FIVE STAR BANCORP

Five Star Bancorp operates as a bank holding company through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. The Company provides a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through nine branch offices. The Bank's primary funding source is deposits from customers, and its loans and deposits are primarily within Northern California. The Company's principal geographic market is the Roseville/Sacramento/Rancho Cordova/Elk Grove area, known as the Greater Sacramento Area, which has a profitable and productive economy driven by the governmental, education, technology, health care, agricultural, and manufacturing sectors. Since 2016, the Company's market share of total deposits in the Greater Sacramento Area has increased significantly, according to FDIC Deposit Market Share Reports.

Based on the FDIC Summary of Deposits as of June 30, 2025, the Bank ranks sixth in the Sacramento-Roseville-Folsom metropolitan statistical area by deposit market share with deposits of $3.1 billion ¹ and four branches. As of June 30, 2025, total market deposits in the Sacramento-Roseville-Folsom MSA were $94.7 billion ², of which $77.3 billion ³, or approximately 81.55% ⁴, was held by five money center banks across 174 branches. The Company is the 39th largest insured depository institution in California by deposits as of June 30, 2025. The Company's principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders, and commercial and consumer finance companies, including large national financial institutions. To offset competitive disadvantages, the Company concentrates marketing efforts in local markets with local advertisements and personal contacts, and depends on its reputation of having greater personal service, consistency, flexibility, ability to make credit and other business decisions quickly, and deep knowledge of competitor strengths and weaknesses.

The Company generates revenue primarily through net interest income, which is the difference between interest income on interest-earning assets such as loans and investment securities and interest expense on interest-bearing liabilities such as deposits and borrowings. Deposits are the primary source of funding for business operations, representing 97.49% ⁵ of total liabilities as of December 31, 2025. The Company offers a comprehensive array of deposit products for small and medium-sized businesses, professionals, and individuals, including checking accounts, savings accounts, money market accounts, and term certificate accounts. The Company's primary loan products are commercial real estate loans, land development loans, construction loans, and operating lines of credit. The Company emphasizes obtaining deposit relationships at loan origination and provides a high level of customer service to depositors.

The Company's lending activities focus primarily on commercial lending with an emphasis on commercial real estate. As of December 31, 2025, total commercial real estate loans were $3.3 billion ⁶, representing 81.08% ⁷ of total loans before deferred fees. Commercial land and construction loans totaled $98.1 million ⁸, representing 2.40% ⁹ of total loans before deferred fees. Residential real estate and construction loans totaled $46.0 million ¹⁰, representing 1.13% ¹¹ of total loans before deferred fees. Farmland loans totaled $59.6 million ¹², representing 1.46% ¹³ of total loans before deferred fees. Commercial loans totaled $292.2 million ¹⁴, representing 7.16% ¹⁵ of total loans before deferred fees. Total commercial SBA portfolio held for investment was $34.3 million ¹⁶, representing 0.84% ¹⁷ of total loans before deferred fees. Consumer and other loans totaled $275.5 million ¹⁸, representing 6.77% ¹⁹ of total loans before deferred fees. The Company also participates in the SBA 7(a) program and sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million ²⁰ in 2025.

The investment portfolio as of December 31, 2025 had a carrying value of $96.9 million ²¹, representing 2.04% ²² of total assets, with an average effective yield of 2.03% ²³ and an estimated modified duration of approximately 6.06 years ²⁴. At December 31, 2025, 49.73% ²⁵ and 40.41% ²⁶ of the investment portfolio consisted of mortgage-backed securities and obligations of states and political subdivisions, respectively. The remainder of the securities portfolio is invested in U.S. government agencies, collateralized mortgage obligations, and corporate bonds. The primary objectives of the investment portfolio are to provide a source of liquidity and provide collateral that can be readily sold or pledged for public deposits or other business purposes.

During 2025, the Company continued its expansion into the San Francisco Bay Area, including the opening of a full service branch in Walnut Creek in September 2025. The Company hired three business development officers, three loan officers, and four additional staff to support these operations during 2025 as part of its expansion. The Company completed its initial public offering in May 2021, in connection with which it terminated its status as a Subchapter S corporation as of May 5, 2021 and became a taxable C Corporation. As of December 31, 2025, the Company had total assets of $4.8 billion ²⁷, total loans held for investment of $4.1 billion ²⁸, and total deposits of $4.2 billion ²⁹.

For the fiscal year ended December 31, 2025, the Company reported net income of $62.0 million ³⁰ and diluted earnings per share of $2.89 ³¹. Net interest income was $176.5 million ³² for the year. The Company maintained a net interest margin of 3.93% ³³ for the year ended December 31, 2025. Return on average assets was 1.33% ³⁴ and return on average equity was 12.42% ³⁵ for the year. The allowance for credit losses was $44.4 million ³⁶ at December 31, 2025.

The Company's growth strategy includes continued expansion into the San Francisco Bay Area, as evidenced by the opening of a full service branch in Walnut Creek in September 2025 and the hiring of three business development officers, three loan officers, and four additional staff during 2025 to support these operations. The Company believes its investment in information technology systems and staff for banking and lending operations and treasury management activities will support continued growth and enable enhancement of capabilities to offer new products, improve overall customer experience, improve profitability through efficiencies, and provide scalability for future growth. The Company utilizes nationally recognized software vendors and their cloud/hosted models, which allow outsourcing of data processing, and maintains its production infrastructure in a data center facility near Reno, Nevada with power and connectivity redundancy and a disaster recovery program including a cloud-based recovery environment.

The Company's growth also focuses on its core lending activities, with an emphasis on commercial real estate lending. The Company seeks credit arrangements that serve its local community and provide attractive risk-adjusted returns, while remaining mindful of liquidity, flexibility, and risk considerations by exercising controls on non-interest expenses and close management of assets and liabilities. The Company periodically sets guidelines designed to maintain stability of its loan-to-deposit ratio, minimize past-due and non-accrual loans, and achieve an optimal loan mix and concentration. The Company seeks well-margined and collateralized loan opportunities to borrowers with extensive professional asset operating experience.

The filing does not contain specific margin or cost outlook targets or restructuring targets.

The Company has made, and continues to make, significant investments in its information technology systems and staff for its banking and lending operations and treasury management activities. The Company's internal network and e-mail systems are administered by a managed service provider specializing in financial institutions, and the majority of other systems, including electronic funds transfer, transaction processing, and online banking services, are hosted by third-party service providers. The scalability of this infrastructure is intended to support the Company's growth strategy. As of December 31, 2025, the Company had 233 full-time employees and five part-time employees.

The filing does not specify R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy with exact figures.

The Company faces structural headwinds including the concentration of its business in California, specifically Northern California, making it more sensitive than geographically diversified competitors to adverse changes in the local economy. As of December 31, 2025, approximately 56.89% ³⁷ of the Company's real estate loans measured by dollar amount were secured by collateral located in California, a majority of which is in Northern California. The Company also faces risks related to its significant concentration in real estate related loans, which represented approximately 86.07% ³⁸ of total loans before deferred fees at December 31, 2025. The Company's 30 largest borrowing relationships ranged from approximately $25.0 million to $293.3 million and totaled approximately $1.5 billion in total commitments, representing 35.64% ³⁹ of total loans held for investment before deferred fees at that date.

The Company faces risks related to its 53 largest deposit relationships, each accounting for more than $10.0 million, which totaled $2.0 billion ⁴⁰, or 47.82% ⁴¹ of total deposits at December 31, 2025. This includes $789.6 million ⁴² of total deposits held by municipalities. The Company also faces risks related to changes in market interest rates, as significant portions of its interest-bearing liabilities were variable rate as of December 31, 2025, where variable rate liabilities reprice at a faster rate than variable rate assets. Additionally, the Company faces risks related to the soundness of other financial institutions, as the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in 2023 resulted in significant disruption in the financial services industry and outflows of deposits for the Company and many other financial institutions.

The Company's business is concentrated in Northern California, with approximately 56.89% ⁴³ of real estate loans secured by collateral in California, making it more sensitive than diversified competitors to local economic downturns. Real estate related loans represent approximately 86.07% ⁴⁴ of total loans before deferred fees, exposing the Company to declines in property values. The 30 largest borrowing relationships total approximately $1.5 billion in commitments, representing 35.64% ⁴⁵ of total loans held for investment, creating concentration risk. The 53 largest deposit relationships total $2.0 billion ⁴⁶, or 47.82% ⁴⁷ of total deposits, including $789.6 million ⁴⁸ in municipal deposits, exposing the Company to liquidity risk from large withdrawals. The Company faces interest rate risk as significant portions of interest-bearing liabilities are variable rate and reprice faster than variable rate assets, which could compress net interest margin if rates change unexpectedly.

Management's message emphasizes the Company's mission to strive to become the top business bank in all markets served through exceptional service, deep connectivity, and customer empathy, dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. Management aims to consistently deliver value that meets or exceeds expectations of shareholders, customers, employees, business partners, and community, referring to this mission as purpose-driven and integrity-centered banking. The strategic priorities emphasized for the period ahead include continued expansion into the San Francisco Bay Area, as demonstrated by the opening of a full service branch in Walnut Creek in September 2025 and the hiring of three business development officers, three loan officers, and four additional staff during 2025. Management also emphasizes the Company's commitment to Environmental, Social, and Governance strategy designed to promote positive change, including developing policies and procedures to contribute to reducing the effects of climate change, creating positive social impacts in communities, and maintaining diversity on the board of directors.