Third 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)
September 30,2025
June 30,2025
September 30,2024
Return on average assets ("ROAA")
1.44
%
1.37
%
1.18
%
Return on average equity ("ROAE")
15.35
%
14.17
%
11.31
%
Pre-tax income
$
22,234
$
20,099
$
15,241
Pre-tax, pre-provision income(1)
$
24,734
$
22,599
$
17,991
Net income
$
16,344
$
14,508
$
10,941
Basic earnings per common share
$
0.77
$
0.68
$
0.52
Diluted earnings per common share
$
0.77
$
0.68
$
0.52
Weighted average basic common shares outstanding
21,231,563
21,225,831
21,182,143
Weighted average diluted common shares outstanding
21,281,818
21,269,265
21,232,758
Shares outstanding at end of period
21,367,387
21,360,991
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:
"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:
(in thousands)
September 30,2025
June 30,2025
$ Change
% Change
Loans held for investment
$
3,887,259
$
3,758,025
$
129,234
3.44
%
Non-interest-bearing deposits
1,059,082
1,004,061
55,021
5.48
%
Interest-bearing deposits
3,044,356
2,890,561
153,795
5.32
%
(in thousands)
September 30,2025
September 30,2024
$ Change
% Change
Loans held for investment
$
3,887,259
$
3,460,565
$
426,694
12.33
%
Non-interest-bearing deposits
1,059,082
906,939
152,143
16.78
%
Interest-bearing deposits
3,044,356
2,493,040
551,316
22.11
%
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:
Three months ended
(in thousands, except per share data)
September 30,2025
June 30,2025
$ Change
% Change
Selected operating data:
Net interest income
$
39,348
$
36,515
$
2,833
7.76
%
Provision for credit losses
2,500
2,500
—
—
%
Non-interest income
1,966
1,810
156
8.62
%
Non-interest expense
16,580
15,726
854
5.43
%
Pre-tax income
22,234
20,099
2,135
10.62
%
Provision for income taxes
5,890
5,591
299
5.35
%
Net income
$
16,344
$
14,508
$
1,836
12.66
%
Earnings per common share:
Basic
$
0.77
$
0.68
$
0.09
13.24
%
Diluted
$
0.77
$
0.68
$
0.09
13.24
%
Performance and other financial ratios:
ROAA
1.44
%
1.37
%
ROAE
15.35
%
14.17
%
Net interest margin
3.56
%
3.53
%
Cost of funds
2.51
%
2.53
%
Efficiency ratio
40.13
%
41.03
%
Three months ended
(in thousands, except per share data)
September 30,2025
September 30,2024
$ Change
% Change
Selected operating data:
Net interest income
$
39,348
$
30,386
$
8,962
29.49
%
Provision for credit losses
2,500
2,750
(250
)
(9.09
)%
Non-interest income
1,966
1,381
585
42.36
%
Non-interest expense
16,580
13,776
2,804
20.35
%
Pre-tax income
22,234
15,241
6,993
45.88
%
Provision for income taxes
5,890
4,300
1,590
36.98
%
Net income
$
16,344
$
10,941
$
5,403
49.38
%
Earnings per common share:
Basic
$
0.77
$
0.52
$
0.25
48.08
%
Diluted
$
0.77
$
0.52
$
0.25
48.08
%
Performance and other financial ratios:
ROAA
1.44
%
1.18
%
ROAE
15.35
%
11.31
%
Net interest margin
3.56
%
3.37
%
Cost of funds
2.51
%
2.72
%
Efficiency ratio
40.13
%
43.37
%
Balance Sheet Summary
(in thousands)
September 30,2025
June 30,2025
$ Change
% Change
Selected financial condition data:
Total assets
$
4,641,770
$
4,413,473
$
228,297
5.17
%
Cash and cash equivalents
580,447
483,810
96,637
19.97
%
Total loans held for investment
3,887,259
3,758,025
129,234
3.44
%
Total investments
97,825
97,575
250
0.26
%
Total liabilities
4,210,462
3,996,731
213,731
5.35
%
Total deposits
4,103,438
3,894,622
208,816
5.36
%
Subordinated notes, net
74,004
73,968
36
0.05
%
Total shareholders' equity
431,308
416,742
14,566
3.50
%
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.
September 30, 2025
(in thousands)
Line of Credit
Letters of Credit Issued
Borrowings
Available
Federal Home Loan Bank of San Francisco ("FHLB") advances
$
1,420,987
$
762,500
$
—
$
658,487
Federal Reserve Discount Window
918,370
—
—
918,370
Correspondent bank lines of credit
185,000
—
—
185,000
Cash and cash equivalents
—
—
—
580,447
Total
$
2,524,357
$
762,500
$
—
$
2,342,304
(in thousands)
September 30,2025
December 31,2024
$ Change
% Change
Selected financial condition data:
Total assets
$
4,641,770
$
4,053,278
$
588,492
14.52
%
Cash and cash equivalents
580,447
352,343
228,104
64.74
%
Total loans held for investment
3,887,259
3,532,686
354,573
10.04
%
Total investments
97,825
100,914
(3,089
)
(3.06
)%
Total liabilities
4,210,462
3,656,654
553,808
15.15
%
Total deposits
4,103,438
3,557,994
545,444
15.33
%
Subordinated notes, net
74,004
73,895
109
0.15
%
Total shareholders' equity
431,308
396,624
34,684
8.74
%
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:
Three months ended
(in thousands)
September 30,2025
June 30,2025
$ Change
% Change
Interest and fee income
$
64,845
$
60,580
$
4,265
7.04
%
Interest expense
25,497
24,065
