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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): April 25, 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 2.02Results of Operations and Financial Condition

 

On April 25, 2022, Five Star Bancorp (the “Company”) issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2022. 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 7.01Regulation FD Disclosure

 

The Company is conducting an earnings call on April 26, 2022 at 10:00am PT/1:00pm ET to discuss its first quarter 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 9.01Financial Statements and Exhibits

(d) Exhibits

 

Number

     Description
99.1     Press Release dated April 25, 2022
99.2     First Quarter 2022 Investor Presentation, dated April 26, 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: April 26, 2022  

 

 

Exhibit 99.1

 

 

 

PRESS RELEASE FOR IMMEDIATE RELEASE

 

Five Star Bancorp Announces Quarterly Results

RANCHO CORDOVA, Calif. April 25, 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 $9.9 million for the quarter ended March 31, 2022, as compared to $11.3 million for the quarter ended December 31, 2021 and $10.3 million for the quarter ended March 31, 2021.

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 ended March 31, 2022 and December 31, 2021 were calculated using the actual effective tax rates of 27.07% and 10.43%, respectively, while the results for the three months ended March 31, 2021 have been calculated using a 3.50% S Corporation tax rate. Performance highlights and other developments for the Company for the periods noted below included the following:

 

•Pre-tax net income for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021 and the three months ended March 31, 2021 were as follows:

 

   Three months ended
   March 31,
2022		  December 31,
2021		  March 31,
2021
Pre-tax net income  $13,522   $12,630   $10,660 

 

•Earnings per share for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021 and three months ended March 31, 2021 were as follows:

 

   Three months ended
   March 31,
2022		  December 31,
2021		  March 31,
2021
Basic earnings per common share  $0.58   $0.66   $0.93 
Diluted earnings per common share  $0.58   $0.66   $0.93 
Weighted average basic common shares outstanding   17,102,508    17,096,230    10,998,041 
Weighted average diluted common shares outstanding   17,164,519    17,139,693    10,998,041 
Shares outstanding at end of period   17,246,199    17,224,848    11,007,005 

 

  1 

 

•Loan and deposit growth at March 31, 2022, as compared to December 31, 2021 and March 31, 2021, were as follows:

 

(dollars in thousands)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Loans held for investment  $2,080,158   $1,934,460   $145,698    7.53%
Loans held for investment, excluding Paycheck Protection Program (“PPP”) loans(1)   2,078,630    1,912,336    166,294    8.70%
PPP loans   1,528    22,124    (20,596)   (93.09)%
PPP deferred fees   42    628    (586)   (93.31)%
Non-interest-bearing deposits   941,285    902,118    39,167    4.34%
Interest-bearing deposits   1,561,807    1,383,772    178,035    12.87%
                     

 

(dollars in thousands)  March 31,
2022		  March 31,
2021		  $ Change  % Change
Loans held for investment  $2,080,158   $1,543,493   $536,665    34.77%
Loans held for investment, excluding PPP loans(1)   2,078,630    1,360,617    718,013    52.77%
PPP loans   1,528    182,876    (181,348)   (99.16)%
PPP deferred fees   42    4,761    (4,719)   (99.12)%
Non-interest-bearing deposits   941,285    804,044    137,241    17.07%
Interest-bearing deposits   1,561,807    1,179,066    382,741    32.46%

 

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

 

•PPP income recognized for the quarter ended March 31, 2022 totaled $0.6 million, as compared to $1.1 million for the quarter ended December 31, 2021 and and $2.0 million for the quarter ended March 31, 2021.

 

•At March 31, 2022, the Company reported total loans held for investment, total assets, and total deposits of $2.1 billion, $2.8 billion, and $2.5 billion, respectively, as compared to $1.9 billion, $2.6 billion, and $2.3 billion, respectively, at December 31, 2021.

 

•For the three months ended March 31, 2022, the Company recorded a provision for loan losses of $1.0 million, as compared to $1.5 million for the three months ended December 31, 2021 and $0.2 million for the three months ended March 31, 2021.

 

•At March 31, 2022, the ratio of nonperforming loans to loans held for investment, or total loans at period end, of 0.06% increased from 0.03% at December 31, 2021.

 

•For the quarter ended March 31, 2022, net interest margin was 3.60%, as compared to 3.67% for the quarter ended December 31, 2021 and 3.83% for the quarter ended March 31, 2021.

 

•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 March 31, 2022. Additionally, based on the filing of the Company's final S Corporation tax return during the quarter ended March 31, 2022, the Company paid an additional distribution, representing the remaining balance of the Company's accumulated adjustments account, of an aggregate balance of approximately $4.9 million, or $0.45 per share, to S Corporation shareholders of record as of May 3, 2021, in connection with the IPO.

 

•For the three months ended March 31, 2022, the Company’s return on average assets (“ROAA”) was 1.53% and the return on average equity (“ROAE”) was 17.07%, as compared to ROAA and ROAE of 1.82% and 19.15%, respectively, for the three months ended December 31, 2021, and 2.05% and 32.08%, respectively, for the three months ended March 31, 2021.

 

•Effective January 1, 2022, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases, ultimately recording a lease liability of approximately $5.2 million on its consolidated balance sheet upon adoption, along with a corresponding right-of-use asset.

 

“The strength of the Company's first quarter financial results is emblematic of a reputation built on an unwavering commitment to customers and community partners who rely on our speed to serve and certainty of execution for their own successes,” said President and Chief Executive Officer, James Beckwith. “This differentiated customer experience has led to great demand for our services and seized market opportunities evidenced by substantial growth in loans and deposits in the first quarter. Our people, technology, operating efficiencies, conservative underwriting practices, and expense management have also contributed to our robust organic growth. As we execute on the expansion of industry verticals and our presence in new geographies to meet customer demand, we expect the ongoing acceleration of our growth to benefit our customers, employees, and shareholders. We also expect our proven ability to adapt to changing economic conditions to serve us well into the future.”

 

  2 

 

Summary Results

 

For the three months ended March 31, 2022, the Company’s ROAA and ROAE were 1.53% and 17.07%, respectively, as compared to 1.82% and 19.15%, respectively, for the three months ended December 31, 2021, and 2.05% and 32.08%, respectively, for the three months ended March 31, 2021.

 

As compared to the three months ended December 31, 2021, net income for the three months ended March 31, 2022 decreased, while average assets increased and average equity remained largely unchanged. The decrease in net income from the three months ended December 31, 2021 to the three months ended March 31, 2022 was due to an increase in the provision for income taxes of $2.3 million as a result of a higher effective tax rate than that of the three months ended December 31, 2021. As compared to the three months ended December 31, 2021, the increase in average assets was largely the result of an increase in average loans held for investment and sale due to loan growth, while average equity remained stable due to offsetting impacts from the recognition of net income, distributions of cash during the period, and the recognition of other comprehensive loss during the period.

 

As compared to the three months ended March 31, 2021, net income for the three months ended March 31, 2022 decreased, while average assets and average equity increased. The decrease in net income was due to an increase in the provision for income taxes of $3.3 million as a result of the Company’s conversion to a C Corporation during the second quarter of 2021. As compared to the three months ended March 31, 2021, the increase in average assets was largely the result of an increase in average loans held for investment and sale due to loan growth, and the increase in average equity was primarily the result of net proceeds received from the issuance of additional shares of common stock in the Company’s IPO during the second quarter of 2021.

 

  3 

 

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

 

   Three months ended      
(dollars in thousands, except per share data)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Selected operating data:                    
Net interest income  $21,862   $21,358   $504    2.36%
Provision for loan losses   950    1,500    (550)   (36.67)%
Non-interest income   2,185    1,790    395    22.07%
Non-interest expense   9,575    9,018    557    6.18%
Pre-tax net income   13,522    12,630    892    7.06%
Provision for income taxes   3,660    1,321    2,339    177.06%
Net income   9,862    11,309    (1,447)   (12.80)%
Earnings per common share:                    
Basic  $0.58   $0.66   $(0.08)   (12.12)%
Diluted  $0.58   $0.66   $(0.08)   (12.12)%
Performance and other financial ratios:                    
ROAA   1.53%   1.82%          
ROAE   17.07%   19.15%          
Net interest margin   3.60%   3.67%          
Cost of funds   0.17%   0.16%          

 

   Three months ended      
(dollars in thousands, except per share data)  March 31,
2022		  March 31,
2021		  $ Change  % Change
Selected operating data:                    
Net interest income  $21,862   $18,048   $3,814    21.13%
Provision for loan losses   950    200    750    375.00%
Non-interest income   2,185    1,616    569    35.21%
Non-interest expense   9,575    8,804    771    8.76%
Pre-tax net income   13,522    10,660    2,862    26.85%
Provision for income taxes   3,660    382    3,278    858.12%
Net income   9,862    10,278    (416)   (4.05)%
Earnings per common share:                    
Basic  $0.58   $0.93   $(0.35)   (37.63)%
Diluted  $0.58   $0.93   $(0.35)   (37.63)%
Performance and other financial ratios:                    
ROAA   1.53%   2.05%          
ROAE   17.07%   32.08%          
Net interest margin   3.60%   3.83%          
Cost of funds   0.17%   0.24%          

 

Balance Sheet Summary

 

Total assets at March 31, 2022 were $2.8 billion, an increase of $221.5 million from $2.6 billion at December 31, 2021. The increase was primarily due to a $79.6 million increase in cash and cash equivalents and a $145.7 million increase in total loans held for investment. The $145.7 million increase in total loans held for investment between December 31, 2021 and March 31, 2022 was a result of $312.5 million in non-PPP loan originations, partially offset by $20.6 million in PPP loan forgiveness, $146.6 million in non-PPP loan payoffs and paydowns, and a decrease in deferred loan fees of $0.4 million.

  4 

 

Total liabilities were $2.5 billion at March 31, 2022, an increase of $225.5 million from $2.3 billion at December 31, 2021. The increase in total liabilities was primarily attributable to an increase in deposits of $217.2 million, largely due to increases in interest checking, time deposits over $250 thousand, and non-interest-bearing deposits of $92.7 million, $75.0 million, and $39.2 million, respectively.

Total shareholders’ equity decreased by $4.0 million from $235.0 million at December 31, 2021 to $231.1 million at March 31, 2022, primarily as a result of net income recognized of $9.9 million, offset by a net decline of $6.7 million in other comprehensive income and $7.5 million in cash distributions paid during the three months ended March 31, 2022.

(dollars in thousands)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Selected financial condition data:                    
Total assets  $2,778,249   $2,556,761   $221,488    8.66%
Cash and cash equivalents   504,964    425,329    79,635    18.72%
Total loans held for investment   2,080,158    1,934,460    145,698    7.53%
Total investments   139,299    153,753    (14,454)   (9.40)%
Total liabilities   2,547,188    2,321,715    225,473    9.71%
Total deposits   2,503,092    2,285,890    217,202    9.50%
Subordinated notes, net   28,403    28,386    17    0.06%
Total shareholders’ equity   231,061    235,046    (3,985)   (1.70)%

 

Net Interest Income and Net Interest Margin

 

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

 

   Three months ended      
(dollars in thousands)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Interest and fee income  $22,850   $22,253   $597    2.68%
Interest expense   988    895    93    10.39%
Net interest income   21,862    21,358    504    2.36%
Net interest margin   3.60%   3.67%          
                     

 

   Three months ended      
(dollars in thousands)  March 31,
2022		  March 31,
2021		  $ Change  % Change
Interest and fee income  $22,850   $19,190   $3,660    19.07%
Interest expense   988    1,142    (154)   (13.49)%
Net interest income   21,862    18,048    3,814    21.13%
Net interest margin   3.60%   3.83%          

 

  5 

 

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

   Three months ended
   March 31, 2022  December 31, 2021  March 31, 2021
(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  $339,737   $192    0.23%  $330,825   $143    0.17%  $263,120   $104    0.16%
Investment securities   148,736    567    1.54%   160,315    541    1.34%   121,862    473    1.57%
Loans held for investment and sale   1,977,509    22,091    4.53%   1,815,627    21,569    4.71%   1,526,130    18,613    4.95%
Total interest-earning assets   2,465,982    22,850    3.76%   2,306,767    22,253    3.83%   1,911,112    19,190    4.07%
Interest receivable and other assets, net   150,116              159,123              125,981           
Total assets  $2,616,098             $2,465,890             $2,037,093           
                                              
Liabilities and shareholders’ equity                                             
Interest-bearing transaction accounts  $276,690   $70    0.10%  $165,709   $42    0.10%  $154,678   $38    0.10%
Savings accounts   90,815    25    0.11%   84,290    21    0.10%   60,885    16    0.11%
Money market accounts   920,767    367    0.16%   957,030    351    0.15%   867,374    581    0.27%
Time accounts   128,183    83    0.26%   75,332    38    0.20%   46,171    64    0.56%
Subordinated debt   28,393    443    6.33%   28,376    443    6.20%   28,326    443    6.36%
Total interest-bearing liabilities   1,444,848    988    0.28%   1,310,737    895    0.27%   1,157,434    1,142    0.40%
Demand accounts   922,128              914,821              745,605           
Interest payable and other liabilities   14,800              5,988              5,418           
Shareholders’ equity   234,322              234,344              128,636           
Total liabilities & shareholders’ equity  $2,616,098             $2,465,890             $2,037,093           
                                              
Net interest spread             3.48%             3.56%             3.67%
Net interest income/margin       $21,862    3.60%       $21,358    3.67%       $18,048    3.83%

 

  6 

 

Net interest income increased during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021 and the three months ended March 31, 2021. Net interest margin decreased 7 basis points to 3.60%, as compared to 3.67% in the quarter ended December 31, 2021, and decreased 23 basis points as compared to 3.83% in the quarter ended March 31, 2021. A key driver in the decrease in net interest margin during the periods indicated was a decrease in average loan yields. Loan yields decreased from 4.95% during the three months ended March 31, 2021, to 4.71% during the three months ended December 31, 2021, and to 4.53% during the three months ended March 31, 2022. Average loan yields, excluding PPP loans, decreased from 4.87% during the three months ended March 31, 2021, to 4.56% during the three months ended December 31, 2021, and to 4.43% during the three months ended March 31, 2022. These decreases were primarily due to changes in the macroeconomic environment, which caused a majority of the Company’s fixed-rate loans funded in the aforementioned quarters to recognize yields lower than those recognized in prior quarters. 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 March 31, 2022, as compared to the prior quarter and the three months ended March 31, 2021, but a majority of these loans were not scheduled to reprice during the three months ended March 31, 2022, 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 March 31, 2021 to the three months ended December 31, 2021 and the three months ended March 31, 2022, which partially offset the aforementioned declining average loan yields. Additionally, yields on PPP loans increased from 5.51%, to 10.72%, to 27.85%, for the quarters ended March 31, 2021, December 31, 2021, and March 31, 2022, 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.

 

Interest expense increased for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021, and decreased as compared to the three months ended March 31, 2021. Increased average daily balances and increased rates paid on interest-bearing liabilities during the quarter ended March 31, 2022, as compared to the quarter ended December 31, 2021, drove the increase in interest expense during the most recent quarter as compared to the previous quarter. The decline in interest expense for the quarter ended March 31, 2022 when compared to the quarter ended March 31, 2021 was primarily attributed to reductions in the rates offered on money market and maturing deposit products during that period. As a result, the cost of interest-bearing liabilities decreased to 0.28% for the quarter ended March 31, 2022 from 0.40% for the quarter ended March 31, 2021. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the cost of funds decreased from 0.24% for the quarter ended March 31, 2021 to 0.16% for the quarter ended December 31, 2021, with a slight increase to 0.17% for the quarter ended March 31, 2022.

 

 

Asset Quality

 

SBA PPP

 

At March 31, 2022, there were five PPP loans outstanding totaling $1.5 million. Two of these PPP loans, or 40.00% of the total number of PPP loans outstanding at March 31, 2022, totaling $0.1 million, were less than or equal to $0.15 million and had access to streamlined forgiveness processing. At March 31, 2022, 1,424 PPP loan forgiveness applications had been submitted to the SBA and forgiveness payments had been received on 1,422 of these PPP loans, totaling $353.2 million in principal and interest. The Company has submitted all forgiveness applications on the first round of PPP loans and all but three forgiveness applications on the second round of PPP loans. We expect full forgiveness, or repayment by the borrower, on all PPP loans to be completed in the near future.

 

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 March 31, 2022, 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 March 31, 2022 have returned to their pre-COVID-19 contractual payment structures 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.

 

  7 

 

Allowance for Loan Losses

 

At March 31, 2022, the Company’s allowance for loan losses was $23.9 million, as compared to $23.2 million at December 31, 2021. The $0.7 million increase is due to a $1.0 million provision for loan losses recorded during the quarter ended March 31, 2022, offset by net charge-offs of $0.3 million during the quarter. At March 31, 2022, the Company’s ratio of nonperforming loans to loans held for investment increased from 0.03% at December 31, 2021 to 0.06%, primarily due to an increase in the Company’s commercial secured nonperforming loans. At March 31, 2022, six loans totaling $12.2 million, or 0.59% of loans held for investment, were in a COVID-19 deferment period, and one loan totaling $0.1 million had been in a COVID-19 deferment in the fourth quarter of 2021 but was not in such deferment at March 31, 2022. Loans designated as watch increased to $14.0 million and loans designated as substandard decreased to $3.0 million at March 31, 2022 from $8.6 million and $10.6 million, respectively, at December 31, 2021, which resulted in a net reduction of $0.1 million in reserves related to classified and watch loans that was offset by an additional provision for loan growth during the quarter. There were no loans with doubtful risk grades at March 31, 2022 or December 31, 2021. A summary of the allowance for loan losses by loan class is as follows:

 

   March 31, 2022  December 31, 2021
(dollars in thousands)  Amount  % of Total  Amount  % of Total
Collectively evaluated for impairment:                    
Real estate:                    
Commercial  $13,868    58.01%  $12,869    55.37%
Commercial land and development   66    0.28%   50    0.22%
Commercial construction   430    1.80%   371    1.60%
Residential construction   40    0.17%   50    0.22%
Residential   208    0.87%   192    0.83%
Farmland   611    2.56%   645    2.78%
Commercial:                    
Secured   6,400    26.77%   6,687    28.77%
Unsecured   246    1.03%   207    0.89%
PPP   —      —  %   —      —  %
Consumer and other   1,088    4.55%   889    3.82%
Unallocated   308    1.29%   1,111    4.78%
   $23,265    97.33%  $23,071    99.28%
Individually evaluated for impairment:                    
Commercial secured   639    2.67%   172    0.72%
                     
Total allowance for loan losses  $23,904    100.00%  $23,243    100.00%

 

The ratio of allowance for loan losses to loans held for investment, or total loans at period end, was 1.15% at March 31, 2022, as compared to 1.20% at December 31, 2021. Excluding PPP loans, the ratio of the allowance for loan losses to loans held for investment was 1.15% and 1.22% at March 31, 2022 and December 31, 2021, respectively. The decline in the ratio of allowance to loans held for investment period-over-period is primarily due to a significant decline in classified loans and improvement in the risk level for retail loans, offset by increased reserves based on economic conditions and loan growth realized during the three months ended March 31, 2022. The ratio of the allowance for loan losses to loans held for investment, 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.

 

  8 

 

Non-interest Income

 

Three months ended March 31, 2022, as compared to three months ended December 31, 2021

 

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

 

   Three months ended      
(dollars in thousands)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Service charges on deposit accounts  $108   $116   $(8)   (6.90)%
Net gain on sale of securities   5    15    (10)   (66.67)%
Gain on sale of loans   918    1,072    (154)   (14.37)%
Loan-related fees   617    391    226    57.80%
FHLB stock dividends   102    102    —      —  %
Earnings on bank-owned life insurance   90    57    33    57.89%
Other income   345    37    308    832.43%
Total non-interest income  $2,185   $1,790   $395    22.07%

 

Gain on sale of loans. The decrease in gain on sale of loans was primarily due to a $0.2 million gain recognized during the three months ended December 31, 2021 on the sale of a $1.8 million consumer loan portfolio, which did not recur during the three months ended March 31, 2022. During the three months ended March 31, 2022, approximately $11.7 million of loans were sold with an effective yield of 7.84%, compared to approximately $9.7 million of loans sold with an effective yield of 9.38% during the three months ended December 31, 2021. The overall decline in the effective yields recorded quarter over quarter related primarily to declining premiums paid in the secondary market due to uncertain timing of rising interest rates.

Loan-related fees. The increase in loan-related fees resulted primarily from the recognition of $0.3 million in swap referral fees during the three months ended March 31, 2022, compared to $0.1 million of swap referral fees recognized during the three months ended December 31, 2021.

 

Other income. The increase in other income resulted primarily from a $0.3 million gain recorded on a distribution received on an investment in a venture-backed fund, which did not occur during the quarter ended December 31, 2021.

 

Three months ended March 31, 2022, as compared to three months ended March 31, 2021

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

   Three months ended      
(dollars in thousands)  March 31,
2022		  March 31,
2021		  $ Change  % Change
Service charges on deposit accounts  $108   $90   $18    20.00%
Net gain on sale of securities   5    182    (177)   (97.25)%
Gain on sale of loans   918    931    (13)   (1.40)%
Loan-related fees   617    260    357    137.31%
FHLB stock dividends   102    78    24    30.77%
Earnings on bank-owned life insurance   90    52    38    73.08%
Other income   345    23    322    1400.00%
Total non-interest income  $2,185   $1,616   $569    35.21%

 

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to the sale of one $1.5 million municipal security for a gain of $5.3 thousand during the three months ended March 31, 2022, compared to $11.5 million of municipal securities sold in the three months ended March 31, 2021 for a total gain recognized of $0.2 million.

Loan-related fees. The increase in loan-related fees primarily related to $0.3 million of swap referral fees recognized during the three months ended March 31, 2022, which did not occur in the three months ended March 31, 2021.

Other income. The increase in other income resulted primarily from a $0.3 million gain recorded on a distribution received on an investment in a venture-backed fund, which did not occur during the three months ended March 31, 2021.

  9 

 

Non-interest Expense

 

Three months ended March 31, 2022, as compared to three months ended December 31, 2021

 

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

 

   Three months ended      
(dollars in thousands)  March 31,
2022		  December 31,
2021		  $ Change  % Change
Salaries and employee benefits  $5,675   $5,209   $466    8.95%
Occupancy and equipment   520    544    (24)   (4.41)%
Data processing and software   716    656    60    9.15%
Federal Deposit Insurance Corporation (“FDIC”) insurance   165    160    5    3.13%
Professional services   554    444    110    24.77%
Advertising and promotional   344    499    (155)   (31.06)%
Loan-related expenses   278    136    142    104.41%
Other operating expenses   1,323    1,370    (47)   (3.43)%
Total non-interest expense  $9,575   $9,018   $557    6.18%

 

Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of a $0.4 million increase in salaries and benefits related to a 4.17% increase in headcount during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. In addition, the Company recognized a $0.2 million increase in employer taxes incurred for commission and executive bonus payments made during the three months ended March 31, 2022, and a decrease in deferred loan origination costs of $0.6 million during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. These increases were partially offset by a reduction of $0.4 million of commissions related to loan and deposit growth for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.

Professional services. The increase in professional services primarily related to a $0.1 million increase in audit fees recorded for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.

Advertising and promotional. The decrease in advertising and promotional is primarily related to slight declines in donations and sponsorships due to the timing of events held during the three months ended March 31, 2022, as compared to the three months ended December 31, 2021.

Loan-related expenses. Loan-related expenses increased, primarily as a result of a net overall increase in loan expenses incurred to support loan production in the three months ended March 31, 2022, as compared to the three months ended December 31, 2021, including increased expenses for insurance, taxes, and UCC fees.

 

Three months ended March 31, 2022, as compared to three months ended March 31, 2021

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

   Three months ended      
(dollars in thousands)  March 31,
2022		  March 31,
2021		  $ Change  % Change
Salaries and employee benefits  $5,675   $4,697   $978    20.82%
Occupancy and equipment   520    451    69    15.30%
Data processing and software   716    629    87    13.83%
FDIC insurance   165    280    (115)   (41.07)%
Professional services   554    1,532    (978)   (63.84)%
Advertising and promotional   344    170    174    102.35%
Loan-related expenses   278    229    49    21.40%
Other operating expenses   1,323    816    507    62.13%
Total non-interest expense  $9,575   $8,804   $771    8.76%

 

  10 

 

Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of a $1.1 million increase related to an 18.24% increase in headcount during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021 combined with a $0.6 million increase in commissions when comparing the quarter ended March 31, 2022 to the three months ended March 31, 2021. These increases were partially offset by a $0.6 million increase in deferred loan origination costs when comparing the three months ended March 31, 2022 to March 31, 2021.

FDIC insurance. FDIC insurance decreased, primarily due to an improvement in the leverage ratio used in the FDIC assessment calculation 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 March 31, 2021 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 March 31, 2022.

Advertising and promotional. The increase in advertising and promotional was primarily related to increases in business development, marketing, and sponsorship expenses due to more in-person participation in events held during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

Other operating expenses. Other operating expenses increased, primarily due to $0.1 million of stock compensation expense recorded for restricted stock granted to members of the Board of Directors during the three months ended March 31, 2022, combined with 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.

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 ended March 31, 2022 yielded an effective tax rate of 27.07%.

 

Three months ended March 31, 2022, as compared to three months ended December 31, 2021

Provision for income taxes for the quarter ended March 31, 2022 increased by $2.3 million, or 177.06%, to $3.7 million, as compared to $1.3 million for the quarter ended December 31, 2021. This increase was primarily due to the application of the full statutory income tax rate of 29.56% to taxable income for the quarter ended March 31, 2022, partially offset by a return-to-provision true up adjustment of approximately $0.3 million related to tax-exempt loan interest income. Additionally, the Company recorded a true up of certain permanent items in the quarter ended December 31, 2021, including tax-exempt municipal security interest income, which did not recur in the quarter ended March 31, 2022.

 

Three months ended March 31, 2022, as compared to three months ended March 31, 2021

Provision for income taxes increased by $3.3 million, or 858.12%, to $3.7 million for the three months ended March 31, 2022, as compared to $0.4 million for the three months ended March 31, 2021. This increase is due to the change in the effective tax rate from 3.50% to 27.07%.

Webcast Details

Five Star Bancorp will host a webcast on Tuesday, April 26, 2022, at 1:00 p.m. ET (10:00 a.m. PT), to discuss its first quarter 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.

  11 

 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of the Company’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Company’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Company’s forward-looking information and statements proves incorrect, then the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Company’s forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 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.

 

  12 

 

Condensed Financial Data (Unaudited)

   Three months ended
(dollars in thousands, except share and per share data)  March 31,
2022		  December 31,
2021		  March 31,
2021
Revenue and Expense Data               
Interest and fee income  $22,850   $22,253   $19,190 
Interest expense   988    895    1,142 
Net interest income   21,862    21,358    18,048 
Provision for loan losses   950    1,500    200 
Net interest income after provision   20,912    19,858    17,848 
Non-interest income:               
Service charges on deposit accounts   108    116    90 
Gain on sale of securities   5    15    182 
Gain on sale of loans   918    1,072    931 
Loan-related fees   617    391    260 
FHLB stock dividends   102    102    78 
Earnings on bank-owned life insurance   90    57    52 
Other income   345    37    23 
Total non-interest income   2,185    1,790    1,616 
Non-interest expense:               
Salaries and employee benefits   5,675    5,209    4,697 
Occupancy and equipment   520    544    451 
Data processing and software   716    656    629 
FDIC insurance   165    160    280 
Professional services   554    444    1,532 
Advertising and promotional   344    499    170 
Loan-related expenses   278    136    229 
Other operating expenses   1,323    1,370    816 
Total non-interest expense   9,575    9,018    8,804 
Total income before taxes   13,522    12,630    10,660 
Provision for income taxes   3,660    1,321    382 
Net income  $9,862   $11,309   $10,278 
                
Share and Per Share Data               
Earnings per common share:               
Basic  $0.58   $0.66   $0.93 
Diluted  $0.58   $0.66   $0.93 
Book value per share  $13.40   $13.65   $11.94 
Tangible book value per share(1)  $13.40   $13.65   $11.94 
Weighted average basic common shares outstanding   17,102,508    17,096,230    10,998,041 
Weighted average diluted common shares outstanding   17,164,519    17,139,693    10,998,041 
Shares outstanding at end of period   17,246,199    17,224,848    11,007,005 
                
Credit Quality               
Allowance for loan losses to period end nonperforming loans   1,799.99%   3,954.30%   4,341.52%
Nonperforming loans to loans held for investment   0.06%   0.03%   0.03%
Nonperforming assets to total assets   0.05%   0.02%   0.02%
Nonperforming loans plus performing TDRs to loans held for investment   0.06%   0.03%   0.03%
COVID-19 deferments to loans held for investment   0.59%   0.63%   1.11%
                
Selected Financial Ratios               
ROAA   1.53%   1.82%   2.05%
ROAE   17.07%   19.15%   32.08%
Net interest margin   3.60%   3.67%   3.83%
Loan to deposit   83.52%   85.09%   77.99%

 

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

 

  13 

 

(dollars in thousands)  March 31,
2022		  December 31,
2021		  March 31,
2021
Balance Sheet Data               
Cash and due from financial institutions  $66,747   $136,074   $44,720 
Interest-bearing deposits   438,217    289,255    389,872 
Time deposits in banks   14,464    14,464    25,696 
Securities - available-for-sale, at fair value   134,813    148,807    127,251 
Securities - held-to-maturity, at amortized cost   4,486    4,946    6,486 
Loans held for sale   10,386    10,671    3,060 
Loans held for investment   2,080,158    1,934,460    1,543,493 
Allowance for loan losses   (23,904)   (23,243)   (22,271)
Loans held for investment, net of allowance for loan losses   2,056,254    1,911,217    1,521,222 
Federal Home Loan Bank stock   6,667    6,723    6,232 
Operating leases, right-of-use asset   4,718    —      —   
Premises and equipment, net   1,836    1,773    1,645 
Bank-owned life insurance   14,343    11,203    8,714 
Interest receivable and other assets   25,318    21,628    15,839 
Total assets  $2,778,249   $2,556,761   $2,150,737 
                
Non-interest-bearing deposits  $941,285   $902,118   $804,044 
Interest-bearing deposits   1,561,807    1,383,772    1,179,066 
Total deposits   2,503,092    2,285,890    1,983,110 
Subordinated notes, net   28,403    28,386    28,336 
Operating lease liability   4,987    —      —   
Interest payable and other liabilities   10,706    7,439    7,914 
Total liabilities   2,547,188    2,321,715    2,019,360 
                
Common stock   218,721    218,444    110,144 
Retained earnings   19,558    17,168    21,623 
Accumulated other comprehensive loss, net   (7,218)   (566)   (390)
Total shareholders’ equity  $231,061   $235,046   $131,377 
                
Quarterly Average Balance Data               
Average loans held for investment and sale  $1,977,509   $1,815,627   $1,526,130 
Average interest-earning assets  $2,465,982   $2,306,767   $1,911,112 
Average total assets  $2,616,098   $2,465,890   $2,037,093 
Average deposits  $2,338,583   $2,197,183   $1,874,713 
Average total equity  $234,322   $234,344   $128,636 
                
Capital Ratio Data               
Total shareholders’ equity to total assets   8.32%   9.19%   6.11%
Tangible shareholders’ equity to tangible assets(1)   8.32%   9.19%   6.11%
Total capital (to risk-weighted assets)   13.09%   13.98%   12.09%
Tier 1 capital (to risk-weighted assets)   10.71%   11.44%   8.89%
Common equity Tier 1 capital (to risk-weighted assets)   10.71%   11.44%   8.89%
Tier 1 leverage ratio   9.02%   9.47%   6.37%

 

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

  

  14 

 

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. Additionally, these non-GAAP measures are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons.

Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. 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 held for investment, excluding PPP loans, is defined as total loans held for investment less PPP loans. The most directly comparable GAAP financial measure is total loans held for investment.

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

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

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

 

Total loans held for investment, excluding PPP loans

(dollars in thousands)

  March 31,
2022		  December 31,
2021		  March 31,
2021
Total loans held for investment  $2,080,158   $1,934,460   $1,543,493 
Less: PPP loans   1,528    22,124    182,876 
Total loans held for investment, excluding PPP loans  $2,078,630   $1,912,336   $1,360,617 

 

   Three months ended

Average loans held for investment and sale, excluding PPP loans

(dollars in thousands)

  March 31,
2022		  December 31,
2021		  March 31,
2021
Average loans held for investment and sale  $1,977,509   $1,815,627   $1,526,130 
Less: average PPP loans   8,886    44,101    176,384 
Average loans held for investment and sale, excluding PPP loans  $1,968,623   $1,771,526   $1,349,746 

  

  15 

 

   Three months ended

Average loan yield, excluding PPP loans

(dollars in thousands)

  March 31,
2022		  December 31,
2021		  March 31,
2021
Interest and fee income on loans  $22,091   $21,569   $18,613 
Less: interest and fee income on PPP loans   610    1,192    2,400 
Interest and fee income on loans, excluding PPP loans  $21,481   $20,377   $16,213 
Annualized interest and fee income on loans, excluding PPP loans (numerator)  $87,117   $80,844   $65,753 
                
Average loans held for investment and sale  $1,977,509   $1,815,627   $1,526,130 
Less: average PPP loans   8,886    44,101    176,384 
Average loans held for investment and sale, excluding PPP loans (denominator)  $1,968,623   $1,771,526   $1,349,746 
Average loan yield, excluding PPP loans   4.43%   4.56%   4.87%

 

Allowance for loan losses to total loans held for investment, excluding PPP loans

(dollars in thousands)

  March 31,
2022		  December 31,
2021
Allowance for loan losses (numerator)  $23,904   $23,243 
Total loans held for investment  $2,080,158   $1,934,460 
Less: PPP loans   1,528    22,124 
Total loans held for investment, excluding PPP loans (denominator)  $2,078,630   $1,912,336 
Allowance for loan losses to total loans held for investment, excluding PPP loans   1.15%   1.22%

 

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

  16 

Exhibit 99.2

 

Investor Presentation First Quarter 2022

 
 

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 Annual Report on Form 10 - K for the year ended December 31 , 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 ended March 31, 2022 and for other quarterly periods are unaudited. Addit ionally, 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 information may cause a cha nge 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. First Quarter 2022 Investor Presentation | 2

 
 

Agenda First Quarter 2022 Investor Presentation | 3 • Company Overview • Financial Highlights • Loans and Credit Quality • Deposit and Capital Overview • Financial Results

 
 

Company Overview First Quarter 2022 Investor Presentation | 4

 
 

Company Overview Nasdaq: Headquarters: Asset Size: Loans Held for Investment: Deposits: Bank Branches: First Quarter 2022 Investor Presentation | 5 FSBC Rancho Cordova, California $2.8 billion $2.1 billion $2.5 billion 7 Note: Balances are as of March 31, 2022. 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 First Quarter 2022 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 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 First Quarter 2022 Investor Presentation | 7

 
 

Consistent and Organic Asset Growth First Quarter 2022 Investor Presentation | 8 Note: Dollars are in millions. Balances are end of period. References to PPP are the Paycheck Protection Program. 1. CAGR is based upon balances as of March 31, 2022. 2. A reconciliation of this non - GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years 10 years Total Assets 23.35 % 17.65 %

 
 

Financial Highlights First Quarter 2022 Investor Presentation | 9 (dollars in millions) For the three months ended 3/31/2022 12/31/2021 3/31/2021 Profitability Net income $ 9.9 $ 11.3 $ 10.3 Return on average assets ("ROAA") 1.53 % 1.82 % 2.05 % Return on average equity ("ROAE") 17.07 % 19.15 % 32.08 % Net Interest Margin Net interest margin 3.60 % 3.67 % 3.83 % Average loan yield 4.53 % 4.71 % 4.95 % Average loan yield, excluding PPP loans (1) 4.43 % 4.56 % 4.87 % PPP income $ 0.6 $ 1.1 $ 2.0 PPP loans forgiven $ 20.6 $ 39.4 $ 74.5 Total cost of funds 0.17 % 0.16 % 0.24 % 3/31/2022 12/31/2021 Asset Quality Nonperforming loans to loans held for investment (2) 0.06 % 0.03 % Allowance for loan losses to loans held for investment (2) 1.15 % 1.20 % # of PPP loans outstanding 5 60 Balance of PPP loans outstanding $ 1.5 $ 22.1 # of loans in a COVID - 19 deferment period 6 6 Balance of loans in a COVID - 19 deferment period $ 12.2 $ 12.2 Note: Yields are based on average balance and annualized quarterly interest income. 1. A reconciliation of this non - GAAP measure is set forth in the appendix. 2. Loans held for investment are the equivalent of total loans outstanding at each period end.

 
 

Financial Highlights First Quarter 2022 Investor Presentation | 10 Growth • Continued balance sheet growth with $166.0 million of growth in non - PPP loans held for investment (1) and $217.2 million in deposit growth since December 31, 2021. Funding • For the most recent quarter ended, non - interest - bearing deposits comprised 37.60% of total deposits, compared to 39.46% for the year ended December 31, 2021. • Deposits comprised 98.27% of total liabilities as of March 31, 2022, as compared to 98.46% of total liabilities as of December 31, 2021. Capital • All capital ratios were above well - capitalized regulatory thresholds as of March 31, 2022 and December 31, 2021. • On January 21, 2022, 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 First Quarter 2022 Investor Presentation | 11

 
 

Consistent Loan Growth First Quarter 2022 Investor Presentation | 12 Note: Loan balances are end of period loans held for investment. Yields are based on average balance and annualized quarterly interest income. 1. CAGR is based upon balances as of March 31, 2022. 2. A reconciliation of this non - GAAP measure is set forth in the appendix. (2) CAGR (1) 5 years Total Loans 21.94 %

 
 

Loan Portfolio Composition First Quarter 2022 Investor Presentation | 13 Types of collateral securing commercial real estate ("CRE") loans Loan Balance ($000s) # of Loans % of CRE Manufactured home community $ 598,014 278 33.97 % Retail $ 192,575 65 10.94 % Multifamily $ 167,103 70 9.49 % Industrial $ 145,598 102 8.27 % Office $ 141,318 90 8.03 % Faith - based $ 130,036 79 7.39 % Mini storage $ 95,172 29 5.41 % All other types (1) $ 290,735 133 16.50 % Total $ 1,760,551 846 100.00 % Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, 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.

 
 

CRE Collateral Values First Quarter 2022 Investor Presentation | 14 (1) Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, 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.

 
 

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 . First Quarter 2022 Investor Presentation | 15 Note: Balances are net book value as of period end, before allowance for loan losses, before deferred loan fees, and exclude loans held for sale. Loans by Type Loans by Purpose Real Estate Loans by Geography

 
 

Loan Rollforward First Quarter 2022 Investor Presentation | 16 Note: Dollars are in millions. Beginning and ending balances are as of period end, before allowance for loan losses, including deferred loan fees, and excluding loans held for sale. Q4 2021 Q1 2022 Beginning Balance $ 1,707 $ 1,936 Non PPP Originations 462 313 PPP Originations — — Non PPP Payoffs and Paydowns (194) (147) PPP Forgiveness and Repayments (39) (21) Ending Balance $ 1,936 $ 2,081

 
 

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 op erating 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 First Quarter 2022 Investor Presentation | 17 Nonperforming Loan Trend Allowance for Loan Losses and Net Charge - off Trend Note: References to loans HFI are loans held for investment which are the equivalent of total loans outstanding at each period end. References to average loans HFI are average loans held for investment during the period.

 
 

Allocation of Allowance for Loan Losses First Quarter 2022 Investor Presentation | 18 (dollars in thousands) March 31, 2022 December 31, 2021 Allowance for Loan Losses Amount % of Total Amount % of Total Collectively evaluated for impairment Real estate: Commercial $ 13,868 58.01 % $ 12,869 55.37 % Commercial land & development 66 0.28 % 50 0.22 % Commercial construction 430 1.80 % 371 1.60 % Residential construction 40 0.17 % 50 0.22 % Residential 208 0.87 % 192 0.83 % Farmland 611 2.56 % 645 2.78 % Total real estate loans 15,223 63.69 % 14,177 61.02 % Commercial: Secured 6,400 26.77 % 6,687 28.77 % Unsecured 246 1.03 % 207 0.89 % PPP — — % — — % Total commercial loans 6,646 27.80 % 6,894 29.66 % Consumer and other 1,088 4.55 % 889 3.82 % Unallocated 308 1.29 % 1,111 4.78 % Individually evaluated for impairment Commercial secured 639 2.67 % 172 0.72 % Total allowance for loan losses $ 23,904 100.00 % $ 23,243 100.00 %

 
 

Risk Grade Migration First Quarter 2022 Investor Presentation | 19 Classified Loans (Loans Rated Substandard or Doubtful) (dollars in thousands) 2020 2021 Q1 2022 Real estate: Commercial $ 35,543 $ 9,256 $ 901 Commercial land & development — — — Commercial construction — — — Residential construction — — — Residential 183 178 177 Farmland — — — Commercial: Secured 132 1,180 1,921 Unsecured — — — Paycheck Protection Program (PPP) — — — Consumer and other — — 12 Total $ 35,858 $ 10,614 $ 3,011 Note: Loan portfolio outstanding is the total balance of loans outstanding at period end, before deferred loan fees, before allowance for loan losses, excluding loans held for sale.

 
 

Deposit and Capital Overview First Quarter 2022 Investor Presentation | 20

 
 

Diversified Funding First Quarter 2022 Investor Presentation | 21 Total Deposits (1) = $2.5 billion 98.3% of Total Liabilities Liability Mix 1. Balance as of March 31, 2022. 2. Loan balance in loan to deposit ratio is total loans held for investment and sale at period end. Loan (2) to Deposit Ratio Non - Interest - Bearing Deposits to Total Deposits

 
 

Strong Deposit Growth First Quarter 2022 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 March 31, 2022. Cost of Total Deposits 0.55% 0.81% 0.44% 0.11% 0.09% CAGR (1) 4 years Total Deposits 21.17 %

 
 

Capital Ratios First Quarter 2022 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 First Quarter 2022 Investor Presentation | 24

 
 

Earnings Track Record First Quarter 2022 Investor Presentation | 25 Note: References to EPS are Earnings Per Share. Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income $ 10.3 M $ 9.8 M $ 11.0 M $ 11.3 M $ 9.9 M Quarterly Basic EPS $ 0.93 $ 0.67 $ 0.64 $ 0.66 $ 0.58 Quarterly Diluted EPS $ 0.93 $ 0.67 $ 0.64 $ 0.66 $ 0.58

 
 

Operating Metrics First Quarter 2022 Investor Presentation | 26 Efficiency Ratio Net Interest Margin Note: All 2022 figures are through March 31, 2022. Total Income Before Taxes

 
 

Non - interest Income and Expense Comparison First Quarter 2022 Investor Presentation | 27 (dollars in thousands) For the three months ended 3/31/2022 12/31/2021 3/31/2021 Non - interest Income Service charges on deposit accounts $ 108 $ 116 $ 90 Net gain on sale of securities 5 15 182 Gain on sale of loans 918 1,072 931 Loan - related fees 617 391 260 FHLB stock dividends 102 102 78 Earnings on bank - owned life insurance 90 57 52 Other income 345 37 23 Total non - interest income $ 2,185 $ 1,790 $ 1,616 Non - interest Expense Salaries and employee benefits $ 5,675 $ 5,209 $ 4,697 Occupancy and equipment 520 544 451 Data processing and software 716 656 629 Federal Deposit Insurance Corporation insurance 165 160 280 Professional services 554 444 1,532 Advertising and promotional 344 499 170 Loan - related expenses 278 136 229 Other operating expenses 1,323 1,370 816 Total non - interest expense $ 9,575 $ 9,018 $ 8,804

 
 

Shareholder Returns First Quarter 2022 Investor Presentation | 28 ROAA ROAE EPS (basic and diluted) Value per Share (book and tangible book (1) ) Note: All 2022 figures are through March 31, 2022. 1. A reconciliation of this non - GAAP measure is set forth in the appendix.

 
 

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 provide useful information to management and investors that is supplementary to the Company's financial condition, results of operations, and cash flows computed in accordance with GAAP . However, the Company acknowledges that its non - GAAP financial measures have a number of limitations . As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP . Additionally, these non - GAAP measures are not necessarily comparable to non - GAAP financial measures that other banking companies use . Other banking companies may use names similar to those the Company uses for the non - GAAP financial measures the Company discloses but may calculate them differently . Investors should understand how the Company and other companies each calculate their non - GAAP financial measures when making comparisons . 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 . Growth in non - PPP loans held for investment, is defined as growth in loans held for investment less PPP loans . The most directly comparable GAAP financial measure is growth in total loans held for investment . 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 . First Quarter 2022 Investor Presentation | 30 (dollars in thousands) Twelve months ended Three months ended Average loan yield, excluding PPP loans 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 Interest and fee income on loans $ 71,405 $ 18,613 $ 18,626 $ 20,085 $ 21,569 $ 22,091 Less: interest and fee income on PPP loans 6,535 2,400 1,771 2,054 1,192 610 Interest and fee income on loans, excluding PPP loans 64,870 16,213 16,855 18,031 20,377 21,481 Annualized interest and fee income on loans, excluding PPP loans (numerator) 64,870 65,753 67,605 71,536 80,844 87,117 Average loans held for investment and sale 1,439,380 1,526,130 1,578,438 1,625,995 1,815,627 1,977,509 Less: average PPP loans 165,414 176,384 158,568 89,436 44,101 8,886 Average loans held for investment and sale, excluding PPP loans (denominator) 1,273,966 1,349,746 1,419,870 1,536,559 1,771,526 1,968,623 Average loan yield, excluding PPP loans 5.09 % 4.87 % 4.76 % 4.66 % 4.56 % 4.43 %

 
 

Appendix: Non - GAAP Reconciliation (Unaudited) First Quarter 2022 Investor Presentation | 31 (dollars in millions) Total assets, excluding PPP loans 12/31/2020 12/31/2021 3/31/2022 Total assets $ 1,954 $ 2,557 $ 2,778 Less: PPP loans 148 22 2 Total assets, excluding PPP loans $ 1,806 $ 2,535 $ 2,776 (dollars in millions) Growth in non - PPP loans held for investment 3/31/2022 12/31/2021 $ Change Total loans held for investment $ 2,080 $ 1,934 $ 146 Less: PPP loans 2 22 (20) Total loans held for investment, excluding PPP loans $ 2,078 $ 1,912 $ 166