SEC Filing | Five Star Bancorp

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 31, 2022

FIVE STAR BANCORP

(Exact Name of Registrant as Specified in Charter)

California

001-40379

75-3100966

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

3100 Zinfandel Drive, Suite 100, Rancho Cordova, California, 95670

(Address of Principal Executive Offices, and Zip Code)

(916) 626-5000

Registrant’s Telephone Number, Including Area Code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value per share	FSBC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02

Results of Operations and Financial Condition

On January 31, 2022, Five Star Bancorp (the “Company”) issued a press release announcing its results of operations and financial condition for the quarter and year ended December 31, 2021. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

This information (including Exhibit 99.1) is being furnished under Item 2.02 hereof and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 7.01

Regulation FD Disclosure

The Company is conducting an earnings call on February 1, 2022 at 10:00am PT/1:00pm ET to discuss its fourth quarter and year end 2021 financial results. A copy of the investor presentation to be used during the earnings call is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.

This information (including Exhibit 99.2) is being furnished under Item 7.01 hereof and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01

Financial Statements and Exhibits

(d) Exhibits

Number			Description
99.1			Press Release dated January 31, 2022
99.2			Fourth Quarter and Year End 2021 Investor Presentation, dated February 1, 2022
104			Cover Page Interactive Data File (embedded within the Inline XBRL)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	FIVE STAR BANCORP

	By:	/s/ Heather Luck
		Name: Heather Luck
		Title: Senior Vice President and Chief Financial Officer

Date: January 31, 2022

PRESS RELEASE

FOR IMMEDIATE RELEASE

Five Star Bancorp Announces Quarterly and Annual Results

RANCHO CORDOVA, Calif. January 31, 2022 (GLOBE NEWSWIRE) – Five Star Bancorp (Nasdaq: FSBC) (the “Company” or “Five Star”), the holding company for Five Star Bank, today reported net income of $11.3 million for the quarter ended December 31, 2021, as compared to $11.0 million for the quarter ended September 30, 2021 and $9.5 million for the quarter ended December 31, 2020. Net income for the year ended December 31, 2021 was $42.4 million, as compared to $35.9 million for the year ended December 31, 2020.

Financial Highlights

During the second quarter of 2021, the Company terminated its status as a “Subchapter S” corporation in connection with its initial public offering (“IPO”). As such, results presented for the three months and year ended December 31, 2020 have been calculated using a 3.50% S Corporation tax rate, while the effective tax rate for the three months and year ended December 31, 2021 was 10.43% and 9.98%, respectively, as noted in the section titled “Provision for Income Taxes” herein. Performance highlights and other developments for the Company for the periods noted below included the following:

Earnings per share for the three months and year ended December 31, 2021, as compared to the three months ended September 30, 2021 and three months and year ended December 31, 2020 were as follows:

	For the three months ended
	Dec 31, 2021		Sep 30, 2021		Dec 31, 2020
Basic earnings per common share	$	0.66	$	0.64	$	0.86
Diluted earnings per common share	$	0.66	$	0.64	$	0.86
Weighted average basic common shares outstanding		17,096,230		17,095,957		10,988,705
Weighted average diluted common shares outstanding		17,139,693		17,123,182		10,988,705
Shares outstanding at end of period		17,224,848		17,223,808		11,000,273

	For the year ended
	Dec 31, 2021		Dec 31, 2020
Basic earnings per common share	$	2.83	$	3.57
Diluted earnings per common share	$	2.83	$	3.57
Weighted average basic common shares outstanding		14,972,637		10,063,183
Weighted average diluted common shares outstanding		14,995,213		10,063,183
Shares outstanding at end of period		17,224,848		11,000,273

Loan and deposit growth at December 31, 2021, as compared to September 30, 2021 and December 31, 2020, were as follows:

(dollars in thousands)	Dec 31, 2021		Sep 30, 2021		$ Change			% Change
Total loans	$	1,945,131	$	1,709,983	$	235,148			13.75	%
Total loans, excluding Paycheck Protection Program (“PPP”) loans⁽¹⁾		1,923,007		1,648,483		274,524			16.65	%
PPP loans		22,124		61,499		(39,375	)		(64.03	)%
PPP deferred fees		628		1,706		(1,078	)		(63.19	)%
Non-interest-bearing deposits		902,118		899,252		2,866			0.32	%
Interest-bearing deposits		1,383,772		1,269,142		114,630			9.03	%

(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change			% Change
Total loans	$	1,945,131	$	1,507,979	$	437,152			28.99	%
Total loans, excluding PPP loans⁽¹⁾		1,923,007		1,360,014		562,993			41.40	%
PPP loans		22,124		147,965		(125,841	)		(85.05	)%
PPP deferred fees		628		2,720		(2,092	)		(76.91	)%
Non-interest-bearing deposits		902,118		701,079		201,039			28.68	%
Interest-bearing deposits		1,383,772		1,082,922		300,850			27.78	%

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

PPP fee income recognized for the quarter ended December 31, 2021 totaled $1.1 million, as compared to $1.8 million and $3.1 million for the quarters ended September 30, 2021 and December 31, 2020, respectively. PPP fee income recognized for the year ended December 31, 2021 totaled $6.2 million, as compared to $4.9 million for the year ended December 31, 2020.

At December 31, 2021, the Company reported total loans, total assets, and total deposits of $1.9 billion, $2.6 billion, and $2.3 billion, respectively, as compared to $1.5 billion, $2.0 billion, and $1.8 billion, respectively, at December 31, 2020.

For the three months ended December 31, 2021, the Company recorded a provision for loan losses of $1.5 million, as compared to no provision recorded for the three months ended September 30, 2021 and $3.0 million for the three months ended December 31, 2020. For the year ended December 31, 2021, the Company recorded a provision for loan losses of $1.7 million, as compared to a provision of $9.0 million recorded for the year ended December 31, 2020.

At December 31, 2021, the ratio of nonperforming loans to period end loans of 0.03% remained unchanged, as compared to December 31, 2020.

For the quarter ended December 31, 2021, net interest margin was 3.67%, as compared to 3.60% for the quarter ended September 30, 2021 and 4.09% for the quarter ended December 31, 2020. For the year ended December 31, 2021, net interest margin was 3.64%, as compared to 3.68% for the year ended December 31, 2020.

The Company’s Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.15 per share during the three months ended December 31, 2021.

For the three months ended December 31, 2021, the Company’s return on average assets (“ROAA”) was 1.82% and the return on average equity (“ROAE”) was 19.15%, as compared to ROAA and ROAE of 1.85% and 19.26%, respectively, for the three months ended September 30, 2021, and 1.90% and 29.05%, respectively, for the three months ended December 31, 2020. For the year ended December 31, 2021, the Company’s ROAA and ROAE were 1.86% and 22.49%, respectively, as compared to ROAA and ROAE of 1.95% and 31.16%, respectively, for the year ended December 31, 2020.

“While we remain focused on the future and maintaining a position of distinction and respect in the markets and communities we serve, we are proud to look back at 2021 as an exceptional year of achievement. The bank’s stellar performance included a very successful IPO, outstanding year-over-year growth in loans, assets, and deposits, strong earnings per share, and a regular shareholder dividend. This is the culmination of our entire team’s efforts, even while working through a pandemic. An adaptive team is critical to our success, and we will continue to hire those who can quickly respond to changing market conditions and demands,” said Five Star Bank President and Chief Executive Officer, James Beckwith.

“Five Star Bank was built on a foundation of client and community-focused initiatives, and in 2021 we were honored to receive a Corporate Steward Award, Corporate Champion of the Year Award, and Leadership Award, all recognizing that our culture embraces the significance and impact of seizing opportunities, overcoming challenges, and being of service to others. In addition to community leadership, we are committed to staying at the forefront of innovation and technology and making investments in people and processes. We also remain focused on the successful execution of our ongoing digital transformation and the continued build-out of our verticals. I am humbled and proud of our team’s accomplishments and look forward to the continuation of our organic growth story,” Beckwith concluded.

Summary Results

For the three months ended December 31, 2021, the Company’s ROAA and ROAE were 1.82% and 19.15%, respectively, as compared to 1.85% and 19.26%, respectively, for the three months ended September 30, 2021, and 1.90% and 29.05%, respectively, for the three months ended December 31, 2020. The rate at which net income increased from the quarter ended September 30, 2021 to the quarter ended December 31, 2021 was less significant than the increase to average assets and average equity, during the three months ended December 31, 2021, primarily due to (i) recording of a $1.5 million provision for loan losses; (ii) an increase of $0.2 million for salaries and benefits; and (iii) a decline of $0.7 million of PPP fee income earned, which offset the increase in income. As compared to the three months ended September 30, 2021, the increases in average assets and average equity were largely the result of a high degree of new loans originated during the three months ended December 31, 2021 at lower yields, coupled with more equity being retained by the Company. As compared to the three months ended December 31, 2020, the increases in average assets and average equity were largely the result of a higher average equity balance during the three months ended December 31, 2021 stemming from net proceeds from the issuance of additional shares of common stock in the Company’s IPO during the second quarter of 2021, a high degree of new loans originated during the three months ended December 31, 2021 at lower yields, and a higher income tax expense recognized during the three months ended December 31, 2021 as a result of the Company’s conversion to a C Corporation during the second quarter of 2021.

For the year ended December 31, 2021, the Company’s ROAA and ROAE were 1.86% and 22.49%, respectively, as compared to 1.95% and 31.16%, respectively, for the year ended December 31, 2020. The decrease in ROAA and ROAE is largely the result of a higher average equity balance during the year ended December 31, 2021 stemming from net proceeds from the issuance of additional shares of common stock in the Company’s IPO during the second quarter of 2021, new loans originated during the year ended December 31, 2021 at lower yields, and a higher income tax expense recognized during the year ended December 31, 2021 as a result of the Company’s conversion to a C Corporation during the second quarter of 2021.

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

	For the three months ended
(dollars in thousands, except per share data)	Dec 31, 2021			Sep 30, 2021			$ Change			% Change
Selected operating data:
Net interest income	$	21,358		$	19,909		$	1,449			7.28	%
Provision for loan losses		1,500			—			1,500			100.00	%
Non-interest income		1,790			2,028			(238	)		(11.74	)%
Non-interest expense		9,018			8,641			377			4.36	%
Pre-tax net income		12,630			13,296			(666	)		(5.01	)%
Provision for income taxes		1,321			2,270			(949	)		(41.81	)%
Net income		11,309			11,026			283			2.57	%

Earnings per common share:
Basic	$	0.66		$	0.64		$	0.02			3.13	%
Diluted	$	0.66		$	0.64		$	0.02			3.13	%

Performance and other financial ratios:
ROAA		1.82	%		1.85	%
ROAE		19.15	%		19.26	%
Net interest margin		3.67	%		3.60	%
Cost of funds		0.16	%		0.17	%

	For the three months ended
(dollars in thousands, except per share data)	Dec 31, 2021			Dec 31, 2020			$ Change			% Change
Selected operating data:
Net interest income	$	21,358		$	19,192		$	2,166			11.29	%
Provision for loan losses		1,500			3,000			(1,500	)		(50.00	)%
Non-interest income		1,790			2,540			(750	)		(29.53	)%
Non-interest expense		9,018			8,911			107			1.20	%
Pre-tax net income		12,630			9,821			2,809			28.60	%
Provision for income taxes		1,321			359			962			267.97	%
Net income		11,309			9,462			1,847			19.52	%

Earnings per common share:
Basic	$	0.66		$	0.86		$	(0.20	)		(23.26	)%
Diluted	$	0.66		$	0.86		$	(0.20	)		(23.26	)%

Performance and other financial ratios:
ROAA		1.82	%		1.90	%
ROAE		19.15	%		29.05	%
Net interest margin		3.67	%		4.09	%
Cost of funds		0.16	%		0.31	%

	For the year ended
(dollars in thousands, except per share data)	Dec 31, 2021			Dec 31, 2020			$ Change			% Change
Selected operating data:
Net interest income	$	77,611		$	65,210		$	12,401			19.02	%
Provision for loan losses		1,700			9,000			(7,300	)		(81.11	)%
Non-interest income		7,280			9,302			(2,022	)		(21.74	)%
Non-interest expense		36,043			28,257			7,786			27.55	%
Pre-tax net income		47,148			37,255			9,893			26.55	%
Provision for income taxes		4,707			1,327			3,380			254.71	%
Net income		42,441			35,928			6,513			18.13	%

Earnings per common share:
Basic	$	2.83		$	3.57		$	(0.74	)		(20.73	)%
Diluted	$	2.83		$	3.57		$	(0.74	)		(20.73	)%

Performance and other financial ratios:
ROAA		1.86	%		1.95	%
ROAE		22.49	%		31.16	%
Net interest margin		3.64	%		3.68	%
Cost of funds		0.19	%		0.54	%

Balance Sheet Summary

Total assets at December 31, 2021 were $2.6 billion, an increase of $603.0 million from $2.0 billion at December 31, 2020. The increase was primarily due to a $134.8 million increase in cash and cash equivalents, a $431.3 million increase in total loans held for investment (“HFI”), net of deferred loan fees, and a $30.8 million increase in total investments. The $431.3 million increase in total loans HFI between December 31, 2020 and December 31, 2021 was a result of $1.0 billion in non-PPP loan originations and $102.5 million in PPP loan originations, partially offset by $236.5 million in PPP loan forgiveness, $478.5 million in non-PPP loan payoffs and paydowns, and a decrease in deferred loan fees of $1.7 million.

Total liabilities were $2.3 billion at December 31, 2021, an increase of $501.7 million from $1.8 billion at December 31, 2020. The increase in total liabilities was primarily attributable to growth in deposits of $501.9 million, largely due to increases in savings, money market, interest checking, and non-interest-bearing deposits of $38.8 million, $73.5 million, $131.7 million, and $201.0 million, respectively.

Total shareholders’ equity increased by $101.3 million from $133.8 million at December 31, 2020 to $235.0 million at December 31, 2021, primarily as a result of net income recognized of $42.4 million and net proceeds of $111.2 million from the issuance of 6,054,750 shares of common stock in our IPO, partially offset by $51.9 million in cash distributions paid during the year ended December 31, 2021.

(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change		% Change
Selected financial condition data:
Total assets	$	2,556,761	$	1,953,765	$	602,996		30.86	%
Cash and cash equivalents		425,329		290,493		134,836		46.42	%
Total loans HFI, net of deferred loan fees		1,934,460		1,503,159		431,301		28.69	%
Total investments		153,753		122,928		30,825		25.08	%
Total liabilities		2,321,715		1,819,990		501,725		27.57	%
Total deposits		2,285,890		1,784,001		501,889		28.13	%
Subordinated notes, net		28,386		28,320		66		0.23	%
Total shareholders’ equity		235,046		133,775		101,271		75.70	%

Net Interest Income and Net Interest Margin

The following is a summary of the components of net interest income for the periods indicated:

	For the three months ended
(dollars in thousands)	Dec 31, 2021			Sep 30, 2021			$ Change			% Change
Interest income	$	22,253		$	20,832		$	1,421			6.82	%
Interest expense		895			923			(28	)		(3.03	)%
Net interest income		21,358			19,909			1,449			7.28	%
Net interest margin		3.67	%		3.60	%

	For the three months ended
(dollars in thousands)	Dec 31, 2021			Dec 31, 2020			$ Change			% Change
Interest income	$	22,253		$	20,652		$	1,601			7.75	%
Interest expense		895			1,460			(565	)		(38.70	)%
Net interest income		21,358			19,192			2,166			11.29	%
Net interest margin		3.67	%		4.09	%

	For the year ended
(dollars in thousands)	Dec 31, 2021			Dec 31, 2020			$ Change			% Change
Interest income	$	81,583		$	74,390		$	7,193			9.67	%
Interest expense		3,972			9,180			(5,208	)		(56.73	)%
Net interest income		77,611			65,210			12,401			19.02	%
Net interest margin		3.64	%		3.68	%

Three months ended December 31, 2021, as compared to three months ended September 30, 2021 and three months ended December 31, 2020

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

	For the three months ended December 31, 2021							For the three months ended September 30, 2021							For the three months ended December 31, 2020
(dollars 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 with banks	$	330,825	$	143		0.17	%	$	412,953	$	175		0.17	%	$	214,732	$	125		0.23	%
Investment securities		160,315		541		1.34	%		157,305		571		1.44	%		121,413		440		1.44	%
Loans		1,815,627		21,569		4.71	%		1,625,995		20,086		4.90	%		1,530,227		20,087		5.22	%
Total interest-earning assets		2,306,767		22,253		3.83	%		2,196,253		20,832		3.76	%		1,866,372		20,652		4.40	%
Interest receivable and other assets, net		159,123							168,906							116,677
Total assets	$	2,465,890						$	2,365,159						$	1,983,049

Liabilities and shareholders’ equity
Interest-bearing transaction accounts	$	165,709	$	42		0.10	%	$	149,479	$	38		0.10	%	$	145,025	$	59		0.16	%
Savings accounts		84,290		21		0.10	%		76,669		19		0.10	%		45,548		15		0.13	%
Money market accounts		957,030		351		0.15	%		966,629		389		0.16	%		910,619		866		0.38	%
Time accounts		75,332		38		0.20	%		54,314		34		0.25	%		62,457		77		0.49	%
Subordinated debt		28,376		443		6.20	%		28,359		443		6.20	%		28,309		443		6.23	%
Total interest-bearing liabilities		1,310,737		895		0.27	%		1,275,450		923		0.29	%		1,191,958		1,460		0.49	%
Demand accounts		914,821							853,017							654,713
Interest payable and other liabilities		5,988							9,537							6,616
Shareholders’ equity		234,344							227,155							129,762
Total liabilities & shareholders’ equity	$	2,465,890						$	2,365,159						$	1,983,049

Net interest spread						3.56	%						3.48	%						3.91	%
Net interest income/margin			$	21,358		3.67	%			$	19,909		3.60	%			$	19,192		4.09	%

Net interest income increased during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020. Net interest margin increased 7 basis points to 3.67%, as compared to 3.60% in the quarter ended September 30, 2021, but decreased 42 basis points as compared to 4.09% in the quarter ended December 31, 2020. A key driver in the modest 7 basis point increase and 42 basis point decrease in net interest margin during the periods noted was a decrease in average loan yields and a decrease in average loan yields, excluding PPP loans. Loan yields decreased from 5.22% during the three months ended December 31, 2020, to 4.90% during the three months ended September 30, 2021, to 4.71% during the three months ended December 31, 2021. Average loan yields, excluding PPP loans, decreased from 4.94% during the three months ended December 31, 2020, to 4.66% during the three months ended September 30, 2021, to 4.56% during the three months ended December 31, 2021. These decreases were primarily due to decreases in market interest rates and increases in market competition which caused a majority of the Company’s current fixed rate loans funded in the quarter ended December 31, 2021 to recognize yields lower than those recognized in the trailing quarter and the quarter ended December 31, 2020. Average loan yields, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. The rates associated with the index utilized for a significant portion of the Company’s variable rate loans, the United States 5 Year Treasury index, were higher during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020, but a majority of these loans were not scheduled to reprice during the three months ended December 31, 2021, also contributing to the downward trend in average loan yields. New loan originations drove increases in the average daily balance of loans from the three months ended December 31, 2020 to the three months ended September 30, 2021 and the three months ended December 31, 2021 which partially offset the aforementioned declining average loan yields and average loan yields, excluding PPP loans. Additionally, yields on PPP loans increased from 7.06%, to 9.11%, to 10.72%, for the quarters ended December 31, 2020, September 30, 2021, and December 31, 2021, respectively, due to an acceleration of deferred fee accretion resulting from PPP loans being forgiven by the Small Business Administration (“SBA”) and repaid, also helping to offset declining average loan yields and average loan yields, excluding PPP loans.

Interest expense decreased for the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020. The rates paid on interest bearing liabilities declined slightly during the quarter ended December 31, 2021, as compared to the quarter ended September 30, 2021. The decline in interest expense when compared to the quarter ended December 31, 2020, was primarily attributed to reductions in the rates offered on deposit products during that period. As a result, the cost of interest-bearing liabilities decreased to 0.27% for the quarter ended December 31, 2021 from 0.29% for the quarter ended September 30, 2021 and 0.49% for the quarter ended December 31, 2020. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the ratio of average total non-interest-bearing deposits to total average deposits was 41.64% and 40.62% in the quarters ended December 31, 2021 and September 30, 2021, respectively, as compared to 36.01% in the quarter ended December 31, 2020. As a result, the cost of funds decreased to 0.16% for the quarter ended December 31, 2021, as compared to 0.17% for the quarter ended September 30, 2021 and 0.31% for the quarter ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

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

	For the year ended December 31, 2021							For the year ended December 31, 2020
(dollars in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate			Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning deposits with banks	$	346,522	$	547		0.16	%	$	237,815	$	1,198		0.50	%
Investment securities		147,519		2,142		1.45	%		95,158		1,787		1.88	%
Loans		1,637,280		78,894		4.82	%		1,439,380		71,405		4.96	%
Total interest-earning assets		2,131,321		81,583		3.83	%		1,772,353		74,390		4.20	%
Interest receivable and other assets, net		148,830							72,628
Total assets	$	2,280,151						$	1,844,981

Liabilities and shareholders’ equity
Interest-bearing transaction accounts	$	155,163	$	155		0.10	%	$	141,293	$	374		0.26	%
Savings accounts		74,402		74		0.10	%		39,182		94		0.24	%
Money market accounts		935,445		1,798		0.19	%		867,417		5,750		0.66	%
Time accounts		53,222		172		0.32	%		102,890		1,189		1.16	%
Subordinated debt		28,350		1,773		6.25	%		28,364		1,773		6.25	%
Total interest-bearing liabilities		1,246,582		3,972		0.32	%		1,179,146		9,180		0.78	%
Demand accounts		835,834							546,048
Interest payable and other liabilities		8,984							4,496
Shareholders’ equity		188,751							115,291
Total liabilities & shareholders’ equity	$	2,280,151						$	1,844,981

Net interest spread						3.51	%						3.42	%
Net interest income/margin			$	77,611		3.64	%			$	65,210		3.68	%

Net interest income increased while net interest margin decreased for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase in net interest income was driven primarily by a $7.5 million increase in interest income from loans to $78.9 million for the year ended December 31, 2021, as the average daily balance of loans increased by $197.9 million, or 13.75%, as compared to the year ended December 31, 2020. The four basis point decrease in net interest margin to 3.64% for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily attributed to a 14 basis point decrease in average loan yields to 4.82% for the year ended December 31, 2021, as compared to 4.96% for the year ended December 31, 2020 and a 39 basis point decrease in average loan yields, excluding PPP loans to 4.70% for the year ended December 31, 2021, as compared to 5.09% for the year ended December 31, 2020. Average total loans and average loan yield, excluding PPP loans, respectively, are considered non-GAAP financial measures. See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Decreases in market interest rates and increases in market competition caused a majority of the Company’s current fixed rate loans funded in 2021 to recognize yields lower than those recognized in the year ended December 31, 2020, contributing to the aforementioned decrease in average loan yields. Additionally, the rates associated with the index utilized for a significant portion of the Company’s variable rate loans, the United States 5 Year Treasury index, were higher during the year ended December 31, 2021 than during the prior year, but a majority of these loans were not scheduled to reprice during the year ended December 31, 2021, contributing to the downward trend in average loan yields. Partially offsetting the declining average loan yields was $6.2 million of fee income resulting from PPP loans being forgiven and repaid by the SBA that was recognized in the year ended December 31, 2021, as compared to $4.9 million during the year ended December 31, 2020. As a result, yields on PPP loans increased from 3.95% for the year ended December 31, 2020 to 6.36% for the year ended December 31, 2021.

Interest expense decreased for the year ended December 31, 2021, when compared to the year ended December 31, 2020. The decline in interest expense was primarily attributed to reductions in the rates offered on deposit products. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the ratio of average total non-interest-bearing deposits to average total deposits was 40.69% in the year ended December 31, 2021, as compared to 32.18% in the year ended December 31, 2020. As a result, the cost of interest-bearing liabilities decreased by 46 basis points at December 31, 2021 to 0.32%, from 0.78% at December 31,2020, and the cost of funds decreased to 0.19% at December 31, 2021, as compared to 0.54% at December 31, 2020.

Asset Quality

SBA PPP

At December 31, 2021, there were 60 PPP loans outstanding totaling $22.1 million, which included 59 loans totaling $21.5 million funded during 2021 under the second round of the PPP stimulus plan. Approximately 11 of these PPP loans, or 18.33% of total PPP loans at December 31, 2021, totaling $0.6 million, were less than or equal to $0.15 million and had access to streamlined forgiveness processing. At December 31, 2021, 1,370 PPP loan forgiveness applications had been submitted to the SBA and forgiveness payments had been received on 1,367 of these PPP loans, totaling $332.4 million in principal and interest. The Company has submitted all forgiveness applications on the first round of PPP loans and received payment on all but one pending application. We expect full forgiveness of the second round of PPP loans to be completed in the near term.

COVID-19 Deferments

Pursuant to federal guidance, the Company implemented loan programs to allow certain consumers and businesses impacted by the COVID-19 pandemic to defer loan principal and interest payments. At December 31, 2021, six borrowing relationships with six loans totaling $12.2 million were on COVID-19 deferment. All loans that ended COVID-19 deferments in the quarter ended December 31, 2021 returned to their contractual payment structures prior to the COVID-19 pandemic with no risk rating downgrades to classified nor any troubled debt restructuring (“TDR”), and we anticipate that the remaining loans on COVID-19 deferment will return to their pre-COVID-19 contractual payment status after their COVID-19 deferments end.

Allowance for Loan Losses

At December 31, 2021, the Company’s allowance for loan losses was $23.2 million, as compared to $22.2 million at December 31, 2020. The $1.1 million increase is due to a $1.7 million provision for loan losses recorded during the year ended December 31, 2021, offset by net charge-offs of $0.6 million during the year ended December 31, 2021. At December 31, 2021, the Company’s ratio of nonperforming loans to period end loans of 0.03% remained unchanged compared to December 31, 2020, primarily due to the stability of the Company’s nonperforming loans. At December 31, 2021, six loans totaling $12.2 million, or 0.63% of the loan portfolio, were in a COVID-19 deferment period and three loans totaling $0.1 million had been in a COVID-19 deferment in the third quarter of 2021 but were not in such deferment at December 31, 2021. Loans designated as watch and substandard decreased to $8.6 million and $10.6 million, respectively, at December 31, 2021 from $24.3 million and $35.9 million, respectively at December 31, 2020, reducing reserves related to classified and watch loans by $0.5 million, which was offset by additional provision for loan growth during the quarter. There were no loans with doubtful risk grades at December 31, 2021 or December 31, 2020. A summary of the allowance for loan losses by loan class is as follows:

	December 31, 2021					December 31, 2020
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Collectively evaluated for impairment:
Real Estate:
Commercial	$	12,870		55.37	%	$	9,358		42.17	%
Commercial land and development		50		0.22	%		77		0.35	%
Commercial construction		371		1.60	%		821		3.70	%
Residential construction		50		0.22	%		87		0.39	%
Residential		192		0.83	%		220		0.99	%
Farmland		645		2.78	%		615		2.77	%
Commercial:
Secured		6,686		28.77	%		9,476		42.71	%
Unsecured		207		0.89	%		179		0.81	%
PPP		—		0.00	%		—		0.00	%
Consumer and other		889		3.82	%		632		2.85	%
Unallocated		1,111		4.78	%		724		3.26	%
		23,071		99.28	%		22,189		100.0	%
Individually evaluated for impairment:
Commercial Secured		172		0.72	%		—		0.00	%

Total allowance for loan losses	$	23,243		100.00	%	$	22,189		100.00	%

The ratio of allowance for loan losses to total loans was 1.20% at December 31, 2021, as compared to 1.47% at December 31, 2020. Excluding PPP loans, the ratio of the allowance for loan losses to total loans was 1.21% and 1.63% at December 31, 2021 and December 31, 2020, respectively. The decline in the ratio of allowance to total loans is primarily due to an improvement in economic conditions for SBA loans during fiscal year 2021 and increased loan growth year-over-year. The ratio of the allowance for loan losses to total loans, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Reconciliation (Unaudited)” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Non-interest Income

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

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

	For the three months ended
(dollars in thousands)	Dec 31, 2021		Sep 30, 2021		$ Change			% Change
Service charges on deposit accounts	$	116	$	112	$	4			3.57	%
Net gain on sale of securities		15		435		(420	)		(96.55	)%
Gain on sale of loans		1,072		988		84			8.50	%
Loan-related fees		219		87		132			151.72	%
FHLB stock dividends		102		100		2			2.00	%
Earnings on bank-owned life insurance		57		68		(11	)		(16.18	)%
Other income		209		238		(29	)		(12.18	)%
Total non-interest income	$	1,790	$	2,028	$	(238	)		(11.74	)%

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to a decrease in the gain recognized on the sale of approximately $6.3 million of municipal securities during the three months ended December 31, 2021, as compared to the gain recognized on the sale of approximately $24.6 million of municipal securities, mortgage-backed securities, and U.S. government treasuries during the three months ended September 30, 2021.

Loan-related fees. The increase in loan-related fees resulted primarily from the recognition of $0.1 million in swap referral fees recognized in the quarter ended December 31, 2021, which did not occur during the quarter ended September 30, 2021.

Three months ended December 31, 2021, as compared to three months ended December 31, 2020

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

	For the three months ended
(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change			% Change
Service charges on deposit accounts	$	116	$	98	$	18			18.37	%
Net gain on sale of securities		15		197		(182	)		(92.39	)%
Gain on sale of loans		1,072		1,510		(438	)		(29.01	)%
Loan-related fees		219		434		(215	)		(49.54	)%
FHLB stock dividends		102		94		8			8.51	%
Earnings on bank-owned life insurance		57		46		11			23.91	%
Other income		209		161		48			29.81	%
Total non-interest income	$	1,790	$	2,540	$	(750	)		(29.53	)%

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to the sale of approximately $6.3 million of municipal securities during the three months ended December 31, 2021, as compared to the sale of approximately $6.5 million of municipal securities and mortgage-backed securities during the quarter ended December 31, 2020. Of the securities sold in the three months ended December 31, 2020, the mortgage-backed securities sold represented $5.5 million of the sales and contributed primarily to the gain recognized during the period.

Gain on sale of loans. The decline in gain on sale of loans primarily related to a change in the fiscal transfer agent in the SBA’s 7a loan guarantee program, effective August 30, 2021. The change in transfer agent slowed the Company’s ability to sell loans during the three months ended December 31, 2021, thus resulting in lower volumes of loans sold period-over-period, as approximately $9.7 million and $22.3 million of loans were sold during the three months ended December 31, 2021 and the three months ended December 31, 2020, respectively. The decline in volume was partially offset by an increase in premiums received, from 6.09% to 9.38% for the three months ended December 31, 2020 and 2021, respectively, due to the mix of loan size and types sold during the three months ended December 31, 2021. Additionally, a $1.8 million consumer loan portfolio was sold for a net gain of approximately $0.2 million during the three months ended December 31, 2021, which did not occur during the three months ended December 31, 2020.

Loan-related fees. The decrease in loan-related fees resulted primarily from a $0.2 million decrease in swap referral fees recognized in the quarter ended December 31, 2021, as compared to the quarter ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

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

	For the year ended
(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change			% Change
Service charges on deposit accounts	$	424	$	367	$	57			15.53	%
Net gain on sale of securities		724		1,438		(714	)		(49.65	)%
Gain on sale of loans		4,082		4,145		(63	)		(1.52	)%
Loan-related fees		639		2,309		(1,670	)		(72.33	)%
FHLB stock dividends		372		321		51			15.89	%
Earnings on bank-owned life insurance		237		220		17			7.73	%
Other income		802		502		300			59.76	%
Total non-interest income	$	7,280	$	9,302	$	(2,022	)		(21.74	)%

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to a decrease in the gain recognized on the sale of approximately $47.1 million of municipal securities, U.S. government agencies, and U.S. government treasuries during the year ended December 31, 2021, as compared to the gain recognized on the sale of approximately $46.4 million of municipal securities, mortgage-backed securities, and corporate bonds during the year ended December 31, 2020. Of the securities sold during the year ended December 31, 2020, approximately $18.7 million were sold prior to the shutdowns enacted in response to the COVID-19 pandemic, representing approximately $0.5 million of the gain, and the remainder of the securities were sold throughout the remainder of the year in response to market fluctuations.

Loan-related fees. The decrease in loan-related fees resulted primarily from a $1.4 million decrease in swap referral fees recognized in the year ended December 31, 2021, as compared to the year ended December 31, 2020, combined with $0.4 million of loan-related fees earned during the year ended December 21, 2020 for processing micro-loans to businesses in the local area in response to COVID-19, which did not recur in the year ended December 31, 2021.

Non-interest Expense

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

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

	For the three months ended
(dollars in thousands)	Dec 31, 2021		Sep 30, 2021		$ Change			% Change
Salaries and employee benefits	$	5,209	$	4,980	$	229			4.60	%
Occupancy and equipment		544		502		42			8.37	%
Data processing and software		656		611		45			7.36	%
Federal Deposit Insurance Corporation (“FDIC”) insurance		160		110		50			45.45	%
Professional services		444		505		(61	)		(12.08	)%
Advertising and promotional		499		366		133			36.34	%
Loan-related expenses		136		462		(326	)		(70.56	)%
Other operating expenses		1,370		1,105		265			23.98	%
Total non-interest expense	$	9,018	$	8,641	$	377			4.36	%

Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of an increase in the number of employees and increased commissions related to loan and deposit growth during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021. These increases were partially offset by a $0.5 million increase in deferred loan origination costs during the three months ended December 31, 2021, as compared to September 30, 2021.

Advertising and promotional. The increase in advertising and promotional expenses primarily related to increases in business development, marketing, and sponsorship expenses due to in-person participation in events held during the three months ended December 31, 2021, as compared to September 30, 2021.

Loan-related expenses. Loan-related expenses decreased, primarily as a result of a $0.2 million accrual for an SBA matter in the normal course of business during the three months ended September 30, 2021, which did not occur in the three months ended December 31, 2021.

Other operating expenses. Other operating expenses are comprised of travel, insurance, postage and supplies, director fees, other employee expenses, armored car expenses, courier services, and other miscellaneous administrative expenses. These expenses increased primarily due to the net effect of individually immaterial items, including increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees during the three months ended December 31, 2021, as compared to September 30, 2021.

Three months ended December 31, 2021, as compared to three months ended December 31, 2020

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

	For the three months ended
(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change			% Change
Salaries and employee benefits	$	5,209	$	5,640	$	(431	)		(7.64	)%
Occupancy and equipment		544		476		68			14.29	%
Data processing and software		656		549		107			19.49	%
FDIC insurance		160		270		(110	)		(40.74	)%
Professional services		444		806		(362	)		(44.91	)%
Advertising and promotional		499		336		163			48.51	%
Loan-related expenses		136		222		(86	)		(38.74	)%
Other operating expenses		1,370		612		758			123.86	%
Total non-interest expense	$	9,018	$	8,911	$	107			1.20	%

Salaries and employee benefits. The decrease in salaries and employee benefits was primarily related to a $1.2 million increase in deferred loan origination costs when comparing the three months ended December 31, 2021 to the three months ended December 31, 2020, partially offset by an increase in the number of employees and increased commissions related to loan and deposit growth for the three months ended December 31, 2021, as compared to December 31, 2020. Additionally, restricted stock compensation expense of $0.2 million was recognized for employee restricted share grants during the three months ended December 31, 2021, which did not occur in the three months ended December 31, 2020.

Data processing and software. The increase in data processing and software was primarily a result of (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) increased number of licenses for new users on our loan origination and documentation system.

FDIC insurance. FDIC insurance decreased, primarily due to an improvement in the leverage ratio used in the FDIC assessment as a result of the Company’s IPO in May 2021.

Professional services. Professional services decreased, primarily as a result of expenses recognized during the three months ended December 31, 2020 related to the increased audit, consulting, and legal costs incurred to support corporate organizational matters leading up to the IPO. These expenses did not recur during the three months ended December 31, 2021.

Advertising and promotional. The increase in advertising and promotional was primarily related to increases in business development, marketing, and sponsorship expenses due to in-person participation in events held during the three months ended December 31, 2021, as compared to the three months ended December 31, 2020.

Other operating expenses. Other operating expenses increased, primarily due to the net effect of individually immaterial items, including increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees period-over-period.

Year ended December 31, 2021, as compared to year ended December 31, 2020

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

	For the years ended
(dollars in thousands)	Dec 31, 2021		Dec 31, 2020		$ Change			% Change
Salaries and employee benefits	$	19,825	$	16,084	$	3,741			23.26	%
Occupancy and equipment		1,938		1,715		223			13.00	%
Data processing and software		2,494		1,982		512			25.83	%
FDIC insurance		700		1,137		(437	)		(38.43	)%
Professional services		3,792		1,960		1,832			93.47	%
Advertising and promotional		1,300		1,102		198			17.97	%
Loan-related expenses		1,045		732		313			42.76	%
Other operating expenses		4,949		3,545		1,404			39.61	%
Total non-interest expense	$	36,043	$	28,257	$	7,786			27.55	%

Salaries and employee benefits. The increase in salaries and employee benefits year-over-year was primarily related to an increase of full-time equivalent employees and increased commissions related to our loan and deposit growth for the year ended December 31, 2021, as compared to December 31, 2020, as well as restricted stock compensation expense recognized for employee restricted share grants of $0.3 million during the year ended December 31, 2021, which did not occur in 2020. These increases were partially offset by a $1.7 million increase in deferred loan origination costs for the year ended December 31, 2021, as compared to December 31, 2020, from increased loan originations.

Data processing and software. Data processing and software increased, primarily as a result of (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; (iii) increased number of licenses for new users on our loan origination and documentation system; and (iv) increased costs related to improved collateral tracking, electronic statements, and mobile payment solutions.

Professional services. Professional services increased, primarily as a result of increased audit, consulting, and legal costs incurred to support corporate organizational matters leading up to the IPO during the year ended December 31, 2021, as compared to the year ended December 31, 2020.

Other operating expenses. The increase in other operating expenses year-over-year was primarily related to stock compensation expense recognized for director restricted share grants of $0.8 million, which were related to the IPO, during the year ended December 31, 2021. These expenses did not occur in the year ended December 31, 2020. Additionally, other operating expenses increased as a result of increased director fees and expenses combined with increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees period-over-period.

Provision for Income Taxes

The Company terminated its status as a “Subchapter S” corporation effective May 5, 2021, in connection with the Company’s IPO and became a C Corporation. Prior to that date, as an S Corporation, the Company had no U.S. federal income tax expense. The provision recorded for the three months and year ended December 31, 2021 yielded an effective tax rate of 10.43% and 9.98%, respectively.

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

Provision for income taxes for the quarter ended December 31, 2021 decreased by $0.9 million, or 41.81%, to $1.3 million, as compared to $2.3 million for the quarter ended September 30, 2021. This decrease is due to the true up of certain permanent items, including tax-exempt interest income. Such items were not included in the provision calculation for the three months ended September 31, 2021.

Three months ended December 31, 2021, as compared to three months ended December 31, 2020

Provision for income taxes increased by $1.0 million, or 267.97%, to $1.3 million for the three months ended December 31, 2021, as compared to $0.4 million for the three months ended December 31, 2020. As noted above, this increase is due to the change in the effective tax rate from 3.50% to 10.43%. This increase was partially offset by the true up of certain permanent items, including tax-exempt interest income. Such items were not included in the provision calculation for the three months ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

Provision for income taxes increased by $3.4 million, or 254.71%, to $4.7 million for the year ended December 31, 2021, as compared to $1.3 million for the year ended December 31, 2020. This increase is due to the change in the tax rate as a result of the Company’s conversion from an S Corporation to a C Corporation, which was partially offset by the $4.6 million reduction to the provision for income taxes for the adjustment of the net deferred tax assets due to the termination of the Company’s S Corporation status, recorded during the three months ended June 30, 2021.

Webcast Details

Five Star Bancorp will host a webcast on Tuesday, February 1, 2022, at 10:00 a.m. PT (1:00 p.m. ET), to discuss its fourth quarter and annual 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. Five Star has seven branches and two loan production offices throughout 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 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)

	For the three months ended
(dollars in thousands, except share and per share data)	December 31, 2021			September 30, 2021			December 31, 2020
Revenue and Expense Data
Interest income	$	22,253		$	20,832		$	20,652
Interest expense		895			923			1,460
Net interest income		21,358			19,909			19,192
Provision for loan losses		1,500			—			3,000
Net interest income after provision		19,858			19,909			16,192
Non-interest income:
Service charges on deposit accounts		116			112			98
Gain on sale of securities		15			435			197
Gain on sale of loans		1,072			988			1,510
Loan-related fees		219			87			434
Dividends on FHLB stock		102			100			94
Earnings on bank-owned life insurance		57			68			46
Other income		209			238			161
Total non-interest income		1,790			2,028			2,540
Non-interest expense:
Salaries and employee benefits		5,209			4,980			5,640
Occupancy and equipment		544			502			476
Data processing and software		656			611			549
FDIC insurance		160			110			270
Professional services		444			505			806
Advertising and promotional		499			366			336
Loan-related expenses		136			462			222
Other operating expenses		1,370			1,105			612
Total non-interest expense		9,018			8,641			8,911
Total income before taxes		12,630			13,296			9,821
Provision for income taxes		1,321			2,270			359
Net income	$	11,309		$	11,026		$	9,462

Share and Per Share Data
Earnings per common share:
Basic	$	0.66		$	0.64		$	0.86
Diluted	$	0.66		$	0.64		$	0.86
Book value per share	$	13.65		$	13.16		$	12.16
Tangible book value per share⁽¹⁾	$	13.65		$	13.16		$	12.16
Weighted average basic common shares outstanding		17,096,230			17,095,957			10,988,705
Weighted average diluted common shares outstanding		17,139,693			17,123,182			10,988,705
Shares outstanding at end of period		17,224,848			17,223,808			11,000,273

Credit Quality
Allowance for loan losses to period end nonperforming loans		3954.30	%		3923.67	%		4909.07	%
Nonperforming loans to period end loans		0.03	%		0.03	%		0.03	%
Nonperforming assets to total assets		0.02	%		0.02	%		0.02	%
Nonperforming loans plus performing TDRs to total loans		0.03	%		0.03	%		0.03	%
COVID-19 deferments to period end loans		0.63	%		0.72	%		2.75	%

Selected Financial Ratios
ROAA		1.82	%		1.85	%		1.90	%
ROAE		19.15	%		19.26	%		29.05	%
Net interest margin		3.67	%		3.60	%		4.09	%
Loan to deposit		85.09	%		78.86	%		84.53	%

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

	For the year ended
(dollars in thousands, except share and per share data)	December 31, 2021			December 31, 2020
Revenue and Expense Data
Interest income	$	81,583		$	74,390
Interest expense		3,972			9,180
Net interest income		77,611			65,210
Provision for loan losses		1,700			9,000
Net interest income after provision		75,911			56,210
Non-interest income:
Service charges on deposit accounts		424			367
Net gain on sale of securities		724			1,438
Gain on sale of loans		4,082			4,145
Loan-related fees		639			2,309
FHLB stock dividends		372			321
Earnings on bank-owned life insurance		237			220
Other income		802			502
Total non-interest income		7,280			9,302
Non-interest expense:
Salaries and employee benefits		19,825			16,084
Occupancy and equipment		1,938			1,715
Data processing and software		2,494			1,982
FDIC insurance		700			1,137
Professional services		3,792			1,960
Advertising and promotional		1,300			1,102
Loan-related expenses		1,045			732
Other operating expenses		4,949			3,545
Total non-interest expense		36,043			28,257
Total income before taxes		47,148			37,255
Provision for income taxes		4,707			1,327
Net income	$	42,441		$	35,928

Share and Per Share Data
Earnings per common share:
Basic	$	2.83		$	3.57
Diluted	$	2.83		$	3.57
Book value per share	$	13.65		$	12.16
Tangible book value per share⁽¹⁾	$	13.65		$	12.16
Weighted average basic common shares outstanding		14,972,637			10,063,183
Weighted average diluted common shares outstanding		14,995,213			10,063,183
Shares outstanding at end of period		17,224,848			11,000,273

Credit Quality
Allowance for loan losses to period end nonperforming loans		3954.30	%		4909.07	%
Nonperforming loans to period end loans		0.03	%		0.03	%
Nonperforming assets to total assets		0.02	%		0.02	%
Nonperforming loans plus performing TDRs to total loans		0.03	%		0.03	%
COVID-19 deferments to period end loans		0.63	%		2.75	%

Selected Financial Ratios
ROAA		1.86	%		1.95	%
ROAE		22.49	%		31.16	%
Net interest margin		3.64	%		3.68	%
Loan to deposit		85.09	%		84.50	%

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

(dollars in thousands)	December 31, 2021			September 30, 2021			December 31, 2020
Balance Sheet Data
Cash and due from financial institutions	$	136,074		$	89,951		$	46,028
Interest-bearing deposits		289,255			440,881			244,465
Time deposits in banks		14,464			17,204			23,705
Securities - available-for-sale, at fair value		148,807			153,821			114,949
Securities - held-to-maturity, at amortized cost		4,946			4,955			7,979
Loans held for sale		10,671			5,267			4,820
Total loans HFI, net of deferred loan fees		1,934,460			1,704,716			1,503,159
Allowance for loan losses		(23,243	)		(21,848	)		(22,189	)
Loans, net		1,911,217			1,682,868			1,480,970
Federal Home Loan Bank stock		6,723			6,723			6,232
Premises and equipment, net		1,773			1,630			1,663
Bank owned life insurance		11,203			11,142			8,662
Interest receivable and other assets		21,628			20,051			14,292
Total assets	$	2,556,761		$	2,434,493		$	1,953,765

Non-interest-bearing deposits	$	902,118		$	899,252		$	701,079
Interest-bearing deposits		1,383,772			1,269,142			1,082,922
Total deposits		2,285,890			2,168,394			1,784,001
Subordinated notes, net		28,386			28,370			28,320
Interest payable and other liabilities		7,439			11,091			7,669
Total liabilities		2,321,715			2,207,855			1,819,990

Common stock		218,444			218,216			110,082
Retained earnings		17,168			8,442			22,348
Accumulated other comprehensive income (loss), net		(566	)		(20	)		1,345
Total shareholders’ equity	$	235,046		$	226,638		$	133,775

Quarterly Average Balance Data
Average loans	$	1,815,627		$	1,625,995		$	1,530,227
Average interest-earning assets	$	2,306,767		$	2,196,253		$	1,866,372
Average total assets	$	2,465,890		$	2,365,159		$	1,983,049
Average deposits	$	2,197,183		$	2,100,108		$	1,818,360
Average total equity	$	234,344		$	227,155		$	129,762

Capital Ratio Data
Total shareholders’ equity to total assets		9.19	%		9.31	%		6.85	%
Tangible shareholders’ equity to tangible assets⁽¹⁾		9.19	%		9.31	%		6.85	%
Total capital (to risk-weighted assets)		13.98	%		15.66	%		12.18	%
Tier 1 capital (to risk-weighted assets)		11.44	%		12.79	%		8.98	%
Common equity Tier 1 capital (to risk-weighted assets)		11.44	%		12.79	%		8.98	%
Tier 1 leverage ratio		9.47	%		9.50	%		6.58	%

(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 are 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, and they 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. 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. 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.

Total loans, excluding PPP loans, is defined as total loans less PPP loans. The most directly comparable GAAP financial measure is total loans.

Average loans, excluding PPP loans, is defined as the daily average total loans, excluding the daily average PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP measure is average loans.

Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP financial measure is average loan yield.

Allowance for loan losses to total loans, excluding PPP loans, is defined as allowance for loan losses, divided by total loans less PPP loans. The most directly comparable GAAP financial measure is allowance for loan losses to total loans.

The following reconciliation tables provide a more detailed analysis of these non-GAAP financial measures.

Total loans, excluding PPP loans (dollars in thousands)	December 31, 2021			September 30, 2021			December 31, 2020
Total loans	$	1,945,131		$	1,709,982		$	1,507,979
PPP loans		(22,124	)		(61,499	)		(147,965	)
Total loans, excluding PPP loans		1,923,007			1,648,483			1,360,014

	For the three months ended
Average loans, excluding PPP loans (dollars in thousands)	December 31, 2021		September 30, 2021		December 31, 2020
Average total loans	$	1,815,627	$	1,625,995	$	1,530,227
Less: average PPP loans		44,101		89,436		200,541
Average total loans, excluding PPP loans		1,771,526		1,536,559		1,329,686

	For the year ended
Average loans, excluding PPP loans (dollars in thousands)	December 31, 2021		December 31, 2020
Average total loans	$	1,637,280	$	1,439,380
Less: average PPP loans		116,652		165,414
Average total loans, excluding SBA PPP loans (denominator)		1,520,628		1,273,966

	For the three months ended
Average loan yield, excluding PPP loans (dollars in thousands)	December 31, 2021			September 30, 2021			December 31, 2020
Interest income on loans	$	21,569		$	20,085		$	20,087
Less: interest income on PPP loans		1,192			2,054			3,561
Interest income on loans, excluding PPP loans		20,377			18,031			16,526
Annualized interest income on loans, excluding PPP loans (numerator)		80,844			71,536			65,745

Average total loans	$	1,815,627		$	1,625,995		$	1,530,227
Less: average PPP loans		44,101			89,436			200,541
Average total loans, excluding PPP loans (denominator)		1,771,526			1,536,559			1,329,686
Average loan yield, excluding PPP loans		4.56	%		4.66	%		4.94	%

	For the year ended
Average loan yield, excluding PPP loans (dollars in thousands)	December 31, 2021			December 31, 2020
Interest income on loans	$	78,894		$	71,405
Less: interest income on PPP loans		7,417			6,535
Interest income on loans, excluding PPP loans (numerator)		71,477			64,870

Average total loans	$	1,637,280		$	1,439,380
Less: average PPP loans		116,652			165,414
Average total loans, excluding PPP loans (denominator)		1,520,628			1,273,966
Average loan yield, excluding PPP loans		4.70	%		5.09	%

Allowance for loan losses to total loans, excluding PPP loans (dollars in thousands)	December 31, 2021			December 31, 2020
Allowance for loan losses (numerator)	$	23,243		$	22,189
Total loans		1,945,131			1,507,979
Less: PPP loans		22,124			147,965
Total loans, excluding PPP loans (denominator)		1,923,007			1,360,014
Allowance for loan losses to total loans, excluding PPP loans		1.21	%		1.63	%

Media Contact:
Heather Luck, CFO
Five Star Bancorp
(916) 626-5008
hluck@fivestarbank.com

Shelley Wetton, CMO
Five Star Bancorp
(916) 284-7827
swetton@fivestarbank.com

Investor Presentation Fourth Quarter and Year End 2021

Safe Harbor Statement and Disclaimer Forward - Looking Statements In this presentation, “we,” “our,” “us,” “Five Star" or “the Company” refers to Five Star Bancorp, a California corporation, and our consolidated subsidiaries, including Five Star Bank, a California state - chartered bank, unless the context indicates that we refer only to the parent company, Five Star Bancorp . This presentation 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 Quarterly Report on Form 10 - Q for the quarter ended September 30 , 2021 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 . Industry Information This presentation includes statistical and other industry and market data that we obtained from government reports and other third - party sources . Our internal data, estimates, and forecasts are based on information obtained from government reports, trade, and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions . Although we believe that this information (including the industry publications and third - party research, surveys, and studies) is accurate and reliable, we have not independently verified such information . In addition, estimates, forecasts, and assumptions are necessarily subject to a high degree of uncertainty and risk due to a variety of factors . Finally, forward - looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward - looking statements in this presentation . Unaudited Financial Data Numbers contained in this presentation for the quarter and year ended December 31, 2021 and for other quarterly periods are u nau dited. Additionally, all figures presented as year - to - date, except for periods that represent a full fiscal year ended December 31, represent unaudited results. As a result, subsequent informatio n m ay cause a change in certain accounting estimates and other financial information, including the Company’s allowance for loan losses, fair values, and income taxes. Non - GAAP Financial Measures The Company uses financial information in its analysis of the Company’s performance that are not in conformity with accountin g p rinciples 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 suppl ementary 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 n umber of limitations. See the appendix to this presentation for a reconciliation of these non - GAAP measures to the most directly comparable GAAP financial measures. Fourth Quarter 2021 Investor Presentation | 2

Agenda • Company Overview • Financial Highlights • Loans and Credit Quality • Deposit and Capital Overview • Financial Results Fourth Quarter 2021 Investor Presentation | 3

Company Overview Fourth Quarter 2021 Investor Presentation | 4

Company Overview Nasdaq: Headquarters: Asset Size: Loans (1) : Deposits: Bank Branches: Fourth Quarter 2021 Investor Presentation | 5 CA Redding 5 5 Chico 6 Yuba City 80 7 Roseville 1 Elk Grove 4 Sacramento Santa Rosa Rancho Cordova 3 2 Bank Branch (7) Non - Depository Office (2) 505 FSBC Rancho Cordova, California $2.6 Billion $1.9 Billion $2.3 Billion 7 Note: Balances are as of December 31, 2021. (1) Loans are presented before allowance for loan losses, net of deferred loan fees, and exclude loans held for sale. Five Star is a community business bank that was founded to serve the commercial real estate industry. Today, the markets we serve have expanded to meet customer demand and now include manufactured housing and storage, faith - based, government, nonprofits, and more.

Executive Team Fourth Quarter 2021 Investor Presentation | 6 James Beckwith President and Chief Executive Officer Five Star since 2003 John Dalton Senior Vice President and Chief Credit Officer Five Star since 2011 Mike Lee Senior Vice President and Chief Regulatory Officer Five Star since 2005 Michael Rizzo Senior Vice President and Chief Banking Officer Five Star since 2005 Brett Wait Senior Vice President and Chief Information Officer Five Star since 2011 Lydia Ramirez Senior Vice President and Chief Operations and Chief DE&I Officer Five Star since 2017 Kristine Hyde Senior Vice President and Chief Human Resources Officer Five Star since 2020 Heather Luck Senior Vice President and Chief Financial Officer Five Star since 2018 Shelley Wetton Senior Vice President and Chief Marketing Officer Five Star since 2015

Financial Highlights Fourth Quarter 2021 Investor Presentation | 7

$440 $547 $565 $604 $811 $840 $973 $1,272 $1,480 $1,954 $2,151 $2,328 $2,434 $2,557 $1,806 $1,968 $2,207 $2,373 $2,535 $148 $183 $121 $61 $22 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Total Assets Excluding PPP Loans PPP Loans Consistent and Organic Asset Growth Fourth Quarter 2021 Investor Presentation | 8 Note: Dollars are in millions. Balances are end of period. References to PPP are to the Paycheck Protection Program. (1) CAGR is based upon balances as of December 31, 2021. (2) A reconciliation of this non - GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years 10 years Total Assets 24.92% 19.25%

Financial Highlights Fourth Quarter 2021 Investor Presentation | 9 Note: Period end loan balances are before allowance for loan losses, before deferred loan fees, and exclude loans held for sa le. (1) A reconciliation of this non - GAAP measure is set forth in the appendix. (2) Funds received in Q4 2020 include all principal on forgiven PPP loans that were initially forgiven in Q4 2020 and may include Economic Injury Disaster Loan deductions that were received in Q1 2021. (dollars in millions) Q4 2020 Q3 2021 Q4 2021 FY 2020 FY 2021 Net income 9.5$ 11.0$ 11.3$ 35.9$ 42.4$ Return on average assets ("ROAA") 1.90% 1.85% 1.82% 1.95% 1.86% Return on average equity ("ROAE") 29.05% 19.26% 19.15% 31.16% 22.49% Net interest margin 4.09% 3.60% 3.67% 3.68% 3.64% Average loan yield 5.22% 4.90% 4.71% 4.96% 4.82% Average loan yield, excluding PPP loans (1) 4.94% 4.66% 4.56% 5.09% 4.70% PPP fee income 3.1$ 1.8$ 1.1$ 4.9$ 6.2$ PPP loans forgiven (2) 94.6$ 59.4$ 39.4$ 94.6$ 236.5$ Total cost of funds 0.31% 0.17% 0.16% 0.54% 0.19% 12/31/2020 9/30/2021 12/31/2021 Nonperforming loans to period end loans 0.03% 0.03% 0.03% Allowance for loan losses to period end loans 1.47% 1.28% 1.20% # of PPP loans outstanding 595 183 60 Balance of PPP loans outstanding 148.0$ 61.5$ 22.1$ # of loans in a COVID-19 deferment period 35 8 6 Balance of loans in a COVID-19 deferment period 41.4$ 12.2$ 12.2$ For the quarter ended For the year ended Profitability Net Interest Margin Asset Quality

Financial Highlights Fourth Quarter 2021 Investor Presentation | 10 Growth • Continued balance sheet growth with $563.0 million in non - PPP loan growth (1) and $501.9 million in deposit growth since December 31, 2020. Funding • For the most recent quarter ended, non - interest - bearing deposits comprised 39.46% of total deposits, compared to 41.47% at the end of the trailing quarter and 39.30% for the year ended December 31, 2020. • Deposits comprised 98.46% of total liabilities as of December 31, 2021, compared to 98.21% of total liabilities as of September 30, 2021 and 98.02% of total liabilities as of December 31, 2020. Capital • All capital ratios remained above well - capitalized regulatory thresholds for the quarters ended September 30, 2021 and December 31, 2021 as well as the years ended December 31, 2020 and December 31, 2021. • On October 6, 2021, the Company announced a cash dividend of $0.15 per share. (1) A reconciliation of this non - GAAP measure is set forth in the appendix.

Loans and Credit Quality Fourth Quarter 2021 Investor Presentation | 11

$148 $22 4.86% 4.93% 5.28% 5.45% 4.96% 4.82% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 2018 2019 2020 2021 Total Loans (Millions) Non-PPP Loans PPP Loans Average Loan Yield Average Loan Yield Excl PPP Consistent Loan Growth Fourth Quarter 2021 Investor Presentation | 12 Note: Balances are end of period, before allowance for loan losses, net of deferred loan fees, and exclude loans held for sal e. Yields are based on average balance and annualized quarterly interest income. (1) CAGR is based upon balances as of December 31, 2021. (2) A reconciliation of this non - GAAP measure is set forth in the appendix. $253 $253 $148 $183 $121 $61 $22 5.28% 4.82% 4.58% 5.22% 4.95% 4.73% 4.90% 4.71% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Total Loans (Millions) Non-PPP Loans PPP Loans Average Loan Yield Average Loan Yield Excl PPP Annual Trend Quarterly Trend Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Non-PPP Loans PPP Loans Average Loan Yield Average Loan Yield Excluding PPP Loans (2)

Loan Portfolio Composition Fourth Quarter 2021 Investor Presentation | 13 Note: Balances are net book value at December 31, 2021 and exclude loans held for sale. (1) Types of collateral in “all other types” are those that individually make up less than 5% CRE concentration. Commercial 81.93% Commercial land and development 0.38% Commercial construction 2.80% Residential construction 0.38% Residential 1.48% Farmland 2.83% Secured 7.08% Unsecured 1.09% PPP 1.14% Consumer and other 0.89% Types of collateral securing commercial real estate ("CRE") loans Loan Balance ($000s) # of Loans % of CRE Manufactured home community 518,910$ 251 32.71% Retail 166,960$ 58 10.53% Multifamily 152,412$ 71 9.61% Industrial 135,401$ 99 8.54% Office 134,728$ 85 8.49% Faith-based 108,718$ 74 6.85% Mini storage 85,712$ 25 5.40% Mixed use 83,270$ 35 5.25% All other types (1) 200,121$ 91 12.62% Total 1,586,232$ 789 100.00%

CRE Collateral Values Fourth Quarter 2021 Investor Presentation | 14 Note: Balances are net book value at December 31, 2021 and exclude loans held for sale. Dollars are in thousands. (1) Types of collateral in the “all other types” category are those that individually make up less than 5% CRE concentration. $519M $167M $152M $135M $135M $109M $86M $83M $200M $849M $307M $351M $319M $294M $272M $160M $156M $474M $0M $180M $360M $540M $720M $900M Manufactured home community Retail Multifamily Industrial Office Faith-based Mini storage Mixed use All other types Loan Balance Collateral Value (1)

Loan Portfolio Diversification We focus primarily on commercial lending, with an emphasis on commercial real estate . We offer a variety of loans to small and medium - sized businesses, professionals, and individuals, including commercial real estate, commercial land and construction, and farmland loans . To a lesser extent, we also offer residential real estate, construction real estate, and consumer loans . Fourth Quarter 2021 Investor Presentation | 15 Note: Balances are net book value at December 31, 2021 and exclude loans held for sale. CML Term Multifamily , 34.57% CML Term CRE NOO , 28.01% CML Term CRE OO , 19.17% CML Secured , 3.58% CML Term Ag RE , 2.81% CML Const CRE , 2.80% SBA 7A Secured , 2.61% CML Term SFR 1st , 1.22% SBA 7A PPP , 1.14% Others , 4.09% CRE Manufactured Home , 26.80% CRE Other , 11.84% CRE Retail , 8.62% CRE Multifamily , 7.95% CRE Industrial , 6.99% CRE Office , 6.96% Commercial Other , 5.89% CRE Faith Based , 5.62% CRE Mini Storage , 4.43% CRE Mixed Use , 4.30% Commercial Construction , 3.18% CRE Agricultural , 2.83% Commercial SBA 7A , 2.42% Commercial SBA 7A PPP , 1.14% Others , 1.03% Loans by Type Loans by Purpose Real Estate Loans by Geography

Loan Rollforward Fourth Quarter 2021 Investor Presentation | 16 Note: Dollars are in millions. Beginning and ending balances are as of period end, before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. Column1 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Beginning Balance 1,506$ 1,549$ 1,590$ 1,707$ Non PPP Originations 120$ 181$ 280$ 462$ PPP Originations 99$ 3$ -$ -$ Non PPP Payoffs and Paydowns (104)$ (77)$ (104)$ (194)$ PPP Forgiveness and Repayments (72)$ (66)$ (59)$ (39)$ Ending Balance 1,549$ 1,590$ 1,707$ 1,936$

Asset Quality Our primary objective is to maintain a high level of asset quality in our loan portfolio. In order to maintain our strong asset quality, we: - Place emphasis on our commercial portfolio, where we reevaluate risk assessments as a result of reviewing commercial property operating statements and borrower financials - Monitor payment performance, delinquencies, and tax and property insurance compliance - Design our practices to facilitate the early detection and remediation of problems within our loan portfolio - Employ the use of an outside, independent consulting firm to evaluate our underwriting and risk assessment process Fourth Quarter 2021 Investor Presentation | 17 Nonperforming Loan Trend Allowance for Loan Losses and Net Charge - off Trend Note: Period end loan balances are before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. $1.5M $3.1M $2.1M $0.8M $0.5M $0.5M $0.4M $0.6M $0.6M 0.23% 0.41% 0.22% 0.07% 0.03% 0.03% 0.03% 0.03% 0.03% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 2016 2017 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Nonperforming Loans Nonperforming Loans to Period End Loans 1.30% 1.25% 1.21% 1.26% 1.47% 1.20% - 0.01% 0.03% 0.23% 0.21% 0.12% 0.03% -0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 2016 2017 2018 2019 2020 2021 Allowance for Loan Losses to Period End Loans Net Charge-offs to Period End Loans

Allocation of Allowance for Loan Losses Fourth Quarter 2021 Investor Presentation | 18 (dollars in thousands) Allowance for Loan Losses Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total Collectively evaluated for impairment Real estate: Commercial 9,358$ 42.17% 10,219$ 45.88% 10,108$ 45.63% 11,695$ 53.53% 12,870$ 55.35% Commercial land and development 77 0.35% 80 0.36% 75 0.34% 112 0.51% 50 0.22% Commercial construction 821 3.70% 504 2.26% 491 2.22% 343 1.57% 371 1.60% Residential construction 87 0.39% 57 0.26% 46 0.21% 60 0.27% 50 0.22% Residential 220 0.99% 188 0.84% 188 0.85% 207 0.95% 192 0.83% Farmland 615 2.77% 578 2.60% 594 2.68% 666 3.05% 645 2.78% Total real estate loans 11,178 50.37% 11,626 52.20% 11,502 51.93% 13,083 59.88% 14,178 61.00% Commercial: Secured 9,476 42.71% 8,918 40.04% 9,194 41.50% 7,260 33.23% 6,686 28.77% Unsecured 179 0.81% 195 0.88% 209 0.94% 218 1.00% 207 0.89% PPP - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% Total commercial loans 9,655 43.52% 9,113 40.92% 9,403 42.44% 7,478 34.23% 6,893 29.66% Consumer and other 632 2.85% 528 2.38% 484 2.18% 638 2.92% 889 3.82% Unallocated 724 3.26% 932 4.18% 764 3.45% 515 2.36% 1,111 4.78% Individually evaluated for impairment Commercial secured - 0.00% - 0.00% - 0.00% 134 0.61% 172 0.74% Consumer and other - 0.00% 72 0.32% - 0.00% - 0.00% - 0.00% Total allowance for loan losses 22,189$ 100.00% 22,271$ 100.00% 22,153$ 100.00% 21,848$ 100.00% 23,243$ 100.00% December 31, 2020 March 31, 2021 September 30, 2021 December 31, 2021June 30, 2021

Risk Grade Migration Fourth Quarter 2021 Investor Presentation | 19 (dollars in thousands) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Real Estate: Commercial 35,543$ 35,531$ 35,519$ 35,488$ 9,255$ Commercial land and development - - - - - Commercial construction - - - - - Residential construction - - - - - Residential 183 182 181 179 178 Farmland - - - - - Commercial: Secured 132 1,037 1,026 1,154 1,181 Unsecured - - - - - PPP - - - - - Consumer and other - 71 - - - Total 35,858$ 36,821$ 36,726$ 36,821$ 10,614$ Classified Loans (Loans Rated Substandard or Doubtful) 96.01% 96.09% 96.36% 96.60% 99.00% 1.61% 1.53% 1.33% 1.24% 0.45% 2.38% 2.38% 2.31% 2.16% 0.55% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 % of Loan Portfolio Outstanding, by Risk Grade Pass Watch Substandard Doubtful

Deposit and Capital Overview Fourth Quarter 2021 Investor Presentation | 20

83.2% 90.5% 84.5% 78.0% 76.8% 78.9% 85.1% 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 29.0% 29.6% 39.3% 40.5% 40.4% 41.5% 39.5% 2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Diversified Funding Fourth Quarter 2021 Investor Presentation | 21 Total Deposits (1) = $2.3 Billion 98.5% of Total Liabilities Liability Mix (1) Balance as of December 31, 2021. Loan to Deposit Ratio Non - Interest - Bearing Deposits to Total Deposits Money Market and Savings 43.1% Non - Interest - Bearing Demand 38.9% Interest - Bearing Demand 12.0% Time Deposits 4.5% Borrowings and Subordinated Debt 1.2% Other Liabilities 0.3%

2018 2019 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Cost of Total Deposits 0.55% 0.81% 0.44% 0.15% 0.11% 0.09% 0.08% Time Deposits 100,069 96,510 47,602 36,338 54,674 53,935 104,272 Interest-Bearing Demand 123,835 118,644 146,553 155,866 136,336 155,881 278,406 Non-Interest-Bearing Demand 336,796 388,762 701,079 804,044 834,672 899,252 902,118 Money Market and Savings 600,694 707,834 888,767 986,862 1,040,603 1,059,326 1,001,094 Total 1,161,394 1,311,750 1,784,001 1,983,110 2,066,285 2,168,394 2,285,890 $1,161M $1,312M $1,784M $1,983M $2,066M $2,168M $2,286M Time Deposits Interest-Bearing Demand Non-Interest-Bearing Demand Money Market and Savings (dollars in thousands) Strong Deposit Growth Fourth Quarter 2021 Investor Presentation | 22 Note: Balances are end of period. Cost of total deposits is based on total average balance of interest - bearing and non - interest - bearing deposits and annualized quarterly deposit interest expense. (1) CAGR is based upon balances as of December 31, 2021. 2021 Cost of Total Deposits 0.11% 3 year Total Deposits CAGR (1) 25.32%

9.66% 8.26% 6.81% 7.51% 6.58% 9.47% 2016 2017 2018 2019 2020 2021 10.81% 9.32% 7.48% 8.21% 8.98% 11.44% 2016 2017 2018 2019 2020 2021 11.97% 13.23% 10.79% 11.52% 12.18% 13.98% 2016 2017 2018 2019 2020 2021 10.81% 9.32% 7.48% 8.21% 8.98% 11.44% 2016 2017 2018 2019 2020 2021 Capital Ratios Fourth Quarter 2021 Investor Presentation | 23 Tier 1 Leverage Ratio Tier 1 Capital to RWA Total Capital to RWA Common Equity Tier 1 to RWA Note: References to RWA are risk - weighted assets.

Financial Results Fourth Quarter 2021 Investor Presentation | 24

Earnings Track Record Fourth Quarter 2021 Investor Presentation | 25 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Net Income ($M) $7.0 $10.1 $9.3 $9.5 $10.3 $9.8 $11.0 $11.3 Basic EPS $0.72 $1.05 $0.94 $0.86 $0.93 $0.67 $0.64 $0.66 Diluted EPS $0.72 $1.05 $0.94 $0.86 $0.93 $0.67 $0.64 $0.66 $- $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $0.0M $2.0M $4.0M $6.0M $8.0M $10.0M $12.0M Basic Earnings Per Share "EPS" Earnings 2019 2020 2021 Net Income ($M) $29.3 $35.9 $42.4 Basic EPS $3.40 $3.57 $2.83 Diluted EPS $3.40 $3.57 $2.83 $- $0.70 $1.40 $2.10 $2.80 $3.50 $4.20 $0.0M $7.5M $15.0M $22.5M $30.0M $37.5M $45.0M Basic Earnings Per Share "EPS" Earnings Annual Trend Quarterly Trend

3.72% 3.99% 3.93% 3.98% 3.68% 3.64% 2016 2017 2018 2019 2020 2021 40.32% 37.94% 42.27% 38.63% 37.92% 42.46% 2016 2017 2018 2019 2020 2021 $16.4M $22.1M $23.4M $30.4M $37.3M $47.1M 2016 2017 2018 2019 2020 2021 Operating Metrics Fourth Quarter 2021 Investor Presentation | 26 Total Income Before Taxes Efficiency Ratio Net Interest Margin

Non - interest Income and Expense Trends Fourth Quarter 2021 Investor Presentation | 27 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2020 FY 2021 Service charges on deposit accounts 98$ 90$ 106$ 112$ 116$ 367$ 424$ Net gain on sale of securities 197 182 92 435 15 1,438 724 Gain on sale of loans 1,510 931 1,091 988 1,072 4,145 4,082 Loan-related fees 434 122 211 87 219 2,309 639 FHLB stock dividends 94 78 92 100 102 321 372 Earnings on bank-owned life insurance 46 52 60 68 57 220 237 Other income 161 161 194 238 209 502 802 Total non-interest income 2,540 1,616 1,846 2,028 1,790 9,302 7,280 Salaries and employee benefits 5,640$ 4,697$ 4,939$ 4,980$ 5,209$ 16,084$ 19,825$ Occupancy and equipment 476 451 441 502 544 1,715 1,938 Data processing and software 549 629 598 611 656 1,982 2,494 Federal Deposit Insurance Corporation insurance 270 280 150 110 160 1,137 700 Professional services 806 1,532 1,311 505 444 1,960 3,792 Advertising and promotional 336 170 265 366 499 1,102 1,300 Loan-related expenses 222 229 218 462 136 732 1,045 Other operating expenses 612 816 1,658 1,105 1,370 3,545 4,949 Total non-interest expense 8,911 8,804 9,580 8,641 9,018 28,257 36,043 Non- interest Expense For the quarter ended For the year ended(dollars in thousands) Non- interest Income

Shareholder Returns Fourth Quarter 2021 Investor Presentation | 28 24.57% 27.80% 29.28% 31.40% 31.16% 22.49% 2016 2017 2018 2019 2020 2021 $2.60 $2.92 $3.08 $3.40 $3.57 $2.83 2016 2017 2018 2019 2020 2021 ROAA ROAE EPS (basic and diluted) Value per Share (book and tangible book (1) ) $10.48 $10.93 $10.88 $11.25 $12.16 $13.65 2016 2017 2018 2019 2020 2021 Note: Ratios are for the twelve - month period of the year indicated. (1) A reconciliation of this non - GAAP measure is set forth in the appendix. 1.99% 2.34% 1.99% 2.15% 1.95% 1.86% 2016 2017 2018 2019 2020 2021

We strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith - based, and small to medium - sized enterprises. We aim to consistently deliver value that meets or exceeds the expectations of our shareholders, customers, employees, business partners, and community.

Appendix: Non - GAAP Reconciliation (Unaudited) The Company uses financial information in its analysis of the Company's performance that are not in conformity with GAAP . The Company believes that these non - GAAP financial measures provides 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 measure have a number of limitations . As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP, and they 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 . Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding PPP loans, and includes both performing and nonperforming loans . The most directly comparable GAAP financial measure is average loan yield . Total assets, excluding PPP loans, is defined as total assets less PPP loans . The most directly comparable GAAP financial measure is total assets . Non - PPP loan growth, is defined as total loan growth less PPP loans . The most directly comparable GAAP financial measure is total loan growth . 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 . 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 . Fourth Quarter 2021 Investor Presentation | 30 (dollars in thousands) Average loan yield, excluding PPP loans Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2020 FY 2021 Interest income on loans 16,061$ 17,522$ 17,735$ 20,087$ 18,613$ 18,626$ 20,085$ 21,569$ 71,405$ 78,894$ Less: interest income on PPP loans - 1,312 1,663 3,561 2,400 1,771 2,054 1,192 6,535 7,417 Interest income on loans, excluding PPP loans 16,061 16,210 16,072 16,526 16,213 16,855 18,031 20,377 64,870 71,477 Annualized interest income on loans, excluding PPP loans (numerator) 64,597 65,196 63,939 65,745 65,753 67,605 71,536 80,844 64,870 71,477 Average total loans 1,224,426 1,461,437 1,539,239 1,530,227 1,526,001 1,578,438 1,625,995 1,815,627 1,439,380 1,637,280 Less: average PPP loans - 206,396 253,366 200,541 176,255 158,568 89,436 44,101 165,414 116,652 Average total loans, excluding PPP loans (denominator) 1,224,426 1,255,041 1,285,873 1,329,686 1,349,746 1,419,870 1,536,559 1,771,526 1,273,966 1,520,628 Average loan yield, excluding PPP loans 5.28% 5.19% 4.97% 4.94% 4.87% 4.76% 4.66% 4.56% 5.09% 4.70% For the quarter ended For the year ended

Appendix: Non - GAAP Reconciliation (Unaudited) Fourth Quarter 2021 Investor Presentation | 31 (dollars in millions) Total assets, excluding PPP loans 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Total assets 1,954$ 2,151$ 2,328$ 2,434$ 2,557$ Less: PPP loans 148 183 121 61 22 Total assets, excluding PPP loans 1,806$ 1,968$ 2,207$ 2,373$ 2,535$ (dollars in millions) Non-PPP loan growth 12/31/2020 12/31/2021 $ Change Total loans 1,508$ 1,945$ 437$ Less: PPP loans 148 22 (126) Total loans, excluding PPP loans 1,360$ 1,923$ 563$