FIVE STAR BANCORP
For the period ended Mar 31, 2026. Filed May 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 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-Q
Period ended 2025-09-30; filed 2025-11-06.
0001628280-25-050090
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001628280-26-032282
ITEM 2. 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 245 previous paragraphs and 214 current paragraphs.
129 unchanged; 78 reworded; 7 added; 24 removed; 14 previous and 0 current paragraphs rearranged.
Tables are not compared: 31 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 (7)
Current report
3 Total cost of funds reflects the average cost of all funding sources, including both interest-bearing and non-interest-bearing deposits and borrowings.
Current report
FHLB stock dividends. The increase related primarily to a $0.4 million special cash dividend from the FHLB during the three months ended March 31, 2026 that did not occur during the three months ended March 31, 2025.
Current report
Occupancy and equipment. The increase was primarily due to expenses for the Walnut Creek branch office and Newport Beach non-depository office during the three months ended March 31, 2026, which did not exist for the three months ended March 31, 2025.
Current report
Other operating expenses. The decrease related primarily to the release of a $1.0 million loss contingency on an SBA loan during the three months ended March 31, 2026. No such release occurred during the three months ended March 31, 2025. This was partially offset by individually immaterial increases in expenses related to operations, including administration, courier service, and travel.
Current report
The ratio of the allowance for credit losses to period end nonperforming loans increased from 1,434.40% as of December 31, 2025 to 1,649.11% as of March 31, 2026. This increase was due to a $2.0 million, or 4.57%, increase in the allowance for credit losses, while nonperforming loans decreased by $0.3 million, or 9.04%, due to the payoff of one nonperforming loan and the sale of another.
Current report
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 14 shows loans by credit quality risk rating as of the periods indicated.
Current report
On March 19, 2026, the federal banking agencies issued several proposals to revise the U.S. regulatory capital framework. The proposals would, among other things, modify aspects of the standardized approach to risk-based capital that applies to the Company, including to make the risk weights for certain residential mortgage exposures more risk-sensitive and decrease the risk weights of corporate exposures, which could affect certain aspects of the Company’s regulatory capital calculations. The Company is continuing to evaluate these proposals and their potential impact on its regulatory capital position.
Removed paragraphs (24)
Previous report
ACL
Previous report
Net interest income during the nine months ended September 30, 2025 increased to $109.8 million compared to $86.2 million during the nine months ended September 30, 2024. Net interest margin totaled 3.52% for the nine months ended September 30, 2025, compared to 3.30% for the same period of the prior year. The increase in net interest income is primarily attributable to an additional $33.3 million in interest income, mainly due to a $486.2 million, or 15.14%, increase in the average balance of loans and a 24 basis point improvement in the average yield on loans during the nine months ended September 30, 2025 compared to the same period of the prior year. The increase in interest income was partially offset by an additional $9.7 million in interest expense compared to the same period of the prior year. The increase in interest expense was primarily due to an increase in the average balance of interest-bearing deposits of $524.1 million, or 23.02%, compared to the same period of the prior year. The cost of interest-bearing deposits decreased 18 basis points. In addition, the average balance of non-interest-bearing deposits increased by $124.3 million, or 14.84%, compared to the same period of the prior year.
Previous report
We recorded a $2.5 million provision for credit losses in the third quarter of 2025, compared to a $2.8 million provision for credit losses for the same period of 2024. The decrease in the provision for credit losses in the third quarter of 2025 is mainly due to loan growth and an overall increase in loss rates related to the annual CECL model refresh. These increases were partially offset by lower net charge-offs recorded in the third quarter of 2025.
Previous report
Loan-related fees. The increase related primarily to a $0.3 million increase in swap fees and a $0.1 million increase in credit card-related fees.
Previous report
Earnings on BOLI. The increase related primarily to an increase in BOLI balances between September 30, 2024 and September 30, 2025 due to the addition of a new policy.
Previous report
Other income. The increase resulted primarily from a $1.0 million improvement in earnings related to equity investments in venture-backed funds, partially offset by a decrease in income received on equity investments in venture-backed funds from a gain of $0.2 million for the nine months ended September 30, 2024 to a loss of $0.1 million for the nine months ended September 30, 2025.
Previous report
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.
Previous report
Professional services. The increase was primarily due to a $0.1 million increase in fees paid for business development consulting services.
Previous report
Other operating expenses. The increase was primarily due to: (i) a $0.1 million increase in administrative charges, including subscription services and bank charges; (ii) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; and (iii) a $0.1 million increase in armored car and courier expenses.
Previous report
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.
Previous report
FDIC insurance. The increase was primarily due to a $0.8 million increase in the assessment base period-over-period.
Previous report
Professional services. The increase was primarily due to $0.1 million in fees paid for compensation consulting services that did not occur during the first nine months of 2024 and a $0.2 million increase in expenses related to business development consulting services.
Previous report
Advertising and promotional. The increase was primarily due to a $0.3 million increase in expenses related to business development and a $0.1 million increase in expenses related to sponsored events and partnerships.
Previous report
Loan-related expenses. The increase was primarily related to a $0.1 million increase in loan legal fees and a $0.1 million increase in expenses related to inspections.
Previous report
Other operating expenses. The increase was primarily due to: (i) a $0.2 million increase in travel expense; (ii) a $0.1 million increase in expenses related to conferences, training, and professional association membership; (iii) a $0.1 million increase in administrative expenses, including subscription services and bank charges; (iv) a $0.1 million increase in armored car and courier services; and (v) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network.
Previous 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 September 30, 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.
Previous report
The provision for income taxes was $16.8 million for the nine months ended September 30, 2025, as compared to $13.0 million for the nine months ended September 30, 2024. The increase was primarily due to an overall increase in pre-tax income period-over-period. This increase was partially offset by a net $0.2 million reduction to the provision recorded during the six months 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. No such adjustment was recorded during the nine months ended September 30, 2024. The effective tax rates for the nine months ended September 30, 2025 and 2024 were 27.60% and 28.66%, respectively.
Previous report
The banking industry defines loans graded substandard or doubtful as “classified” loans. Table 19 shows our levels of classified loans as of the periods indicated.
Previous report
Allowance for Credit Losses
Previous report
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 July 16, 2025, the agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the CRA framework that existed previously, which has remained in effect due to a preliminary injunction that stayed implementation of the October 2023 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.
Previous report
On October 22, 2024, the CFPB released a final rule to implement Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Under the final rule, financial institutions are required, upon request, to make available to a consumer or third party authorized by the consumer certain information Five Star has concerning a consumer financial product or service covered by the rule, such as a credit card or a deposit account. Industry organizations challenged the final rule in court. On July 29, 2025, the district court granted the motion by the CFPB to stay the proceedings while the CFPB conducts a rulemaking to revise the final rule substantially. On August 22, 2025, the CFPB issued an advance notice of proposed rulemaking to solicit comments and data on several issues relating to the final rule. On October 29, 2025, the district court issued a preliminary injunction preventing the CFPB from enforcing the final rule until the CFPB has completed its reconsideration of the rule.
Previous report
On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the “GENIUS Act,” into law, establishing a federal licensing and supervisory framework for payment stablecoins and their issuers. The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks’ payment services, but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins, or issue stablecoins. Several key provisions of the GENIUS Act require federal regulatory agencies to adopt implementing regulations, and the Act will take effect the earlier of 18 months after its enactment or 120 days after the agencies issue final implementing regulations.
Previous report
Glossary of Acronyms, Abbreviations, and Terms
Previous report
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.
Reworded paragraphs (78)
Previous wording
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.
Current wording
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 discussion and analysis relate to activities primarily conducted by the Bank.
Previous wording
•the impact of the current or any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;
Current wording
•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;
Previous wording
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, our Quarterly Reports on Form 10-Q for the three months ended March 31, 2025 and June 30, 2025, 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.
Current wording
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 2025 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.
Previous wording
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 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 September 30, 2025, we had total assets of $4.6 billion, total loans held for investment of $3.9 billion, and total deposits of $4.1 billion.
Current wording
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 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 March 31, 2026, we had total assets of $5.0 billion, total loans held for investment of $4.2 billion, and total deposits of $4.5 billion.
Previous wording
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.
Current wording
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 2025 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 allowance for credit losses described below, there have been no significant changes concerning our critical accounting estimates as described in our 2025 Annual Report on Form 10-K.
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 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
The ACL represents the estimated expected credit losses in our loan and investment portfolios and is estimated as of September 30, 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.
Current wording
The allowance for credit losses represents the estimated expected credit losses in our loan and investment portfolios and is estimated as of March 31, 2026 using Current Expected Credit Loss (“CECL”). The allowance for credit losses is established through a provision for credit losses charged to operations. Loans and investments 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.
Previous wording
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.
Current wording
The allowance for credit losses 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.
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 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 factor concerning concentrations within the loan portfolio 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.
Current wording
A significant amount of the allowance for credit losses 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 Federal Financial Institutions Examination Council (“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 the 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. The factor concerning concentrations within the loan portfolio 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.
Previous wording
Net income for the three and nine months ended September 30, 2025 totaled $16.3 million and $44.0 million, respectively, as compared to net income of $10.9 million and $32.4 million for the three and nine months ended September 30, 2024, respectively.
Current wording
Net income for the three months ended March 31, 2026 totaled $18.6 million, as compared to net income of $13.1 million for the three months ended March 31, 2025.
Previous wording
•Deposits. Total deposits increased by $545.4 million, or 15.33%, from $3.6 billion at December 31, 2024 to $4.1 billion at September 30, 2025. Non-wholesale deposits increased by $599.0 million in the first nine months of 2025 to $3.6 billion at September 30, 2025. Wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits, decreased by $53.6 million in the first nine months of 2025 to $506.4 million. Non-interest-bearing deposits increased by $136.5 million in the first nine months of 2025 to $1.1 billion, and represented 25.81% of total deposits at September 30, 2025, as compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 94.73% at September 30, 2025, as compared to 99.38% at December 31, 2024.
Current wording
•Deposits. Total deposits increased by $268.3 million, or 6.39%, from $4.2 billion at December 31, 2025 to $4.5 billion at March 31, 2026. Non-wholesale deposits increased by $350.2 million in the first three months of 2026 to $4.1 billion at March 31, 2026. Wholesale deposits, which the Company defines as brokered deposits and California Time Deposit Program deposits, decreased by $81.9 million in the first three months of 2026 to $383.1 million. Non-interest-bearing deposits increased by $148.2 million in the first three months of 2026 to $1.2 billion, and represented 27.58% of total deposits at March 31, 2026, as compared to 25.82% of total deposits at December 31, 2025. Our loan to deposit ratio was 94.27% at March 31, 2026, as compared to 97.00% at December 31, 2025.
Previous wording
•Assets. Total assets were $4.6 billion at September 30, 2025, representing a $588.5 million, or 14.52%, increase compared to $4.1 billion at December 31, 2024.
Current wording
•Assets. Total assets were $5.0 billion at March 31, 2026, representing a $276.9 million, or 5.82%, increase compared to $4.8 billion at December 31, 2025.
Previous wording
•Loans. Total loans held for investment were $3.9 billion at September 30, 2025, as compared to $3.5 billion at December 31, 2024, an increase of $354.6 million, or 10.04%. The increase was a result of $931.8 million in loan originations and advances, partially offset by $219.8 million and $357.5 million in loan payoffs and paydowns, respectively. The $354.6 million increase in total loans held for investment included $70.7 million in purchases of loans within the consumer concentration of the loan portfolio.
Current wording
•Loans. Total loans held for investment were $4.2 billion at March 31, 2026, as compared to $4.1 billion at December 31, 2025, an increase of $138.5 million, or 3.40%. The increase was a result of $389.0 million in loan originations and advances, partially offset by $67.9 million and $182.6 million in loan payoffs and paydowns, respectively.
Previous wording
•Credit Quality. Credit quality remains strong, with non-accrual loans representing $2.1 million, or 0.05% of total loans held for investment at September 30, 2025, as compared to $1.8 million, or 0.05% of total loans held for investment at December 31, 2024. The ratio of the allowance for credit losses to total loans held for investment was 1.08% at September 30, 2025 and 1.07% at December 31, 2024.
Current wording
•Credit Quality. Credit quality remains strong, with non-accrual loans representing $2.8 million, or 0.07% of total loans held for investment at March 31, 2026, as compared to $3.1 million, or 0.08% of total loans held for investment at December 31, 2025. The ratio of the allowance for credit losses to total loans held for investment was 1.10% at March 31, 2026 and 1.09% at December 31, 2025.
Previous wording
•Net Interest Margin. Net interest margin was 3.56% and 3.52%, respectively, for the three and nine months ended September 30, 2025, and 3.37% and 3.30%, respectively, for the three and nine months ended September 30, 2024. The increase in net interest margin for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 is primarily due to loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. The increase in net interest margin for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is primarily due to loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth.
Current wording
•Net Interest Margin. Net interest margin was 3.70% for the three months ended March 31, 2026, and 3.45% for the three months ended March 31, 2025. The increase in net interest margin for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 is primarily due to an increase in interest income related to loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth.
Previous wording
•Efficiency Ratio. Efficiency ratio was 40.13% for the three months ended September 30, 2025, down from 43.37% for the corresponding period of 2024, mainly due to a $9.0 million, or 29.49%, increase in net interest income during the same period. Additionally, efficiency ratio was 41.18% for the nine months ended September 30, 2025, down from 43.96% for the corresponding period of 2024, mainly due to a $23.6 million, or 27.39%, increase in net interest income during the same period.
Current wording
•Efficiency Ratio. Efficiency ratio was 38.57% for the three months ended March 31, 2026, down from 42.58% for the corresponding period of 2025, mainly due to a $9.5 million, or 27.90%, increase in net interest income during the same period.
Previous wording
•Capital Ratios. All capital ratios were above well-capitalized regulatory thresholds as of September 30, 2025. The total risk-based capital ratio for the Company was 13.59% at September 30, 2025, as compared to 13.99% at December 31, 2024. The Tier 1 leverage ratio was 9.78% at September 30, 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.
Current wording
•Capital Ratios. All capital ratios were above well-capitalized regulatory thresholds as of March 31, 2026. The total risk-based capital ratio for the Company was 13.17% at March 31, 2026, as compared to 13.33% at December 31, 2025. The Tier 1 leverage ratio was 9.56% at March 31, 2026, as compared to 9.70% at December 31, 2025. 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.
Previous wording
•Dividends. The board of directors declared a cash dividend of $0.20 per share on July 17, 2025.
Current wording
•Dividends. The board of directors declared a cash dividend of $0.25 per share on January 15, 2026.
Previous wording
3 Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share.
Current wording
4 Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share.
Previous wording
The following discussion of our results of operations compares the three and nine months ended September 30, 2025 to the three and nine months ended September 30, 2024. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025.
Current wording
The following discussion of our results of operations compares the three months ended March 31, 2026 to the three months ended March 31, 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2026.
Previous wording
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.
Current wording
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/rates 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.
Previous wording
Net interest income increased by $9.0 million, or 29.49%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, and our net interest margin increased 19 basis points during the same period. The increase in net interest income is primarily attributable to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. Additional detail relating to net interest margin in each period is provided below.
Current wording
Net interest income increased by $9.5 million, or 27.90%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, and our net interest margin increased by 25 basis points during the same period. The increase in net interest income is primarily attributable to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. Additional detail relating to net interest margin in each period is provided below.
Previous wording
Net interest income during the three months ended September 30, 2025 increased to $39.3 million compared to $30.4 million during the three months ended September 30, 2024. Net interest margin totaled 3.56% for the three months ended September 30, 2025, compared to 3.37% in the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $12.2 million in interest income, mainly due to a $477.8 million, or 14.25%, increase in the average balance of loans and a 16 basis point improvement in the average yield on loans during the three months ended September 30, 2025 compared to the same quarter of the prior year. The increase in interest income was partially offset by an additional $3.2 million in interest expense compared to the same quarter of the prior year. The increase in interest expense is mainly attributable to a $776.9 million, or 24.39%, increase in the average balance of deposits at an average rate of 19 basis points lower during the three months ended September 30, 2025 compared to the same quarter of the prior year. In addition, the average balance of non-interest-bearing deposits increased by $163.7 million, or 19.19%, compared to the same period of the prior year.
Current wording
As compared to the three months ended March 31, 2025, net interest income during the three months ended March 31, 2026 increased by $9.5 million, or 27.90%, to $43.5 million from $34.0 million. Net interest margin totaled 3.70% for the three months ended March 31, 2026, an increase of 25 basis points compared to the same quarter of the prior year. The increase in net interest income is primarily attributable to an additional $10.3 million in interest income, mainly due to a $582.5 million, or 16.32%, increase in the average balance of loans and a five basis point improvement in the average yield on loans during the three months ended March 31, 2026, as compared to the same quarter of the prior year. The increase in interest income was partially offset by a $0.8 million increase in interest expense due to a $734.4 million, or 20.48%, increase in the average balance of deposits during the three months ended March 31, 2026. The average cost of deposits during the three months ended March 31, 2026 was 2.13%, a decrease of 35 basis points compared to the same quarter of the prior year, which helped to moderate the increase in interest expense related to deposits. In addition, the average balance of non-interest-bearing deposits increased by $211.1 million, or 23.17%, compared to the same period of the prior year.
Previous wording
We recorded a $6.9 million provision for credit losses in the first nine months of 2025, as compared to a $5.7 million provision for credit losses for the same period of 2024. The increase in the provision for credit losses recorded during the first nine months of 2025 is mainly due to increases in loan growth and an overall increase in loss rates related to the annual CECL model refresh.
Current wording
We recorded a $2.7 million provision for credit losses in the first quarter of 2026, compared to a $1.9 million provision for credit losses for the same period of 2025. The increase in the provision for credit losses in the first quarter of 2026 is mainly due to increases in loan growth and an overall increase in loss rates in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
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 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 three months ended September 30, 2025, no loans were sold, as compared to approximately $4.4 million of loans sold with an effective yield of 7.03% during the three months ended September 30, 2024.
Current wording
Gain on sale of loans. The decrease related to an overall decline in the volume of SBA loans sold due to a strategic, intentional reduction in originations of loans held for sale. During the three months ended March 31, 2026, no SBA loans were sold, as compared to approximately $1.7 million of SBA loans sold with an effective yield of 7.24% during the three months ended March 31, 2025.
Previous wording
Loan-related fees. The increase resulted primarily from an increase of $0.3 million in swap referral fees recognized during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.
Current wording
Loan-related fees. The increase resulted primarily from an increase of $0.8 million in fees from swap referrals during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
Previous wording
Other income. The increase related primarily to an overall improvement in earnings related to equity investments in venture-backed funds during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.
Current wording
Other income. The decrease related primarily to an overall loss in earnings related to investments in venture-backed funds during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Previous wording
Salaries and employee benefits. The increase related primarily to: (i) a $1.7 million increase in salaries, benefits, and bonus expense, mainly related to a 13.33% increase in headcount between September 30, 2024 and September 30, 2025; and (ii) a $0.5 million increase in commissions paid. This increase was partially offset by a $0.5 million increase in deferred loan origination costs due to a greater number of loan originations, net of purchased consumer loans, period-over-period.
Current wording
Salaries and employee benefits. The increase related primarily to: (i) a $2.3 million increase in salaries, benefits, and bonus expense, mainly related to a 17.48% increase in headcount between March 31, 2025 and March 31, 2026; and (ii) a $0.5 million increase in commissions paid. This increase was partially offset by a $0.6 million increase in deferred loan origination costs due to higher loan production period-over-period.
Previous wording
Advertising and promotional. The increase related primarily to additional expenses incurred to support the expansion of the Bank’s business development teams, including a $0.1 million increase in expenses related to sponsored events and partnerships and a $0.1 million increase related to client and prospective client development expenses.
Current wording
Advertising and promotional. The increase related primarily to additional expenses incurred to support the expansion of the Bank’s business development teams, including $0.1 million related to business development expenses and $0.1 million related to donation, sponsorship, and advertising expenses.
Previous wording
The provision for income taxes was $5.9 million for the three months ended September 30, 2025, a $1.6 million increase from the three months ended September 30, 2024. This increase was primarily driven by an increase in taxable income. The effective tax rates were 26.49% and 28.21% for the three months ended September 30, 2025 and September 30, 2024, respectively.
Current wording
The provision for income taxes was $6.4 million for the three months ended March 31, 2026, a $1.1 million increase from the three months ended March 31, 2025. This increase was primarily driven by an increase in taxable income, partially offset by a $0.2 million benefit recorded during the three months ended March 31, 2026 related to the purchase of transferable tax credits that did not occur during the three months ended March 31, 2025. The effective tax rates were 25.61% and 28.71% for the three months ended March 31, 2026 and March 31, 2025, respectively.
Previous wording
At September 30, 2025, total assets were $4.6 billion, an increase of $588.5 million from $4.1 billion at December 31, 2024. The increase was primarily comprised of a $354.6 million increase in total loans held for investment and a $228.1 million increase in cash and cash equivalents. The $354.6 million increase in total loans held for investment between December 31, 2024 and September 30, 2025 was a result of $931.8 million in loan originations and advances, partially offset by $219.8 million and $357.5 million in loan payoffs and paydowns, respectively. The $354.6 million increase in total loans held for investment included $70.7 million in purchases of loans within the consumer concentration of the loan portfolio.
Current wording
At March 31, 2026, total assets were $5.0 billion, an increase of $276.9 million from $4.8 billion at December 31, 2025. The increase was primarily comprised of a $138.5 million increase in total loans held for investment and a $137.5 million increase in cash and cash equivalents. The $138.5 million increase in total loans held for investment between December 31, 2025 and March 31, 2026 was a result of $389.0 million in loan originations and advances, partially offset by $67.9 million and $182.6 million in loan payoffs and paydowns, respectively.
Previous wording
Total cash and cash equivalents were $580.4 million at September 30, 2025, an increase of $228.1 million from $352.3 million at December 31, 2024. The increase in cash and cash equivalents primarily resulted from a $217.8 million increase in interest-bearing deposits in banks.
Current wording
Total cash and cash equivalents were $644.4 million at March 31, 2026, an increase of $137.5 million from $506.9 million at December 31, 2025. The increase in cash and cash equivalents was primarily due to the net increase in cash inflows from growth in total deposits of $268.3 million and cash outflows from growth in total loans held for investment of $138.5 million.
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 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.
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 $97.8 million at September 30, 2025 and $100.9 million at December 31, 2024, representing a decrease of $3.1 million during the same period. The decrease to available-for-sale securities was primarily due to maturities, prepayments, and calls of $7.6 million, partially offset by a purchase of a $1.0 million security and an unrealized gain on securities of $4.1 million, with the remainder of the change due to amortization of premiums. For the nine months ended September 30, 2025, other comprehensive gain was $2.5 million, primarily due to rate changes and other market conditions on securities during that period.
Current wording
Our total securities available-for-sale and held-to-maturity amounted to $93.9 million at March 31, 2026 and $96.9 million at December 31, 2025, representing a decrease of $3.0 million during the same period. The decrease to available-for-sale securities was primarily due to maturities, prepayments, and calls of $1.7 million, and an unrealized loss on securities of $1.2 million, with the remainder of the change due to amortization of premiums. For the three months ended March 31, 2026, other comprehensive loss was $1.0 million, primarily due to market conditions on securities during that 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 September 30, 2025 and December 31, 2024, our total loans amounted to $3.9 billion and $3.5 billion, respectively. Table 14 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 March 31, 2026 and December 31, 2025, our total loans amounted to $4.2 billion and $4.1 billion, respectively. Table 10 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 84.40% of loans held for investment at September 30, 2025. Commercial secured lending represents 4.91% of loans held for investment at September 30, 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.
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 83.80% of loans held for investment at March 31, 2026. Commercial secured lending represents 5.77% of loans held for investment at March 31, 2026. 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 589.24% and 571.91% as of September 30, 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 September 30, 2025. Additionally, our loans are geographically concentrated with borrowers and collateralized properties primarily in California.
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 599.40% and 594.17% as of March 31, 2026 and December 31, 2025, 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, 2026. Additionally, our loans are geographically concentrated with borrowers and collateralized properties primarily in California.
Previous wording
Table 17 sets forth the sensitivity to interest rate changes of our loan portfolio as of the dates shown.
Current wording
Table 12 sets forth the contractual maturities and sensitivity to interest rate changes of our loan portfolio as of the dates indicated.
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Previous report — wording carried elsewhere
Net interest income increased by $23.6 million, or 27.39%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, and our net interest margin increased 22 basis points when compared to the same period in 2024. The increase in net interest income is primarily attributable to an increase in interest income driven by loan growth and an improvement in the average yield on loans, partially offset by an increase in interest expense driven by deposit growth. Additional detail relating to net interest margin in each period is provided below.
Previous report — wording carried elsewhere
Average balance sheet, interest, and yield/rate analysis. Table 5 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.
Previous report — wording carried elsewhere
1 Interest 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.
Previous report — wording carried elsewhere
2 Yields 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.
Previous report — wording carried elsewhere
3 Non-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.
Previous report — wording carried elsewhere
4 Allowance for credit losses is included in interest receivable and other assets, net.
Previous report — wording carried elsewhere
5 Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
Previous report — wording carried elsewhere
6 Net 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.
Previous report — wording carried elsewhere
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 6 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.
Previous report — wording carried elsewhere
Table 8 details the components of non-interest income for the periods indicated.
Previous report — wording carried elsewhere
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, partially offset by an improvement in the effective yield of loans sold period-over-period. During the nine months ended September 30, 2025, approximately $3.3 million of loans were sold with an effective yield of 7.41%, as compared to approximately $16.4 million of loans sold with an effective yield of 6.87% during the nine months ended September 30, 2024.
Previous report — wording carried elsewhere
Table 10 details the components of non-interest expense for the periods indicated.
Previous report — wording carried elsewhere
Salaries and employee benefits. The increase was primarily a result of: (i) a $4.6 million increase in salaries, benefits, and bonus expense, mainly related to a 13.33% increase in headcount between September 30, 2024 and September 30, 2025; and (ii) a $0.7 million increase in commission expense. This increase was partially offset by a $0.9 million increase in deferred loan origination costs due to greater loan originations, net of purchased consumer loans, period-over-period.
Previous report — wording carried elsewhere
Table 16 sets forth the contractual maturities of our loan portfolio as of the dates indicated.