Five Star Bancorp profit rises 34.05% from a year earlier to $21.9 million

Five Star Bancorp reported third-quarter 2026 net income of $21.9 million, or $0.92 per diluted share, up 34.05% from $16.3 million a year earlier, as net interest income rose 29.42% to $50.9 million and the net interest margin widened 13 basis points to 3.69%. A $130.0 million net-proceeds stock offering raised common equity Tier 1 capital to 12.52% of risk-weighted assets from 9.97% at June 30, and return on average equity was 15.04%, down from 16.67% in the second quarter.

Five Star Bancorp's third quarter paired faster profit growth with a much larger equity base, and the two moved in opposite directions for per-share returns. Net income of $21.9 million compared with $16.3 million a year earlier, an increase of 34.05%, and with $19.4 million in the linked quarter, up 12.94%. Net interest income rose to $50.9 million from $39.3 million, up 29.42% from a year earlier, while non-interest expense increased 24.19% to $20.59 million.

A stock offering resets the per-share math

Five Star sold 3,133,750 shares in an underwritten public offering, raising net proceeds of approximately $130.0 million after $7.3 million of underwriting discounts and $600,000 of expenses. “In the third quarter of 2026, Five Star raised approximately $130.0 million in net proceeds”, Chief Executive James E. Beckwith said in the release. Common equity Tier 1 capital reached 12.52% of risk-weighted assets, against 9.97% at June 30, and the total capital ratio reached 15.00%.

The larger equity base shows up in returns, while the larger share count caps per-share growth. Return on average equity slipped to 15.04% from 16.67% in the linked quarter even as return on average assets improved to 1.55% from 1.49%, and diluted earnings per share rose a penny to $0.92 from $0.91 on weighted average diluted shares of 23,697,397 versus 21,338,903. Book value per share rose to $25.15 from $20.19 a year earlier, an increase of 24.57%.

Margin growth outruns a double-digit hiring build

Net interest income rose $4.8 million, or 10.51%, from the second quarter and $11.6 million, or 29.42%, from a year earlier. The net interest margin widened six basis points sequentially to 3.69% and 13 basis points from a year earlier. Total cost of funds was 2.25%, up from 2.23% in the linked quarter but down from 2.51% a year earlier; the release credits the year-over-year gain to lower deposit funding costs after three Federal Reserve rate cuts that began in September 2025, and cites higher deposit funding costs as a partial offset in the linked quarter. The efficiency ratio improved to 39.13% from 40.91% in the linked quarter and 40.13% a year earlier, even though non-interest expense rose 24.19%, or $4.0 million, from a year earlier, with salaries and employee benefits of $12.34 million, up 26.99%, as headcount grew 16.29%. The bank ended the quarter with 50 business development officers, up from 45 at June 30. Non-interest income fell $300,000 from a year earlier to $1.69 million on lower loan-related fees and weaker venture-fund earnings.

One credit account drives the nonperforming-loan jump

Nonperforming loans were $13.3 million at September 30, up from $3.1 million at December 31, 2025, lifting the ratio to 0.28% of loans held for investment from 0.08% at December 31, 2025 (0.05% a year earlier), though down from 0.30% at June 30. The release attributes the increase to a single Community Reinvestment Act-related credit placed on non-accrual status during the second quarter, with a balance of $11.4 million, and adds that “it remains well secured by collateral with an appraised value that meaningfully exceeds its carrying amount”. The allowance for credit losses was $49.4 million, or 1.05% of loans held for investment, against 1.09% at December 31, 2025, after $2.3 million of net charge-offs in the first nine months of the year. The provision for credit losses was $2.5 million, unchanged from a year earlier and $300,000 above the second quarter, reflecting loan growth and the annual CECL model refresh.

Loan growth, deposit mix and the October 27 call

Total deposits were $4.8 billion, up $25.1 million, or 0.52%, from the second quarter, as non-wholesale deposits rose $75.1 million, or 1.65%, and wholesale deposits fell $50.0 million, or 20.00%; non-wholesale balances were 95.85% of deposits. Loans held for investment grew $184.5 million, or 4.08%, to $4.7 billion from $4.52 billion at June 30, and the $629.3 million of year-to-date growth included $230.7 million of purchased consumer loans alongside $1.6 billion of loan originations and advances. Insured and collateralized deposits were approximately $3.3 billion, or 68.08% of the total. The board declared a $0.25 per share dividend on October 15, payable November 9 to shareholders of record on November 2, unchanged from the third-quarter payout. Management scheduled a webcast for 1:00 PM ET on October 27 to discuss the results. The release offers no revenue, margin or credit outlook, so that call is the next dated disclosure.