Five Star Bancorp Soars in Q1 on Strong Deposit and Loan Growth

RANCHO CORDOVA, Calif. – April 28, 2026 – Five Star Bancorp (Nasdaq: FSBC) delivered a powerful start to 2026, announcing first-quarter financial results that significantly outpaced prior periods and showcased resilience amid a complex economic landscape for regional banks. The company reported a net income of $18.6 million, a 42% increase from the same period last year, and boosted its quarterly cash dividend by 25% to $0.25 per share, signaling strong confidence in its financial health and future prospects.

The performance, driven by robust growth in both loans and core deposits, allowed the bank to expand its net interest margin at a time when many peers are facing compression. These results underscore the success of the bank's strategy, which hinges on expanding its market presence and cultivating a strong customer base.

“The strength of Five Star Bank’s first quarter 2026 financial results is emblematic of seized market opportunities fueled by the continued demand for our differentiated customer experience,” said James E. Beckwith, President and Chief Executive Officer, in the company’s press release. He noted the successful execution of the bank's strategic plan, which is translating into tangible benefits for customers and shareholders.

Defying Market Headwinds

While the broader regional banking sector navigates challenges from shifting interest rate expectations, Five Star Bancorp demonstrated a notable ability to improve its core profitability. The bank’s net interest margin (NIM)—a key indicator of lending profitability—expanded to 3.70%. This marks an increase from 3.66% in the previous quarter and a significant jump from 3.45% in the first quarter of 2025.

This improvement is particularly striking given the market context. The bank achieved this NIM expansion during a period where the effective federal funds rate had previously declined, a scenario that often pressures bank margins. Furthermore, with the spread between short-term and long-term interest rates narrowing in what some analysts call the "2026 Twist," many regional banks have struggled with high funding costs that compress profitability. Five Star’s ability to buck this trend points to effective balance sheet management and a favorable funding structure.

The bottom-line impact was clear. Net income of $18.6 million, or $0.87 per diluted share, represents a steady climb from $17.6 million ($0.83 per share) in the fourth quarter of 2025 and a substantial leap from $13.1 million ($0.62 per share) a year ago.

A Magnet for Deposits and Loans

A primary driver of the quarter's success was the bank's remarkable growth in its core business of lending and gathering deposits. Total loans held for investment surged by $138.5 million during the quarter, an annualized growth rate of 14%, to reach $4.21 billion. The growth was primarily fueled by a $116.2 million increase in commercial real estate loans.

Even more impressive was the bank's performance on the other side of the balance sheet. Total deposits grew by a staggering $268.3 million, representing a 26% annualized growth rate. Critically, the quality of this deposit growth signals deepening customer relationships. The bank saw non-wholesale deposits—typically more stable and lower-cost funds from local businesses and individuals—increase by $350.2 million. Simultaneously, it strategically reduced its reliance on more volatile and expensive wholesale deposits by $81.9 million.

This shift towards a more stable, core-funded deposit base is a significant strategic advantage. It lowers the bank's cost of funds, which fell 10 basis points to 2.20% during the quarter, and enhances its liquidity and resilience. This successful cultivation of its deposit franchise appears to be a direct result of the bank's stated focus on its customer experience and expansion into new verticals and geographies.

The Engine of Efficiency

Beyond top-line growth, Five Star Bancorp demonstrated exceptional operational discipline. The company’s efficiency ratio—a measure of non-interest expense as a percentage of revenue—improved significantly, falling to 38.57%. This is a sharp improvement from 42.58% a year ago and stands in stark contrast to many industry peers, whose efficiency ratios can often exceed 60%.

Such a low ratio indicates that the bank is highly effective at controlling costs while generating revenue. Despite increasing its headcount to support growth, total non-interest expense actually decreased by $0.3 million from the prior quarter, aided in part by the release of a $1.0 million loss contingency on a U.S. Small Business Administration loan. This disciplined management of expenses ensures that more of the bank's revenue translates directly into profit, a key factor in its strong return on average assets (ROAA) of 1.55% and return on average equity (ROAE) of 16.73%.

A Fortified Balance Sheet

Underpinning the strong earnings report is a picture of solid financial health and prudent risk management. Asset quality remains pristine, with the ratio of nonperforming loans to total loans held for investment decreasing to a mere 0.07%. While loans designated as "watch" or "substandard" saw an increase, they remain a small and manageable portion of the overall portfolio. The bank proactively increased its allowance for credit losses to $46.4 million, or 1.10% of loans, ensuring it is well-provisioned for its larger loan book.

The institution remains “well-capitalized” by all regulatory measures, with a common equity Tier 1 capital ratio of 10.45%. Liquidity is also robust, with total available liquidity of approximately $2.2 billion as of March 31, 2026. Cash and cash equivalents alone stood at $644.4 million, representing over 14% of total deposits, providing a substantial buffer.

The combination of strong capital, ample liquidity, and stellar asset quality positions the bank to continue its growth trajectory. The Board of Directors declared another cash dividend of $0.25 per share, payable on May 11, 2026, rewarding shareholders for a quarter of exceptional performance.