FIVE STAR BANCORP
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 27, 2026
FSBC$44.11+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001275168-25-000038
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001628280-26-012724
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 209 previous paragraphs and 204 current paragraphs.
123 unchanged; 68 reworded; 11 added; 17 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 25 previous and 25 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
•continue to focus on and expand our operations in our unique lines of business throughout our geographic service areas;
Current report
Other income. The increase related primarily to an overall improvement in earnings related to equity investments in venture-backed funds during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Current report
Occupancy and equipment. The increase was primarily due to higher rent and property management expenses for the Walnut Creek and San Francisco branch offices period-over-period.
Current report
FDIC Insurance. The increase was primarily due to a $571.8 million increase in the assessment base period-over-period.
Current report
Professional services. The increase was due to: (i) $0.1 million in fees paid for compensation consulting services that did not occur during 2024; (ii) a $0.2 million increase in expenses related to business development consulting services; (iii) a $0.1 million increase in legal expenses; and (iv) a $0.1 million increase in recruiter fees related to the 13.66% increase in employee headcount between December 31, 2024 and December 31, 2025.
Current report
Advertising and promotional. The increase was primarily due to an additional $0.2 million in donations and $0.2 million related to sponsored events and partnerships, combined with $0.4 million of additional expenses incurred to support the expansion of the Bank’s business development teams, specifically related to client and prospective client development expenses.
Current report
Loan-related expenses. The increase was due to an increase of $0.1 million in inspection fees and an increase of $0.1 million in loan-related legal expenses, both due to loan growth between December 31, 2024 and December 31, 2025.
Current report
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. These changes were not reflected in the income tax provision for the period ended December 31, 2025. The Company evaluated the impact on future periods and the legislation is not expected to have a significant impact on the Company’s consolidated financial statements.
Current report
Provision for income taxes increased by $3.1 million, or 16.15%, to $22.1 million for the year ended December 31, 2025, as compared to $19.1 million for the year ended December 31, 2024. This increase is primarily due to a 29.37% increase in pre-tax income recognized during the year ended December 31, 2025. This was partially offset by: (i) a $0.9 million benefit recorded during the quarter ended December 31, 2025 related to the purchase of transferable federal tax credits; and (ii) a net $0.2 million reduction to the provision recorded during the quarter ended June 30, 2025. This adjustment related to a tax law change for the state of California effective as of June 30, 2025, which requires a transition from a three-factor apportionment formula to a single-sales-factor formula for determining state income tax. As such, the Company recorded a net benefit of approximately $0.9 million relating to the current year provision, which was partially offset by a $0.7 million expense relating to the remeasuring of the deferred tax assets and liabilities as of June 30, 2025. The effective tax rate was 26.42% and 29.43% for the years ended December 31, 2025 and December 31, 2024, respectively.
Current report
The ratio of nonperforming loans to loans held for investment was 0.08% at December 31, 2025, increasing from 0.05% as of December 31, 2024. The ratio of non-accrual loans to loans held for investment was also 0.08% at December 31, 2025, increasing from 0.05% as of December 31, 2024.
Current report
Loans designated as watch decreased from $123.4 million to $101.9 million between December 31, 2024 and December 31, 2025. Consequently, loans designated as substandard increased from $2.6 million to $22.3 million between December 31, 2024 and December 31, 2025, primarily attributable to the downgrade of one borrower experiencing financial difficulty with a special purpose commercial real estate loan and a commercial line of credit. There were no loans with doubtful risk grades at December 31, 2025 or December 31, 2024.
Removed paragraphs (17)
Previous report
S Corporation Status
Previous report
Beginning at our inception, we elected to be taxed for U.S. federal income tax purposes as an S Corporation. In conjunction with our IPO, we filed consents from the requisite amount of our shareholders to revoke our S Corporation election with the IRS, resulting in the commencement of our taxation as a C Corporation for U.S. federal and California state income tax purposes in the second quarter of fiscal year 2021. Prior to such revocation, our earnings were not subject to and we did not pay U.S. federal income tax, and we were not required to make any provision or recognize any liability for U.S. federal income tax in our consolidated financial statements. While we were not subject to and did not pay U.S. federal income tax, we were subject to and paid California S Corporation income tax at a current rate of 3.50%. Upon the termination of our status as an S Corporation, we commenced paying U.S. federal income tax and a higher California state income tax on our taxable earnings for each year (including the short year beginning on the date our status as an S Corporation terminated), and our consolidated financial statements reflect a provision for U.S. federal income tax and a higher California state income tax from that date forward. As a result of this change, the net income and EPS data presented in our historical financial statements for periods prior to the termination of our S Corporation status and the other related financial information set forth in this filing, which (unless otherwise specified) do not include any provision for U.S. federal income tax or the higher California state income tax rate, will not be comparable with our net income and EPS in periods after we commenced being taxed as a C Corporation. As a C Corporation, our net income is calculated by including a provision for U.S. federal income tax and a higher state income tax rate at a combined statutory rate of 29.11%.
Previous report
The termination of our status as an S Corporation may also affect our financial condition and cash flows. Historically, we made quarterly cash distributions to our shareholders in amounts estimated by us to be sufficient for them to pay estimated individual U.S. federal and California state income tax liabilities resulting from our taxable income that was “passed through” to them. However, these distributions were not consistent, as sometimes the distributions were less than or in excess of the shareholders’ estimated U.S. federal and California state income tax liabilities resulting from their ownership of our stock. In addition, these estimates were based on individual income tax rates, which may differ from the rates imposed on the income of C Corporations. As a C Corporation, no income is “passed through” to any shareholders, but, as noted above, we commenced paying U.S. federal income tax and a higher California state income tax. However, in the event of an adjustment to our reported taxable income for periods prior to the termination of our S Corporation status, it is possible that our pre-IPO shareholders would be liable for additional income taxes for those prior periods. Pursuant to the Tax Sharing Agreement we entered into with such shareholders, upon our filing any tax return (amended or otherwise), in the event of any restatement of our taxable income or pursuant to a determination by, or a settlement with, a taxing authority, for any period during which we were an S Corporation, depending on the nature of the adjustment, we may be required to make a payment to such shareholders, who accepted distribution of the estimated balance of our federal AAA of $31.9 million under the Tax Sharing Agreement, in an amount equal to such shareholders’ incremental tax liability (including interest and penalties). In addition, the Tax Sharing Agreement provides that we will indemnify such shareholders with respect to unpaid income tax liabilities (including interest and penalties) to the extent that such unpaid income tax liabilities are attributable to an adjustment to our taxable income for any period after our S Corporation status terminated. The amounts that we have historically distributed to our shareholders may not be indicative of the amount of U.S. federal and California state income tax that we will be required to pay going forward. Depending on our effective tax rate and our future dividend rate, our future cash flows and financial condition could be positively or adversely affected compared to our historical cash flows and financial condition.
Previous report
Furthermore, deferred tax assets and liabilities were recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a C Corporation was recognized in net income in the year ended December 31, 2021.
Previous report
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
Previous report
$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.
Previous report
•continue to focus on and grow each of the diverse industry clusters throughout our market areas;
Previous report
Service charges on deposit accounts. The increase resulted primarily from a $0.2 million increase in wire transfer fees recognized, partially offset by a small decrease in other fees recognized during the year ended December 31, 2024 compared to the year ended December 31, 2023.
Previous report
Net gain (loss) on sale of securities. The decrease in the net loss on sale of securities resulted from the sale of two municipal securities with a par value of approximately $0.8 million for a loss of approximately $0.2 million during the year ended December 31, 2023, with no sales occurring during the year ended December 31, 2024.
Previous report
FHLB stock dividends. The increase primarily relates to a 50 basis point increase in the annualized dividend rate earned year-over-year, while the average shares outstanding remained consistent.
Previous report
Other income. The decrease resulted primarily from $0.5 million in income received on equity investments in venture-backed funds during the year ended December 31, 2024, as compared to $1.7 million in income received on equity investments in venture-backed funds during the year ended December 31, 2023.
Previous report
Occupancy and equipment. The increase related to rent expense for the San Francisco branch office and a new office lease to support back office staff during the year ended December 31, 2024, which did not exist for the full year ended December 31, 2023.
Previous report
Professional services. The increase was due to an increase in audit, IT support, and other consulting fees for services provided for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Previous report
Provision for income taxes increased by $0.2 million, or 0.89%, to $19.1 million for the year ended December 31, 2024, compared to $18.9 million for the year ended December 31, 2023. This increase is due to a $0.6 million provision to return true-up recorded during the year ended December 31, 2024, partially offset by a decline in taxable income year-over-year. The effective tax rate was 29.43% and 28.34% for the years ended December 31, 2024 and December 31, 2023, respectively.
Previous report
The ratio of nonperforming loans to loans held for investment was 0.05% at December 31, 2024, decreasing from 0.06% as of December 31, 2023.
Previous report
Loans designated as watch and substandard, which are not considered adversely classified, increased to $126.0 million at December 31, 2024 from $41.6 million at December 31, 2023. The increase related primarily to an $83.8 million increase in loans designated as watch for loans which have indicators of deficient loan quality and potential significant issues which are expected to be temporary in nature. There were no loans with doubtful risk grades at December 31, 2024 or December 31, 2023.
Previous report
Allowance for Credit Losses
Reworded paragraphs (68)
Previous wording
Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp (“Bancorp” or the “Company”) 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 December 31, 2024, we had total assets of $4.1 billion, total loans held for investment of $3.5 billion, and total deposits of $3.6 billion.
Current wording
Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp (“Bancorp” or the “Company”) 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 nine 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 December 31, 2025, we had total assets of $4.8 billion, total loans held for investment of $4.1 billion, and total deposits of $4.2 billion.
Previous wording
Interest rates have risen significantly following the historically low levels during the COVID-19 pandemic. Due to elevated levels of inflation and corresponding pressure to raise interest rates, the Federal Reserve announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The Federal Open Market Committee (“FOMC”) then increased the target range eleven times throughout 2022 and 2023. During 2024, the Federal Reserve decreased the federal funds rate three times. As of December 31, 2024, the target range for the federal funds rate had been decreased to 4.25% to 4.50%, and the FOMC signaled that current economic data and the interest rate environment are more balanced, projecting two decreases in 2025, as part of a strategy to return inflation to normalized levels.
Current wording
Interest rates have risen significantly following the historically low levels during the COVID-19 pandemic. Due to elevated levels of inflation and corresponding pressure to raise interest rates, the Federal Reserve announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The Federal Open Market Committee (“FOMC”) then increased the target range eleven times throughout 2022 and 2023. During 2024 and 2025, the Federal Reserve decreased the federal funds rate three times each year. As of December 31, 2025, the target range for the federal funds rate had been decreased to 3.50% to 3.75%, and the FOMC projects one additional decrease in 2026, as part of a strategy to return inflation to normalized levels while keeping unemployment low.
Previous wording
We anticipate that interest rates may be lowered over the next few years. Based on our liability sensitivity, a steepened yield curve could have a beneficial impact on our net interest income. Additionally, a continued flat yield curve would be expected to maintain our net interest income.
Current wording
We anticipate that interest rates may be lowered over the next few years. Based on our sensitivity analysis, a steepened yield curve could have a slight negative impact on our net interest income over the next year. Additionally, a continued flat yield curve would be expected to maintain our net interest income over the next year.
Previous wording
On January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to-maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.
Current wording
On January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to-maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently
Previous wording
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.
Current wording
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. However, we may early adopt certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted.
Previous wording
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 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. This estimate is subject to significant judgment and could potentially add $2.4 million based on existing loan balances, if not more, to the allowance for credit losses while using severely adverse economic conditions in the estimate. The concentrations within the loan portfolio factor is estimated based on concentrations at the loan pool level. This estimate is subject to significant judgment and could potentially add $9.4 million based on existing loan balances, if not more, to the allowance for credit losses while using a severely adverse market outlook for the specifically identified concentrations. The external factor is estimated based on current external factors, such as environmental factors, which could impact the loan portfolio. This estimate is subject to significant judgment and could potentially add $6.9 million based on existing loan balances, if not more, to the allowance for credit losses while using severely adverse external factors in the estimate.
Current wording
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 factors to reflect current conditions. The most significant components of qualitative factors used to estimate the allowance for credit losses are adjustments relating to prevailing economic conditions, concentrations within the loan portfolio, and external factors. These qualitative factors are subject to significant judgment and carry a higher degree of uncertainty. 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. This estimate is subject to significant judgment and could potentially add $3.2 million based on existing loan balances to the allowance for credit losses while using severely adverse economic conditions in the estimate. The concentrations within the loan portfolio factor is estimated based on concentrations at the loan pool level. This estimate is subject to significant judgment and could potentially add $12.0 million based on existing loan balances to the allowance for credit losses while using a severely adverse market outlook for the specifically identified concentrations. The external factor is estimated based on current external factors, such as environmental factors, which could impact the loan portfolio. This estimate is subject to significant judgment and could potentially add $9.5 million based on existing loan balances to the allowance for credit losses while using severely adverse external factors in the estimate. Other qualitative factors within the ACL relate to items which carry a lower degree of judgment using internally generated data. These factors include, but are not limited to, policy exception rates, volume of loan growth, and results of internal and external audits.
Previous wording
•continue our organic lending growth in our market through our “purpose-driven and integrity-centered” approach to banking;
Current wording
•continue our organic growth in our market through our “purpose-driven and integrity-centered” approach to banking;
Previous wording
Net interest income increased by $8.8 million, or 7.96%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, while our net interest margin decreased 10 basis points during the same period. The increase in net interest income was primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances and rates on deposits. Additional detail relating to net interest margin in each period is provided below.
Current wording
Net interest income increased by $32.2 million, or 26.89%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, while our net interest margin increased 23 basis points during the same period. The increase in net interest income was primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances of deposits. Additional detail relating to net interest margin in each period is provided below.
Previous wording
Net interest income during the year ended December 31, 2024 increased $8.8 million, or 7.96%, to $119.7 million compared to $110.9 million during the year ended December 31, 2023. Net interest margin totaled 3.32% for the year ended December 31, 2024, a decrease of 10 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $30.6 million in loan interest income due to a $336.3 million, or 11.41%, increase in the average balance of loans and a 37 basis point improvement in the average yield on loans as compared to the prior year. The increase in interest income was partially offset by an additional $24.5 million in deposit interest expense due to a $293.4 million, or 10.00%, increase in the average balance of deposits and a 58 basis point increase in the average cost of deposits compared to the prior year.
Current wording
Net interest income during the year ended December 31, 2025 increased $32.2 million, or 26.89%, to $151.9 million, as compared to $119.7 million during the year ended December 31, 2024. Net interest margin totaled 3.55% for the year ended December 31, 2025, an increase of 23 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $35.9 million in loan interest income due to a $483.3 million, or 14.72% increase in the average balance of loans and a 19 basis point improvement in the average yield on loans as compared to the prior year. The increase in interest income was partially offset by an additional $10.0 million in deposit interest expense due to a $627.4 million, or 19.45% increase in the average balance of deposits during the year. The average cost of deposits was 2.40% for the year ended December 31, 2025, a decrease of 16 basis points compared to the prior year which helped to moderate the increase in interest expense related to deposits.
Previous wording
We recorded a $7.0 million provision for credit losses in the year ended December 31, 2024, compared to a $4.0 million provision for credit losses for the year ended December 31, 2023. The provision for credit losses increased $3.0 million, or 73.75%, primarily due to loan growth as loan originations in the year ended December 31, 2024 were almost double those for the year ended December 31, 2023.
Current wording
We recorded a $9.7 million provision for credit losses in the year ended December 31, 2025 compared to a $7.0 million provision for credit losses for the year ended December 31, 2024. The provision for credit losses increased $2.8 million, or 39.57%, primarily due to increases in loan growth and an overall increase in loss rates related to the annual CECL model refresh during the three months ended December 31, 2025, as compared to the prior year.
Previous wording
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.
Current wording
Non-interest income is a secondary contributor to our net income, following interest income. Non-interest income consists of service charges on deposit accounts, gain on sale of loans, loan-related fees, FHLB stock dividends, earnings on BOLI, and other income.
Previous wording
Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold during the year ended December 31, 2024 compared to the year ended December 31, 2023. During the year ended December 31, 2024, 56 SBA 7(a) loans with government guaranteed portions totaling approximately $18.3 million were sold with an effective yield of 6.96%, as compared to approximately $36.5 million of loans sold with an effective yield of 5.35% during the year ended December 31, 2023.
Current wording
Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold due to a strategic, intentional reduction in originations of loans held for sale during the second half of the year ended December 31, 2025. During the year ended December 31, 2025, approximately $3.3 million of loans were sold with an effective yield of 7.41%, as compared to approximately $18.3 million of loans sold with an effective yield of 6.96% during the year ended December 31, 2024.
Previous wording
Loan-related fees. The decrease was primarily a result of a $0.2 million net decrease in income earned from the credit card program, partially offset by a small increase in loan fee income earned on various loan types and services.
Current wording
Loan-related fees. The increase was primarily a result of a $0.5 million increase in fees from swap referrals and a $0.2 million increase in income from credit card activity, partially offset by a $0.1 million decrease in fees from SBA 7(a) loans.
Previous wording
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.
Current wording
Over the past several years, we have continued to invest significant resources in personnel, technology, and infrastructure. As we execute initiatives based on growth, we expect non-interest expense to continue 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.
Previous wording
Salaries and employee benefits. The increase was the result of: (i) a $3.5 million increase in salaries, benefits, and bonuses, of which approximately $3.3 million related to employees hired to support expansion into the San Francisco Bay Area; and (ii) a $1.4 million increase in commissions paid, primarily to employees in the San Francisco Bay Area. The increase was partially offset by a $0.3 million increase in loan origination costs due to higher loan production, net of purchased consumer loans, period-over-period.
Current wording
Salaries and employee benefits. The increase was the result of: (i) a $6.5 million increase in salaries, benefits, and bonus expense, related to the 13.66% increase in employee headcount between December 31, 2024 and December 31, 2025; and (ii) a $1.2 million increase in commissions expense due to higher loan production. The increase was partially offset by a $1.5 million increase in deferred loan origination costs due to higher loan production period-over-period.
Previous wording
Other operating expenses. The increase is primarily related to a $0.2 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network, partially offset by a $0.1 million decrease in conference and training expenses.
Current wording
Other operating expenses. The increase was due to: (i) a $0.4 million increase in employee-related expenses, such as travel, conferences, training, and professional association memberships; (ii) a $0.2 million increase in armored car and courier expenses; (iii) a $0.2 million increase in administrative charges, including subscription services and bank charges; (iv) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; (v) a $0.1 million increase in office expenses, such as check printing and supplies; and (vi) a $0.1 million increase in regulatory assessment fees.
Previous wording
At December 31, 2024, total assets were $4.1 billion, an increase of $460.2 million from $3.6 billion at December 31, 2023, primarily due to a $451.0 million increase in total loans held for investment and a $30.8 million increase in cash and cash equivalents, partially offset by a $10.2 million decrease in investments.
Current wording
At December 31, 2025, total assets were $4.8 billion, an increase of $701.6 million from $4.1 billion at December 31, 2024, primarily due to a $542.2 million increase in total loans held for investment and a $154.5 million increase in cash and cash equivalents.
Previous wording
Total cash and cash equivalents were $352.3 million at December 31, 2024, an increase of $30.8 million from $321.6 million at December 31, 2023. The increase in cash and cash equivalents was primarily due to increases in deposits of $531.1 million, $80.9 million in net proceeds from the 2024 Public Offering (as defined below), and pre-tax income of $64.7 million, partially offset by loan originations, net of repayments, of $442.8 million and a decrease in borrowings of $170.0 million.
Current wording
Total cash and cash equivalents were $506.9 million at December 31, 2025, an increase of $154.5 million from $352.3 million at December 31, 2024. The increase in cash and cash equivalents was primarily due to the net increase in cash inflows from growth in total deposits of $643.1 million and cash outflows from growth in total loans held for investment of $542.2 million.
Previous wording
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 aims to maximize earnings while maintaining liquidity in securities with minimal credit risk and interest rate risk that is reflective of the yields obtained on those securities. 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.
Current wording
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 in securities with minimal credit risk and interest rate risk that is reflective of the yields obtained on those securities. 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.
Previous wording
Our total securities available-for-sale and held-to-maturity amounted to $100.9 million at December 31, 2024 and $111.2 million at December 31, 2023, a decrease of $10.2 million year-over-year. The decrease was primarily due to principal paydowns and amortization of $9.0 million, partially offset by an improvement in the unrealized loss on securities of $0.9 million, primarily in our municipal securities portfolios. The improvement in the unrealized loss was recognized as a result of interest rate decreases that occurred during the period.
Current wording
Our total securities available-for-sale and held-to-maturity amounted to $96.9 million at December 31, 2025 and $100.9 million at December 31, 2024, a decrease of $4.0 million year-over-year. The decrease was primarily due to maturities, prepayments, and calls of $9.3 million, partially offset by a purchase of a $1.0 million security and an unrealized gain on securities of $5.1 million, with the remainder of the change due to amortization of premiums. For the year ended December 31, 2025, other comprehensive gain was $3.2 million, primarily due to rate changes and other market conditions on securities during the period.
Previous wording
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.
Current wording
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. Yields on tax-exempt securities are not presented on a tax-equivalent basis.
Previous wording
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 December 31, 2024 and 2023, our total loans amounted to $3.5 billion and $3.1 billion, respectively. Table 9 presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated.
Current wording
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 December 31, 2025 and 2024, our total loans amounted to $4.1 billion and $3.5 billion, respectively. Table 9 presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated.
Previous wording
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 84.09% of loans held for investment at December 31, 2024. Commercial secured lending represents 4.83% of loans held for investment at December 31, 2024. 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.
Current wording
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 83.49% of loans held for investment at December 31, 2025. Commercial secured lending represents 6.17% of loans held for investment at December 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.
Previous wording
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 571.91% and 682.72% as of December 31, 2024 and
Current wording
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 594.17% and 571.91% as of December 31, 2025 and
Previous wording
Table 12 sets forth the sensitivity to interest rate changes of our loan portfolio as of the dates shown.
Current wording
Table 11 sets forth the contractual maturities and sensitivity to interest rate changes of our loan portfolio as of the dates shown.
Previous wording
During 2023, the Company sold 143 SBA 7(a) loans with government-guaranteed portions totaling approximately $36.5 million. The Company received gross proceeds of $38.4 million on the loans sold in 2023, resulting in a net gain on sale of $2.0 million.
Current wording
During 2025, the Company sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million. The decrease in sales from prior years is due to a strategic, intentional reduction in originations of loans held for sale. The Company received gross proceeds of $3.5 million on the loans sold in 2025, resulting in a net gain on sale of $0.2 million.
Previous wording
The ratio of the allowance for credit losses to period end nonperforming loans increased from 1,752.70% as of December 31, 2023 to 2,101.78% as of December 31, 2024. This increase was due to: (i) a 9.76% increase in the allowance for credit losses year-over-year; and (ii) an 8.50% decrease in nonperforming loans year-over-year.
Current wording
The ratio of the allowance for credit losses to period end nonperforming loans decreased from 2,101.78% as of December 31, 2024 to 1,434.40% as of December 31, 2025. This decrease was due to a 72.19% increase in nonperforming loans year-over-year, partially offset by a 17.51% increase in the allowance for credit losses year-over-year. The increase in nonperforming loans resulted mainly from the occurrence of two separate faith-based real estate loans entering nonperforming status.
Previous wording
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 ACL. 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.
Current wording
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.
Previous wording
The banking industry defines loans graded substandard or doubtful as “classified” loans. Table 14 shows loans by credit quality risk rating as of the periods indicated.
Current wording
Loans designated as “watch” are internal bank designations and are not considered adversely classified. However, loans designated as “substandard” or “doubtful” are considered adversely classified. Table 13 shows loans by credit quality risk rating as of the periods indicated.
Previous wording
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.
Current wording
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. Historical loss rates within the commercial secured pool are also evaluated by management on a regular basis to estimate the allowance for credit losses. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.
Previous wording
At December 31, 2024, the Company’s allowance for credit losses was $37.8 million, compared to $34.4 million at December 31, 2023. The $3.4 million increase in the allowance is due to a $7.5 million provision for credit losses, partially offset by net charge-offs of $4.1 million during the year ended December 31, 2024, mainly attributable to commercial and industrial loans, during the same period.
Current wording
At December 31, 2025, the Company’s allowance for credit losses was $44.4 million compared to $37.8 million at December 31, 2024. The $6.6 million increase in the allowance is due to a $9.8 million provision for credit losses, partially offset by net charge-offs of $3.1 million during the year ended December 31, 2025, mainly attributable to commercial and industrial loans, during the same period.
Previous wording
While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 15 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.
Current wording
While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 14 represents management’s allocation of our allowance for credit losses by loan category, the allocation of our allowance for credit losses as a percent of the total allowance for credit losses, and the balance of loans in each category as a percentage of total loans, for the periods indicated.
Previous wording
The ratio of allowance for credit losses to total loans held for investment was 1.07% at December 31, 2024, as compared to 1.12% at December 31, 2023.
Current wording
The ratio of allowance for credit losses to total loans held for investment was 1.09% at December 31, 2025, as compared to 1.07% at December 31, 2024.
Previous wording
The allowance for credit losses to loans held for investment decreased from 1.12% as of December 31, 2023 to 1.07% as of December 31, 2024. Net charge-offs as a percent of average loans held for investment increased from 0.11% to 0.12% for the years ended December 31, 2023 and December 31, 2024, respectively.
Current wording
The allowance for credit losses to loans held for investment increased from 1.07% as of December 31, 2024 to 1.09% as of December 31, 2025. Net charge-offs as a percent of average loans held for investment decreased from 0.12% to 0.08% for the years ended December 31, 2024 and December 31, 2025, respectively.
Previous wording
During 2024, total liabilities increased by $349.3 million from $3.3 billion at December 31, 2023 to $3.7 billion at December 31, 2024. This increase was primarily attributable to an increase in deposits of $531.1 million, partially offset by a decrease in other borrowings of $170.0 million. The $531.1 million increase in deposits was largely due to increases in money market, time, and non-interest-bearing demand deposits of $242.9 million, $203.6 million, and $91.5 million, respectively, partially offset by decreases in interest-bearing transaction and savings deposits of $5.1 million and $1.8 million, respectively.
Current wording
During 2025, total liabilities increased by $652.4 million from $3.7 billion at December 31, 2024 to $4.3 billion at December 31, 2025. This increase was primarily attributable to an increase in deposits of $643.1 million. The $643.1 million increase in deposits was largely due to increases in money market, non-interest-bearing demand, interest-bearing transaction, and savings deposits of $553.3 million, $161.9 million, $29.0 million, and $14.5 million, respectively. These increases were partially offset by decreases in time deposits of $115.5 million, largely driven by a $95.0 million decrease in wholesale deposits.
Previous wording
Representing 97.30% of our total liabilities as of December 31, 2024, deposits are our primary source of funding for our business operations.
Current wording
Representing 97.49% of our total liabilities as of December 31, 2025, deposits are our primary source of funding for our business operations.
Previous wording
Total deposits increased by $531.1 million, or 17.55%, to $3.6 billion at December 31, 2024 from $3.0 billion as of December 31, 2023. Deposit increases were primarily attributable to an increase in the number of new relationships, as well as normal fluctuations in our existing accounts. Non-interest-bearing deposits increased by $91.5 million in 2024 to $922.6 million, and represented 25.93% of total deposits at December 31, 2024, compared to 27.46% of total deposits at December 31, 2023. Our loan to deposit ratio was 99.38% at December 31, 2024, compared to 102.19% at December 31, 2023. We closely monitor the loan to deposit ratio for purposes of both operational objectives and regulatory capital compliance. We intend to continue to operate our business with close monitoring of the loan to deposit ratio.
Current wording
Total deposits increased by $643.1 million, or 18.07%, to $4.2 billion at December 31, 2025 from $3.6 billion as of December 31, 2024. Deposit increases were primarily attributable to an increase in the number of new relationships, as well as normal fluctuations in our existing accounts. Non-interest-bearing deposits increased by $161.9 million in 2025 to $1.1 billion, and represented 25.82% of total deposits at December 31, 2025, compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 97.00% at December 31, 2025, compared to 99.38% at December 31,
Previous wording
Uninsured and uncollateralized deposits totaled $1.2 billion and $1.0 billion at December 31, 2024 and 2023, respectively.
Current wording
Uninsured and uncollateralized deposits totaled $1.4 billion and $1.2 billion at December 31, 2025 and 2024, respectively.
Previous wording
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. The average age on deposit relationships of more than $5.0 million was approximately 9.13 years. As of December 31, 2023, our 40 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.5 billion, or 49.80% of our total deposits. Overall, our large deposit relationships have been relatively consistent over time and have helped to continue to grow our deposit base. Table 18 shows the entity types making up our large deposit relationships at the dates indicated.
Current wording
As of December 31, 2025, our 53 largest deposit relationships, each accounting for more than $10.0 million, totaled $2.0 billion, or 47.82% of our total deposits. The average age on deposit relationships of more than $5.0 million was approximately 7.67 years. 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. Overall, our large deposit relationships have been relatively consistent over time and have helped to continue to grow our deposit base. Table 17 shows the entity types making up our large deposit relationships at the dates indicated.
Previous wording
Our largest single deposit relationship at December 31, 2024 related to brokered deposits. The balance for this customer was $300.0 million, or approximately 8.43% of total deposits as of December 31, 2024. At December 31, 2023, our largest single deposit relationship related to a government agency and had a balance of $260.0 million, or 8.59% of total deposits as of December 31, 2023. 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.
Current wording
Our largest single deposit relationship at December 31, 2025 related to a government agency. The balance for this customer was $290.0 million, or approximately 6.90% of total deposits as of December 31, 2025. 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 December 31, 2024. 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.
Showing the first 40 of 68 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.
Current report — wording carried from elsewhere
We closely monitor the loan to deposit ratio for purposes of both operational objectives and regulatory capital compliance. We intend to continue to operate our business with close monitoring of the loan to deposit ratio.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Table 11 sets forth the contractual maturities of our loan portfolio as of the dates shown.