First Quarter Highlights
Performance and operating highlights for the Company for the periods noted below included the following:
Three months ended
(in thousands, except per share and share data)
March 31,2026
December 31,2025
March 31,2025
Return on average assets ("ROAA")
1.55
%
1.50
%
1.30
%
Return on average equity ("ROAE")
16.73
%
15.97
%
13.28
%
Pre-tax income
$
25,031
$
23,008
$
18,391
Pre-tax, pre-provision income(1)
$
27,706
$
25,808
$
20,291
Net income
$
18,621
$
17,643
$
13,111
Basic earnings per common share
$
0.87
$
0.83
$
0.62
Diluted earnings per common share
$
0.87
$
0.83
$
0.62
Weighted average basic common shares outstanding
21,253,085
21,231,563
21,209,881
Weighted average diluted common shares outstanding
21,313,078
21,289,056
21,253,588
Shares outstanding at end of period
21,376,153
21,367,387
21,329,235
(1) See the section entitled "Non-GAAP Reconciliation (Unaudited)" for a reconciliation of this non-GAAP financial measure.
James E. Beckwith, President and Chief Executive Officer, commented:
"The strength of Five Star Bank's first quarter 2026 financial results is emblematic of seized market opportunities fueled by the continued demand for our differentiated customer experience. In the first quarter of 2026, we successfully executed on our strategic plan and declared a cash dividend of $0.25 per share to shareholders (an increase of $0.05 per share from dividends declared in each quarter of 2025). Earnings per share increased to $0.87 per share, up $0.04 from the fourth quarter of 2025 and $0.25 from the first quarter of 2025. Net income increased to $18.6 million, up from $17.6 million for the fourth quarter of 2025, while total cost of funds decreased 10 basis points to 2.20% during the first quarter of 2026, and net interest margin increased by four basis points to 3.70%. We are pleased that over the first quarter, total loans held for investment increased by $138.5 million, or 3% (14% when annualized) while total deposits increased by $268.3 million, or 6% (26% when annualized). 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."
Financial highlights as of and during the three months ended March 31, 2026 included the following:
Total deposits increased by $268.3 million, or 6.39%, during the three months ended March 31, 2026, with increases in non-wholesale deposits exceeding decreases in wholesale deposits. The Company defines wholesale deposits as brokered deposits and California Time Deposit Program deposits. During the three months ended March 31, 2026, non-wholesale deposits increased by $350.2 million, or 9.37%, and wholesale deposits decreased by $81.9 million, or 17.62%.
The number of Business Development Officers increased from 42 at December 31, 2025 to 43 at March 31, 2026.
Cash and cash equivalents were $644.4 million, representing 14.42% of total deposits at March 31, 2026, as compared to 12.06% at December 31, 2025.
Consistent, disciplined management of expenses contributed to our efficiency ratio of 38.57% for the three months ended March 31, 2026, as compared to 40.62% for the three months ended December 31, 2025 and 42.58% for the three months ended March 31, 2025.
For the three months ended March 31, 2026, net interest margin was 3.70%, as compared to 3.66% for the three months ended December 31, 2025 and 3.45% for the three months ended March 31, 2025. The improvement in net interest margin from the three months ended March 31, 2025 occurred during a period of declining effective federal funds rates. Specifically, the effective federal funds rate was 4.33% as of March 31, 2025 and declined over the subsequent quarters to 3.64% by December 31, 2025. The effective federal funds rate remained constant at 3.64% through March 31, 2026.
Other comprehensive loss was $1.0 million during the three months ended March 31, 2026. Unrealized losses, net of tax effect, on available-for-sale securities were $10.1 million as of March 31, 2026. Total carrying value of held-to-maturity and available-for-sale securities represented 0.04% and 1.87% of total interest-earning assets, respectively, as of March 31, 2026.
The Company's common equity Tier 1 capital ratio was 10.45% and 10.58% as of March 31, 2026 and December 31, 2025, respectively. The Bank continues to meet all requirements to be considered "well-capitalized" under applicable regulatory guidelines.
Loan and deposit growth in the three and twelve months ended March 31, 2026 was as follows:
(in thousands)
March 31,2026
December 31,2025
$ Change
% Change
Loans held for investment
$
4,213,393
$
4,074,929
$
138,464
3.40
%
Non-interest-bearing deposits
1,232,696
1,084,537
148,159
13.66
%
Interest-bearing deposits
3,236,657
3,116,547
120,110
3.85
%
(in thousands)
March 31,2026
March 31,2025
$ Change
% Change
Loans held for investment
$
4,213,393
$
3,621,819
$
591,574
16.33
%
Non-interest-bearing deposits
1,232,696
933,652
299,044
32.03
%
Interest-bearing deposits
3,236,657
2,802,702
433,955
15.48
%
The ratio of nonperforming loans to loans held for investment at period end decreased from 0.08% at December 31, 2025 to 0.07% at March 31, 2026.
The Company's Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.25 per share during the three months ended March 31, 2026. The Company's Board of Directors declared an additional cash dividend of $0.25 per share on April 16, 2026, which the Company expects to pay on May 11, 2026 to shareholders of record as of May 4, 2026.
Summary Results
Three months ended March 31, 2026, as compared to three months ended December 31, 2025
The Company's net income was $18.6 million for the three months ended March 31, 2026, as compared to $17.6 million for the three months ended December 31, 2025. Net interest income increased by $1.4 million during the three months ended March 31, 2026, as compared to the three months ended December 31, 2025, primarily due to an increase in interest income driven by loan growth, augmented by a decrease in interest expense driven by a decline in the average cost of deposits. The provision for credit losses decreased by $0.1 million during the three months ended March 31, 2026, as compared to the three months ended December 31, 2025, primarily due to a slight improvement in estimated loss rates. Non-interest income increased by $0.2 million, primarily due to an increase in fees from swap referrals and a special FHLB stock dividend, partially offset by an overall decline in earnings related to investments in venture-backed funds during the three months ended March 31, 2026, as compared to the three months ended December 31, 2025. Non-interest expense decreased by $0.3 million during the three months ended March 31, 2026, as compared to the three months ended December 31, 2025, primarily due to the release of a loss contingency on a U.S. Small Business Administration ("SBA") loan that did not occur during the three months ended December 31, 2025, partially offset by increased salaries and employee benefits due to increased headcount during the three months ended March 31, 2026.
Three months ended March 31, 2026, as compared to three months ended March 31, 2025
The Company's net income was $18.6 million for the three months ended March 31, 2026, as compared to $13.1 million for the three months ended March 31, 2025. Net interest income increased by $9.5 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. The provision for credit losses increased by $0.8 million, reflecting increases in loan growth and an overall increase in loss rates in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Non-interest income increased by $0.3 million, primarily due to an increase in fees from swap referrals and a special FHLB stock dividend, partially offset by an overall decline in earnings related to investments in venture-backed funds during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Non-interest expense increased by $2.3 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to increased salaries and employee benefits due to increased headcount.
The following is a summary of the components of the Company's operating results and performance ratios for the periods indicated:
Three months ended
(in thousands, except per share data)
March 31,2026
December 31,2025
$ Change
% Change
Selected operating data:
Net interest income
$
43,457
$
42,065
$
1,392
3.31
%
Provision for credit losses
2,675
2,800
(125
)
(4.46
)%
Non-interest income
1,643
1,400
243
17.36
%
Non-interest expense
17,394
17,657
(263
)
(1.49
)%
Pre-tax income
25,031
23,008
2,023
8.79
%
Provision for income taxes
6,410
5,365
1,045
19.48
%
Net income
$
18,621
$
17,643
$
978
5.54
%
Earnings per common share:
Basic
$
0.87
$
0.83
$
0.04
4.82
%
Diluted
$
0.87
$
0.83
$
0.04
4.82
%
Performance and other financial ratios:
ROAA
1.55
%
1.50
%
ROAE
16.73
%
15.97
%
Net interest margin
3.70
%
3.66
%
Total cost of funds(1)
2.20
%
2.30
%
Efficiency ratio
38.57
%
40.62
%
Three months ended
(in thousands, except per share data)
March 31,2026
March 31,2025
$ Change
% Change
Selected operating data:
Net interest income
$
43,457
$
33,977
$
9,480
27.90
%
Provision for credit losses
2,675
1,900
775
40.79
%
Non-interest income
1,643
1,359
284
20.90
%
Non-interest expense
17,394
15,045
2,349
15.61
%
Pre-tax income
25,031
18,391
6,640
36.10
%
Provision for income taxes
6,410
5,280
1,130
21.40
%
Net income
$
18,621
$
13,111
$
5,510
42.03
%
Earnings per common share:
Basic
$
0.87
$
0.62
$
0.25
40.32
%
Diluted
$
0.87
$
0.62
$
0.25
40.32
%
Performance and other financial ratios:
ROAA
1.55
%
1.30
%
ROAE
16.73
%
13.28
%
Net interest margin
3.70
%
3.45
%
Total cost of funds(1)
2.20
%
2.56
%
Efficiency ratio
38.57
%
42.58
%
(1) Total cost of funds reflects the average cost of all funding sources, including both interest-bearing and non-interest-bearing deposits and borrowings.
Balance Sheet Summary
(in thousands)
March 31,2026
December 31,2025
$ Change
% Change
Selected financial condition data:
Total assets
$
5,031,751
$
4,754,861
$
276,890
5.82
%
Cash and cash equivalents
644,359
506,851
137,508
27.13
%
Total loans held for investment
4,213,393
4,074,929
138,464
3.40
%
Total investments
93,850
96,889
(3,039
)
(3.14
)%
Total liabilities
4,573,232
4,309,029
264,203
6.13
%
Total deposits
4,469,353
4,201,084
268,269
6.39
%
Subordinated notes, net
74,077
74,041
36
0.05
%
Total shareholders' equity
458,519
445,832
12,687
2.85
%
Insured and collateralized deposits were approximately $2.9 billion, representing 65.55% of total deposits as of March 31, 2026, as compared to 66.20% as of December 31, 2025. Net uninsured and uncollateralized deposits were approximately $1.5 billion as of March 31, 2026, increasing from $1.4 billion at December 31, 2025.
Non-wholesale deposit accounts constituted 91.43% of total deposits as of March 31, 2026, as compared to 88.93% at December 31, 2025. Deposit relationships of greater than $5 million represented 60.67% of total deposits as of March 31, 2026, as compared to 60.90% as of December 31, 2025, and had an average age of approximately 7.98 years as of March 31, 2026, as compared to 7.67 years as of December 31, 2025.
Total deposits as of March 31, 2026 were $4.5 billion, an increase of $268.3 million, or 6.39%, from December 31, 2025, comprised of increases in both interest-bearing and non-interest-bearing deposits.
Cash and cash equivalents as of March 31, 2026 were $644.4 million, representing 14.42% of total deposits at March 31, 2026, as compared to 12.06% as of December 31, 2025.
Total liquidity (consisting of cash and cash equivalents as well as unused and immediately available borrowing capacity as set forth below) was approximately $2.2 billion as of March 31, 2026, as compared to $2.3 billion at December 31, 2025.
March 31, 2026
(in thousands)
Line of Credit
Letters of Credit Issued
Borrowings
Available
Federal Home Loan Bank of San Francisco ("FHLB") advances
$
1,425,706
$
1,112,500
$
—
$
313,206
Federal Reserve Discount Window
1,016,633
—
—
1,016,633
Correspondent bank lines of credit
185,000
—
—
185,000
Cash and cash equivalents
—
—
—
644,359
Total
$
2,627,339
$
1,112,500
$
—
$
2,159,198
The increase in total assets from December 31, 2025 to March 31, 2026 was primarily comprised of a $138.5 million increase in total loans held for investment and a $137.5 million increase in cash and cash equivalents. The $138.5 million increase in total loans held for investment between December 31, 2025 and March 31, 2026 was a result of $389.0 million in loan originations and advances, partially offset by $67.9 million and $182.6 million in loan payoffs and paydowns, respectively. The $137.5 million increase in cash and cash equivalents primarily resulted from the net increase in cash inflows from growth in total deposits of $268.3 million and cash outflows from growth in total loans held for investment of $138.5 million.
The increase in total liabilities from December 31, 2025 to March 31, 2026 was primarily due to an increase in deposits of $268.3 million. The increase in deposits was largely due to increases in money market and non-interest-bearing deposits of $212.6 million and $148.2 million, respectively, partially offset by a $100.3 million decrease in time deposits, mainly attributed to an $81.9 million decline in wholesale deposits.
The increase in total shareholders' equity from December 31, 2025 to March 31, 2026 was primarily a result of $18.6 million recognized as net income, partially offset by $5.3 million in cash dividends paid during the period and a $1.0 million increase in accumulated other comprehensive loss.
Net Interest Income and Net Interest Margin
The following is a summary of the components of net interest income for the periods indicated:
Three months ended
(in thousands)
March 31,2026
December 31,2025
$ Change
% Change
Interest and fee income
$
67,347
$
66,421
$
926
1.39
%
Interest expense
23,890
24,356
(466
)
(1.91
)%
Net interest income
$
43,457
$
42,065
$
1,392
3.31
%
Net interest margin
3.70
%
3.66
%
Three months ended
(in thousands)
March 31,2026
March 31,2025
$ Change
% Change
Interest and fee income
$
67,347
$
57,087
$
10,260
17.97
%
Interest expense
23,890
23,110
780
3.38
%
Net interest income
$
43,457
