Key Highlights

  • Net income rose to USD 21.9 million from USD 16.3 million a year earlier, with diluted EPS of USD 0.92.
  • Net interest margin expanded six basis points to 3.69%, and the efficiency ratio improved to 39.13% from 40.91%.
  • Loans held for investment grew USD 184.5 million, or 4.08%, in the quarter to USD 4.70 billion.
  • A public offering raised about USD 130.0 million, lifting the common equity Tier 1 ratio to 12.52% from 9.97%.

Earnings Growth and Fresh Capital

Five Star Bancorp (NASDAQ:FSBC), the parent of Five Star Bank in Rancho Cordova, California, reported third-quarter net income of USD 21.9 million on Monday, Oct. 26. That compares with USD 19.4 million in the second quarter and USD 16.3 million a year earlier. Diluted earnings per share were USD 0.92 against USD 0.91 and USD 0.77, with the per-share gain tempered by an 11% increase in weighted average shares after the offering.

Return on average assets was 1.55% against 1.49% in the second quarter, while return on average equity was 15.04% against 16.67%, reflecting the larger equity base. Pre-tax, pre-provision income was USD 32.0 million against USD 28.3 million.

During the quarter the company sold 3,133,750 shares in an underwritten public offering, raising about USD 130.0 million in net proceeds after USD 7.3 million of underwriting discounts and USD 0.6 million of expenses. Shares outstanding rose to 24.5 million from 21.4 million, and the common equity Tier 1 ratio reached 12.52%. President and Chief Executive James Beckwith said the proceeds expand capacity for organic growth and strategic investment.

Margin, Loans and Deposits

Net interest income rose USD 4.8 million, or 11%, to USD 50.9 million, and net interest margin widened to 3.69% from 3.63% on higher-yielding loans and a higher yield on earning assets, partly offset by higher deposit funding costs. A year earlier the margin was 3.56%, with the gain tied to balance sheet growth and lower deposit costs after three Federal Reserve rate cuts that began in September 2025.

Loans held for investment reached USD 4.704 billion, up 21.0% from a year earlier. Total deposits rose USD 25.1 million, or 0.52%, as non-wholesale deposits grew USD 75.1 million, or 1.65%, and wholesale deposits fell USD 50.0 million, or 20.00%. Noninterest-bearing deposits were USD 1.21 billion, up 14.3% year over year. Cash and equivalents were USD 679.5 million, or 14.08% of deposits.

The efficiency ratio improved to 39.13% from 40.91%. Non-interest expense rose USD 1.0 million on higher salaries and recruiter fees, and non-interest income fell USD 0.2 million on lower venture-backed fund earnings and loan referral income, partly offset by a special FHLB stock dividend.

Credit, Expansion and Dividend

The ratio of nonperforming loans to loans held for investment declined to 0.28% from 0.30%. The provision for credit losses rose USD 0.3 million on loan growth and the annual refresh of the credit loss model. Unrealized losses on available-for-sale securities, net of tax, were USD 12.4 million against USD 9.4 million in June.

Business Development Officers rose to 50 from 45. The company opened a branch in Lodi, a new administrative office in Calabasas and made four hires in Palo Alto. The board paid a dividend of USD 0.25 per share in the quarter and declared another USD 0.25 payable on Nov. 9 to holders of record on Nov. 2.

Bank Markers to Follow

Tracking points include net interest margin against 3.69%, loan growth relative to the 4.08% quarterly pace, and the share of non-wholesale deposits as wholesale funding declines.

Further items are the efficiency ratio against 39.13%, nonperforming loans relative to 0.28%, and the return on average equity after the larger equity base.