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, fivestarbank.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 Five 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 4 cents per share from the prior quarter. With annualized growth in loans held for investment of 14% and annualized deposit growth of 26%, we remained 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%, an increase of 5 basis points from the prior quarter; return on average equity of 16.73%, an increase of 76 basis points from the prior quarter; net interest margin of 3.70%, an increase of 4 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 7 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 20 25 cents per share and declared an additional 25 cents 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. Ongoing 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, 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 3- 3.70% from 3.66% in the prior quarter, reflecting disciplined 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 $166,000 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 the decrease in the costs 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 $1.44 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 31st, 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 31st, 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 31st, 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.

Now, I will hand it back to James for closing remarks.

Thank you, Heather. Five Star Bank's success serves as strong testimony to clients who value our team of committed professionals who provide authentic, relationship- based service.

We continue to ensure our technology stack, operating efficiencies, conservative underwriting practices, exceptional credit quality, and prudent approach to portfolio management will benefit our customers, employees, community, and shareholders. As we look to Q2, we remain committed to our disciplined approach to growth, prudent risk management, and delivering value to all of our stakeholders.

We're excited about the opportunities our markets and confident of our ability to continuing executing on our strategic priorities. Our focus will remain on expanding our presence in key geographies, deepening client relationships, and investing in technology and talent to support our long-term success.

We appreciate your time today. This concludes today's presentation.

Now we will be happy to take any questions you might have.

Hey, this is David on for David Feaster. Good morning, everybody.

Good morning, David. How are you?

I'm doing well. I just wanted to start on the SoCal expansion announced earlier.

I know it's early innings, but on a high level, I'm just curious what you're most excited about for that market and how the team down there has been ramping up so far. I also wanted to just gauge your thoughts on potential de novo expansion in Southern California alongside those hires, and how you see that market evolving broadly.

Thank you for the question. We're very excited about the team that we brought on.

We have four business development officers and two support staff. They're very competent, and so far, deal flow seems to be very, very strong from them.

It's a lot of fun for us engaging with them in a market which is just substantial, a much bigger market than Northern California, as you know. The deal flow that we're seeing right now are just great credits, C&I-based, and we're excited about the opportunities that the team is presenting us.

In terms of de novo operations or potentials, we have a team in Newport Beach right now, and then we have a team up in LA County, Ventura County. As they continue to mature and develop, the next step for us would be to open a full-service office in those localities.

We want to see a substantial growth coming from those teams, and it'll help us get to where we want to be, ultimately, which is to have full-service offices.

That's really helpful, and excited to see how that develops. Then maybe sticking on the growth side, originations were really strong during the quarter.

I'm just curious where that's coming from broadly. Is it more a function of increasing demand in your markets or increasing contribution from existing bankers or new hires?

Then maybe just curious where you're seeing the most opportunity for growth within specific segments as well.

It's coming from a lot of different places. Our existing business development people, we now have 46 of them working for the company, but during the quarter it was 42.

Everybody is producing. Everybody's doing quite well.

Across our verticals that we have and also our geographies, we're seeing substantial growth coming from all the way up into Redding, all the way down to Walnut Creek and the Bay Area, and our ag team also is doing quite well. We're hitting on a lot of cylinders right now in terms of deal flow and really good relationships that our seasoned professionals are bringing in.

I couldn't really single out one, but maybe on the depository side, our government book has done quite well on some relationships, growth in relationships. We're excited about that.

Our manufacturing home and RV folks are doing well also. It's coming from a lot of different sources, which we're all very, very excited about.

That's great to hear. Then maybe on the deposit side, it was good to see the growth during the quarter, which allowed you to pay down some wholesale funding.

I'm just curious what was primarily driving that and if you see any opportunities for additional funding cost leverage from here, especially given the prospect of no Fed cuts this year?

Right. We're going to continue to focus on reducing our wholesale deposit book, with the desire to be out of it by 12/31.

Hopefully, we'll be able to do that more quickly. That's our plan.

That will provide maybe some relief in our interest costs, and it's really going to be dependent upon continuing to push deposits. The value of our franchise, we recognize, is in our deposit base, and we're executing quite well on that in terms of bringing on new relationships.

Non-interest-bearing deposits saw a substantial growth in Q1. We hope and expect to just see that growth continue.

As I mentioned previously, our government banking team has done quite well. That team really covers the entire state, and their focus is on cities and counties, but more over, their focus is really on special districts, and they've done quite well in that space.

Their pipelines remain very strong. We're excited about that.

That's great. Thanks, guys.

Great quarter.

Thank you.

Hey, thanks for taking my questions. Had a follow-up on deposits, the focus is continuing to pay down wholesale deposits, but if I look over the past year, it's pretty incredible, the mix change that's undergone there.

Just curious, is that being driven by some of these sub-verticals, that's allowed you to grow core deposits? Is it new customers to the bank, is it expanding the wallet of current customers?

Would kind of love your take on that.

It's a great mix between deposit flow from existing customers, but also new relationships that we brought on. Often a deposit relationship, or any banking relationship, takes a while to mature.

We're seeing some growth coming from the business that we put on in 2025 as those relationships kind of work their way over to us, Woody. That's exciting, but also, our first three months have been very strong in terms of new deposit growth, in terms of new accounts.

We're excited about that. Again, our government book has done quite well, but it's really our growth in deposits is coming from all different types of verticals.

What we're trying to do is pay down our wholesale book. It's pretty evident what we've been able to do for the last six months with that, and hopefully we'll be out of broker deposits, as I mentioned, by 12/31, and we certainly like to do that more quickly than by the end of the year, and we'll see how the second quarter goes.

I appreciate the color there. I would imagine paying down the brokered has been a positive to the net interest margin, and we saw the NIM take another step up in the first quarter.

How are y'all thinking about continued NIM expansion from here? Especially if assume cuts are flat, and then kind of the incremental impact that rate cuts could provide?

We don't know how much juice is left in terms of the impact of rates or have on our NIM. We're kind of thinking it's settling in and around 3.70%, which what it was for the quarter.

We do expect increase in net interest income to come from growth. That's kind of what our sense of it is right now.

NIM, it might move up a couple basis points, but nothing substantial like we've seen for the last four quarters. We're settling in on this NIM range of 3.70% to 3.75%.

Hopefully, we can maintain it there and just have net interest income being driven by growth.

Yep. I appreciate the color.

Maybe just last for me on the growth, loan growth remains really strong. It feels like I have heard just anecdotal commentary across the industry of some increased competition, especially among the bigger banks.

Are you seeing that within your footprint?

We've been doing this for quite some time, and competition is always present, and we mentioned it in the script that competition is out there, and yeah, on good deals, people are fighting for them. You got to be careful that your growth is spread out amongst several relationships, and your pricing is something that you can make money on.

We know it's going to be competitive for the best deals, and that's our mindset when we come to work every day, and so we're winning our fair share. We're not winning everything, okay?

If we were winning everything, maybe we're not pricing it right, but we are winning our fair share. What's really driving our growth is just the number of people we have, the boots on the ground, to speak, Woody.

Relative to our size, in total headcount, we just have more people, more biz dev people, the opportunities that are coming to us are really being driven by, more than anything else, just by the number of folks we have in the space.

That all sounds good. Thanks for taking my questions.

You bet.

Hey, good morning.

Hey, good morning, Andrew.

Wanted to stick on maybe margin and deposits for a bit. How much of the deposit growth this quarter was related to the government or the special district kind of business line?

Then would love to get a sense for where you're bringing on cost-wise the incremental dollar of core deposits versus what's rolling off that we can see on kind of the wholesale side, pricing-wise?

Sure. The growth in our government book in the first quarter was quite substantial, as I mentioned.

It's about $189 $190 million. It really kind of drove the overall increases in deposits.

Other verticals have did also quite well, but that one kind of stands out. Now, that money that came in is really kind of priced right on top of our broker deposit book, there's no really incremental pickup, if you will, Andrew, in terms of cost reduction, if you will, with that money coming in versus having the broker deposits go away.

For some of these counties, that's their liquidity, and we hope to bring on some non-interest-bearing deposits through that process through those relationships, and we have,

but

a lot of that growth is really coming right at the margin.

Just for reference, just to compare the two, so, our broker's book at the end of the quarter was sitting at about 3.82% for the actual broker deposits, and then the LAIF rate is about the 3.80% range, we're pretty much just swapping dollar for dollar.

Yep. Makes sense.

Then on the non-interest-bearing deposits, obviously, fantastic growth this quarter. Was there anything in the end-of-period figure for non-interest-bearing that we can see, I think it was $1.23?

Anything that was elevated specifically kind of at period end that's normalized in the second quarter so far? Is that kind of a good base to work off of?

Just asking because it's a lot higher than the average.

A couple things really kind of drove non-interest-bearing deposits. One, we do have a title company that's doing quite well, pretty big relationship, but also with some of our folks in our Newport Beach office, they're bringing on their customer base, which is escrow companies, and all those moneys are non-interest-bearing.

We expect to continue to see growth in our Newport Beach office from those two folks that we've brought on. I think in combination of that, and then also all the other C&I business that we've been doing up and down the platform, that really kind of drove non-interest-bearing deposits, but I think those two matters kind of stand out.

Yep. Okay.

Then I got to ask, I think last quarter, we talked about kind of 10% growth for the year on both sides of the balance sheet. You're pretty darn close on the deposit side already.

Any updated expectations on pace of balance sheet growth or targets for the year?

I think we guided pretty consistent with what our plan is, but obviously we exceeded that, which is a good thing. We could probably see maybe 10% to 12% growth on both sides of the balance sheet, Andrew, for the remainder of the year.

We'll just have to see how it goes. We're excited our pipelines are pretty robust right now, frankly, and with the bringing on of this new team in Southern California, we expect to really kind of drive growth on both sides, both deposits and loans, and their book and their client base and prospect base is really very strong C&I operating companies, which will bring in some nice non-interest-bearing deposits.

I think that's kind of where we are right now on that 10% to 12% growth, Andrew.

Yep. Okay.

If I could just ask one last one, if I kind of normalize the expense base, it looks like $18.4 million or so for the quarter. Just update thoughts on kind of expense run rate going forward?

I think you could probably add back a million dollars to adjust for

that release of the accrual, but if you add about five- half a million to that, we're still consistently kind of fallen in that [18.4 to 18.5?] range, and I think we'll stick to that probably for the next quarter or two.

Great. Thanks so much.

Thanks. Good morning.

Just wanted

to ask a follow-up, James, to your comments just a moment ago on the Newport office and bringing in escrow company deposits. Does any of that start leaning into deposits that start showing up on the expense line from any kind of earnings credit noise or anything like that?

Or are these pure non-interest-bearing deposits?

No, earnings credits are pretty robust in that space, and we're not doing anything in terms of earnings credit rate for those new customers, anything outside of what the market rates are, but there will be some expense associated with that based upon those earnings credits, we fully expect that and have planned for it. It has a cost, to your point, Gary.

All right, thank you for that. Then, also follow up, I guess, on the expenses in general.

Year-over-year expenses up about 20%, first quarter to first quarter, adjusted for that million dollar SBA liability. Obviously, you're built for growth.

Is the pace of investment changing at all on the next 12 months versus the last 12 months in terms of hires, et cetera? Just thinking about it from a different angle than maybe the last question.

We're investing in the business, and we announced this month that we are bringing on I guess the announcement was five people, but we're actually bringing on six. That's a substantial cost.

These folks aren't cheap. We'll continue to invest back in the business, because and take the Bay Area for Gary, we're desirous of being in the South Bay, from Palo Alto all the way down to San Jose.

We're obviously looking at opportunities there. We're going to continue to invest.

Your question is, is the pace going to be consistent with what it's been in the past? The answer, I think, is yes.

I think we're following what really worked well in the Bay is hiring smaller teams of people and smaller tranches of people, and we're starting to do that in Southern California as well, and that's worked really well for us too to integrate them into the company. I kind of think you're going to just have some stair-stepping, and we'll have some resets each quarter on what our new expectation for expenses are, but likely what will happen over the next year or two.

Yeah.

You've clearly developed a playbook that works for moving to new markets, appreciate the thoughts on that.

Thank you. Again, if you have a question, please press star, then one.

Thank you. I want to reiterate our appreciation for the trust and support of our shareholders, clients, and employees.

The results we shared today are a direct reflection of the dedication and hard work of our entire Five Star Bank team, as well as the enduring relationships we have built with our customers and communities. It's our privilege to continue to be a driving force of economic development, a trusted resource for our clients, and a committed advocate for our communities.

We look forward to speaking with you again in July to discuss earnings for Q2. Have a great day, and thank you for listening.