fsbc-20250331

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-40379

FIVE STAR BANCORP

(Exact name of Registrant as specified in its charter)


California						75-3100966
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

3100 Zinfandel Drive, Suite 100 Rancho Cordova, CA 95670

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: (916) 626-5000

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


Title of each class	Trading symbol	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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of May 2, 2025, there were 21,360,991 shares of the registrant’s common stock, no par value, outstanding.

Table of Contents

TABLE OF CONTENTS

FIVE STAR BANCORP AND SUBSIDIARY

Quarterly Report on Form 10-Q

March 31, 2025


PART I	FINANCIAL INFORMATION	1

ITEM 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Shareholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	59

ITEM 4.	Controls and Procedures	60

PART II	OTHER INFORMATION	61

ITEM 1.	Legal Proceedings	61

ITEM 1A.	Risk Factors	61

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

ITEM 3.	Defaults Upon Senior Securities	61

ITEM 4.	Mine Safety Disclosures	61

ITEM 5.	Other Information	61

ITEM 6.	Exhibits	62

SIGNATURES		63

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share amounts)	March 31, 2025		December 31, 2024
ASSETS
Cash and due from financial institutions	$	42,473	$	33,882
Interest-bearing deposits in banks	410,098		318,461
Cash and cash equivalents	452,571		352,343
Time deposits in banks	4,024		4,121
Securities available-for-sale, at fair value, net of allowance for credit losses of $0 at March 31, 2025 and December 31, 2024 (amortized cost of $113,642 and $115,757 at March 31, 2025 and December 31, 2024, respectively)	97,111		98,194
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $20 at March 31, 2025 and December 31, 2024 (fair value of $2,275 and $2,353 at March 31, 2025 and December 31, 2024, respectively)	2,585		2,720
Loans held for sale	2,669		3,247
Loans held for investment	3,621,819		3,532,686
Allowance for credit losses	(39,224)		(37,791)
Loans held for investment, net of allowance for credit losses	3,582,595		3,494,895
FHLB stock	15,000		15,000
Operating leases, right-of-use asset, net	5,944		6,245
Premises and equipment, net	1,524		1,584
Bank-owned life insurance	23,246		19,375
Interest receivable and other assets	57,788		55,554
Total assets	$	4,245,057	$	4,053,278

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing	$	933,652	$	922,629
Interest-bearing	2,802,702		2,635,365
Total deposits	3,736,354		3,557,994
Borrowings:
Subordinated notes, net	73,932		73,895
Other borrowings	—		—
Operating lease liability	6,591		6,857
Interest payable and other liabilities	21,729		17,908
Total liabilities	3,838,606		3,656,654
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock, no par value; 10,000,000 shares authorized; zero issued and outstanding at March 31, 2025 and December 31, 2024	—		—
Common stock, no par value; 100,000,000 shares authorized; 21,329,235 shares issued and outstanding at March 31, 2025; 21,319,083 shares issued and outstanding at December 31, 2024	302,788		302,531
Retained earnings	115,309		106,464
Accumulated other comprehensive loss, net of taxes	(11,646)		(12,371)
Total shareholders’ equity	406,451		396,624
Total liabilities and shareholders’ equity	$	4,245,057	$	4,053,278

See accompanying notes to the unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share amounts)	2025		2024
Interest and fee income:
Loans, including fees	$	52,931	$	43,786
Taxable securities	407		477
Nontaxable securities	174		176
Interest-bearing deposits in banks	3,575		3,102
Total interest and fee income	57,087		47,541

Interest expense:
Deposits	21,948		19,511
Subordinated notes	1,162		1,161
Other borrowings	—		125
Total interest expense	23,110		20,797

Net interest income	33,977		26,744
Provision for credit losses	1,900		900
Net interest income after provision for credit losses	32,077		25,844

Non-interest income:
Service charges on deposit accounts	215		188

Gain on sale of loans	125		369
Loan-related fees	448		429
FHLB stock dividends	331		332
Earnings on BOLI	161		142
Other	79		373
Total non-interest income	1,359		1,833

Non-interest expense:
Salaries and employee benefits	9,134		7,577
Occupancy and equipment	637		626
Data processing and software	1,457		1,157
FDIC insurance	455		400
Professional services	913		707
Advertising and promotional	522		460
Loan-related expenses	319		297
Other operating expenses	1,608		1,492
Total non-interest expense	15,045		12,716

Income before provision for income taxes	18,391		14,961

Provision for income taxes	5,280		4,330

Net income	$	13,111	$	10,631

Basic earnings per common share	$	0.62	$	0.62
Diluted earnings per common share	$	0.62	$	0.62

See accompanying notes to unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2025		2024
Net income	$	13,111	$	10,631

Unrealized gain (loss) on securities:
Net unrealized holding gain (loss) on securities available-for-sale during the period	1,030		(955)

Less: Income tax expense (benefit) related to items of other comprehensive income (loss)	305		(282)
Other comprehensive income (loss)	725		(673)

Total comprehensive income	$	13,836	$	9,958

See accompanying notes to the unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
(in thousands, except per share amounts)	Shares	Amount
Balance at December 31, 2023	17,256,989	$	220,505	$	77,036	$	(11,767)	$	285,774

Net income	—	—		10,631		—		10,631
Other comprehensive loss	—	—		—		(673)		(673)
Stock issued under stock award plans	96,380	—		—		—		—
Stock compensation expense	—	299		—		—		299
Stock forfeitures	(118)	—		—		—		—
Cash dividends paid ($0.20 per share)	—	—		(3,451)		—		(3,451)
Balance at March 31, 2024	17,353,251	$	220,804	$	84,216	$	(12,440)	$	292,580

Balance at December 31, 2024	21,319,083	$	302,531	$	106,464	$	(12,371)	$	396,624
Net income	—	—		13,111		—		13,111
Other comprehensive income	—	—		—		725		725

Stock issued under stock award plans	10,485	—		—		—		—
Stock compensation expense	—	257		—		—		257
Stock forfeitures	(333)	—		—		—		—
Cash dividends paid ($0.20 per share)	—	—		(4,266)		—		(4,266)
Balance at March 31, 2025	21,329,235	$	302,788	$	115,309	$	(11,646)	$	406,451

See accompanying notes to the unaudited consolidated financial statements.

FIVE STAR BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2025		2024
Cash flows from operating activities:
Net income	$	13,111	$	10,631
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	1,900		900
Depreciation and amortization	461		472
Amortization of deferred loan fees and costs	51		(127)
Amortization of premiums and discounts on securities	221		246
Amortization of subordinated note issuance costs	36		36
Amortization of low income housing tax credits	354		—
Stock compensation expense	257		299
Earnings on BOLI	(161)		(142)
Deferred tax provision	—		6
Loans originated for sale	(4,390)		(15,453)
Gain on sale of loans	(125)		(369)
Gross proceeds from sale of loans	1,846		5,580

Gain on partial sale of equity investment	—		300
Net changes in:
Interest receivable and other assets	(1,644)		2,050
Interest payable and other liabilities	3,821		(3,941)
Operating lease liability	(266)		(241)
Net cash provided by operating activities	15,472		247
Cash flows from investing activities:

Maturities, prepayments, and calls of securities available-for-sale	2,029		1,953

Capital call for equity investment	(1,250)		(1,000)
Proceeds received from equity investment	—		300

Net change in time deposits in banks	97		(20)
Loan originations, net of repayments	(86,404)		(11,498)
Purchase of premises and equipment	(100)		(108)

Purchase of BOLI	(3,710)		(1,550)
Net cash used in investing activities	(89,338)		(11,923)
Cash flows from financing activities:
Net change in deposits	178,360		(71,124)

Advances (payments) on other borrowings	—		(50,000)
Cash dividends paid	(4,266)		(3,451)


Net cash provided by (used in) financing activities	174,094		(124,575)
Net change in cash and cash equivalents	100,228		(136,251)
Cash and cash equivalents at beginning of period	352,343		321,576
Cash and cash equivalents at end of period	$	452,571	$	185,325

Supplemental disclosure of cash flow information:
Interest paid	$	23,044	$	22,568
Income taxes paid	26		144
Supplemental disclosure of noncash items:
Transfer from loans held for sale to loans held for investment	3,247		11,464
Unrealized gain (loss) on securities	1,030		(955)
Operating lease liabilities exchanged for ROUA	—		1,958
ROUA acquired	—		(1,958)

See accompanying notes to the unaudited consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

(a) Organization

Five Star Bank (the “Bank”) was chartered on October 26, 1999 and began operations on December 20, 1999. Five Star Bancorp (“Bancorp” or the “Company”) was incorporated on September 16, 2002 and subsequently obtained approval from the Federal Reserve to become a bank holding company in connection with its acquisition of the Bank. The Company became the sole shareholder of the Bank on June 2, 2003 in a statutory merger, pursuant to which each outstanding share of the Bank’s common stock was exchanged for one share of common stock of the Company.

The Company, through the Bank, provides financial services to customers who are predominately small and middle-market businesses, professionals, and individuals residing in the Northern California region. The Company’s primary loan products are commercial real estate loans, land development loans, construction loans, and operating lines of credit, and its primary deposit products are checking accounts, savings accounts, money market accounts, and term certificate accounts. The Bank currently has eight branch offices in Roseville, Natomas, Rancho Cordova, Redding, Elk Grove, Chico, Yuba City, and San Francisco.

(b) Basis of Financial Statement Presentation and Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board’s (“FASB”) ASC and the rules and regulations of the SEC, including the instructions to Regulation S-X. These interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in shareholders’ equity, and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, 2024, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”), which was filed with the SEC on February 28, 2025.

The unaudited consolidated financial statements include Bancorp and its wholly owned subsidiary, the Bank. All significant intercompany transactions and balances are eliminated in consolidation.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2025.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry.

The Company has one reportable operating segment: banking. The banking segment derives its revenues through the Bank, which provides a broad range of banking products and services to customers who are predominantly small to medium-sized businesses, professionals, and individuals primarily in Northern California. The Company manages the business activities on a consolidated basis.

The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM assesses performance for the operating segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets.

These financial metrics are used by the CODM to make key operating decisions, such as determination of the rate at which the Company seeks to grow, loan and deposit pricing, and the allocation of budget for non-interest expenses. Net income is used to monitor budget versus actual results. Discrete financial information is not available other than on a Company-wide basis.

(d) Emerging Growth Company

The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, and, as such, may take advantage of specified reduced reporting requirements and deferred adoption dates for accounting standards, and is relieved of other significant requirements that are otherwise generally applicable to other public companies. The Company will remain an emerging growth company for five years after its IPO date of May 5, 2021, unless one of the following occurs: (i) total annual gross revenues are $1.235 billion or more; (ii) the Company issues more than $1.0 billion in non-convertible debt; or (iii) the Company becomes a large accelerated filer with a public float of more than $0.7 billion, as measured at June 30 annually.

(e) Significant Accounting Policies

The Company’s significant accounting policies are included in Note 1, Basis of Presentation in the notes to our audited consolidated financial statements included in the 2024 Annual Report on Form 10-K.

(f) Recently Issued Accounting Standards

The following information reflects recent accounting standards that have been adopted or are pending adoption by the Company. The Company qualifies as an emerging growth company and, as such, has elected not to opt out of the extended transition period for complying with new or revised accounting standards and is not subject to the new or revised accounting standards applicable to public companies during the extended transition period. The accounting standards discussed below indicate effective dates for the Company as an emerging growth company using the extended transition period.

Accounting Standards Adopted in 2025

None.

Accounting Standards Issued But Not Yet Adopted

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”), amending disclosure or presentation requirements related to various subtopics in the FASB’s ASC. ASU 2023-06 was issued in response to the SEC’s initiative to update and simplify disclosure requirements. The SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into GAAP. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations as the FASB incorporated them into the relevant ASC subtopics. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC. ASU 2023-06 is to be applied prospectively, and early adoption is prohibited. For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entities. ASU 2023-06 is not expected to have a significant impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. Entities will also be required to disclose income/(loss) from continuing operations before income tax expense/(benefit) disaggregated between domestic and foreign operations, as well as income tax expense/(benefit) from continuing operations disaggregated by federal, state, and foreign operations. ASU 2023-09 is effective January 1, 2026 for emerging growth companies electing not to opt out of the extended transition period and is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements (“ASU 2024-02”). ASU 2024-02 contains amendments to the ASC that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Statements to provide guidance in certain topical areas. FASB Concepts Statements are nonauthoritative. Removing all references to Concepts Statements in the guidance is intended to

simplify the ASC and draw a distinction between authoritative and nonauthoritative literature. ASU 2024-02 is effective January 1, 2026 for emerging growth companies electing not to opt out of the extended transition period and is not expected to have a significant impact on the Company’s consolidated financial statements.

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“Subtopic 220-40”): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 the FASB issued ASU 2025-01, Clarifying the Effective Date. This standard responds to investor input by requiring public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. This standard is effective for all entities that are subject to Subtopic 220-40, for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, but early adoption is permitted. ASU 2024-03 is not expected to have a significant impact on the Company’s consolidated financial statements.

Note 2: Fair Value of Assets and Liabilities

Fair Value Hierarchy and Fair Value Measurement

Accounting standards require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Table 2.1 summarizes the Company’s assets and liabilities required to be recorded at fair value on a recurring basis.


Table 2.1: Fair Value on a Recurring Basis
(in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Measurement Categories: Changes in Fair Value Recorded In
March 31, 2025
Assets:
Securities available-for-sale:
U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, collateralized mortgage obligations, and corporate bonds	$	97,111	$	—	$	97,111	$	—	OCI




December 31, 2024
Assets:
Securities available-for-sale:
U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, collateralized mortgage obligations, and corporate bonds	$	98,194	$	—	$	98,194	$	—	OCI

Available-for-sale securities are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1 inputs) are used to determine the fair value of available-for-sale securities. If quoted market prices are not available, management obtains pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity, and credit spreads (Level 2 inputs). Level 2 securities include U.S. agencies’ or government-sponsored agencies’ debt securities, mortgage-backed securities, government agency-issued bonds, privately issued collateralized mortgage obligations, and corporate bonds. Level 3 securities are based on unobservable inputs that are supported by little or no market activity. In addition, values use discounted cash flow models and may include significant management judgment and estimation. As of March 31, 2025 and December 31, 2024, there were no Level 1 available-for-sale securities and no transfers between Level 1 and Level 2 classifications for assets or liabilities measured at fair value on a recurring basis.

On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date. Standard valuation techniques are used to calculate the present value of the future expected cash flows assuming an orderly transaction. Valuation adjustments may be made to reflect both the Company’s credit risk and the counterparties’ credit risk in determining the fair value of the derivatives. A similar credit risk adjustment, correlated to the credit standing of the counterparty, is made when collateral posted by the counterparty does not fully cover their liability to the Company. There was no carrying value or fair value for interest rate swaps as of March 31, 2025 and December 31, 2024.

Certain financial assets may be measured at fair value on a non-recurring basis. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as collateral dependent loans and other real estate owned. As of March 31, 2025 and December 31, 2024, the carrying amount of assets measured at fair value on a non-recurring basis was immaterial to the Company.

Disclosures about Fair Value of Financial Instruments

Table 2.2 is a summary of fair value estimates for financial instruments as of March 31, 2025 and December 31, 2024. The carrying amounts in Table 2.2 are recorded in the consolidated balance sheets under the indicated captions. Further, management has not disclosed the fair value of financial instruments specifically excluded from disclosure requirements, such as BOLI.


Table 2.2: Fair Value Estimates for Financial Instruments
	March 31, 2025					December 31, 2024
(in thousands)	Carrying Amounts		Fair Value		Fair Value Hierarchy	Carrying Amounts		Fair Value		Fair Value Hierarchy
Financial assets:
Cash and cash equivalents	$	452,571	$	452,571	Level 1	$	352,343	$	352,343	Level 1
Time deposits in banks	4,024		4,024		Level 1	4,121		4,121		Level 1
Securities available-for-sale	97,111		97,111		Level 2	98,194		98,194		Level 2
Securities held-to-maturity	2,585		2,275		Level 3	2,720		2,353		Level 3
Loans held for sale	2,669		2,967		Level 2	3,247		3,597		Level 2
Loans held for investment, net of allowance for credit losses	3,582,595		3,512,114		Level 3	3,494,895		3,412,032		Level 3

Financial liabilities:

Time deposits	801,386		800,074		Level 2	670,154		669,078		Level 2
Subordinated notes	73,932		73,481		Level 3	73,895		73,371		Level 3

The Company used the following methods and assumptions to estimate the fair value of its financial instruments at March 31, 2025 and December 31, 2024:

Cash and cash equivalents and time deposits in banks: The carrying amount is estimated to be fair value due to the liquid nature of the assets and their short-term maturities.

Investment securities: See discussion above for the methods and assumptions used by the Company to estimate the fair value of investment securities. Fair value of held-to-maturity securities is estimated by calculating the net present value of future cash flows based on observable market data, such as interest rates and yield curves (observable at commonly quoted intervals) as provided by an independent third party.

Loans held for sale: The fair value is based on what secondary markets are currently offering for portfolios with similar characteristics.

Loans held for investment, net of allowance for credit losses: For variable rate loans that reprice frequently with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, which use interest rates being offered at each reporting date for loans with similar terms to borrowers of comparable creditworthiness without considering widening credit spreads due to market illiquidity, which approximates the exit price notion. The allowance for credit losses is considered to be a reasonable estimate of loan discount for credit quality concerns.

Commitments to extend credit: These are primarily for adjustable rate loans, and there are no differences between the committed amounts and their fair values. Commitments to fund fixed rate loans are at rates which approximate fair value at each reporting date.

Time deposits: The fair value is estimated using a discounted cash flow analysis that uses interest rates offered at each reporting date by the Company for certificates with similar remaining maturities, resulting in a Level 2 classification.

Subordinated notes: The fair value is estimated by discounting the future cash flow using the current three-month CME Term SOFR. The Company’s subordinated notes are not registered securities and were issued through private placements, resulting in a Level 3 classification. The notes are recorded at carrying value.

Other borrowings: The carrying amount is estimated to be fair value.

Note 3: Investment Securities

The Company’s investment securities portfolio includes obligations of states and political subdivisions, securities issued by U.S. federal government agencies, such as the SBA, and securities issued by U.S. GSEs, such as the FNMA, the FHLMC, and the FHLB. The Company also invests in residential and commercial mortgage-backed securities, collateralized mortgage obligations issued or guaranteed by GSEs, and corporate bonds, as reflected in Tables 3.1 and 3.2.

A summary of the amortized cost and fair value related to securities held-to-maturity as of March 31, 2025 and December 31, 2024 is presented in Table 3.1. Securities held-to-maturity, at amortized cost, had a $20.0 thousand allowance for credit losses as of March 31, 2025 and December 31, 2024.


Table 3.1: Securities Held-to-Maturity
(in thousands)	Amortized Cost		Gross Unrealized				Fair Value
			Gains		(Losses)
March 31, 2025
Obligations of states and political subdivisions	$	2,585	$	—	$	(310)	$	2,275
Total held-to-maturity	$	2,585	$	—	$	(310)	$	2,275
December 31, 2024
Obligations of states and political subdivisions	$	2,720	$	—	$	(367)	$	2,353
Total held-to-maturity	$	2,720	$	—	$	(367)	$	2,353

For securities issued by states and political subdivisions, for purposes of evaluating whether to recognize credit loss expense, management considers: (i) issuer and/or guarantor credit ratings; (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity; (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities; (iv) internal credit review of the financial information; and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

As of March 31, 2025 and December 31, 2024, the allowance for credit losses on held-to-maturity securities, at amortized cost, was $20.0 thousand. The Company did not record an allowance for credit losses on available-for-sale securities as of March 31, 2025 or December 31, 2024.

A summary of the amortized cost and fair value related to securities available-for-sale as of March 31, 2025 and December 31, 2024 is presented in Table 3.2. Securities available-for-sale did not have an allowance for credit losses as of March 31, 2025 or December 31, 2024.


Table 3.2: Securities Available-for-Sale
(in thousands)	Amortized Cost		Gross Unrealized				Fair Value
			Gains		(Losses)
March 31, 2025
U.S. government agency securities	$	7,513	$	147	$	(86)	$	7,574
Mortgage-backed securities	61,210		16		(10,929)		50,297
Obligations of states and political subdivisions	42,630		1		(5,559)		37,072
Collateralized mortgage obligations	289		—		(22)		267
Corporate bonds	2,000		—		(99)		1,901
Total available-for-sale	$	113,642	$	164	$	(16,695)	$	97,111
December 31, 2024
U.S. government agency securities	$	8,293	$	152	$	(100)	$	8,345
Mortgage-backed securities	62,397		6		(11,833)		50,570
Obligations of states and political subdivisions	42,762		1		(5,626)		37,137
Collateralized mortgage obligations	305		—		(26)		279
Corporate bonds	2,000		—		(137)		1,863
Total available-for-sale	$	115,757	$	159	$	(17,722)	$	98,194

The amortized cost and fair value of investment securities by contractual maturity at March 31, 2025 and December 31, 2024 are shown in Table 3.3. Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties.


Table 3.3: Contractual Maturities - Investment Securities
(in thousands)	March 31, 2025								December 31, 2024
	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	195	$	172	$	—	$	—	$	210	$	182	$	—	$	—
After one but within five years	905		796		794		738		945		818		798		737
After five years through ten years	1,315		1,157		10,514		9,282		1,380		1,193		9,221		8,108
After ten years	170		150		31,322		27,052		185		160		32,743		28,292

Investment securities not due at a single maturity date:
U.S. government agency securities	—		—		7,513		7,574		—		—		8,293		8,345
Mortgage-backed securities	—		—		61,210		50,297		—		—		62,397		50,570
Collateralized mortgage obligations	—		—		289		267		—		—		305		279
Corporate bonds	—		—		2,000		1,901		—		—		2,000		1,863
Total	$	2,585	$	2,275	$	113,642	$	97,111	$	2,720	$	2,353	$	115,757	$	98,194

There were no purchases or sales of investment securities during the three months ended March 31, 2025 and March 31, 2024.


Table 3.4: Pledged Investment Securities
(in thousands)	March 31, 2025		December 31, 2024
Pledged to:
The State of California, securing deposits of public funds and borrowings	$	49,201	$	49,477
The Federal Reserve Discount Window, increasing borrowing capacity	44,782		45,576
Total pledged investment securities	$	93,983	$	95,053

Table 3.5 details the gross unrealized losses and fair values aggregated by investment category and length of time that individual available-for-sale securities have been in a continuous unrealized loss position at March 31, 2025 and December 31, 2024.


Table 3.5: Securities Available-for-Sale in Continuous Unrealized Loss Positions
(in thousands)	Less than 12 months				12 months or more				Total securities in a loss position
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
March 31, 2025
U.S. government agency securities	$	2,183	$	(14)	$	3,750	$	(72)	$	5,933	$	(86)
Mortgage-backed securities	—		—		49,200		(10,929)		49,200		(10,929)
Obligations of states and political subdivisions	—		—		35,567		(5,559)		35,567		(5,559)
Collateralized mortgage obligations	—		—		268		(22)		268		(22)
Corporate bonds	—		—		1,901		(99)		1,901		(99)
Total temporarily impaired securities	$	2,183	$	(14)	$	90,686	$	(16,681)	$	92,869	$	(16,695)

December 31, 2024
U.S. government agency securities	$	2,316	$	(11)	$	4,082	$	(89)	$	6,398	$	(100)
Mortgage-backed securities	—		—		49,476		(11,833)		49,476		(11,833)
Obligations of states and political subdivisions	—		—		35,630		(5,626)		35,630		(5,626)
Collateralized mortgage obligations	—		—		279		(26)		279		(26)
Corporate bonds	—		—		1,863		(137)		1,863		(137)
Total temporarily impaired securities	$	2,316	$	(11)	$	91,330	$	(17,711)	$	93,646	$	(17,722)

There were 147 available-for-sale securities in unrealized loss positions at both March 31, 2025 and December 31, 2024. As of March 31, 2025, the investment portfolio included 141 investment securities that had been in a continuous loss position for twelve months or more and six investment securities that had been in a loss position for less than twelve months.

There was one held-to-maturity security in a continuous unrealized loss position at both March 31, 2025 and December 31, 2024, which at December 31, 2024 had been in a continuous loss position for more than twelve months.

Obligations issued or guaranteed by government agencies such as the GNMA and the SBA or GSEs under conservatorship such as the FNMA and the FHLMC, are guaranteed or sponsored by agencies of the U.S. government and have strong credit profiles. The Company therefore expects to receive all contractual interest payments on time and believes the risk of credit losses on these securities is remote.

The Company’s investment in obligations of states and political subdivisions is deemed credit worthy after management’s comprehensive analysis of the issuers’ latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

Non-Marketable Securities

FHLB capital stock: As a member of the FHLB, the Company is required to maintain a minimum investment in FHLB capital stock determined by the board of directors of the FHLB. The minimum investment requirements can increase in the event the Company increases its total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. The Company held $15.0 million of FHLB stock at both March 31, 2025 and December 31, 2024. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and do not have a readily determinable market value. Based on management’s analysis of the FHLB’s financial condition and certain qualitative factors, management determined that the FHLB stock was not impaired at March 31, 2025 or December 31, 2024.

Note 4: Loans and Allowance for Credit Losses

The Company’s loan portfolio is its largest class of earning assets and typically provides higher yields than other types of earning assets. Associated with the higher yields is an inherent amount of credit risk which the Company attempts to mitigate through strong underwriting practices. Table 4.1 presents the balance of each major product type within the Company’s portfolio as of the dates indicated.


Table 4.1: Loans Outstanding
(in thousands)	March 31, 2025		December 31, 2024
Real estate:
Commercial	$	2,941,201	$	2,857,173
Commercial land and development	3,556		3,849
Commercial construction	113,002		111,318
Residential construction	5,747		4,561
Residential	34,053		32,774
Farmland	43,643		47,241
Commercial:
Secured	170,525		170,548
Unsecured	34,970		27,558
Consumer and other	277,093		279,584
Subtotal	3,623,790		3,534,606
Net deferred loan fees	(1,971)		(1,920)
Loans held for investment	3,621,819		3,532,686
Allowance for credit losses	(39,224)		(37,791)
Loans held for investment, net of allowance for credit losses	$	3,582,595	$	3,494,895

Underwriting

Real estate loans: Real estate loans are subject to underwriting standards and processes similar to those for commercial loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected than other loans by conditions in the real estate market or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria.

Construction loans: With respect to construction loans that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction loans may be underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the ultimate success of the project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored using on-site inspections and are generally considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.

Residential real estate loans: Residential real estate loans are underwritten based upon the borrower’s income, credit history, and collateral. To monitor and manage residential loan risk, policies and procedures are developed and modified,

as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements.

Farmland loans: Farmland loans are generally made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Farmland loans are secured by real property and are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles, as well as adverse weather conditions.

Commercial loans: Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Consumer loans: The Company purchased consumer loans underwritten utilizing credit scoring analysis to supplement the underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements.

Credit Quality Indicators

The Company has established a loan risk rating system to measure and monitor the quality of the loan portfolio. All loans are assigned a risk rating from the inception of the loan until the loan is paid off. The primary loan grades are as follows:

Loans rated pass: These are loans to borrowers with satisfactory financial support, repayment capacity, and credit strength. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history, and management expertise. Loans in this category must have an identifiable and stable source of repayment and meet the Company’s policy regarding debt service coverage ratios. These borrowers are capable of sustaining normal economic, market, or operational setbacks without significant financial impacts and their financial ratios and trends are acceptable. Negative external industry factors are generally not present. The loan may be secured, unsecured, or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain.

Loans rated watch: These are loans which have deficient loan quality and potentially significant issues, but losses do not appear to be imminent, and the issues may be temporary in nature. The significant issues are typically: (i) a history of losses or events that threaten the borrower’s viability; (ii) a property with significant depreciation and/or marketability concerns; or (iii) poor or deteriorating credit, occasional late payments, and/or limited reserves but the loan is generally kept current. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Loans rated substandard: These are loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged (if any). Loans so classified exhibit a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected.

Loans rated doubtful: These are loans for which the collection or liquidation of the entire debt is highly questionable or improbable. Typically, the possibility of loss is extremely high. The losses on these loans are deferred until all pending factors have been addressed.

Table 4.2 presents the amortized cost basis of the Company’s loans by origination year, where origination is defined as the later of origination or renewal date, and credit quality indicator as of the periods indicated.


Table 4.2: Loans by Risk Category and Vintage


	Amortized Cost Basis by Origination Year as of March 31, 2025
(in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans		Revolving Converted to Term		Total
Real estate:
Commercial
Pass	$	120,306	$	422,735	$	299,751	$	881,165	$	612,219	$	494,109	$	6,241	$	—	$	2,836,526
Watch	—		640		9,579		37,903		25,092		23,699		1,391		—		98,304
Substandard	—		—		—		1,102		—		2,551		—		—		3,653

Total	120,306		423,375		309,330		920,170		637,311		520,359		7,632		—		2,938,483
Commercial land and development
Pass	1,551		420		—		767		—		816		—		—		3,554



Total	1,551		420		—		767		—		816		—		—		3,554
Commercial construction
Pass	6,377		17,630		88,230		525		—		—		—		—		112,762



Total	6,377		17,630		88,230		525		—		—		—		—		112,762
Residential construction
Pass	—		5,745		—		—		—		—		—		—		5,745



Total	—		5,745		—		—		—		—		—		—		5,745
Residential
Pass	410		6,080		4,770		2,852		9,429		8,350		2,184		—		34,075



Total	410		6,080		4,770		2,852		9,429		8,350		2,184		—		34,075
Farmland
Pass	341		974		2,034		6,353		8,486		24,150		—		—		42,338
Watch	—		501		—		787		—		—		—		—		1,288


Total	341		1,475		2,034		7,140		8,486		24,150		—		—		43,626
Commercial:
Secured
Pass	16,158		31,212		18,509		20,846		8,918		21,695		41,560		—		158,898
Watch	—		—		673		6,501		2,588		1,119		1,492		—		12,373
Substandard	—		—		—		—		—		43		—		—		43

Total	16,158		31,212		19,182		27,347		11,506		22,857		43,052		—		171,314
Unsecured
Pass	3,619		9,134		3,088		1,616		2,363		3,818		11,350		—		34,988



Total	3,619		9,134		3,088		1,616		2,363		3,818		11,350		—		34,988
Consumer and other
Pass	8,988		225,069		30,474		7,072		5,342		194		125		—		277,264

Substandard	—		—		—		8		—		—		—		—		8

Total	8,988		225,069		30,474		7,080		5,342		194		125		—		277,272
Total
Pass	157,750		718,999		446,856		921,196		646,757		553,132		61,460		—		3,506,150
Watch	—		1,141		10,252		45,191		27,680		24,818		2,883		—		111,965
Substandard	—		—		—		1,110		—		2,594		—		—		3,704

Total	$	157,750	$	720,140	$	457,108	$	967,497	$	674,437	$	580,544	$	64,343	$	—	$	3,621,819


Table 4.2: Loans by Risk Category and Vintage (continued)


	Amortized Cost Basis by Origination Year as of December 31, 2024
(in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Converted to Term		Total
Real estate:
Commercial
Pass	$	427,209	$	298,408	$	881,675	$	618,052	$	202,356	$	312,622	$	3,688	$	—	$	2,744,010
Watch	641		8,193		42,531		31,895		16,969		6,316		1,391		—		107,936
Substandard	—		—		—		—		—		2,585		—		—		2,585

Total	427,850		306,601		924,206		649,947		219,325		321,523		5,079		—		2,854,531
Commercial land and development
Pass	1,781		—		1,237		—		180		656		—		—		3,854



Total	1,781		—		1,237		—		180		656		—		—		3,854
Commercial construction
Pass	13,757		72,933		13,112		—		11,231		—		—		—		111,033



Total	13,757		72,933		13,112		—		11,231		—		—		—		111,033
Residential construction
Pass	4,560		—		—		—		—		—		—		—		4,560



Total	4,560		—		—		—		—		—		—		—		4,560
Residential
Pass	6,080		4,783		2,869		9,483		2,201		6,246		1,134		—		32,796



Total	6,080		4,783		2,869		9,483		2,201		6,246		1,134		—		32,796
Farmland
Pass	1,054		2,042		7,032		11,467		6,960		17,373		—		—		45,928
Watch	501		—		791		—		—		—		—		—		1,292


Total	1,555		2,042		7,823		11,467		6,960		17,373		—		—		47,220
Commercial:
Secured
Pass	26,536		20,427		21,142		9,607		9,144		14,400		55,914		—		157,170
Watch	—		301		9,840		2,581		107		1,289		—		—		14,118
Substandard	—		—		—		—		—		48		—		—		48

Total	26,536		20,728		30,982		12,188		9,251		15,737		55,914		—		171,336
Unsecured
Pass	8,071		4,499		2,815		3,494		4,817		1,364		2,515		—		27,575



Total	8,071		4,499		2,815		3,494		4,817		1,364		2,515		—		27,575
Consumer and other
Pass	232,420		33,453		7,874		5,812		6		207		—		—		279,772

Substandard	—		—		9		—		—		—		—		—		9

Total	232,420		33,453		7,883		5,812		6		207		—		—		279,781
Total
Pass	721,468		436,545		937,756		657,915		236,895		352,868		63,251		—		3,406,698
Watch	1,142		8,494		53,162		34,476		17,076		7,605		1,391		—		123,346
Substandard	—		—		9		—		—		2,633		—		—		2,642

Total	$	722,610	$	445,039	$	990,927	$	692,391	$	253,971	$	363,106	$	64,642	$	—	$	3,532,686

Management regularly reviews the Company’s loans for accuracy of risk grades whenever new information is received. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals generally ranging from monthly to annually depending on credit size, risk, and complexity. All commercial borrowers with loans exceeding a certain dollar threshold are usually required to submit financials annually for review; this includes business financial statements, rent rolls, property income statements, and tax returns. Management monitors construction loans monthly and reviews consumer loans based on delinquency. Management also reviews loans graded “watch” or worse, regardless of loan type, no less than quarterly.

Table 4.3 shows the age analysis of past due loans by class as of the dates shown.


Table 4.3: Age Analysis of Past Due Loans by Class
(in thousands)	Past Due
	30-59 Days		60-89 Days		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable
March 31, 2025
Real estate:
Commercial	$	386	$	—	$	—	$	386	$	2,938,097	$	2,938,483
Commercial land and development	—		—		—		—		3,554		3,554
Commercial construction	—		—		—		—		112,762		112,762
Residential construction	—		—		—		—		5,745		5,745
Residential	—		—		—		—		34,075		34,075
Farmland	—		—		—		—		43,626		43,626
Commercial:
Secured	1,232		—		—		1,232		170,082		171,314
Unsecured	—		—		—		—		34,988		34,988

Consumer and other	30		—		—		30		277,242		277,272
Total	$	1,648	$	—	$	—	$	1,648	$	3,620,171	$	3,621,819

December 31, 2024
Real estate:
Commercial	$	—	$	—	$	—	$	—	$	2,854,531	$	2,854,531
Commercial land and development	—		—		—		—		3,854		3,854
Commercial construction	—		—		—		—		111,033		111,033
Residential construction	—		—		—		—		4,560		4,560
Residential	—		—		—		—		32,796		32,796
Farmland	—		—		—		—		47,220		47,220
Commercial:
Secured	1,107		—		—		1,107		170,229		171,336
Unsecured	—		—		—		—		27,575		27,575

Consumer and other	67		—		—		67		279,714		279,781
Total	$	1,174	$	—	$	—	$	1,174	$	3,531,512	$	3,532,686

There were no loans greater than 90 days past due and still accruing interest income as of March 31, 2025 or December 31, 2024.

No collateral dependent loans were in process of foreclosure at March 31, 2025 or December 31, 2024. The Company had one collateral dependent commercial real estate loan outstanding as of March 31, 2025 and December 31, 2024 in the amounts of $1.7 million and $1.8 million, respectively, for which the borrower was experiencing financial difficulty.

Non-accrual loans, segregated by class, as of March 31, 2025 and December 31, 2024 are shown in Table 4.4.


Table 4.4: Non-accrual Loans
(in thousands)	March 31, 2025		December 31, 2024
Real estate:
Commercial	$	1,722	$	1,750

Commercial:
Secured	43		48

Total non-accrual loans	$	1,765	$	1,798

No interest income was recognized on non-accrual loans in the three months ended March 31, 2025 or March 31, 2024. Non-accrual real estate loans did not have an allowance for credit losses as of March 31, 2025. Interest income can be recognized on non-accrual loans in cases where resolution occurs through a sale or full payment is received on the non-accrual loan.

The amount of foregone interest income related to non-accrual loans was $35.2 thousand for the three months ended March 31, 2025, as compared to $39.2 thousand for the three months ended March 31, 2024.

Allowance for Credit Losses

Table 4.5 discloses activity in the allowance for credit losses for the periods indicated.


Table 4.5: Allowance for Credit Losses
(in thousands)	Beginning Balance		Charge-offs		Recoveries		Provision (Benefit)		Ending Balance
Three months ended March 31, 2025
Real estate:
Commercial	$	25,864	$	—	$	—	$	1,163	$	27,027
Commercial land and development	78		—		—		(8)		70
Commercial construction	2,268		—		—		(41)		2,227
Residential construction	64		—		—		14		78
Residential	270		—		—		9		279
Farmland	607		—		—		(9)		598
Commercial:
Secured	5,866		(745)		64		720		5,905
Unsecured	278		—		—		125		403

Consumer and other	2,496		(71)		35		177		2,637

Total	$	37,791	$	(816)	$	99	$	2,150	$	39,224

Three months ended March 31, 2024
Real estate:
Commercial	$	29,015	$	—	$	—	$	(120)	$	28,895
Commercial land and development	178		—		—		(14)		164
Commercial construction	718		—		—		(21)		697
Residential construction	89		—		—		25		114
Residential	151		—		—		13		164
Farmland	399		—		—		39		438
Commercial:
Secured	3,314		(998)		182		764		3,262
Unsecured	189		(34)		—		104		259

Consumer and other	378		(71)		93		260		660

Total	$	34,431	$	(1,103)	$	275	$	1,050	$	34,653

Unfunded Loan Commitment Reserves

Unfunded loan commitment reserves are included in “Interest payable and other liabilities” in the unaudited consolidated balance sheets. Provisions for unfunded loan commitments are included in “Provision for credit losses” in the unaudited consolidated statements of income.


Table 4.6: Unfunded Loan Commitment Reserves
	Three months ended
(in thousands)	March 31, 2025		March 31, 2024
Balance at beginning of period	$	747	$	1,247

Provision (benefit)	(250)		(150)


Balance at end of period	$	497	$	1,097

Pledged Loans

The Company’s FHLB line of credit is secured under terms of a collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.9 billion at March 31, 2025 and December 31, 2024. In addition, the Company pledges eligible tenants in common loans, which totaled $1.2 billion at March 31, 2025 and December 31, 2024, to secure its borrowing capacity with the Federal Reserve Discount Window. See Note 6, Subordinated Notes and Other Borrowings, for further discussion of these borrowings.

Note 5: Interest-Bearing Deposits

Table 5.1 shows the composition of interest-bearing deposits as of March 31, 2025 and December 31, 2024.


Table 5.1: Interest-Bearing Deposits
(in thousands)	March 31, 2025		December 31, 2024
Interest-bearing transaction accounts	$	295,633	$	315,217
Savings accounts	128,210		124,702
Money market accounts	1,577,473		1,525,292
Time accounts, $250 or more	376,237		344,129
Other time accounts	425,149		326,025

Total interest-bearing deposits	$	2,802,702	$	2,635,365

Time deposits totaled $801.4 million and $670.2 million as of March 31, 2025 and December 31, 2024, respectively. Scheduled maturities of time deposits as of March 31, 2025 for the next five years are shown in Table 5.2.


Table 5.2: Scheduled Maturities of Time Deposits
(in thousands)
2025	$	770,268
2026	30,025
2027	1,093
2028	—
2029	—
Total time deposits	$	801,386

Total deposits include deposits offered through the IntraFi Network that are comprised of Certificate of Deposit Account Registry Service® (“CDARS”) balances included in time deposits and Insured Cash Sweep® (“ICS”) balances included in money market and interest-bearing transaction deposits. Through this network, the Company offers customers access to FDIC-insured deposit products in aggregate amounts exceeding current insurance limits. When funds are deposited through CDARS and ICS on behalf of a customer, the Company has the option of receiving matching deposits through the network’s reciprocal deposit program or placing deposits “one-way,” for which the Company receives no matching deposits. The Company considers the reciprocal deposits to be in-market deposits, as distinguished from traditional out-of-market brokered deposits. There were no one-way deposits at March 31, 2025 or December 31, 2024. The composition of network deposits as of March 31, 2025 and December 31, 2024 is shown in Table 5.3.


Table 5.3: Network Deposits
(in thousands)	March 31, 2025		December 31, 2024
CDARS	$	18,679	$	19,292
ICS	676,433		674,453
Total network deposits	$	695,112	$	693,745

Table 5.4 presents interest expense recognized on interest-bearing deposits for the periods ended March 31, 2025 and 2024.


Table 5.4: Interest Expense Recognized on Interest-Bearing Deposits
	Three months ended
(in thousands)	March 31, 2025		March 31, 2024
Interest-bearing transaction accounts	$	1,112	$	1,126
Savings accounts	772		861
Money market accounts	12,435		12,155
Time accounts, $250 or more	3,756		3,824
Other time accounts	3,873		1,545
Total interest expense on interest-bearing deposits	$	21,948	$	19,511

Note 6: Subordinated Notes and Other Borrowings

Subordinated notes: On August 17, 2022, the Company completed a private placement of $75.0 million of fixed-to-floating rate subordinated notes to certain qualified investors, of which $19.3 million was purchased by existing or former members of the board of directors and their affiliates. The notes will be used for capital management and general corporate purposes, including, without limitation, the redemption of existing subordinated notes. The subordinated notes have a maturity date of September 1, 2032 and bear interest, payable semi-annually, at the rate of 6.00% per annum until September 1, 2027. On that date, the interest rate will be adjusted to float at a rate equal to the three-month Term SOFR plus 329.0 basis points (7.58% as of March 31, 2025) until maturity. The notes include a right of prepayment, on or after August 17, 2027 or, in certain limited circumstances, before that date. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior in right to payment to general and secured creditors and depositors of the Company.

The subordinated notes have been structured to qualify as Tier 2 capital for the Company for regulatory capital purposes. Eligible amounts will be phased out by 20% per year beginning five years before the maturity date of the notes. Debt issuance costs incurred in conjunction with the notes were $1.5 million, of which $0.4 million has been amortized as of March 31, 2025. The Company reflects debt issuance costs as a direct deduction from the face of the note. The debt issuance costs are amortized into interest expense through the maturity period. At March 31, 2025 and December 31, 2024, the carrying value of the Company’s subordinated notes outstanding was $73.9 million.

Other borrowings: The Company entered into an agreement with the FHLB which granted the FHLB a blanket lien on certain loans receivable as collateral for a borrowing line. The Company’s total financing availability is based on the dollar volume of qualifying loan collateral. The Company’s total financing availability with the FHLB is decreased by outstanding borrowings and letters of credit (“LCs”) issued on behalf of the Company, as shown in Table 6.1.


Table 6.1: Financing Availability with the FHLB
(in thousands)	March 31, 2025		December 31, 2024
Total financing ability from the FHLB	$	1,276,072	$	1,212,209
Less: outstanding borrowings	—		—
Less: LCs pledged to secure State of California deposits	311,500		281,500
Less: LCs pledged to secure local agency deposits	420,000		420,000
Total LCs issued	731,500		701,500
Available borrowing capacity with the FHLB	$	544,572	$	510,709

At March 31, 2025 and December 31, 2024, the Company had the ability to borrow from the Federal Reserve Discount Window. The borrowings were available at an interest rate of 4.50% as of March 31, 2025. At March 31, 2025 and December 31, 2024, the borrowing capacity under this arrangement was $856.4 million and $862.1 million, respectively.

There were no amounts outstanding at March 31, 2025 or December 31, 2024. The borrowing line is secured by certain liens on the Company’s loans and certain available-for-sale securities.

At March 31, 2025 and December 31, 2024, the Company had five unsecured federal funds lines of credit totaling $175.0 million with five of its correspondent banks. The borrowings were available at interest rates ranging from 4.50% to 5.70% as of March 31, 2025. There were no amounts outstanding at March 31, 2025 or December 31, 2024.

Note 7: Shareholders’ Equity

(a) EPS

Basic EPS is net income divided by the weighted average number of common shares outstanding during the period less average unvested restricted stock awards (“RSAs”). Diluted EPS includes the dilutive effect of additional potential common shares related to unvested RSAs using the treasury stock method. The Company has two forms of outstanding common stock: common stock and unvested RSAs. Holders of unvested RSAs receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings, and therefore the RSAs are considered participating securities. However, under the two-class method, the difference in EPS is not significant for these participating securities.


Table 7.1: EPS
	Three months ended
(in thousands, except share count and earnings per common share)	March 31, 2025		March 31, 2024
Net income	$	13,111	$	10,631

Basic weighted average common shares outstanding	21,209,881		17,190,867
Add: Dilutive effects of assumed vesting of restricted stock	43,707		82,127
Total dilutive weighted average common shares outstanding	21,253,588		17,272,994
Earnings per common share:
Basic EPS	$	0.62	$	0.62
Diluted EPS	$	0.62	$	0.62

The Company did not have any anti-dilutive shares at March 31, 2025 or March 31, 2024.

(b) Dividends

The board of directors declared on January 16, 2025, and the Company subsequently paid, a cash dividend of $0.20 per share, totaling $4.3 million.

The Company’s stock-based compensation consists of RSAs granted under its historical stock-based incentive arrangement (the “Historical Incentive Plan”) and RSAs issued under the Five Star Bancorp 2021 Equity Incentive Plan (the “Equity Incentive Plan”). The Historical Incentive Plan consisted of RSAs for certain executive officers of the Company. The arrangement provided that these executive officers would receive shares of restricted common stock of the Company that vested over three years, with the number of shares granted based upon achieving certain performance objectives. These objectives included, but were not limited to, net income adjusted for the provision for credit losses, deposit growth, efficiency ratio, net interest margin, and asset quality. Compensation expense for RSAs granted under the Historical Incentive Plan is recognized over the service period, which is equal to the vesting period of the shares based on the fair value of the shares at issue date.

In connection with its IPO in May 2021, the Company granted RSAs under the Equity Incentive Plan to certain employees, officers, executives, and non-employee directors. Shares granted to non-employee directors vested immediately upon grant, while shares granted to certain employees, officers, and executives vest ratably over three, five, or seven years (as defined in the respective agreements). Since the completion of the IPO, the Company has granted RSAs under the Equity Incentive Plan to certain executives, which vest ratably over three or five years (as defined in the respective agreements), and to

directors, which vest over one year. All RSAs were granted at the fair value of common stock at the time of the award. The RSAs are considered fixed awards, as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the service period.

For both the three months ended March 31, 2025 and the three months ended March 31, 2024, $0.3 million of non-cash stock compensation expense was recognized.

As of March 31, 2025, there was approximately $2.1 million of unrecognized compensation expense related to the 111,786 unvested restricted shares. The holders of unvested RSAs are entitled to dividends at the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested RSAs are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable. Such tax benefits and related expense are expected to be recognized over the weighted average term remaining on the unvested restricted shares of 2.82 years as of March 31, 2025. The impact of tax benefits for dividends paid on unvested restricted stock on the Company’s unaudited consolidated statements of income for the three months ended March 31, 2025 and March 31, 2024 was immaterial.

Table 7.2 summarizes activity related to restricted shares for the periods indicated.


Table 7.2: Unvested Restricted Share Activity
	For the three months ended March 31,
	2025			2024
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Beginning of the period balance	120,577	$	21.36	69,338	$	20.53
Shares granted	10,485	30.89		96,380	21.97
Shares vested	(18,943)	22.33		(3,252)	28.51
Shares forfeited	(333)	21.97		(118)	20.00
End of the period balance	111,786	$	22.08	162,348	$	21.22

Note 8: Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Substantially all of these commitments are at variable interest rates, based on an index, and have fixed expiration dates.

Off-balance sheet risk to loan loss exists up to the face amount of these instruments, although material losses are not anticipated. The Company uses the same credit policies in making commitments to originate loans and lines of credit as it does for on-balance sheet instruments, including obtaining collateral at exercise of the commitment. The contractual

amounts of unfunded loan commitments and standby letters of credit not reflected in the unaudited consolidated balance sheets at the dates indicated are presented in Table 8.1.


Table 8.1: Unfunded Loan Commitments and Standby Letters of Credit
(in thousands)	March 31, 2025		December 31, 2024
Commercial lines of credit	$	215,712	$	230,063
Undisbursed commercial real estate loans	96,558		98,508
Undisbursed construction loans	42,813		74,671
Agricultural lines of credit	26,371		21,155
Undisbursed residential real estate loans	6,164		7,225
Undisbursed agricultural real estate loans	135		—
Other	1,780		1,973
Total commitments and standby letters of credit	$	389,533	$	433,595

The Company records an allowance for credit losses on unfunded loan commitments at the consolidated balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and historical loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments totaled $0.5 million as of March 31, 2025 and $0.7 million as of December 31, 2024, which is recorded in “Interest payable and other liabilities” in the unaudited consolidated balance sheets.

Concentrations of credit risk: The Company grants real estate mortgage, real estate construction, commercial, and consumer loans to customers primarily in Northern California. Although the Company has a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate.

In management’s judgment, a concentration of loans exists in real estate related loans, which represented approximately 86.62% of the Company’s loan portfolio at March 31, 2025 and 86.41% of the Company’s loan portfolio at December 31, 2024. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectability of these loans. Personal and business incomes represent the primary source of repayment for the majority of these loans.

Deposit concentrations: At March 31, 2025, the Company had 104 deposit relationships that exceeded $5.0 million each, totaling $2.3 billion, or approximately 60.87% of total deposits. The Company’s largest single deposit relationship at March 31, 2025 totaled $400.0 million, or approximately 10.71% of total deposits. Management maintains the Company’s liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors.

Contingencies: The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially adversely affect the consolidated financial position or results of operations of the Company.

Correspondent banking agreements: The Company maintains funds on deposit with other FDIC-insured financial institutions under correspondent banking agreements. Uninsured deposits through these agreements totaled approximately $37.8 million and $29.2 million at March 31, 2025 and December 31, 2024, respectively.

Equity investments: The Company has committed to and is invested in a limited number of venture funds. As of March 31, 2025 and December 31, 2024, the estimated remaining commitment for these funds totaled $14.6 million and $10.8 million, respectively.

Litigation Matters

The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially adversely affect the consolidated financial position or results of operations of the Company.

Note 9: Subsequent Events

On April 17, 2025, the board of directors of the Company declared a cash dividend of $0.20 per common share, which the Company expects to pay on May 12, 2025 to shareholders of record as of May 5, 2025.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion presents management’s perspective on our results of operations and financial condition on a consolidated basis. However, because we conduct all of our material business operations through our bank subsidiary, Five Star Bank (the “Bank”), the discussion and analysis relates to activities primarily conducted by the Bank.

Management’s discussion of the financial condition and results of operations, which is unaudited, should be read in conjunction with the related unaudited consolidated financial statements and accompanying notes in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes included in the 2024 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2025. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances.

Unless otherwise indicated, references in this report to “we,” “our,” “us,” “the Company,” or “Bancorp” refer to Five Star Bancorp and our consolidated subsidiary. All references to “the Bank” refer to Five Star Bank, our wholly owned subsidiary.

Cautionary Note Regarding Forward-Looking Statements

This report 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 our 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. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. We caution that the forward-looking statements are based largely on our 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 our control. Such forward-looking statements are based on various assumptions (some of which may be beyond our 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. Such risks and uncertainties include, but are not limited to:

•risks related to the concentration of our business in California, and specifically within Northern California, including risks associated with any downturn in the real estate sector;

•changes in market interest rates that affect the pricing of our loans and deposits, our net interest income, and our borrowers’ ability to repay loans;

•changes in the U.S. economy, including an economic slowdown, recession, inflation, deflation, tariffs, housing prices, employment levels, rate of growth, and general business conditions;

•uncertain market conditions and economic trends nationally, regionally, and particularly in Northern California and California;

•the soundness of other financial institutions and the impacts related to or resulting from bank failures and other economic and industry volatility, including increased regulatory requirements and costs and potential impacts to macroeconomic conditions;

•the impact of recent and future legislative and regulatory changes, including changes in banking, securities, and tax laws and regulations and their application by our regulators;

•the effects of increased competition from a wide variety of local, regional, national, and other providers of financial and investment services;

•the risks associated with our loan portfolios, and specifically with our commercial real estate loans;

•our ability to maintain adequate liquidity and to maintain capital necessary to fund our growth strategy and operations and to satisfy minimum regulatory capital levels;

•risks related to our strategic focus on lending to small to medium-sized businesses;

•the sufficiency of the assumptions and estimates we make in establishing reserves for potential credit losses and the value of loan collateral and securities;

•our level of nonperforming assets and the costs associated with resolving problem loans, if any;

•our ability to comply with various governmental and regulatory requirements applicable to financial institutions, including supervisory actions by federal and state banking agencies;

•governmental monetary and fiscal policies, including the policies of the Federal Reserve;

•risks associated with unauthorized access, cybersecurity breaches, cyber-crime, and other threats and disruptions to data security;

•our ability to implement, maintain, and improve effective risk management framework, disclosure controls and procedures, and internal controls over financial reporting;

•our ability to adopt and successfully integrate new initiatives or technologies into our business in a strategic manner;

•our ability to attract and retain executive officers and key employees and their customer and community relationships;

•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;

•the occurrence or impact of climate change or natural or man-made disasters or calamities, such as wildfires, droughts, mudslides, floods, and earthquakes, and particularly in California, and specifically Northern California;

•changes in and impact of local, regional, and global business, economic, and political conditions and geopolitical events, such as pandemics, civil unrest, wars, and acts of terrorism; and

•other factors that are discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The foregoing factors could cause results or performance to materially differ from those expressed in our forward-looking statements, should not be considered exhaustive, and should be read together with other cautionary statements that are included in this report and those discussed in the section entitled “Risk Factors” of our 2024 Annual Report on Form 10-K and other filings we may make with the SEC, copies of which are available from us at no charge. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Quarterly Report on Form 10-Q. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We disclaim 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.

Company Overview

Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp is a bank holding company that operates through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. We provide a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through eight branch offices. Our mission is to 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. We refer to our mission as “purpose-driven and integrity-centered banking.” At March 31, 2025, we had total assets of $4.2 billion, total loans held for investment of $3.6 billion, and total deposits of $3.7 billion.

Critical Accounting Estimates

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Quarterly Reports on Form 10-Q and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in shareholders’ equity, and cash flows in conformity with GAAP as contained within the FASB’s ASC and the rules and regulations of the SEC, including the instructions to Regulation S-X. However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in shareholders’ equity, and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as filed in our 2024 Annual Report on Form 10-K and the notes thereto.

Our most significant accounting policies and our critical accounting estimates are described in greater detail in Note 1, Basis of Presentation, in our audited consolidated financial statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates included in our 2024 Annual Report on Form 10-K. We have identified accounting policies and estimates that, due to the difficult, subjective, or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of our unaudited consolidated financial statements to those judgments and assumptions, are critical to an understanding of our consolidated financial condition and results of operations. We believe that the judgments, estimates, and assumptions used in the preparation of our financial statements are reasonable and appropriate, based on the information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material. With the exception of the changes to the ACL described below, there have been no significant changes concerning our critical accounting estimates as described in our 2024 Annual Report on Form 10-K.

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, we may adopt the standard on the application date for private companies.

We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

ACL

The ACL represents the estimated probable credit losses in our loan and investment portfolios and is estimated as of March 31, 2025 using CECL. The ACL is established through a provision for credit losses charged to operations. Loans and investments are charged against the ACL when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the ACL.

The ACL is evaluated on a regular basis by management in consideration of optimistic, moderate, and pessimistic current conditions, and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions specifically impacting each loan type by purpose and by geography, and concentrations within the loan portfolio. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

A significant amount of the ACL is measured on a collective (pool) basis by loan and investment security type when similar risk characteristics exist. Pools are determined based primarily on regulatory reporting codes as the loans and investment securities within each pool share similar risk characteristics and there is sufficient historical peer loss data from the FFIEC to provide statistically meaningful support in the models developed. Reserves for credit losses identified on a pooled basis are then adjusted for qualitative and other environmental factors to reflect current conditions. The most significant components of the qualitative and environmental factors used to estimate the allowance for credit losses are adjustments relating to prevailing economic conditions, concentrations within the loan portfolio, and external factors. The prevailing economic conditions factor is estimated based on a range of potential economic conditions and is applied at both the portfolio and individual concentration level based on various factors. The concentrations within the loan portfolio factor is estimated based on concentrations at the loan pool level. The external factor is estimated based on current external factors, such as environmental factors, which could impact the loan portfolio.

During the twelve months ended December 31, 2024, we refined our methodology of measuring the ACL on three pools of loans: Multifamily, C&I SBA, and CRE Non-Owner Occupied loans. Within the Multifamily pool, Manufactured Home Community (“MHC”) loans were segregated from traditional Multifamily as we identified a data source to provide sufficient historical peer loss data specific to MHC loans. This segregation now adjusts for differences in the risk characteristics and performance of MHCs compared to traditional Multifamily properties. Losses are estimated using a discounted cash flow analysis using individual probability of default and loss given default rates on a loan-by-loan basis. Applying this adjusted loss rate led to a decrease in the ACL for the MHC pool as of June 30, 2024 of approximately $5.8 million. During routine monitoring of charge-off activity within the C&I SBA pool, we identified an increased level of charge-offs during the first six months of 2024, reflecting a change in the credit quality of the pool. In response to this, we increased the expected loss rates to be more in line with net charge-off rates during the first six months of 2024, as this time

period reflects what is expected based on our current economic outlook for loans in the C&I SBA pool. This adjustment reflects our estimate for future loss rates and increased the required reserves related to the C&I SBA pool by approximately $4.6 million as of June 30, 2024. Within the CRE Non-Owner Occupied portfolio, RV Park loans were segregated from traditional CRE Non-Owner Occupied as we identified a data source to provide sufficient historical peer loss data specific to RV Park loans. This segregation now adjusts for differences in the risk characteristics and performance of RV Park loans compared to traditional CRE Non-Owner Occupied properties. We used calculations of individual probability of default and loss given default on a loan-by-loan basis to derive an estimated loss rate. Applying this adjusted loss rate led to a decrease in the ACL for the RV Park pool of approximately $3.3 million as of September 30, 2024.

Executive Summary

Net income for the three months ended March 31, 2025 totaled $13.1 million, as compared to net income of $10.6 million for the three months ended March 31, 2024.

The following are highlights of our operating and financial performance, and financial condition for the dates and periods presented:

•Deposits. Total deposits increased by $178.4 million, or 5.01%, from $3.6 billion at December 31, 2024 to $3.7 billion at March 31, 2025. Non-wholesale deposits increased by $48.4 million in the first three months of 2025 to $3.0 billion. Wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits, increased by $130.0 million in the first three months of 2025 to $689.9 million. Non-interest-bearing deposits increased by $11.0 million in the first three months of 2025 to $933.7 million, and represented 24.99% of total deposits at March 31, 2025, as compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 97.01% at March 31, 2025, as compared to 99.38% at December 31, 2024.

•Assets. Total assets were $4.2 billion at March 31, 2025, representing a $191.8 million, or 4.73%, increase compared to $4.1 billion at December 31, 2024.

•Loans. Total loans held for investment were $3.6 billion at March 31, 2025, as compared to $3.5 billion at December 31, 2024, an increase of $89.1 million, or 2.52%. The increase was a result of $259.3 million in loan originations and advances, partially offset by $65.6 million and $104.6 million in loan payoffs and paydowns, respectively. The $89.1 million increase in total loans held for investment included $19.8 million in purchases of loans within the consumer concentration of the loan portfolio.

•Credit Quality. Credit quality remains strong, with non-accrual loans representing $1.8 million, or 0.05% of total loans held for investment, at both March 31, 2025 and December 31, 2024. The ratio of the allowance for credit losses to total loans held for investment was 1.08% at March 31, 2025 and 1.07% at December 31, 2024.

•Net Interest Margin. Net interest margin was 3.45% for the three months ended March 31, 2025, and 3.14% for the three months ended March 31, 2024. The increase in net interest margin for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to a higher balance of loans with higher yields, partially offset by an increase in interest expense due to larger average deposit balances.

•Efficiency Ratio. Efficiency ratio was 42.58% for the three months ended March 31, 2025, down from 44.50% for the corresponding period of 2024, mainly due to a $9.5 million, or 20.08%, increase in interest and fee income during the same period.

•Capital Ratios. All capital ratios were above well-capitalized regulatory thresholds as of March 31, 2025. The total risk-based capital ratio for the Company was 13.97% at March 31, 2025, as compared to 13.99% at December 31, 2024. The Tier 1 leverage ratio was 10.17% at March 31, 2025, as compared to 10.05% at December 31, 2024. For additional information about the regulatory capital requirements applicable to the Company and the Bank, see the section entitled “—Financial Condition Summary—Capital Adequacy” below.

•Dividends. The board of directors declared a cash dividend of $0.20 per share on January 16, 2025.

Highlights of our financial results are presented in the following tables:


Table 1: Highlights of Financial Results
(dollars in thousands)	March 31, 2025			December 31, 2024
Selected financial condition data:
Total assets	$	4,245,057		$	4,053,278
Total loans held for investment	3,621,819			3,532,686
Total deposits	3,736,354			3,557,994
Total subordinated notes, net	73,932			73,895
Total shareholders’ equity	406,451			396,624
Asset quality ratios:
Allowance for credit losses to total loans held for investment	1.08		%	1.07		%

Allowance for credit losses to nonperforming loans	2,222.32		%	2,101.78		%
Nonperforming loans to total loans held for investment	0.05		%	0.05		%
Capital ratios:
Total capital (to risk-weighted assets)	13.97		%	13.99		%
Tier 1 capital (to risk-weighted assets)	11.00		%	11.02		%
Common equity Tier 1 capital (to risk-weighted assets)	11.00		%	11.02		%
Tier 1 leverage	10.17		%	10.05		%
Total shareholders’ equity to total assets	9.57		%	9.79		%
Tangible shareholders’ equity to tangible assets1	9.57		%	9.79		%


Table 2: Highlights of Financial Results (continued)
	For the three months ended
(dollars in thousands, except per share data)	March 31, 2025			March 31, 2024
Selected operating data:
Net interest income	$	33,977		$	26,744
Provision for credit losses	1,900			900
Non-interest income	1,359			1,833
Non-interest expense	15,045			12,716
Net income	13,111			10,631

Per common share data:
Earnings per common share:
Basic	$	0.62		$	0.62
Diluted	$	0.62		$	0.62
Book value per share	$	19.06		$	16.86
Tangible book value per share2	$	19.06		$	16.86

Performance and other financial ratios:
ROAA	1.30		%	1.22		%
ROAE	13.28		%	14.84		%
Net interest margin	3.45		%	3.14		%
Cost of funds	2.56		%	2.62		%
Efficiency ratio	42.58		%	44.50		%
Cash dividend payout ratio on common stock3	32.26		%	32.26		%

1Tangible shareholders’ equity to tangible assets is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. 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.

2Tangible book value per share is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. 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.

3Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share.

RESULTS OF OPERATIONS

The following discussion of our results of operations compares the three months ended March 31, 2025 to the three months ended March 31, 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025.

Net Interest Income

Net interest income is the most significant contributor to our net income. Net interest income represents interest income from interest-earning assets, such as loans and investments, less interest expense on interest-bearing liabilities, such as deposits, subordinated notes, and other borrowings, which are used to fund those assets. In evaluating our net interest income, we measure and monitor yields on our interest-earning assets and interest-bearing liabilities as well as trends in our net interest margin. Net interest margin is a ratio calculated as net interest income divided by total interest-earning assets for the same period. We manage our earning assets and funding sources in order to maximize this margin while limiting credit risk and interest rate sensitivity to our established risk appetite levels. Changes in market interest rates and competition in our market typically have the largest impact on periodic changes in our net interest margin.

Net interest income increased by $7.2 million, or 27.05%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and our net interest margin increased 31 basis points during the same period. The increase was primarily due to an increase in interest income driven by a higher balance of loans with higher yields, partially offset by an increase in interest expense due to larger average deposit balances. Additional detail relating to net interest margin in each period is provided below.

Average balance sheet, interest, and yield/rate analysis. Table 3 presents average balance sheet information, interest income, interest expense, and the corresponding average yield earned or rate paid for each period reported. The average balances are daily averages and include both performing and nonperforming loans.


Table 3: Average Balances, Interest, and Yield/Rate
	For the three months ended March 31, 2025						For the three months ended March 31, 2024
(dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate
Assets
Interest-earning deposits in banks1	$	328,571	$	3,575	4.41	%	$	233,002	$	3,102	5.35	%
Investment securities1,2	100,474		581		2.34	%	109,177		653		2.41	%
Loans held for investment and sale1,3	3,567,992		52,931		6.02	%	3,082,290		43,786		5.71	%
Total interest-earning assets1	3,997,037		57,087		5.79	%	3,424,469		47,541		5.58	%
Interest receivable and other assets, net4	93,543						93,983
Total assets	$	4,090,580					$	3,518,452
Liabilities and shareholders’ equity
Interest-bearing transaction accounts1	$	303,822	$	1,112	1.48	%	$	300,325	$	1,126	1.51	%
Savings accounts1	123,599		772		2.53	%	124,561		861		2.78	%
Money market accounts1	1,540,879		12,435		3.27	%	1,410,264		12,155		3.47	%
Time accounts1	706,528		7,629		4.38	%	429,586		5,369		5.03	%
Subordinated notes and other borrowings1	73,908		1,162		6.37	%	82,775		1,286		6.25	%
Total interest-bearing liabilities	2,748,736		23,110		3.41	%	2,347,511		20,797		3.56	%
Demand accounts	910,954						842,105
Interest payable and other liabilities	30,389						40,730
Shareholders’ equity	400,501						288,106
Total liabilities and shareholders’ equity	$	4,090,580					$	3,518,452
Net interest spread5					2.38	%					2.02	%
Net interest income/margin6			$	33,977	3.45	%			$	26,744	3.14	%

1Interest income/expense is divided by the actual number of days in the period multiplied by the actual number of days in the year to correspond to stated interest rate terms, where applicable.

2Yields on available-for-sale securities are calculated based on fair value. Investment security interest is earned monthly on a 30/360 day basis. Yields are not calculated on a tax-equivalent basis.

3Non-accrual loans are included in total loan balances. No adjustment has been made for these loans in the yield calculations. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. Allowance for credit losses is not included in total loan balances.

4Allowance for credit losses is included in interest receivable and other assets, net.

5Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

6Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period.

Analysis of changes in interest income and expenses. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average yields/rates. Table 4 shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the current period’s average yield/rate. The effect of rate changes is calculated by multiplying the change in average yield/rate by the previous period’s volume. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.


Table 4: Interest Income and Expense Change Analysis
	For the three months ended March 31, 2025 compared to the three months ended March 31, 2024
(dollars in thousands)	Volume		Yield/Rate		Total Increase (Decrease)
Interest-earning deposits in banks	$	995	$	(522)	$	473
Investment securities	(53)		(19)		(72)
Loans held for investment and sale	6,916		2,229		9,145
Total interest-earning assets	7,858		1,688		9,546
Interest-bearing transaction accounts	37		(51)		(14)
Savings accounts	(6)		(83)		(89)
Money market accounts	787		(507)		280
Time accounts	2,939		(679)		2,260
Subordinated notes and other borrowings	(152)		28		(124)
Total interest-bearing liabilities	3,605		(1,292)		2,313
Changes in net interest income/margin	$	4,253	$	2,980	$	7,233

Net interest income during the three months ended March 31, 2025 increased by $7.2 million, or 27.05%, to $34.0 million compared to $26.7 million during the three months ended March 31, 2024. Net interest margin totaled 3.45% for the three months ended March 31, 2025, an increase of 31 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $9.1 million in loan interest income due to a $485.7 million, or 15.76%, increase in the average balance of loans and a 31 basis point improvement in the average yield on loans during the three months ended March 31, 2025 compared to the same quarter of the prior year. The increase in interest income was partially offset by a $2.4 million increase in deposit interest expense compared to the same quarter of the prior year. The increase in deposit interest expense is primarily attributable to a $478.9 million, or 15.42%, increase in the average balance of deposits and a five basis point increase in the average cost of deposits during the three months ended March 31, 2025 compared to the same quarter of the prior year.

Provision for Credit Losses

The provision for credit losses is based on management’s assessment of the adequacy of our allowance for credit losses. Factors impacting the provision include inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of the change in collateral values, and the funding probability on unfunded lending commitments. The provision for credit losses is charged against earnings in order to maintain our allowance for credit losses, which reflects management’s best estimate of forecasted life of loan losses in our loan portfolio at the balance sheet date.

We recorded a $1.9 million provision for credit losses in the first quarter of 2025, compared to a $0.9 million provision for credit losses for the same period of 2024. The provision recorded during the three months ended March 31, 2025 reflects loan growth and adjustments to expectations for credit losses based on economic trends and forecasts at the time.

Non-interest Income

Non-interest income is a secondary contributor to our net income, following interest income. Non-interest income consists of service charges on deposit accounts, net gain on sale of securities, gain on sale of loans, loan-related fees, FHLB stock dividends, earnings on BOLI, and other income.

Table 5 details the components of non-interest income for the periods indicated.


Table 5: Non-interest Income
	For the three months ended
(dollars in thousands)	March 31, 2025		March 31, 2024		$ Change		% Change
Service charges on deposit accounts	$	215	$	188	$	27	14.36	%

Gain on sale of loans	125		369		(244)		(66.12)	%
Loan-related fees	448		429		19		4.43	%
FHLB stock dividends	331		332		(1)		(0.30)	%
Earnings on BOLI	161		142		19		13.38	%
Other income	79		373		(294)		(78.82)	%
Total non-interest income	$	1,359	$	1,833	$	(474)	(25.86)	%

Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold, partially offset by an improvement in the effective yield of loans sold. During the three months ended March 31, 2025, approximately $1.7 million of loans were sold with an effective yield of 7.24%, as compared to approximately $5.2 million of loans sold with an effective yield of 7.08% during the three months ended March 31, 2024.

Other income. The decrease related primarily to $0.3 million of income received on equity investments in venture-backed funds during the three months ended March 31, 2024, which did not reoccur during the three months ended March 31, 2025.

Non-interest Expense

Non-interest expense includes salaries and employee benefits, occupancy and equipment, data processing and software, FDIC insurance, professional services, advertising and promotional, loan-related expenses, and other operating expenses. In evaluating our level of non-interest expense, we closely monitor the Company’s efficiency ratio, which is calculated as non-interest expense divided by the sum of net interest income and non-interest income. We constantly seek to identify ways to streamline our business and operate more efficiently in order to reduce our non-interest expense over time as a percentage of our revenue, while continuing to achieve growth in total loans and assets.

Over the past several years, we have invested significant resources in personnel, technology, and infrastructure. As we execute initiatives based on growth, we expect non-interest expense to grow. Non-interest expense has increased throughout the periods presented below; however, we expect our efficiency ratio will improve going forward due, in part, to our past investment in infrastructure.

Table 6 details the components of non-interest expense for the periods indicated.


Table 6: Non-interest Expense
	For the three months ended
(dollars in thousands)	March 31, 2025		March 31, 2024		$ Change		% Change
Salaries and employee benefits	$	9,134	$	7,577	$	1,557	20.55	%
Occupancy and equipment	637		626		11		1.76	%
Data processing and software	1,457		1,157		300		25.93	%
FDIC insurance	455		400		55		13.75	%
Professional services	913		707		206		29.14	%
Advertising and promotional	522		460		62		13.48	%
Loan-related expenses	319		297		22		7.41	%
Other operating expenses	1,608		1,492		116		7.77	%
Total non-interest expense	$	15,045	$	12,716	$	2,329	18.32	%

Salaries and employee benefits. The increase related primarily to: (i) a $1.6 million increase in salaries, benefits, and bonus expense, mainly related to a 13.19% increase in headcount between March 31, 2024 and March 31, 2025; and (ii) a $0.1 million increase in commissions paid. This increase was partially offset by a $0.2 million increase in loan origination costs due to a greater number of loan originations, net of purchased consumer loans, period-over-period.

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

Professional services. The increase was primarily due to $0.1 million in fees paid for compensation consulting services and $0.1 million in consulting services relating to operations in San Francisco, neither of which occurred in the three months ended March 31, 2024.

Other operating expenses. The increase was primarily due to individually immaterial increases in expenses related to operations, including administrative and operational expenses such as travel, subscriptions, and professional association memberships.

Provision for Income Taxes

The provision for income taxes was $5.3 million for the three months ended March 31, 2025, a $1.0 million increase from the three months ended March 31, 2024. This increase was primarily driven by an increase in taxable income. The effective tax rates were 28.71% and 28.94% for the three months ended March 31, 2025 and March 31, 2024, respectively.

FINANCIAL CONDITION SUMMARY

The following discussion compares our financial condition as of March 31, 2025 to our financial condition as of December 31, 2024. Table 7 summarizes selected components of our unaudited consolidated balance sheets as of March 31, 2025 and December 31, 2024.


Table 7: Selected Components of Consolidated Balance Sheets (Unaudited)
(dollars in thousands)	March 31, 2025		December 31, 2024
Total assets	$	4,245,057	$	4,053,278
Cash and cash equivalents	452,571		352,343
Total investments	99,696		100,914
Loans held for investment	3,621,819		3,532,686
Total deposits	3,736,354		3,557,994
Subordinated notes, net	73,932		73,895
Total shareholders’ equity	406,451		396,624

Total Assets

At March 31, 2025, total assets were $4.2 billion, an increase of $191.8 million from $4.1 billion at December 31, 2024, primarily due to a $100.2 million increase in cash and cash equivalents and an $89.1 million increase in total loans held for investment. The $89.1 million increase in total loans held for investment between December 31, 2024 and March 31, 2025 was a result of $259.3 million in loan originations and advances, partially offset by $65.6 million and $104.6 million in loan payoffs and paydowns, respectively. The $89.1 million increase in total loans held for investment included $19.8 million in purchases of loans within the consumer concentration of the loan portfolio.

Cash and Cash Equivalents

Total cash and cash equivalents were $452.6 million at March 31, 2025, an increase of $100.2 million from $352.3 million at December 31, 2024. The increase in cash and cash equivalents was primarily due to net cash inflows related to financing and operating activities of $174.1 million and $15.5 million, respectively, partially offset by net cash outflows related to investing activities of $89.3 million.

Investment Portfolio

Our investment portfolio is primarily comprised of U.S. government agency securities, mortgage-backed securities, and obligations of states and political subdivisions, which are high-quality liquid investments. We manage our investment portfolio according to written investment policies approved by our board of directors. Our investment strategy is designed to maximize earnings while maintaining liquidity with minimal credit and interest rate risk. Most of our securities are classified as available-for-sale, although we have one long-term, fixed rate municipal security classified as held-to-maturity.

Our total securities available-for-sale and held-to-maturity amounted to $99.7 million at March 31, 2025 and $100.9 million at December 31, 2024, representing a decrease of $1.2 million during the same period. The decrease to available-for-sale securities was primarily due to maturities, prepayments, and calls of $2.0 million and an unrealized gain on securities of $1.0 million, with the remainder of the change due to amortization of premiums. For the three months ended March 31, 2025, other comprehensive gain was $0.7 million, primarily due to rate changes and other market conditions on securities during that period.

Table 8 presents the carrying value of our investment portfolio as of the dates indicated.


Table 8: Carrying Value of Investment Securities
	As of
	March 31, 2025				December 31, 2024
(dollars in thousands)	Carrying Value		% of Total		Carrying Value		% of Total
Available-for-sale (at fair value):
U.S. government agency securities	$	7,574	7.60	%	$	8,345	8.27	%
Mortgage-backed securities	50,297		50.44	%	50,570		50.10	%
Obligations of states and political subdivisions	37,072		37.19	%	37,137		36.80	%
Collateralized mortgage obligations	267		0.27	%	279		0.28	%
Corporate bonds	1,901		1.91	%	1,863		1.85	%
Total available-for-sale	97,111		97.41	%	98,194		97.30	%

Held-to-maturity (at amortized cost):
Obligations of states and political subdivisions	2,585		2.59	%	2,720		2.70	%
Total	$	99,696	100.00	%	$	100,914	100.00	%

Table 9 presents the carrying value of our securities by their stated maturities, as well as the weighted average yields for each maturity range, as of the dates shown.


Table 9: Stated Maturities and Weighted Average Yields - Investment Securities
	Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Total
(dollars in thousands)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
March 31, 2025
Available-for-sale:
U.S. government agency securities	$	69	2.02	%	$	1,268	4.51	%	$	345	2.01	%	$	5,892	4.87	%	$	7,574	4.65	%
Mortgage-backed securities	—		—	%	—		—	%	493		2.74	%	49,804		1.73	%	50,297		1.74	%
Obligations of states and political subdivisions	—		—	%	738		1.16	%	9,282		1.66	%	27,052		1.79	%	37,072		1.74	%
Collateralized mortgage obligations	—		—	%	—		—	%	267		1.76	%	—		—	%	267		1.76	%
Corporate bonds	—		—	%	1,901		1.25	%	—		—	%	—		—	%	1,901		1.25	%
Total available-for-sale	69		2.02	%	3,907		2.29	%	10,387		1.72	%	82,748		1.98	%	97,111		1.96	%
Held-to-maturity:
Obligations of states and political subdivisions	195		6.00	%	905		6.00	%	1,315		6.00	%	170		6.00	%	2,585		6.00	%
Total	$	264	4.96	%	$	4,812	2.99	%	$	11,702	2.20	%	$	82,918	1.98	%	$	99,696	2.07	%

December 31, 2024
Available-for-sale:
U.S. government agency securities	$	—	—	%	$	1,583	5.00	%	$	338	2.01	%	$	6,424	5.65	%	$	8,345	5.38	%
Mortgage-backed securities	—		—	%	—		—	%	508		2.74	%	50,062		1.74	%	50,570		1.75	%
Obligations of states and political subdivisions	—		—	%	737		1.17	%	8,108		1.62	%	28,292		1.79	%	37,137		1.74	%
Collateralized mortgage obligations	—		—	%	—		—	%	279		1.76	%	—		—	%	279		1.76	%
Corporate bonds	—		—	%	1,863		1.25	%	—		—	%	—		—	%	1,863		1.25	%
Total available-for-sale	—		—	%	4,183		2.65	%	9,233		1.70	%	84,778		2.05	%	98,194		2.04	%
Held-to-maturity:
Obligations of states and political subdivisions	210		6.00	%	945		6.00	%	1,380		6.00	%	185		6.00	%	2,720		6.00	%
Total	$	210	6.00	%	$	5,128	3.27	%	$	10,613	2.26	%	$	84,963	2.06	%	$	100,914	2.15	%

Weighted average yield for securities available-for-sale is the projected yield to maturity given current cash flow projections for U.S. government agency securities, mortgage-backed securities, and collateralized mortgage obligations. For callable municipal securities and corporate bonds, weighted average yield is a yield to worst. Weighted average yield for securities held-to-maturity is the stated coupon of the bond.

Loan Portfolio

Our loan portfolio is our largest class of interest-earning assets and typically provides higher yields than other types of interest-earning assets. Associated with the higher yields is an inherent amount of credit risk, which we attempt to mitigate with strong underwriting standards. As of March 31, 2025 and December 31, 2024, our total loans amounted to $3.6 billion and $3.5 billion, respectively. Table 10 presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated.


Table 10: Loans Outstanding
	As of
	March 31, 2025				December 31, 2024
(dollars in thousands)	Amount		% of Loans		Amount		% of Loans
Loans held for investment:
Real estate:
Commercial	$	2,941,201	81.11	%	$	2,857,173	80.75	%
Commercial land and development	3,556		0.10	%	3,849		0.11	%
Commercial construction	113,002		3.12	%	111,318		3.15	%
Residential construction	5,747		0.16	%	4,561		0.13	%
Residential	34,053		0.94	%	32,774		0.93	%
Farmland	43,643		1.20	%	47,241		1.34	%
Commercial:
Secured	170,525		4.70	%	170,548		4.82	%
Unsecured	34,970		0.96	%	27,558		0.78	%

Consumer and other	277,093		7.64	%	279,584		7.90	%
Loans held for investment, gross	3,623,790		99.93	%	3,534,606		99.91	%

Loans held for sale:
Commercial	2,669		0.07	%	3,247		0.09	%
Total loans, gross	3,626,459		100.00	%	3,537,853		100.00	%
Net deferred loan fees	(1,971)				(1,920)
Total loans	$	3,624,488			$	3,535,933

Commercial real estate loans consist of term loans secured by a mortgage lien on the real property, such as office and industrial buildings, manufactured home communities, self-storage facilities, hospitality properties, faith-based properties, retail shopping centers, and apartment buildings, as well as commercial real estate construction loans that are offered to builders and developers.

Commercial land and development and commercial construction loans consist of loans made to fund commercial land acquisition and development and commercial construction, respectively. The real estate purchased with these loans is generally located in or near our market.

Residential real estate and construction real estate loans consist of loans secured by single-family and multifamily residential properties, which are both owner-occupied and investor-owned.

Farmland loans consist of loans used to purchase, refinance, or improve farmland secured by farming properties themselves. The farmland is generally located in or near our market.

Commercial loans consist of financing for commercial purposes in various lines of business, including manufacturing, service industry, and professional service areas. Commercial loans can be secured or unsecured but are generally secured with the assets of the company and/or the personal guaranty of the business owner(s).

Consumer and other loans consist primarily of loans purchased in a loan purchase program with a non-bank lender, generally made to professionals for the purpose of large personal or household purchases. The loans are unsecured, fixed rate loans. Consumer and other loans also include loans purchased or originated through financing partnerships which are no longer active.

Table 11 presents the commercial real estate loan balance, associated percentage of commercial real estate concentrations, estimated real estate collateral values, and related loan-to-value (“LTV”) ranges by collateral type as of the dates indicated. Revolving lines of credit with zero balance and 0.00% LTV are excluded from this table. Collateral values are determined at origination using third-party real estate appraisals or evaluations. Updated appraisals, which are included in Table 11, may be obtained for loans that are downgraded to watch or substandard. Loans over $2.0 million are reviewed annually, at which time an internal assessment of collateral values is completed.


Table 11: Commercial Real Estate Loans
(dollars in thousands)	Loan Balance		% of Commercial Real Estate		Collateral Value		Minimum LTV		Maximum LTV
March 31, 2025
Manufactured home community	$	918,864	31.24	%	$	1,637,759	14.15	%	74.52	%
RV Park	378,525		12.87	%	661,462		17.87	%	75.00	%
Retail	272,441		9.26	%	549,633		5.51	%	72.46	%
Industrial	237,128		8.06	%	527,874		3.68	%	91.90	%
Mini storage	198,126		6.74	%	393,377		16.14	%	68.72	%
Faith-based	187,733		6.38	%	498,447		9.29	%	74.90	%
Multifamily	185,543		6.31	%	395,489		14.28	%	74.80	%
All other types1	562,841		19.14	%	1,214,600		—	%	134.92	%
Total2	$	2,941,201	100.00	%	$	5,878,641

December 31, 2024
Manufactured home community	$	891,935	31.22	%	$	1,586,109	14.24	%	74.52	%
RV Park	371,733		13.01	%	648,272		17.94	%	75.00	%
Retail	283,394		9.92	%	569,677		6.49	%	72.80	%
Industrial	224,860		7.87	%	500,307		4.56	%	73.91	%
Faith-based	184,151		6.45	%	492,030		9.35	%	74.67	%
Mini storage	177,854		6.22	%	361,437		16.23	%	69.19	%
Multifamily	172,592		6.04	%	371,634		14.35	%	75.00	%
Office	145,986		5.11	%	338,474		5.03	%	73.64	%
All other types1	404,668		14.16	%	855,084		4.00	%	112.07	%
Total2	$	2,857,173	100.00	%	$	5,723,024

1Types of collateral in the “all other types” category are those that individually make up less than 5.00% of the commercial real estate concentration.

2Minimum LTV and maximum LTV not shown for aggregated totals, as such values are meaningful only when presented by specific category.

Over the past several years, we have experienced significant growth in our loan portfolio, although the relative composition of the portfolio has not changed materially. Our primary focus remains commercial real estate lending (including commercial, commercial land and development, and commercial construction), which constitutes 84.33% of loans held for investment at March 31, 2025. Commercial secured lending represents 4.70% of loans held for investment at March 31, 2025. We sell the guaranteed portion of all SBA 7(a) loans in the secondary market and will continue to do so as long as market conditions continue to be favorable.

We recognize that our commercial real estate loan concentration is significant within our balance sheet. Commercial real estate loan balances as a percentage of risk-based capital were 576.23% and 571.91% as of March 31, 2025 and December 31, 2024, respectively. We have established internal concentration limits in the loan portfolio for commercial real estate loans by sector (e.g., manufactured home communities, self-storage, hospitality, etc.). All loan sectors were within our established limits as of March 31, 2025. Additionally, our loans are geographically concentrated with borrowers and collateralized properties primarily in California.

We believe that our past success is attributable to focusing on products and markets where we have significant expertise. Given our concentrations, we have established strong risk management practices, including risk-based lending standards, self-established product and geographical limits, annual evaluations of income property loans, and semi-annual top-down and bottom-up stress testing. We expect to continue growing our loan portfolio. We do not expect our product or geographic concentrations to materially change.

Table 12 sets forth the contractual maturities of our loan portfolio as of the dates indicated.


Table 12: Contractual Maturities - Gross Loans
(dollars in thousands)	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 15 years		Due after 15 years		Total
March 31, 2025
Real estate:
Commercial	$	33,352	$	402,919	$	2,423,349	$	81,581	$	2,941,201
Commercial land and development	2,257		377		922		—		3,556
Commercial construction	6,377		83,321		23,304		—		113,002
Residential construction	3,746		2,001		—		—		5,747
Residential	3,527		7,559		22,061		906		34,053
Farmland	241		10,509		32,893		—		43,643
Commercial:
Secured	43,899		49,664		79,224		407		173,194
Unsecured	3,535		12,639		18,796		—		34,970
Consumer and other	236		14,656		262,201		—		277,093
Total	$	97,170	$	583,645	$	2,862,750	$	82,894	$	3,626,459

December 31, 2024
Real estate:
Commercial	$	35,682	$	362,077	$	2,383,655	$	75,759	$	2,857,173
Commercial land and development	2,433		438		978		—		3,849
Commercial construction	9,378		64,407		37,533		—		111,318
Residential construction	3,310		1,251		—		—		4,561
Residential	324		9,486		22,045		919		32,774
Farmland	—		6,632		40,609		—		47,241
Commercial:
Secured	56,630		46,722		70,035		408		173,795
Unsecured	2,500		10,552		14,506		—		27,558
Consumer and other	161		13,964		265,459		—		279,584
Total	$	110,418	$	515,529	$	2,834,820	$	77,086	$	3,537,853

Table 13 sets forth the sensitivity to interest rate changes of our loan portfolio as of the dates shown.


Table 13: Sensitivity to Interest Rates - Gross Loans
(dollars in thousands)	Fixed Interest Rates		Floating or Adjustable Rates		Total
March 31, 2025
Real estate:
Commercial	$	603,698	$	2,337,503	$	2,941,201
Commercial land and development	1,401		2,155		3,556
Commercial construction	—		113,002		113,002
Residential construction	—		5,747		5,747
Residential	4,466		29,587		34,053
Farmland	4,819		38,824		43,643
Commercial:
Secured	48,316		124,878		173,194
Unsecured	23,636		11,334		34,970
Consumer and other	276,968		125		277,093
Total	$	963,304	$	2,663,155	$	3,626,459

December 31, 2024
Real estate:
Commercial	$	587,825	$	2,269,348	$	2,857,173
Commercial land and development	1,416		2,433		3,849
Commercial construction	—		111,318		111,318
Residential construction	—		4,561		4,561
Residential	4,495		28,279		32,774
Farmland	4,873		42,368		47,241
Commercial:
Secured	48,587		125,208		173,795
Unsecured	19,988		7,570		27,558
Consumer and other	279,458		126		279,584
Total	$	946,642	$	2,591,211	$	3,537,853

Asset Quality

We manage the quality of our loans based upon trends at the overall loan portfolio level, as well as within each product type. We measure and monitor key factors that include the level and trend of classified, delinquent, non-accrual, and nonperforming assets, collateral coverage, credit scores, and debt service coverage, where applicable. These metrics directly impact our evaluation of the adequacy of our allowance for credit losses.

Our primary objective is to maintain a high level of asset quality in our loan portfolio. We believe our underwriting policies and practices, executed by experienced professionals, appropriately govern the risk profile for our loan portfolio. These policies are continually evaluated and updated as necessary. All loans are assessed and assigned a risk classification at origination based on underlying characteristics of the transaction, such as collateral cash flow, collateral coverage, and borrower strength. We believe that we have a comprehensive methodology to proactively monitor our credit quality after the origination process. Particular emphasis is placed on our commercial portfolio, where risk assessments are reevaluated as a result of reviewing commercial property operating statements and borrower financials. On an ongoing basis, we also monitor payment performance, delinquencies, and tax and property insurance compliance. We design our practices to facilitate the early detection and remediation of problems within our loan portfolio. Assigned risk classifications are an integral part of management’s assessment of the adequacy of our ACL. We periodically employ the use of an independent consulting firm to evaluate our underwriting and risk assessment process. Like other financial institutions, we are subject to

the risk that our loan portfolio will be exposed to increasing pressures from deteriorating borrower credit due to general economic conditions and rising interest rates.

Nonperforming Assets

Our nonperforming assets consist of nonperforming loans and foreclosed real estate, if any. Nonperforming loans consist of non-accrual loans and loans contractually past due by 90 days or more and still accruing. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest.

SBA Loans

During the three months ended March 31, 2025, the Company sold five SBA 7(a) loans with government-guaranteed portions totaling approximately $1.7 million. The Company received gross proceeds of $1.8 million on the loans sold during the three months ended March 31, 2025, resulting in the recognition of net gains on sale of $0.1 million during the period.

Non-accrual Loans

Table 14 provides details of our nonperforming and restructured assets and certain other related information as of the dates presented.


Table 14: Nonperforming and Restructured Assets
	As of
(dollars in thousands)	March 31, 2025			December 31, 2024
Non-accrual loans:
Real estate:
Commercial	$	1,722		$	1,750





Commercial:
Secured	43			48



Total non-accrual loans	1,765			1,798

Loans past due 90 days or more and still accruing:












Total loans past due and still accruing	—			—
Total nonperforming loans	1,765			1,798

Real estate owned	91			87
Total nonperforming assets	$	1,856		$	1,885

Performing LMs (not included above)	$	—		$	—

Allowance for credit losses to period end nonperforming loans	2,222.32		%	2,101.78		%
Nonperforming loans to loans held for investment	0.05		%	0.05		%
Nonperforming assets to total assets	0.04		%	0.05		%
Nonperforming loans plus performing LMs to loans held for investment	0.05		%	0.05		%

The ratio of nonperforming loans to loans held for investment was 0.05% at March 31, 2025, which is unchanged from December 31, 2024.

Potential Problem Loans

We utilize a risk grading system for our loans to aid us in evaluating the overall credit quality of our real estate loan portfolio and assessing the adequacy of our allowance for credit losses. All loans are grouped into a risk category at the time of origination. Commercial real estate loans over $2.0 million are reevaluated at least annually for proper classification in conjunction with our review of property and borrower financial information. All loans are reevaluated for proper risk grading as new information such as payment patterns, collateral condition, and other relevant information comes to our attention.

The banking industry defines loans graded substandard or doubtful as “classified” loans. Table 15 shows our levels of classified loans as of the periods indicated.


Table 15: Gross Loans Held for Investment by Credit Quality Risk Rating
(dollars in thousands)	Pass		Watch		Substandard		Doubtful		Total
March 31, 2025
Real estate:
Commercial	$	2,839,218	$	98,330	$	3,653	$	—	$	2,941,201
Commercial land and development	3,556		—		—		—		3,556
Commercial construction	113,002		—		—		—		113,002
Residential construction	5,747		—		—		—		5,747
Residential	34,053		—		—		—		34,053
Farmland	42,354		1,289		—		—		43,643
Commercial:
Secured	158,117		12,365		43		—		170,525
Unsecured	34,970		—		—		—		34,970
Consumer and other	277,085		—		8		—		277,093
Total	$	3,508,102	$	111,984	$	3,704	$	—	$	3,623,790

December 31, 2024
Real estate:
Commercial	$	2,746,594	$	107,992	$	2,587	$	—	$	2,857,173
Commercial land and development	3,849		—		—		—		3,849
Commercial construction	111,318		—		—		—		111,318
Residential construction	4,561		—		—		—		4,561
Residential	32,774		—		—		—		32,774
Farmland	45,948		1,293		—		—		47,241
Commercial:
Secured	156,381		14,119		48		—		170,548
Unsecured	27,558		—		—		—		27,558
Consumer and other	279,575		—		9		—		279,584
Total	$	3,408,558	$	123,404	$	2,644	$	—	$	3,534,606

Loans designated as watch and substandard, which are not considered adversely classified, decreased to $115.7 million at March 31, 2025 from $126.0 million at December 31, 2024. There were no loans with doubtful risk grades at March 31, 2025 or December 31, 2024.

Allowance for Credit Losses

The allowance for credit losses is established through a provision for credit losses charged to operations. Provisions are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses.

The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

At March 31, 2025, the Company’s allowance for credit losses was $39.2 million, as compared to $37.8 million at December 31, 2024. The $1.4 million increase in the allowance is due to a $2.2 million provision for credit losses recorded during the three months ended March 31, 2025, partially offset by net charge-offs mainly attributable to commercial and industrial loans of $0.7 million, during the same period.

While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 16 represents management’s allocation of our allowance for credit losses by loan category, and the balance of loans in each category as a percentage of total loans, for the periods indicated.


Table 16: Allocation of the Allowance for Credit Losses
	March 31, 2025				December 31, 2024
(dollars in thousands)	Allowance for Credit Losses		% of Loans to Total Loans		Allowance for Credit Losses		% of Loans to Total Loans
Real estate:
Commercial	$	27,027	81.11	%	$	25,864	80.75	%
Commercial land and development	70		0.10	%	78		0.11	%
Commercial construction	2,227		3.12	%	2,268		3.15	%
Residential construction	78		0.16	%	64		0.13	%
Residential	279		0.94	%	270		0.93	%
Farmland	598		1.20	%	607		1.34	%
Commercial:
Secured	5,905		4.77	%	5,866		4.91	%
Unsecured	403		0.96	%	278		0.78	%
Consumer and other	2,637		7.64	%	2,496		7.90	%
Total allowance for credit losses	$	39,224	100.00	%	$	37,791	100.00	%

The ratio of the allowance for credit losses to total loans held for investment was 1.08% at March 31, 2025, as compared to 1.07% at December 31, 2024.


Table 17: Activity Within the Allowance for Credit Losses
	As of and for the three months ended
	March 31, 2025					March 31, 2024
(dollars in thousands)	Activity			% of Average Loans Held for Investment		Activity			% of Average Loans Held for Investment
Average loans held for investment	$	3,565,830				$	3,069,466

Allowance for credit losses	$	37,791				$	34,431


Net (charge-offs) recoveries:







Commercial:
Secured	(681)			(0.02)	%	(816)			(0.03)	%
Unsecured	—			—	%	(34)			—	%

Consumer and other	(36)			—	%	22			—	%
Net charge-offs	(717)			(0.02)	%	(828)			(0.03)	%

Provision for credit losses	2,150					1,050

Allowance for credit losses	$	39,224				$	34,653

Loans held for investment	$	3,621,819				$	3,104,130
Allowance for credit losses to loans held for investment	1.08		%			1.12		%

The ratio of the allowance for credit losses to loans held for investment decreased from 1.12% as of March 31, 2024 to 1.08% as of March 31, 2025. Net charge-offs as a percent of average loans held for investment decreased from 0.03% to 0.02% for the three months ended March 31, 2024 and March 31, 2025, respectively.

Liabilities

During the first three months of 2025, total liabilities increased by $182.0 million from $3.7 billion as of December 31, 2024 to $3.8 billion as of March 31, 2025. This increase was primarily due to an increase in total deposits of $178.4 million, comprised of an increase of $167.3 million in interest-bearing deposits and an increase of $11.0 million in non-interest-bearing deposits. The increase in interest-bearing deposits was largely due to increases in time and money market deposits of $131.2 million and $52.2 million, respectively.

Deposits

Representing 97.34% of our total liabilities as of March 31, 2025, deposits are our primary source of funding for our business operations.

Total deposits increased by $178.4 million, or 5.01%, to $3.7 billion at March 31, 2025 from $3.6 billion at December 31, 2024. The increase was attributable to growth in both non-wholesale and wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits. Non-interest-bearing deposits increased by $11.0 million from December 31, 2024 to $933.7 million at March 31, 2025, representing 24.99% of total deposits at that date, as compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 97.01% at March 31, 2025, as compared to 99.38% at December 31, 2024. We intend to continue to operate our business with close monitoring of the loan to deposit ratio.

Table 18 summarizes our deposit composition by average deposit balances and average rates paid for the periods indicated.


Table 18: Deposit Composition by Average Balances and Rates Paid
	For the three months ended
	March 31, 2025						March 31, 2024
(dollars in thousands)	Average Amount		Average Rate Paid		% of Total Deposits		Average Amount		Average Rate Paid		% of Total Deposits
Interest-bearing transaction accounts	$	303,822	1.48	%	8.47	%	$	300,325	1.51	%	9.67	%
Money market and savings accounts	1,664,478		3.22	%	46.43	%	1,534,825		3.41	%	49.40	%
Time accounts	706,528		4.38	%	19.70	%	429,586		5.03	%	13.83	%
Demand accounts	910,954		—	%	25.40	%	842,105		—	%	27.10	%
Total deposits	$	3,585,782	2.48	%	100.00	%	$	3,106,841	2.53	%	100.00	%

Uninsured and uncollateralized deposits totaled approximately $1.2 billion at March 31, 2025 and December 31, 2024.

As of March 31, 2025, our 42 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.8 billion, or 49.31% of our total deposits. The average age on deposit relationships of more than $5.0 million was approximately 8.80 years as of March 31, 2025. As of December 31, 2024, our 49 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.8 billion, or 50.35% of our total deposits.

Table 19 shows the entity types making up our large deposit relationships at the dates indicated.


Table 19: Composition of Large Deposit Relationships
(dollars in thousands)	March 31, 2025		December 31, 2024
Municipalities	$	695,040	$	674,094
Non-profits	263,295		211,480
Businesses	484,058		605,894
Brokered deposits	399,947		299,961
Total	$	1,842,340	$	1,791,429

Our largest single deposit relationship at March 31, 2025 related to brokered deposits. The balance for this customer was $400.0 million, or approximately 10.71% of total deposits as of that date. At December 31, 2024, our largest single deposit relationship related to brokered deposits and had a balance of $300.0 million, or 8.43% of total deposits as of that date. As our demand deposits fluctuate, we have purchased brokered deposits as needed to supplement liquidity. We do not consider brokered deposits as core deposits, but as another deposit funding source for our loan growth.

Table 20 sets forth the maturity of time deposits as of March 31, 2025.


Table 20: Scheduled Maturities of Time Deposits
(dollars in thousands)	$250,000 or Greater		Less than $250,000		Total		Uninsured Portion
Remaining maturity:
Three months or less	$	254,351	$	316,505	$	570,856	$	248,653
Over three through six months	80,518		103,604		184,122		76,268
Over six through twelve months	37,956		4,296		42,252		32,956
Over twelve months	3,412		744		4,156		1,662
Total	$	376,237	$	425,149	$	801,386	$	359,539

FHLB Advances and Other Borrowings

From time to time, we utilize short-term collateralized FHLB borrowings to maintain adequate liquidity. There were no borrowings outstanding as of March 31, 2025 and December 31, 2024.

In 2022, we issued subordinated notes of $75.0 million. This debt was issued to investors in private placement transactions. See Note 6, Subordinated Notes and Other Borrowings, in the notes to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding these subordinated notes. The proceeds of the notes qualify as Tier 2 capital for the Company under the regulatory capital rules of the federal banking agencies.

Table 21 is a summary of our outstanding subordinated notes as of March 31, 2025.

Table 21: Subordinated Notes Outstanding

(dollars in thousands)

Issuance Date

Amount of Notes

Prepayment Right

Maturity Date

Subordinated notes

August 2022

75,000

August 17, 2027

September 1, 2032

Fixed at 6.00% through September 1, 2027, then three-month Term SOFR plus 329.0 basis points (7.58% as of March 31, 2025) through maturity

Shareholders’ Equity

Shareholders’ equity totaled $406.5 million at March 31, 2025 and $396.6 million at December 31, 2024. The increase in shareholders’ equity was primarily a result of net income recognized of $13.1 million and a $0.7 million increase in accumulated other comprehensive income, partially offset by $4.3 million in cash dividends paid during the three months ended March 31, 2025.

Liquidity and Capital Resources

Liquidity Management

We manage liquidity based upon factors that include the level of diversification of our funding sources, the composition of our deposit types, the availability of unused funding sources, our off-balance sheet obligations, the amount of cash and liquid securities we hold, and the availability of assets to be readily converted into cash without undue loss. As the primary federal regulator of the Bank, the FDIC evaluates our liquidity on a stand-alone basis pursuant to applicable guidance and policies.

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities, and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds, and the ability to convert assets into cash. Changes in economic conditions or exposure to borrower credit quality, capital markets, and operational, legal, or reputational risks could also affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity management.

The Company is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its subordinated notes. The Company’s main source of cash flow is dividends declared and paid to it by the Bank. There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company, including various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the California Financial Code, payment of a dividend from the Bank to the Company without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net income from the previous three fiscal years less the amount of dividends paid during that period. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company maintains a minimum level of cash to fund one year’s projected operating cash flow needs plus two years’ subordinated notes debt service. We continually monitor our liquidity position in order to meet all reasonably foreseeable short-term, long-term, and strategic liquidity demands. Management has established a comprehensive process for identifying, measuring, monitoring, and controlling liquidity risk. Because of

its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include effective corporate governance, consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems, including stress tests, that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments that can be used to meet liquidity needs in stress situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the Bank’s liquidity risk management process.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, Federal Reserve Discount Window advances, FHLB advances, and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, investments available-for-sale, and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and the Federal Reserve Discount Window, and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from established federal funds lines from unaffiliated commercial banks, and the issuance of debt or equity securities. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary.

In addition, we have a shelf registration statement on file with the SEC registering $250.0 million for any combination of equity or debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, and units in one or more offerings. Specific information on the terms of any securities being offered, including the expected use of proceeds from the sale of such securities, are provided at the time of the offering. In April 2024, we sold an aggregate of 3,967,500 shares of our common stock at a price of $21.75 per share in a public offering (the “2024 Public Offering”), for net proceeds to us, after deducting underwriting discounts and commissions and offering expenses payable by us, of approximately $80.9 million, to be used for general corporate purposes and to support continued growth, including through investments in the Bank to pursue growth opportunities, and for working capital. The 2024 Public Offering used approximately $86.3 million of our shelf registration statement on file with the SEC, leaving approximately $163.7 million available for future offerings.

Sources and Uses of Cash

Our executive officers and board of directors review our sources and potential uses of cash in connection with our annual budgeting process. Generally speaking, our principal funding source is cash from deposits, and our principal uses of cash include funding of loans, operating expenses, income taxes, and dividend payments, as described below. As of March 31, 2025, management believes the above-mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs. In addition, in April 2024, the Company closed the 2024 Public Offering. The proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses payable by the Company, were approximately $80.9 million, providing additional cash to support the Company’s ongoing operating needs.

Loans

Loans are a significant use of cash in daily operations, and a source of cash as customers make payments on their loans or as loans are sold to other financial institutions. Cash flows from loans are affected by the timing and amount of customer payments and prepayments, changes in interest rates, the general economic environment, competition, and the political environment.

During the three months ended March 31, 2025, we had cash outflows of $86.4 million in loan originations and advances, net of principal collected, and $4.4 million in loans originated for sale.

Additionally, in the ordinary course of business, we enter into commitments to extend credit, such as commitments to fund new loans and undisbursed construction funds. While these commitments represent contractual cash requirements, a portion of these commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. At March 31, 2025, off-balance sheet commitments totaled

$389.5 million. We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, deposit growth, and liquid assets.

Deposits

Deposits are our primary source of funding for our business operations, and the cost of deposits has a significant impact on our net interest income and net interest margin.

Our deposits are primarily made up of money market, interest-bearing transaction, time, and non-interest-bearing demand deposits. Aside from commercial and business clients, a significant portion of our deposits are from municipalities and non-profit organizations. Cash flows from deposits are impacted by the timing and amount of customer deposits, changes in market rates, and collateral availability.

During the three months ended March 31, 2025, we had cash inflows of $178.4 million related to an increase in deposits.

During the twelve months following March 31, 2025, approximately $797.2 million of time deposits are expected to mature, which includes $399.9 million of brokered deposits. These deposits may or may not renew due to general competition. We expect the outflow will not be significant and can be replenished through our organic growth in deposits. We believe our emphasis on local deposits and our San Francisco Bay Area expansion provide a stable funding base.

At March 31, 2025, cash and cash equivalents represented 12.11% of total deposits.

Investment Securities

Our investment securities totaled $99.7 million at March 31, 2025. Mortgage-backed securities and obligations of states and political subdivisions comprised 50.45% and 37.19% of our investment portfolio, respectively. Cash proceeds from mortgage-backed securities result from payments of principal and interest by borrowers. Cash proceeds from obligations of states and political subdivisions occur when these securities are called or mature. Assuming the current prepayment speed and interest rate environment, we expect to receive approximately $8.3 million from our securities over the twelve months following March 31, 2025. In future periods, we expect to maintain approximately the same level of cash flows from our securities. Depending on market yield and our liquidity, we may purchase securities as a use of cash in our interest-earning asset portfolio.

During the three months ended March 31, 2025, we had cash proceeds from sales, maturities, calls, and prepayments of securities of $2.0 million. Additionally, at March 31, 2025, securities available-for-sale totaled $97.1 million, of which $94.0 million has been pledged as collateral for borrowings and other commitments.

FHLB Financing

The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At March 31, 2025, the Bank had no outstanding FHLB financing borrowings and a total financing availability of $544.6 million, net of letters of credit issued of $731.5 million.

Federal Reserve Discount Window

The Company has the ability to borrow from the Federal Reserve Discount Window when necessary. At March 31, 2025, the Bank had no outstanding Federal Reserve Discount Window borrowings and a total financing availability of $856.4 million.

Correspondent Bank Lines of Credit

At March 31, 2025, the unused and available amount for borrowing from correspondent bank lines of credit was $175.0 million.

Total Liquidity

Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth in Table 22) was approximately $2.0 billion as of March 31, 2025.


Table 22: Total Liquidity
	March 31, 2025
(dollars in thousands)	Line of Credit		Letters of Credit Issued		Borrowings		Available
FHLB advances	$	1,276,072	$	731,500	$	—	$	544,572
Federal Reserve Discount Window	856,366		—		—		856,366
Correspondent bank lines of credit	175,000		—		—		175,000
Cash and cash equivalents	—		—		—		452,571
Total	$	2,307,438	$	731,500	$	—	$	2,028,509

Future Contractual Obligations

Our estimated future contractual obligations as of March 31, 2025 include both current and long-term obligations. Under our operating leases, we have an operating lease liability of $6.6 million. We have a current obligation of $797.2 million and a long-term obligation of $4.2 million related to time deposits, as discussed in Note 5, Interest-Bearing Deposits. We have net subordinated notes of $73.9 million, all of which are long-term obligations. We also have contractual obligations on unfunded loan commitments and standby letters of credit totaling $389.5 million.

Dividends

A use of liquidity for the Company is shareholder dividends. The Company paid dividends to its shareholders totaling $4.3 million during the three months ended March 31, 2025.

We expect to continue our current practice of paying quarterly cash dividends with respect to our common stock, subject to our board of directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. We believe our quarterly dividend rate per share, as approved by our board of directors, enables us to balance our multiple objectives of managing our business and returning a portion of our earnings to our shareholders. Assuming continued payment during the rest of 2025 at a rate of $0.20 per share, our average total dividend paid each quarter would be approximately $4.3 million based on the number of currently outstanding shares if there are no increases or decreases in the number of shares, and given that unvested RSAs share equally in dividends with outstanding common stock.

Impact of Inflation

Our unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services.

Historical Information

Table 23 summarizes our consolidated cash flow activities.


Table 23: Consolidated Cash Flow Activities
	Three months ended March 31,
(dollars in thousands)	2025		2024		$ Change
Net cash provided by operating activities	$	15,472	$	247	$	15,225
Net cash used in investing activities	(89,338)		(11,923)		(77,415)
Net cash provided by (used in) financing activities	174,094		(124,575)		298,669

Operating Activities

Net cash provided by operating activities increased by $15.2 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to lower loans originated for sale, higher net change in interest payable and other liabilities, and a higher provision for credit losses. These sources of cash were partially offset by lower gross proceeds from sale of loans and lower net change in interest receivable and other assets. Cash provided by operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of interest expense, accounts payable, and bonuses.

For additional information about our operating results, see “Results of Operations” above.

Investing Activities

Net cash used in investing activities increased by $77.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to higher originations of loans held for investment, net of repayments.

Financing Activities

Net cash provided by (used in) financing activities increased by $298.7 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in deposits, partially offset by lower borrowings.

Capital Adequacy

We manage our capital by tracking our level and quality of capital with consideration given to our overall financial condition, our asset quality, our level of allowance for credit losses, our geographic and industry concentrations, and other risk factors on our balance sheet, including interest rate sensitivity.

Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements as set forth in Tables 24 and 25 can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on our unaudited consolidated financial statements

Under federal regulations implementing the Basel III framework, the Bank is subject to minimum risk-based and leverage capital requirements. The Bank also is subject to regulatory thresholds that must be met for an insured depository institution to be classified as “well-capitalized” under the prompt corrective action framework. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts for Bancorp and the Bank, and the Bank’s prompt corrective action classification, are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors. As of March 31, 2025, both Bancorp and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank qualified as “well-capitalized” under the prompt corrective action framework.

Management reviews capital ratios on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs. For all periods presented, the Bank’s ratios exceed the regulatory definition of “well-capitalized” under the regulatory framework for prompt corrective action, and Bancorp’s ratios exceed the minimum ratios required for it to be considered a well-capitalized bank holding company.

The capital adequacy ratios as of March 31, 2025 and December 31, 2024 for Bancorp and the Bank are presented in Tables 24 and 25. As of March 31, 2025 and December 31, 2024, Bancorp’s Tier 2 capital included subordinated notes, which were not included at the Bank level. Eligible amounts of subordinated notes included in Tier 2 capital will be phased out by 20% per year beginning five years before the maturity date of the notes.


Table 24: Capital Ratios for Bancorp
	Actual Ratio				Required for Capital Adequacy Purposes1				Ratio to be Well-Capitalized under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
March 31, 2025
Total capital (to risk-weighted assets)	$	530,135	13.97	%	$	339,287	8.00	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	$	417,586	11.00	%	$	227,700	6.00	%	N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	$	417,586	11.00	%	$	170,775	4.50	%	N/A	N/A
Tier 1 leverage	$	417,586	10.17	%	$	164,288	4.00	%	N/A	N/A
December 31, 2024
Total capital (to risk-weighted assets)	$	519,722	13.99	%	$	332,622	8.00	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	$	409,514	11.02	%	$	222,940	6.00	%	N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	$	409,514	11.02	%	$	167,205	4.50	%	N/A	N/A
Tier 1 leverage	$	409,514	10.05	%	$	162,960	4.00	%	N/A	N/A


Table 25: Capital Ratios for the Bank
	Actual Ratio				Required for Capital Adequacy Purposes1				Ratio to be Well-Capitalized under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2025
Total capital (to risk-weighted assets)	$	511,341	13.50	%	$	303,162	8.00	%	$	378,953	10.00	%
Tier 1 capital (to risk-weighted assets)	$	472,723	12.48	%	$	227,372	6.00	%	$	303,162	8.00	%
Common equity tier 1 capital (to risk-weighted assets)	$	472,723	12.48	%	$	170,529	4.50	%	$	246,319	6.50	%
Tier 1 leverage	$	472,723	11.52	%	$	164,164	4.00	%	$	205,205	5.00	%
December 31, 2024
Total capital (to risk-weighted assets)	$	504,896	13.59	%	$	297,216	8.00	%	$	371,520	10.00	%
Tier 1 capital (to risk-weighted assets)	$	468,584	12.61	%	$	222,912	6.00	%	$	297,216	8.00	%
Common equity tier 1 capital (to risk-weighted assets)	$	468,584	12.61	%	$	167,184	4.50	%	$	241,488	6.50	%
Tier 1 leverage	$	468,584	11.50	%	$	162,942	4.00	%	$	203,677	5.00	%

1The listed capital adequacy ratios exclude capital conservation buffers.

Non-GAAP Financial Measures

Some of the financial measures discussed herein are non-GAAP financial measures. In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated statements of income, balance sheets, statements of shareholders’ equity, or statements of cash flows.

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. Management believes that tangible shareholders’ equity to tangible assets is a useful financial measure because it enables management, investors, and others to assess the Company’s financial health based on tangible capital. 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. Management believes that tangible book value per share is a useful financial measure because it enables management, investors, and others to assess the Company’s value and use of equity. 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.

We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations, and cash flows computed in accordance with GAAP. However, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you 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 we use for the non-GAAP financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate our non-GAAP financial measures when making comparisons.

Recent Legislative and Regulatory Developments

On September 17, 2024, the FDIC finalized changes to its Statement of Policy on Bank Merger Transactions (the “Policy Statement”), which outlines factors that the FDIC will consider when evaluating a proposed bank merger transaction. On March 3, 2025, the FDIC issued a proposal to rescind the Policy Statement.

On July 30, 2024, the FDIC issued a proposed rule that would revise the FDIC’s regulations governing the classification and treatment of brokered deposits. On March 3, 2025, the FDIC withdrew the proposed rule.

On October 24, 2023, the federal banking agencies issued a final rule amending their regulations implementing the Community Reinvestment Act (“CRA”) to substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods. On March 28, 2025, the agencies announced their intent to issue a proposal to rescind the October 2023 final rule, and to reinstate the CRA framework that existed prior to the October 2023 final rule. The Bank received a rating of “Satisfactory” in its most recent performance evaluation, which was conducted using the CRA framework that existed prior to the October 2023 final rule.

Glossary of Acronyms, Abbreviations, and Terms

The terms identified below are used in various sections of this Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 and the unaudited Consolidated Financial Statements and Notes to the Financial Statements in Item 1 of this Form 10-Q.

2024 Annual Report on Form 10-K

Company’s Annual Report on Form 10-K for the year ended December 31, 2024

FHLB

Federal Home Loan Bank of San Francisco

ACL

Allowance for Credit Losses

FHLMC

Federal Home Loan Mortgage Corporation

ASC

Accounting Standards Codification

FNMA

Federal National Mortgage Association

ASU

Accounting Standards Update

GAAP

Generally Accepted Accounting Principles in the U.S.

Bancorp

Five Star Bancorp and its subsidiary

GNMA

Government National Mortgage Association

Bank

Five Star Bank

GSE

Government Sponsored Entity

Basel III

A capital framework and rules for U.S. banking organizations

IPO

Initial Public Offering

BOLI

Bank-Owned Life Insurance

Loan modification made to borrower experiencing financial difficulty

CECL

Current Expected Credit Loss

Net Income

CME

Chicago Mercantile Exchange

NII

Net Interest Income

CRE

Commercial Real Estate

OCI

Other Comprehensive Income

C&I

Commercial and Industrial

RSA

Restricted Stock Award

EPS

Earnings per Share

ROAA

Return on Average Assets, annualized

EVE

Economic Value of Equity

ROAE

Return on Average Equity, annualized

FASB

Financial Accounting Standards Board

ROUA

Right-of-Use Asset

FDIC

Federal Deposit Insurance Corporation

SBA

U.S. Small Business Administration

Federal Reserve

Board of Governors of the Federal Reserve System

SEC

Securities and Exchange Commission

FFIEC

Federal Financial Institutions Examination Council

SOFR

Secured Overnight Financing Rate

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. As a financial institution, the Company experiences market risk arising primarily from interest rate risk inherent in lending and deposit-taking activities. Because the interest rates on the Company’s assets and liabilities do not necessarily change at the same speed or rate as market interest rates, sudden and/or substantial changes in interest rates may adversely impact our earnings. In particular, the Company’s financial results are sensitive to significant changes in the treasury yield curve, the Federal Funds rate, and the Wall Street Prime Index.

The Company’s total interest income was $57.1 million for the three months ended March 31, 2025 and $207.0 million for the year ended December 31, 2024. Our total interest expense was $23.1 million for the three months ended March 31, 2025 and $87.2 million for the year ended December 31, 2024. Overall, our net interest income was $34.0 million for the three months ended March 31, 2025 and $119.7 million for the year ended December 31, 2024.

Economic value of equity (“EVE”) measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet, assuming that the rate change remains in effect over the life of the current balance sheet. As of March 31, 2025, the Company carried a slightly higher balance of liabilities than assets that will reprice within the next twelve months in the event that interest rates fall.

Our policies and procedures provide management with guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. This is overseen and adjusted as needed by our Management Asset Liability Committee on a monthly basis and our Director Asset Liability Committee on a quarterly basis. We have historically managed our sensitivity position within our established guidelines. With the intent of stabilizing or increasing net interest income, management typically deploys the Company’s excess liquidity and seeks to migrate certain earning assets into higher-yielding categories (from investment securities into loans, for example). However, in situations where deposit balances contract, management relies upon various borrowing facilities and/or the use of brokered deposits. The Company monitors the impact of interest rate risk on EVE by reviewing and managing assets and liabilities with varying interest rate risks, such as cash and time deposits. Assets and liabilities are subject to fluctuations at each measurement date based on the composition of the balance sheet at each measurement date. EVE results are compared to previous periods and established policies on a quarterly basis.

As of March 31, 2025, the overnight Federal Funds rate (the rate used in the interest rate shock scenarios listed below) was 4.33%, remaining constant from December 31, 2024. The scenarios presented assume that interest rates change instantaneously (“shock”) and that there are no significant changes in the structure of the Company’s balance sheet over the twelve months being measured.

Table 26 summarizes the estimated effect on net interest income and EVE from changing interest rates as measured against a flat rate (no interest rate change) instantaneous parallel shock scenario over a twelve-month period utilizing an interest sensitivity (GAP) analysis based on the Company’s specific mix of interest-earning assets and interest-bearing liabilities as of March 31, 2025 and December 31, 2024.


Table 26: Estimated Effect on Net Interest Income and EVE from Changing Interest Rates
	March 31, 2025				December 31, 2024
Change in Interest Rates	Estimated Change in NII (as % of NII)		Estimated Change in EVE (as % of EVE)		Estimated Change in NII (as % of NII)		Estimated Change in EVE (as % of EVE)
(in basis points)
+300 (shock)	(5.26)	%	(10.22)	%	(6.32)	%	(12.51)	%
+200 (shock)	(3.52)	%	(7.04)	%	(4.09)	%	(8.70)	%
+100 (shock)	(1.95)	%	(3.55)	%	(2.15)	%	(4.29)	%
+ 0 (flat)	—	%	—	%	—	%	—	%
-100 (shock)	2.03	%	3.16	%	2.14	%	3.93	%
-200 (shock)	4.29	%	5.87	%	4.80	%	6.40	%
-300 (shock)	7.61	%	8.99	%	7.95	%	10.12	%

The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions, which are based upon our experience and published industry experience including, but not limited to, assumptions relating to expected maturities, hypothetical changes in interest rates, decay rates, and deposit betas. Such assumptions may not necessarily reflect the manner or timing in which our interest-earning assets and interest-bearing liabilities respond to changes in market rates. Because these assumptions are inherently uncertain, actual results will differ from simulated results.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of March 31, 2025 of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, such controls.

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition, or results of operations.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed under Item 1A of the Company’s 2024 Annual Report on Form 10-K, previously filed with the SEC.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)Unregistered Sales of Equity Securities

None.

(b)Use of Proceeds

Not applicable.

(c)Issuer Purchases of Equity Securities

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

During the three months ended March 31, 2025, none of our directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.

ITEM 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by references to filings previously made with the SEC.

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith

3.1

S econd Amended and Restated Bylaws of Five Star Bancorp

Filed

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed

101

Inline XBRL Interactive Data

Filed

104

Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101)

Filed

SIGNATURES

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 thereunto duly authorized.


									Five Star Bancorp
									(registrant)

			May 8, 2025						/s/ James E. Beckwith
			Date						James E. Beckwith
									President &
									Chief Executive Officer
									(Principal Executive Officer)

			May 8, 2025						/s/ Heather C. Luck
			Date						Heather C. Luck
									Executive Vice President &
									Chief Financial Officer
									(Principal Financial Officer)