performing loan modifications to loans held for investment		0.06	%		0.05	%		0.06	%

Capital Ratios
Total shareholders' equity to total assets		9.44	%		9.57	%		10.47	%
Tangible shareholders' equity to tangible assets⁽¹⁾		9.44	%		9.57	%		10.47	%
Total capital (to risk-weighted assets)		13.72	%		13.97	%		14.38	%
Tier 1 capital (to risk-weighted assets)		10.85	%		11.00	%		11.27	%
Common equity Tier 1 capital (to risk-weighted assets)		10.85	%		11.00	%		11.27	%
Tier 1 leverage ratio		10.03	%		10.17	%		11.05	%

⁽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. Management believes that tangible shareholders' equity to tangible assets is a useful financial measure because it enables management, investors, and others to assess the Company's financial health based on tangible capital. 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. Management believes that tangible book value per share is a useful financial measure because it enables management, investors, and others to assess the Company's value and use of equity. 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. Management believes that pre-tax, pre-provision income is a useful financial measure because it enables management, investors, and others to assess the Company's ability to generate operating profit and capital.

The following reconciliation table provides a more detailed analysis of this non-GAAP financial measure:

	Three months ended
(in thousands)	June 30, 2025		March 31, 2025		June 30, 2024
Pre-tax, pre-provision income
Pre-tax income	$	20,099	$	18,391	$	15,152
Add: provision for credit losses		2,500		1,900		2,000
Pre-tax, pre-provision income	$	22,599	$	20,291	$	17,152

Investor Contact:

Heather C. Luck, Chief Financial Officer

Five Star Bancorp

(916) 626-5008

hluck@fivestarbank.com

Media Contact:

Shelley R. Wetton, Chief Marketing Officer

Five Star Bancorp

(916) 284-7827

swetton@fivestarbank.com

Five Star Bancorp Announces Second Quarter 2025 Results