Five Star Bancorp

Welcome to the Five Star Bancorp First Quarter Earnings Webcast. Please note, this is a closed conference call and you are encouraged to listen via the webcast. After today's presentation, there will be an opportunity for those provided with a dial-in number to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Before we get started, we would like to remind you that today's meeting will include some forward-looking statements within the meeting of applicable securities laws. These forward-looking statements relate to, among other things, current plans, expectations, events, and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties. and future activities and results may differ materially from these expectations. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from the company's forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31st, 2025, and in particular, the information set forth in Item 1A, Risk Factors. Please refer to slide two of the presentation, which includes disclaimers regarding forward-looking statements, industry data, unaudited financial data, and non-GAAP financial information included in this presentation. Reconciliations of non-GAAP financial measures to their most directly comparable GAAP figures are included in the appendix to the presentation. The presentation will be referenced during this call but not followed exactly and is available for closer viewing on the company's website and under the investor relations tab. Please note, this event is being recorded. I would now like to turn the presentation over to James Beckwith, Five Star Bancorp president and CEO. Please go ahead.

Thank you for joining us to review Five Star Bancorp's financial results for Q1, 2026. These results were released yesterday and are available on our website, 5starbank.com, under the Investor Relations section. Joining me today is Heather Luck, Executive Vice President and Chief Financial Officer. Q1 2026 marked another period of outstanding achievement for 5 Star Bancorp, underscored by robust growth across all markets we serve and consistent, strong performance. During the quarter, we continued to deepen our client relationships and expanded our presence in key geographies while investing in both talent and technology to support ongoing organic growth. Our commitment to disciplined execution and differentiated customer service was evident in our solid results. Q1, 2026 earnings per share increased to 87 cents per share up $0.04 per share from the prior quarter. With annualized growth in loans held for investment of 14% and annualized deposit growth of 26%, we remain well positioned to capitalize on new opportunities and drive sustainable value for our shareholders, customers, and communities. Financial highlights during Q1 2026 include Net income of $18.6 million, up 6% from the prior quarter. Return on average assets of 1.55%, and an increase of five basis points from the prior quarter. Return on average equity of 16.73%, and an increase of 76 basis points from the prior quarter. Net interest margin of 3.70%, and increase of four basis points from the prior quarter. and average cost of total deposits of 2.13%, a decrease of 10 basis points from the prior quarter. Our Q1 results were driven by robust loan and deposit growth. Loans held for investment grew by 138.5 million, or 14% on an annualized basis. Total deposits grew by 268.3 million, or 26% on an annualized basis, with non-wholesale deposits up $350.2 million, offsetting an $81.9 million reduction in wholesale deposits. This shift reflects our focus on building stable, relationship-based core deposit funding. Our asset quality remains strong with non-performing loans representing just seven basis points of total loans held for investment, a reflection of our conservative underwriting. We continue to be well capitalized with all capital ratios well above regulatory thresholds for the quarter. We remain committed to delivering value to our shareholders. In Q1, we paid a cash dividend of $0.25 per share and declared an additional $0.25 dividend expected to be paid in May of 2026. Our total assets increased by $276.9 million during the quarter, largely driven by loan growth within the commercial real estate portfolio, which increased by $116.2 million. Competition has increased, but our loan pipeline remains strong. Uncertainty surrounding energy supply chains and global economic consequences of the Iran conflict has triggered volatility in interest rates. We believe we are well positioned for changes in interest rates, as approximately 75% of our loans held for investment are adjustable or floating. This gives us flexibility to respond to market shifts and helps protect our earnings in a volatile environment. Our prudent underwriting standards, comprehensive loan monitoring, and focus on relationship-driven lending have contributed to maintaining strong credit quality. As a result, we have a very low volume of non-performing loans, which declined by $280,000 during the quarter. We recorded a $2.7 million provision for credit losses during the quarter, primarily related to loan growth. The increase in total liabilities during the quarter was the result of growth in interest-bearing and non-interest-bearing deposits related to both new accounts and inflows from existing customers. Non-wholesale deposits increased by $350.2 million, while wholesale deposits decreased by $81.9 million. Non-interest-bearing deposits accounted for approximately 28% of total deposits and an increase from approximately 26% as of December 31, 2025. Approximately 61% of our total deposit relationships total more than $5 million. These deposits have a long tenure with the bank, with an average age of approximately eight years. We believe our deposit portfolio to be a stable funding base for our future growth. On that note, I will hand it over to Heather to present the results of operations. Heather?

Thank you, James. And hello, everyone. Net interest income increased to $43.5 million, a 3% increase from Q4 of 2025, supported by both volume and margin expansion. Our net interest margin improved to $370 from $366 in the prior quarter, reflecting discipline pricing and favorable mix of assets and liabilities. Interest income increased by $926,000 from the previous quarter, mainly due to a 4% increase in the average balance of loans. The increase in interest income was augmented by a $266,000 decrease in interest expense due to a 10 basis point decline in the average cost of deposits. While the average balance of deposits increased by 5% during the quarter, a 5% increase in the average balance of non-interest-bearing deposits combined with a decrease in the cost associated with deposits resulted in a net decrease in total interest expense. Non-interest income increased to $1.6 million in the first quarter from $1.4 million in the previous quarter. primarily due to an increase in fees from swap referrals and a special FHLB stock dividend recognized during the three months ended March 31, 2026, partially offset by an overall decline in earnings related to investments in venture-backed funds. Non-interest expense decreased by $263,000 in the three months ended March 31, 2026. This is primarily due to the release of a $1 million loss contingency on an SBA loan that did not occur during the prior quarter. This was partially offset by an increase in salaries and employee benefits related to increased headcount to support customer facing and back office operations. Our efficiency ratio improved to 38.57% from 40.62% in the prior quarter primarily driven by the release of the loss contingency. The provision for income taxes for the quarter ended March 31, 2026, increased by $1 million as compared to the prior year, primarily due to an increase in taxable income recognized and a net reduction in transferable tax credits recognized during the quarter of approximately $664,000. And now I will hand it back to James for closing remarks.