Five Star Bancorp Announces Second Quarter 2025 Results
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
