GlobeNewswire Inc | Jan 31, 2022 08:42AM EST

January 31, 2022

RANCHO CORDOVA, Calif., Jan. 31, 2022 (GLOBE NEWSWIRE) -- Five Star Bancorp(Nasdaq: FSBC) (the Company or Five Star), the holding company for Five Star Bank, today reported net income of $11.3 million for the quarter ended December 31, 2021, as compared to $11.0 million for the quarter ended September 30, 2021 and $9.5 million for the quarter ended December 31, 2020. Net income for the year ended December 31, 2021 was $42.4 million, as compared to $35.9 million for the year ended December 31, 2020.

Financial Highlights

During the second quarter of 2021, the Company terminated its status as a Subchapter S corporation in connection with its initial public offering (IPO). As such, results presented for the three months and year ended December 31, 2020 have been calculated using a 3.50% S Corporation tax rate, while the effective tax rate for the three months and year ended December 31, 2021 was 10.43% and 9.98%, respectively, as noted in the section titled Provision for Income Taxes herein. Performance highlights and other developments for the Company for the periods noted below included the following:

-- Earnings per share for the three months and year ended December 31, 2021, as compared to the three months ended September 30, 2021 and three months and year ended December 31, 2020 were as follows:

For the three months ended Dec 31, 2021 Sep 30, 2021 Dec 31, 2020 Basic earnings per $ 0.66 $ 0.64 $ 0.86 common shareDiluted earnings $ 0.66 $ 0.64 $ 0.86 per common shareWeighted averagebasic common shares 17,096,230 17,095,957 10,988,705 outstandingWeighted averagediluted common 17,139,693 17,123,182 10,988,705 shares outstandingShares outstanding 17,224,848 17,223,808 11,000,273 at end of period

For the year ended Dec 31, 2021 Dec 31, 2020 Basic earnings per common share $ 2.83 $ 3.57 Diluted earnings per common share $ 2.83 $ 3.57 Weighted average basic common shares 14,972,637 10,063,183 outstandingWeighted average diluted common shares 14,995,213 10,063,183 outstandingShares outstanding at end of period 17,224,848 11,000,273

-- Loan and deposit growth at December 31, 2021, as compared to September 30, 2021 and December 31, 2020, were as follows:

(dollars in Dec 31, Sep 30, $ Change % Change thousands) 2021 2021Total loans $ 1,945,131 $ 1,709,983 $ 235,148 13.75 %Total loans,excluding Paycheck 1,923,007 1,648,483 274,524 16.65 %Protection Program(?PPP?) loans^(1)PPP loans 22,124 61,499 (39,375 ) (64.03 ) %PPP deferred fees 628 1,706 (1,078 ) (63.19 ) %Non-interest-bearing 902,118 899,252 2,866 0.32 %depositsInterest-bearing 1,383,772 1,269,142 114,630 9.03 %deposits (dollars in Dec 31, Dec 31, $ Change % Change thousands) 2021 2020Total loans $ 1,945,131 $ 1,507,979 $ 437,152 28.99 %Total loans,excluding PPP loans^ 1,923,007 1,360,014 562,993 41.40 %(1)PPP loans 22,124 147,965 (125,841 ) (85.05 ) %PPP deferred fees 628 2,720 (2,092 ) (76.91 ) %Non-interest-bearing 902,118 701,079 201,039 28.68 %depositsInterest-bearing 1,383,772 1,082,922 300,850 27.78 %deposits

(1) See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of this non-GAAP financial measure.

-- PPP fee income recognized for the quarter ended December 31, 2021 totaled $1.1 million, as compared to $1.8 million and $3.1 million for the quarters ended September 30, 2021 and December 31, 2020, respectively. PPP fee income recognized for the year ended December 31, 2021 totaled $6.2 million, as compared to $4.9 million for the year ended December 31, 2020. -- At December 31, 2021, the Company reported total loans, total assets, and total deposits of $1.9 billion, $2.6 billion, and $2.3 billion, respectively, as compared to $1.5 billion, $2.0 billion, and $1.8 billion, respectively, at December 31, 2020. -- For the three months ended December 31, 2021, the Company recorded a provision for loan losses of $1.5 million, as compared to no provision recorded for the three months ended September 30, 2021 and $3.0 million for the three months ended December 31, 2020. For the year ended December 31, 2021, the Company recorded a provision for loan losses of $1.7 million, as compared to a provision of $9.0 million recorded for the year ended December 31, 2020. -- At December 31, 2021, the ratio of nonperforming loans to period end loans of 0.03% remained unchanged, as compared to December 31, 2020. -- For the quarter ended December 31, 2021, net interest margin was 3.67%, as compared to 3.60% for the quarter ended September 30, 2021 and 4.09% for the quarter ended December 31, 2020. For the year ended December 31, 2021, net interest margin was 3.64%, as compared to 3.68% for the year ended December 31, 2020. -- The Companys Board of Directors declared, and the Company subsequently paid, a cash dividend of $0.15 per share during the three months ended December 31, 2021. -- For the three months ended December 31, 2021, the Companys return on average assets (ROAA) was 1.82% and the return on average equity (ROAE) was 19.15%, as compared to ROAA and ROAE of 1.85% and 19.26%, respectively, for the three months ended September 30, 2021, and 1.90% and 29.05%, respectively, for the three months ended December 31, 2020. For the year ended December 31, 2021, the Companys ROAA and ROAE were 1.86% and 22.49%, respectively, as compared to ROAA and ROAE of 1.95% and 31.16%, respectively, for the year ended December 31, 2020.

While we remain focused on the future and maintaining a position of distinction and respect in the markets and communities we serve, we are proud to look back at 2021 as an exceptional year of achievement. The banks stellar performance included a very successful IPO, outstanding year-over-year growth in loans, assets, and deposits, strong earnings per share, and a regular shareholder dividend. This is the culmination of our entire teams efforts, even while working through a pandemic. An adaptive team is critical to our success, and we will continue to hire those who can quickly respond to changing market conditions and demands, said Five Star Bank President and Chief Executive Officer, James Beckwith.

Five Star Bank was built on a foundation of client and community-focused initiatives, and in 2021 we were honored to receive a Corporate Steward Award, Corporate Champion of the Year Award, and Leadership Award, all recognizing that our culture embraces the significance and impact of seizing opportunities, overcoming challenges, and being of service to others. In addition to community leadership, we are committed to staying at the forefront of innovation and technology and making investments in people and processes. We also remain focused on the successful execution of our ongoing digital transformation and the continued build-out of our verticals. I am humbled and proud of our teams accomplishments and look forward to the continuation of our organic growth story, Beckwith concluded.

Summary Results

For the three months ended December 31, 2021, the Companys ROAA and ROAE were 1.82% and 19.15%, respectively, as compared to 1.85% and 19.26%, respectively, for the three months ended September 30, 2021, and 1.90% and 29.05%, respectively, for the three months ended December 31, 2020. The rate at which net income increased from the quarter ended September 30, 2021 to the quarter ended December 31, 2021 was less significant than the increase to average assets and average equity, during the three months ended December 31, 2021, primarily due to (i) recording of a $1.5 million provision for loan losses; (ii) an increase of $0.2 million for salaries and benefits; and (iii) a decline of $0.7 million of PPP fee income earned, which offset the increase in income. As compared to the three months ended September 30, 2021, the increases in average assets and average equity were largely the result of a high degree of new loans originated during the three months ended December 31, 2021 at lower yields, coupled with more equity being retained by the Company. As compared to the three months ended December 31, 2020, the increases in average assets and average equity were largely the result of a higher average equity balance during the three months ended December 31, 2021 stemming from net proceeds from the issuance of additional shares of common stock in the Companys IPO during the second quarter of 2021, a high degree of new loans originated during the three months ended December 31, 2021 at lower yields, and a higher income tax expense recognized during the three months ended December 31, 2021 as a result of the Companys conversion to a C Corporation during the second quarter of 2021.

For the year ended December 31, 2021, the Companys ROAA and ROAE were 1.86% and 22.49%, respectively, as compared to 1.95% and 31.16%, respectively, for the year ended December 31, 2020. The decrease in ROAA and ROAE is largely the result of a higher average equity balance during the year ended December 31, 2021 stemming from net proceeds from the issuance of additional shares of common stock in the Companys IPO during the second quarter of 2021, new loans originated during the year ended December 31, 2021 at lower yields, and a higher income tax expense recognized during the year ended December 31, 2021 as a result of the Companys conversion to a C Corporation during the second quarter of 2021.

The following is a summary of the components of the Companys operating results and performance ratios for the periods indicated:

For the three months ended(dollars in thousands, except Dec 31, Sep 30, $ Change % Change per share data) 2021 2021Selected operating data: Net interest income $ 21,358 $ 19,909 $ 1,449 7.28 %Provision for loan losses 1,500 ? 1,500 100.00 %Non-interest income 1,790 2,028 (238 ) (11.74 ) %Non-interest expense 9,018 8,641 377 4.36 %Pre-tax net income 12,630 13,296 (666 ) (5.01 ) %Provision for income taxes 1,321 2,270 (949 ) (41.81 ) %Net income 11,309 11,026 283 2.57 % Earnings per common share: Basic $ 0.66 $ 0.64 $ 0.02 3.13 %Diluted $ 0.66 $ 0.64 $ 0.02 3.13 % Performance and other financial ratios:ROAA 1.82 % 1.85 % ROAE 19.15 % 19.26 % Net interest margin 3.67 % 3.60 % Cost of funds 0.16 % 0.17 % For the three months ended(dollars in thousands, except Dec 31, Dec 31, $ Change % Change per share data) 2021 2020Selected operating data: Net interest income $ 21,358 $ 19,192 $ 2,166 11.29 %Provision for loan losses 1,500 3,000 (1,500 ) (50.00 ) %Non-interest income 1,790 2,540 (750 ) (29.53 ) %Non-interest expense 9,018 8,911 107 1.20 %Pre-tax net income 12,630 9,821 2,809 28.60 %Provision for income taxes 1,321 359 962 267.97 %Net income 11,309 9,462 1,847 19.52 % Earnings per common share: Basic $ 0.66 $ 0.86 $ (0.20 ) (23.26 ) %Diluted $ 0.66 $ 0.86 $ (0.20 ) (23.26 ) % Performance and other financial ratios:ROAA 1.82 % 1.90 % ROAE 19.15 % 29.05 % Net interest margin 3.67 % 4.09 % Cost of funds 0.16 % 0.31 % For the year ended (dollars in thousands, except Dec 31, Dec 31, $ Change % Change per share data) 2021 2020Selected operating data: Net interest income $ 77,611 $ 65,210 $ 12,401 19.02 %Provision for loan losses 1,700 9,000 (7,300 ) (81.11 ) %Non-interest income 7,280 9,302 (2,022 ) (21.74 ) %Non-interest expense 36,043 28,257 7,786 27.55 %Pre-tax net income 47,148 37,255 9,893 26.55 %Provision for income taxes 4,707 1,327 3,380 254.71 %Net income 42,441 35,928 6,513 18.13 % Earnings per common share: Basic $ 2.83 $ 3.57 $ (0.74 ) (20.73 ) %Diluted $ 2.83 $ 3.57 $ (0.74 ) (20.73 ) % Performance and other financial ratios:ROAA 1.86 % 1.95 % ROAE 22.49 % 31.16 % Net interest margin 3.64 % 3.68 % Cost of funds 0.19 % 0.54 %

Balance Sheet Summary

Total assets atDecember 31, 2021were$2.6 billion, an increase of$603.0 million from$2.0 billion at December31, 2020. The increase was primarily due to a$134.8 millionincrease in cash and cash equivalents, a$431.3 millionincrease in total loans held for investment (HFI), net of deferred loan fees, and a$30.8 millionincrease in total investments. The $431.3 million increase in total loans HFI between December 31, 2020 and December 31, 2021 was a result of $1.0 billion in non-PPP loan originations and $102.5 million in PPP loan originations, partially offset by $236.5 million in PPP loan forgiveness, $478.5 million in non-PPP loan payoffs and paydowns, and a decrease in deferred loan fees of $1.7 million.

Total liabilities were$2.3 billion atDecember 31, 2021, an increase of$501.7 million from$1.8 billion at December31, 2020.The increase in total liabilities was primarily attributable to growth in deposits of$501.9 million, largely due to increases in savings, money market, interest checking, and non-interest-bearing deposits of $38.8 million, $73.5 million, $131.7 million, and $201.0 million, respectively.

Total shareholders equity increased by $101.3 million from $133.8 million at December 31, 2020 to $235.0 million at December 31, 2021, primarily as a result of net income recognized of $42.4 million and net proceeds of $111.2 million from the issuance of 6,054,750 shares of common stock in our IPO, partially offset by $51.9 million in cash distributions paid during the year ended December 31, 2021.

(dollars in thousands) Dec 31, Dec 31, $ Change % 2021 2020 ChangeSelected financial condition data:Total assets $ 2,556,761 $ 1,953,765 $ 602,996 30.86 %Cash and cash equivalents 425,329 290,493 134,836 46.42 %Total loans HFI, net of 1,934,460 1,503,159 431,301 28.69 %deferred loan feesTotal investments 153,753 122,928 30,825 25.08 %Total liabilities 2,321,715 1,819,990 501,725 27.57 %Total deposits 2,285,890 1,784,001 501,889 28.13 %Subordinated notes, net 28,386 28,320 66 0.23 %Total shareholders? 235,046 133,775 101,271 75.70 %equity

Net Interest Income and Net Interest Margin

The following is a summary of the components of net interest income for the periods indicated:

For the three months ended(dollars in Dec 31, Sep 30, $ Change % Change thousands) 2021 2021Interest income $ 22,253 $ 20,832 $ 1,421 6.82 %Interest expense 895 923 (28 ) (3.03 )%Net interest 21,358 19,909 1,449 7.28 %incomeNet interest 3.67 % 3.60 % margin For the three months ended(dollars in Dec 31, Dec 31, $ Change % Change thousands) 2021 2020Interest income $ 22,253 $ 20,652 $ 1,601 7.75 %Interest expense 895 1,460 (565 ) (38.70 )%Net interest 21,358 19,192 2,166 11.29 %incomeNet interest 3.67 % 4.09 % margin For the year ended (dollars in Dec 31, Dec 31, $ Change % Change thousands) 2021 2020Interest income $ 81,583 $ 74,390 $ 7,193 9.67 %Interest expense 3,972 9,180 (5,208 ) (56.73 )%Net interest 77,611 65,210 12,401 19.02 %incomeNet interest 3.64 % 3.68 % margin

Three months ended December 31, 2021, as compared to three months ended September 30, 2021 and three months ended December 31, 2020

The following table shows the components of net interest income and net interest margin for the quarterly periods indicated:

For the three months ended For the three months ended For the three months ended December 31, 2021 September 30, 2021 December 31, 2020(dollars in Average Interest Yield/ Average Interest Yield/ Average Interest Yield/thousands) Balance Income/ Rate Balance Income/ Rate Balance Income/ Rate Expense Expense ExpenseAssets Interest-earningdeposits with $ 330,825 $ 143 0.17 % $ 412,953 $ 175 0.17 % $ 214,732 $ 125 0.23 %banksInvestment 160,315 541 1.34 % 157,305 571 1.44 % 121,413 440 1.44 %securitiesLoans 1,815,627 21,569 4.71 % 1,625,995 20,086 4.90 % 1,530,227 20,087 5.22 %Totalinterest-earning 2,306,767 22,253 3.83 % 2,196,253 20,832 3.76 % 1,866,372 20,652 4.40 %assetsInterestreceivable and 159,123 168,906 116,677 other assets,netTotal assets $ 2,465,890 $ 2,365,159 $ 1,983,049 Liabilities andshareholders? equityInterest-bearingtransaction $ 165,709 $ 42 0.10 % $ 149,479 $ 38 0.10 % $ 145,025 $ 59 0.16 %accountsSavings accounts 84,290 21 0.10 % 76,669 19 0.10 % 45,548 15 0.13 %Money market 957,030 351 0.15 % 966,629 389 0.16 % 910,619 866 0.38 %accountsTime accounts 75,332 38 0.20 % 54,314 34 0.25 % 62,457 77 0.49 %Subordinated 28,376 443 6.20 % 28,359 443 6.20 % 28,309 443 6.23 %debtTotalinterest-bearing 1,310,737 895 0.27 % 1,275,450 923 0.29 % 1,191,958 1,460 0.49 %liabilitiesDemand accounts 914,821 853,017 654,713 Interest payableand other 5,988 9,537 6,616 liabilitiesShareholders? 234,344 227,155 129,762 equityTotalliabilities & $ 2,465,890 $ 2,365,159 $ 1,983,049 shareholders?equity Net interest 3.56 % 3.48 % 3.91 %spreadNet interest $ 21,358 3.67 % $ 19,909 3.60 % $ 19,192 4.09 %income/margin

Net interest income increased during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020. Net interest margin increased 7 basis points to 3.67%, as compared to 3.60% in the quarter ended September 30, 2021, but decreased 42 basis points as compared to 4.09% in the quarter ended December 31, 2020. A key driver in the modest 7 basis point increase and 42 basis point decrease in net interest margin during the periods noted was a decrease in average loan yields and a decrease in average loan yields, excluding PPP loans. Loan yields decreased from 5.22% during the three months ended December 31, 2020, to 4.90% during the three months ended September 30, 2021, to 4.71% during the three months ended December 31, 2021. Average loan yields, excluding PPP loans, decreased from 4.94% during the three months ended December 31, 2020, to 4.66% during the three months ended September 30, 2021, to 4.56% during the three months ended December 31, 2021. These decreases were primarily due to decreases in market interest rates and increases in market competition which caused a majority of the Companys current fixed rate loans funded in the quarter ended December 31, 2021 to recognize yields lower than those recognized in the trailing quarter and the quarter ended December 31, 2020. Average loan yields, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. The rates associated with the index utilized for a significant portion of the Companys variable rate loans, the United States 5 Year Treasury index, were higher during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020, but a majority of these loans were not scheduled to reprice during the three months ended December 31, 2021, also contributing to the downward trend in average loan yields. New loan originations drove increases in the average daily balance of loans from the three months ended December 31, 2020 to the three months ended September 30, 2021 and the three months ended December 31, 2021 which partially offset the aforementioned declining average loan yields and average loan yields, excluding PPP loans. Additionally, yields on PPP loans increased from 7.06%, to 9.11%, to 10.72%, for the quarters ended December 31, 2020, September 30, 2021, and December 31, 2021, respectively, due to an acceleration of deferred fee accretion resulting from PPP loans being forgiven by the Small Business Administration (SBA) and repaid, also helping to offset declining average loan yields and average loan yields, excluding PPP loans.

Interest expense decreased for the three months ended December 31, 2021, as compared to the three months ended September 30, 2021 and the three months ended December 31, 2020. The rates paid on interest bearing liabilities declined slightly during the quarter ended December 31, 2021, as compared to the quarter ended September 30, 2021. The decline in interest expense when compared to the quarter ended December 31, 2020, was primarily attributed to reductions in the rates offered on deposit products during that period. As a result, the cost of interest-bearing liabilities decreased to 0.27% for the quarter ended December 31, 2021 from 0.29% for the quarter ended September 30, 2021 and 0.49% for the quarter ended December 31, 2020. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the ratio of average total non-interest-bearing deposits to total average deposits was 41.64% and 40.62% in the quarters ended December 31, 2021 and September 30, 2021, respectively, as compared to 36.01% in the quarter ended December 31, 2020. As a result, the cost of funds decreased to 0.16% for the quarter ended December 31, 2021, as compared to 0.17% for the quarter ended September 30, 2021 and 0.31% for the quarter ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

The following table shows the components of net interest income and net interest margin for the annual periods indicated:

For the year ended For the year ended December 31, 2021 December 31, 2020(dollars in Average Interest Yield/ Average Interest Yield/thousands) Balance Income/ Rate Balance Income/ Rate Expense ExpenseAssets Interest-earningdeposits with $ 346,522 $ 547 0.16 % $ 237,815 $ 1,198 0.50 %banksInvestment 147,519 2,142 1.45 % 95,158 1,787 1.88 %securitiesLoans 1,637,280 78,894 4.82 % 1,439,380 71,405 4.96 %Totalinterest-earning 2,131,321 81,583 3.83 % 1,772,353 74,390 4.20 %assetsInterestreceivable and 148,830 72,628 other assets,netTotal assets $ 2,280,151 $ 1,844,981 Liabilities andshareholders? equityInterest-bearingtransaction $ 155,163 $ 155 0.10 % $ 141,293 $ 374 0.26 %accountsSavings accounts 74,402 74 0.10 % 39,182 94 0.24 %Money market 935,445 1,798 0.19 % 867,417 5,750 0.66 %accountsTime accounts 53,222 172 0.32 % 102,890 1,189 1.16 %Subordinated 28,350 1,773 6.25 % 28,364 1,773 6.25 %debtTotalinterest-bearing 1,246,582 3,972 0.32 % 1,179,146 9,180 0.78 %liabilitiesDemand accounts 835,834 546,048 Interest payableand other 8,984 4,496 liabilitiesShareholders? 188,751 115,291 equityTotalliabilities & $ 2,280,151 $ 1,844,981 shareholders?equity Net interest 3.51 % 3.42 %spreadNet interest $ 77,611 3.64 % $ 65,210 3.68 %income/margin

Net interest income increased while net interest margin decreased for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase in net interest income was driven primarily by a $7.5 million increase in interest income from loans to $78.9 million for the year ended December 31, 2021, as the average daily balance of loans increased by $197.9 million, or 13.75%, as compared to the year ended December 31, 2020. The four basis point decrease in net interest margin to 3.64% for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily attributed to a 14 basis point decrease in average loan yields to 4.82% for the year ended December 31, 2021, as compared to 4.96% for the year ended December 31, 2020 and a 39 basis point decrease in average loan yields, excluding PPP loans to 4.70% for the year ended December 31, 2021, as compared to 5.09% for the year ended December 31, 2020. Average total loans and average loan yield, excluding PPP loans, respectively, are considered non-GAAP financial measures. See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure. Decreases in market interest rates and increases in market competition caused a majority of the Companys current fixed rate loans funded in 2021 to recognize yields lower than those recognized in the year ended December 31, 2020, contributing to the aforementioned decrease in average loan yields. Additionally, the rates associated with the index utilized for a significant portion of the Companys variable rate loans, the United States 5 Year Treasury index, were higher during the year ended December 31, 2021 than during the prior year, but a majority of these loans were not scheduled to reprice during the year ended December 31, 2021, contributing to the downward trend in average loan yields. Partially offsetting the declining average loan yields was $6.2 million of fee income resulting from PPP loans being forgiven and repaid by the SBA that was recognized in the year ended December 31, 2021, as compared to $4.9 million during the year ended December 31, 2020. As a result, yields on PPP loans increased from 3.95% for the year ended December 31, 2020 to 6.36% for the year ended December 31, 2021.

Interest expense decreased for the year ended December 31, 2021, when compared to the year ended December 31, 2020. The decline in interest expense was primarily attributed to reductions in the rates offered on deposit products. In addition, the growth of non-interest-bearing deposits continues to benefit the cost of funds as compared to historical periods. Specifically, the ratio of average total non-interest-bearing deposits to average total deposits was 40.69% in the year ended December 31, 2021, as compared to 32.18% in the year ended December 31, 2020. As a result, the cost of interest-bearing liabilities decreased by 46 basis points at December 31, 2021 to 0.32%, from 0.78% at December 31,2020, and the cost of funds decreased to 0.19% at December 31, 2021, as compared to 0.54% at December 31, 2020.

Asset Quality

SBA PPP

At December 31, 2021, there were 60 PPP loans outstanding totaling $22.1 million, which included 59 loans totaling $21.5 million funded during 2021 under the second round of the PPP stimulus plan. Approximately 11 of these PPP loans, or 18.33% of total PPP loans at December 31, 2021, totaling $0.6 million, were less than or equal to $0.15 million and had access to streamlined forgiveness processing. At December 31, 2021, 1,370 PPP loan forgiveness applications had been submitted to the SBA and forgiveness payments had been received on 1,367 of these PPP loans, totaling $332.4 million in principal and interest. The Company has submitted all forgiveness applications on the first round of PPP loans and received payment on all but one pending application. We expect full forgiveness of the second round of PPP loans to be completed in the near term.

COVID-19 Deferments

Pursuant to federal guidance, the Company implemented loan programs to allow certain consumers and businesses impacted by the COVID-19 pandemic to defer loan principal and interest payments. At December 31, 2021, six borrowing relationships with six loans totaling $12.2 million were on COVID-19 deferment. All loans that ended COVID-19 deferments in the quarter ended December 31, 2021 returned to their contractual payment structures prior to the COVID-19 pandemic with no risk rating downgrades to classified nor any troubled debt restructuring (TDR), and we anticipate that the remaining loans on COVID-19 deferment will return to their pre-COVID-19 contractual payment status after their COVID-19 deferments end.

Allowance for Loan Losses

At December 31, 2021, the Companys allowance for loan losses was $23.2 million, as compared to $22.2 million at December 31, 2020. The $1.1 million increase is due to a $1.7 million provision for loan losses recorded during the year ended December 31, 2021, offset by net charge-offs of $0.6 million during the year ended December 31, 2021. At December 31, 2021, the Companys ratio of nonperforming loans to period end loans of 0.03% remained unchanged compared to December 31, 2020, primarily due to the stability of the Companys nonperforming loans. At December 31, 2021, six loans totaling $12.2 million, or 0.63% of the loan portfolio, were in a COVID-19 deferment period and three loans totaling $0.1 million had been in a COVID-19 deferment in the third quarter of 2021 but were not in such deferment at December 31, 2021. Loans designated as watch and substandard decreased to $8.6 million and $10.6 million, respectively, at December 31, 2021 from $24.3 million and $35.9 million, respectively at December 31, 2020, reducing reserves related to classified and watch loans by $0.5 million, which was offset by additional provision for loan growth during the quarter. There were no loans with doubtful risk grades at December 31, 2021 or December 31, 2020. A summary of the allowance for loan losses by loan class is as follows:

December 31, 2021 December 31, 2020 (dollars in thousands) Amount % of Amount % of Total TotalCollectively evaluated for impairment:Real Estate: Commercial $ 12,870 55.37 % $ 9,358 42.17 %Commercial land and 50 0.22 % 77 0.35 %developmentCommercial construction 371 1.60 % 821 3.70 %Residential construction 50 0.22 % 87 0.39 %Residential 192 0.83 % 220 0.99 %Farmland 645 2.78 % 615 2.77 %Commercial: Secured 6,686 28.77 % 9,476 42.71 %Unsecured 207 0.89 % 179 0.81 %PPP ? 0.00 % ? 0.00 %Consumer and other 889 3.82 % 632 2.85 %Unallocated 1,111 4.78 % 724 3.26 % 23,071 99.28 % 22,189 100.0 %Individually evaluated for impairment:Commercial Secured 172 0.72 % ? 0.00 % Total allowance for loan $ 23,243 100.00 % $ 22,189 100.00 %losses

The ratio of allowance for loan losses to total loans was 1.20% at December 31, 2021, as compared to 1.47% at December 31, 2020. Excluding PPP loans, the ratio of the allowance for loan losses to total loans was 1.21% and 1.63% at December 31, 2021 and December 31, 2020, respectively. The decline in the ratio of allowance to total loans is primarily due to an improvement in economic conditions for SBA loans during fiscal year 2021 and increased loan growth year-over-year. The ratio of the allowance for loan losses to total loans, excluding PPP loans, is considered a non-GAAP financial measure. See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Non-interest Income

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

The following table presents the key components of non-interest income for the periods indicated:

For the three months ended(dollars in Dec 31, Sep 30, $ % Change thousands) 2021 2021 ChangeService charges on $ 116 $ 112 $ 4 3.57 %deposit accountsNet gain on sale of 15 435 (420 ) (96.55 )%securitiesGain on sale of 1,072 988 84 8.50 %loansLoan-related fees 219 87 132 151.72 %FHLB stock dividends 102 100 2 2.00 %Earnings onbank-owned life 57 68 (11 ) (16.18 )%insuranceOther income 209 238 (29 ) (12.18 )%Total non-interest $ 1,790 $ 2,028 $ (238 ) (11.74 )%income

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to a decrease in the gain recognized on the sale of approximately $6.3 million of municipal securities during the three months ended December 31, 2021, as compared to the gain recognized on the sale of approximately $24.6 million of municipal securities, mortgage-backed securities, and U.S. government treasuries during the three months ended September 30, 2021.

Loan-related fees. The increase in loan-related fees resulted primarily from the recognition of $0.1 million in swap referral fees recognized in the quarter ended December 31, 2021, which did not occur during the quarter ended September 30, 2021.

Three months ended December 31, 2021, as compared to three months ended December 31, 2020

The following table presents the key components of non-interest income for the periods indicated:

For the three months ended(dollars in Dec 31, Dec 31, $ % Change thousands) 2021 2020 ChangeService charges on $ 116 $ 98 $ 18 18.37 %deposit accountsNet gain on sale of 15 197 (182 ) (92.39 )%securitiesGain on sale of 1,072 1,510 (438 ) (29.01 )%loansLoan-related fees 219 434 (215 ) (49.54 )%FHLB stock dividends 102 94 8 8.51 %Earnings onbank-owned life 57 46 11 23.91 %insuranceOther income 209 161 48 29.81 %Total non-interest $ 1,790 $ 2,540 $ (750 ) (29.53 )%income

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to the sale of approximately $6.3 million of municipal securities during the three months ended December 31, 2021, as compared to the sale of approximately $6.5 million of municipal securities and mortgage-backed securities during the quarter ended December 31, 2020. Of the securities sold in the three months ended December 31, 2020, the mortgage-backed securities sold represented $5.5 million of the sales and contributed primarily to the gain recognized during the period.

Gain on sale of loans. The decline in gain on sale of loans primarily related to a change in the fiscal transfer agent in the SBAs 7a loan guarantee program, effective August 30, 2021. The change in transfer agent slowed the Companys ability to sell loans during the three months ended December 31, 2021, thus resulting in lower volumes of loans sold period-over-period, as approximately $9.7 million and $22.3 million of loans were sold during the three months ended December 31, 2021 and the three months ended December 31, 2020, respectively. The decline in volume was partially offset by an increase in premiums received, from 6.09% to 9.38% for the three months ended December 31, 2020 and 2021, respectively, due to the mix of loan size and types sold during the three months ended December 31, 2021. Additionally, a $1.8 million consumer loan portfolio was sold for a net gain of approximately $0.2 million during the three months ended December 31, 2021, which did not occur during the three months ended December 31, 2020.

Loan-related fees. The decrease in loan-related fees resulted primarily from a $0.2 million decrease in swap referral fees recognized in the quarter ended December 31, 2021, as compared to the quarter ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

The following table presents the key components of non-interest income for the periods indicated:

For the year ended (dollars in Dec 31, Dec 31, $ Change % Change thousands) 2021 2020Service chargeson deposit $ 424 $ 367 $ 57 15.53 %accountsNet gain on sale 724 1,438 (714 ) (49.65 )%of securitiesGain on sale of 4,082 4,145 (63 ) (1.52 )%loansLoan-related fees 639 2,309 (1,670 ) (72.33 )%FHLB stock 372 321 51 15.89 %dividendsEarnings onbank-owned life 237 220 17 7.73 %insuranceOther income 802 502 300 59.76 %Totalnon-interest $ 7,280 $ 9,302 $ (2,022 ) (21.74 )%income

Net gain on sale of securities. The decrease in net gain on sale of securities was primarily due to a decrease in the gain recognized on the sale of approximately $47.1 million of municipal securities, U.S. government agencies, and U.S. government treasuries during the year ended December 31, 2021, as compared to the gain recognized on the sale of approximately $46.4 million of municipal securities, mortgage-backed securities, and corporate bonds during the year ended December 31, 2020. Of the securities sold during the year ended December 31, 2020, approximately $18.7 million were sold prior to the shutdowns enacted in response to the COVID-19 pandemic, representing approximately $0.5 million of the gain, and the remainder of the securities were sold throughout the remainder of the year in response to market fluctuations.

Loan-related fees. The decrease in loan-related fees resulted primarily from a $1.4 million decrease in swap referral fees recognized in the year ended December 31, 2021, as compared to the year ended December 31, 2020, combined with $0.4 million of loan-related fees earned during the year ended December 21, 2020 for processing micro-loans to businesses in the local area in response to COVID-19, which did not recur in the year ended December 31, 2021.

Non-interest Expense

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

The following table presents the key components of non-interest expense for the periods indicated:

For the three months ended(dollars in thousands) Dec 31, Sep 30, $ % Change 2021 2021 ChangeSalaries and employee benefits $ 5,209 $ 4,980 $ 229 4.60 %Occupancy and equipment 544 502 42 8.37 %Data processing and software 656 611 45 7.36 %Federal Deposit Insurance 160 110 50 45.45 %Corporation (?FDIC?) insuranceProfessional services 444 505 (61 ) (12.08 ) %Advertising and promotional 499 366 133 36.34 %Loan-related expenses 136 462 (326 ) (70.56 ) %Other operating expenses 1,370 1,105 265 23.98 %Total non-interest expense $ 9,018 $ 8,641 $ 377 4.36 %

Salaries and employee benefits. The increase in salaries and employee benefits was primarily a result of an increase in the number of employees and increased commissions related to loan and deposit growth during the three months ended December 31, 2021, as compared to the three months ended September 30, 2021. These increases were partially offset by a $0.5 million increase in deferred loan origination costs during the three months ended December 31, 2021, as compared to September 30, 2021.

Advertising and promotional. The increase in advertising and promotional expenses primarily related to increases in business development, marketing, and sponsorship expenses due to in-person participation in events held during the three months ended December 31, 2021, as compared to September 30, 2021.

Loan-related expenses. Loan-related expenses decreased, primarily as a result of a $0.2 million accrual for an SBA matter in the normal course of business during the three months ended September 30, 2021, which did not occur in the three months ended December 31, 2021.

Other operating expenses. Other operating expenses are comprised of travel, insurance, postage and supplies, director fees, other employee expenses, armored car expenses, courier services, and other miscellaneous administrative expenses. These expenses increased primarily due to the net effect of individually immaterial items, including increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees during the three months ended December 31, 2021, as compared to September 30, 2021.

Three months ended December 31, 2021, as compared to three months ended December 31, 2020

The following table presents the key components of non-interest expense for the periods indicated:

For the three months ended(dollars in Dec 31, Dec 31, $ % Change thousands) 2021 2020 ChangeSalaries and $ 5,209 $ 5,640 $ (431 ) (7.64 )%employee benefitsOccupancy and 544 476 68 14.29 %equipmentData processing and 656 549 107 19.49 %softwareFDIC insurance 160 270 (110 ) (40.74 )%Professional 444 806 (362 ) (44.91 )%servicesAdvertising and 499 336 163 48.51 %promotionalLoan-related 136 222 (86 ) (38.74 )%expensesOther operating 1,370 612 758 123.86 %expensesTotal non-interest $ 9,018 $ 8,911 $ 107 1.20 %expense

Salaries and employee benefits. The decrease in salaries and employee benefits was primarily related to a $1.2 million increase in deferred loan origination costs when comparing the three months ended December 31, 2021 to the three months ended December 31, 2020, partially offset by an increase in the number of employees and increased commissions related to loan and deposit growth for the three months ended December 31, 2021, as compared to December 31, 2020. Additionally, restricted stock compensation expense of $0.2 million was recognized for employee restricted share grants during the three months ended December 31, 2021, which did not occur in the three months ended December 31, 2020.

Data processing and software. The increase in data processing and software was primarily a result of (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) increased number of licenses for new users on our loan origination and documentation system.

FDIC insurance. FDIC insurance decreased, primarily due to an improvement in the leverage ratio used in the FDIC assessment as a result of the Companys IPO in May 2021.

Professional services. Professional services decreased, primarily as a result of expenses recognized during the three months ended December 31, 2020 related to the increased audit, consulting, and legal costs incurred to support corporate organizational matters leading up to the IPO. These expenses did not recur during the three months ended December 31, 2021.

Advertising and promotional. The increase in advertising and promotional was primarily related to increases in business development, marketing, and sponsorship expenses due to in-person participation in events held during the three months ended December 31, 2021, as compared to the three months ended December 31, 2020.

Other operating expenses. Other operating expenses increased, primarily due to the net effect of individually immaterial items, including increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees period-over-period.

Year ended December 31, 2021, as compared to year ended December 31, 2020

The following table presents the key components of non-interest expense for the periods indicated:

For the years ended (dollars in Dec 31, Dec 31, $ Change % Change thousands) 2021 2020Salaries andemployee $ 19,825 $ 16,084 $ 3,741 23.26 %benefitsOccupancy and 1,938 1,715 223 13.00 %equipmentData processing 2,494 1,982 512 25.83 %and softwareFDIC insurance 700 1,137 (437 ) (38.43 )%Professional 3,792 1,960 1,832 93.47 %servicesAdvertising and 1,300 1,102 198 17.97 %promotionalLoan-related 1,045 732 313 42.76 %expensesOther operating 4,949 3,545 1,404 39.61 %expensesTotalnon-interest $ 36,043 $ 28,257 $ 7,786 27.55 %expense

Salaries and employee benefits. The increase in salaries and employee benefits year-over-year was primarily related to an increase of full-time equivalent employees and increased commissions related to our loan and deposit growth for the year ended December 31, 2021, as compared to December 31, 2020, as well as restricted stock compensation expense recognized for employee restricted share grants of $0.3 million during the year ended December 31, 2021, which did not occur in 2020. These increases were partially offset by a $1.7 million increase in deferred loan origination costs for the year ended December 31, 2021, as compared to December 31, 2020, from increased loan originations.

Data processing and software. Data processing and software increased, primarily as a result of (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; (iii) increased number of licenses for new users on our loan origination and documentation system; and (iv) increased costs related to improved collateral tracking, electronic statements, and mobile payment solutions.

Professional services. Professional services increased, primarily as a result of increased audit, consulting, and legal costs incurred to support corporate organizational matters leading up to the IPO during the year ended December 31, 2021, as compared to the year ended December 31, 2020.

Other operating expenses. The increase in other operating expenses year-over-year was primarily related to stock compensation expense recognized for director restricted share grants of $0.8 million, which were related to the IPO, during the year ended December 31, 2021. These expenses did not occur in the year ended December 31, 2020. Additionally, other operating expenses increased as a result of increased director fees and expenses combined with increases in expenses related to travel, insurance, dues and subscriptions, data, and telephone, which increased as a result of an increase in volume of customers and employees period-over-period.

Provision for Income Taxes

The Company terminated its status as a Subchapter S corporation effective May 5, 2021, in connection with the Companys IPO and became a C Corporation. Prior to that date, as an S Corporation, the Company had no U.S. federal income tax expense. The provision recorded for the three months and year ended December 31, 2021 yielded an effective tax rate of 10.43% and 9.98%, respectively.

Three months ended December 31, 2021, as compared to three months ended September 30, 2021

Provision for income taxes for the quarter ended December 31, 2021 decreased by $0.9 million, or 41.81%, to $1.3 million, as compared to $2.3 million for the quarter ended September 30, 2021. This decrease is due to the true up of certain permanent items, including tax-exempt interest income. Such items were not included in the provision calculation for the three months ended September 31, 2021.Three months ended December 31, 2021, as compared to three months ended December 31, 2020

Provision for income taxes increased by $1.0 million, or 267.97%, to $1.3 million for the three months ended December 31, 2021, as compared to $0.4 million for the three months ended December 31, 2020. As noted above, this increase is due to the change in the effective tax rate from 3.50% to 10.43%. This increase was partially offset by the true up of certain permanent items, including tax-exempt interest income. Such items were not included in the provision calculation for the three months ended December 31, 2020.

Year ended December 31, 2021, as compared to year ended December 31, 2020

Provision for income taxes increased by $3.4 million, or 254.71%, to $4.7 million for the year ended December 31, 2021, as compared to $1.3 million for the year ended December 31, 2020. This increase is due to the change in the tax rate as a result of the Companys conversion from an S Corporation to a C Corporation, which was partially offset by the $4.6 million reduction to the provision for income taxes for the adjustment of the net deferred tax assets due to the termination of the Companys S Corporation status, recorded during the three months ended June 30, 2021.

Webcast Details

Five Star Bancorp will host a webcast on Tuesday, February 1, 2022, at 10:00 a.m. PT (1:00 p.m. ET), to discuss its fourth quarter and annual results. To view the live webcast, visit the News & Events section of the Companys website under Events at https://investors.fivestarbank.com/news-events/events. The webcast will be archived on the Companys website for a period of 90 days.

AboutFive Star Bancorp

Five Star is a bank holding company headquartered in Rancho Cordova, California. Five Star operates through its wholly owned banking subsidiary, Five Star Bank. Five Star has seven branches and two loan production offices throughout Northern California.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of the Companys beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as may, could, should, will, would, believe, anticipate, estimate, expect, aim, intend, plan or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on the Companys expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Companys control. Such forward-looking statements are based on various assumptions (some of which may be beyond the Companys control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. If one or more of the factors affecting the Companys forward-looking information and statements proves incorrect, then the Companys actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this press release. Therefore, the Company cautions you not to place undue reliance on the Companys forward-looking information and statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 under the section entitled Risk Factors, and other documents filed by the Company with the Securities and Exchange Commission from time to time.

The Company disclaims 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.

Condensed Financial Data (Unaudited)

For the three months ended (dollars in thousands, December 31, September December 31,except share and per share 2021 30, 2020 data) 2021Revenue and Expense Data Interest income $ 22,253 $ 20,832 $ 20,652 Interest expense 895 923 1,460 Net interest income 21,358 19,909 19,192 Provision for loan losses 1,500 ? 3,000 Net interest income after 19,858 19,909 16,192 provisionNon-interest income: Service charges on deposit 116 112 98 accountsGain on sale of securities 15 435 197 Gain on sale of loans 1,072 988 1,510 Loan-related fees 219 87 434 Dividends on FHLB stock 102 100 94 Earnings on bank-owned life 57 68 46 insuranceOther income 209 238 161 Total non-interest income 1,790 2,028 2,540 Non-interest expense: Salaries and employee 5,209 4,980 5,640 benefitsOccupancy and equipment 544 502 476 Data processing and software 656 611 549 FDIC insurance 160 110 270 Professional services 444 505 806 Advertising and promotional 499 366 336 Loan-related expenses 136 462 222 Other operating expenses 1,370 1,105 612 Total non-interest expense 9,018 8,641 8,911 Total income before taxes 12,630 13,296 9,821 Provision for income taxes 1,321 2,270 359 Net income $ 11,309 $ 11,026 $ 9,462 Share and Per Share Data Earnings per common share: Basic $ 0.66 $ 0.64 $ 0.86 Diluted $ 0.66 $ 0.64 $ 0.86 Book value per share $ 13.65 $ 13.16 $ 12.16 Tangible book value per $ 13.65 $ 13.16 $ 12.16 share^(1)Weighted average basic 17,096,230 17,095,957 10,988,705 common shares outstandingWeighted average diluted 17,139,693 17,123,182 10,988,705 common shares outstandingShares outstanding at end of 17,224,848 17,223,808 11,000,273 period Credit Quality Allowance for loan losses toperiod end nonperforming 3954.30 % 3923.67 % 4909.07 %loansNonperforming loans to 0.03 % 0.03 % 0.03 %period end loansNonperforming assets to 0.02 % 0.02 % 0.02 %total assetsNonperforming loans plusperforming TDRs to total 0.03 % 0.03 % 0.03 %loansCOVID-19 deferments to 0.63 % 0.72 % 2.75 %period end loans Selected Financial Ratios ROAA 1.82 % 1.85 % 1.90 %ROAE 19.15 % 19.26 % 29.05 %Net interest margin 3.67 % 3.60 % 4.09 %Loan to deposit 85.09 % 78.86 % 84.53 %

(1) See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of this non-GAAP financial measure.

For the year ended (dollars in thousands, except share and December 31, December 31, per share data) 2021 2020Revenue and Expense Data Interest income $ 81,583 $ 74,390 Interest expense 3,972 9,180 Net interest income 77,611 65,210 Provision for loan losses 1,700 9,000 Net interest income after provision 75,911 56,210 Non-interest income: Service charges on deposit accounts 424 367 Net gain on sale of securities 724 1,438 Gain on sale of loans 4,082 4,145 Loan-related fees 639 2,309 FHLB stock dividends 372 321 Earnings on bank-owned life insurance 237 220 Other income 802 502 Total non-interest income 7,280 9,302 Non-interest expense: Salaries and employee benefits 19,825 16,084 Occupancy and equipment 1,938 1,715 Data processing and software 2,494 1,982 FDIC insurance 700 1,137 Professional services 3,792 1,960 Advertising and promotional 1,300 1,102 Loan-related expenses 1,045 732 Other operating expenses 4,949 3,545 Total non-interest expense 36,043 28,257 Total income before taxes 47,148 37,255 Provision for income taxes 4,707 1,327 Net income $ 42,441 $ 35,928 Share and Per Share Data Earnings per common share: Basic $ 2.83 $ 3.57 Diluted $ 2.83 $ 3.57 Book value per share $ 13.65 $ 12.16 Tangible book value per share^(1) $ 13.65 $ 12.16 Weighted average basic common shares 14,972,637 10,063,183 outstandingWeighted average diluted common shares 14,995,213 10,063,183 outstandingShares outstanding at end of period 17,224,848 11,000,273 Credit Quality Allowance for loan losses to period end 3954.30 % 4909.07 %nonperforming loansNonperforming loans to period end loans 0.03 % 0.03 %Nonperforming assets to total assets 0.02 % 0.02 %Nonperforming loans plus performing 0.03 % 0.03 %TDRs to total loansCOVID-19 deferments to period end loans 0.63 % 2.75 % Selected Financial Ratios ROAA 1.86 % 1.95 %ROAE 22.49 % 31.16 %Net interest margin 3.64 % 3.68 %Loan to deposit 85.09 % 84.50 %

(1) See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of this non-GAAP financial measure.

December September December(dollars in thousands) 31, 30, 31, 2021 2021 2020Balance Sheet Data Cash and due from financial $ 136,074 $ 89,951 $ 46,028 institutionsInterest-bearing deposits 289,255 440,881 244,465 Time deposits in banks 14,464 17,204 23,705 Securities - available-for-sale, 148,807 153,821 114,949 at fair valueSecurities - held-to-maturity, at 4,946 4,955 7,979 amortized costLoans held for sale 10,671 5,267 4,820 Total loans HFI, net of deferred 1,934,460 1,704,716 1,503,159 loan feesAllowance for loan losses (23,243 ) (21,848 ) (22,189 )Loans, net 1,911,217 1,682,868 1,480,970 Federal Home Loan Bank stock 6,723 6,723 6,232 Premises and equipment, net 1,773 1,630 1,663 Bank owned life insurance 11,203 11,142 8,662 Interest receivable and other 21,628 20,051 14,292 assetsTotal assets $ 2,556,761 $ 2,434,493 $ 1,953,765 Non-interest-bearing deposits $ 902,118 $ 899,252 $ 701,079 Interest-bearing deposits 1,383,772 1,269,142 1,082,922 Total deposits 2,285,890 2,168,394 1,784,001 Subordinated notes, net 28,386 28,370 28,320 Interest payable and other 7,439 11,091 7,669 liabilitiesTotal liabilities 2,321,715 2,207,855 1,819,990 Common stock 218,444 218,216 110,082 Retained earnings 17,168 8,442 22,348 Accumulated other comprehensive (566 ) (20 ) 1,345 income (loss), netTotal shareholders? equity $ 235,046 $ 226,638 $ 133,775 Quarterly Average Balance Data Average loans $ 1,815,627 $ 1,625,995 $ 1,530,227 Average interest-earning assets $ 2,306,767 $ 2,196,253 $ 1,866,372 Average total assets $ 2,465,890 $ 2,365,159 $ 1,983,049 Average deposits $ 2,197,183 $ 2,100,108 $ 1,818,360 Average total equity $ 234,344 $ 227,155 $ 129,762 Capital Ratio Data Total shareholders? equity to 9.19 % 9.31 % 6.85 %total assetsTangible shareholders? equity to 9.19 % 9.31 % 6.85 %tangible assets^(1)Total capital (to risk-weighted 13.98 % 15.66 % 12.18 %assets)Tier 1 capital (to risk-weighted 11.44 % 12.79 % 8.98 %assets)Common equity Tier 1 capital (to 11.44 % 12.79 % 8.98 %risk-weighted assets)Tier 1 leverage ratio 9.47 % 9.50 % 6.58 %

(1) See the section entitled Non-GAAP Reconciliation (Unaudited) for a reconciliation of this non-GAAP financial measure.

Non-GAAP Reconciliation (Unaudited)

The Company uses financial information in its analysis of the Companys performance that are not in conformity with accounting principles generally accepted in the United States of America (GAAP). The Company believes that these non-GAAP financial measures provide useful information to management and investors that is supplementary to the Companys financial condition, results of operations, and cash flows computed in accordance with GAAP. However, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, investors should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons.

Tangible shareholders equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders equity to tangible assets is the same as total shareholders equity to total assets at the end of each of the periods indicated.

Tangible book value per share Is defined as total shareholders equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.

Total loans, excluding PPP loans, is defined as total loans less PPP loans. The most directly comparable GAAP financial measure is total loans.

Average loans, excluding PPP loans, is defined as the daily average total loans, excluding the daily average PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP measure is average loans.

Average loan yield, excluding PPP loans, is defined as the daily average loan yield, excluding PPP loans, and includes both performing and nonperforming loans. The most directly comparable GAAP financial measure is average loan yield.

Allowance for loan losses to total loans, excluding PPP loans, is defined as allowance for loan losses, divided by total loans less PPP loans. The most directly comparable GAAP financial measure is allowance for loan losses to total loans.

The following reconciliation tables provide a more detailed analysis of these non-GAAP financial measures.

Total loans, excluding December 31, September December 31,PPP loans 2021 30, 2020 (dollars in thousands) 2021Total loans $ 1,945,131 $ 1,709,982 $ 1,507,979 PPP loans (22,124 ) (61,499 ) (147,965 )Total loans, excluding 1,923,007 1,648,483 1,360,014 PPP loans

For the three months ended Average loans, December 31, September December 31,excluding PPP loans 2021 30, 2020 (dollars in thousands) 2021Average total loans $ 1,815,627 $ 1,625,995 $ 1,530,227 Less: average PPP 44,101 89,436 200,541 loansAverage total loans, 1,771,526 1,536,559 1,329,686 excluding PPP loans

For the year ended Average loans, excluding PPP loans December 31, December 31, (dollars in thousands) 2021 2020Average total loans $ 1,637,280 $ 1,439,380 Less: average PPP loans 116,652 165,414 Average total loans, excluding SBA PPP 1,520,628 1,273,966 loans (denominator)

For the three months ended Average loan yield, December 31, September December 31,excluding PPP loans 2021 30, 2020 (dollars in thousands) 2021Interest income on $ 21,569 $ 20,085 $ 20,087 loansLess: interest income 1,192 2,054 3,561 on PPP loansInterest income onloans, excluding PPP 20,377 18,031 16,526 loansAnnualized interestincome on loans, 80,844 71,536 65,745 excluding PPP loans(numerator) Average total loans $ 1,815,627 $ 1,625,995 $ 1,530,227 Less: average PPP 44,101 89,436 200,541 loansAverage total loans,excluding PPP loans 1,771,526 1,536,559 1,329,686 (denominator)Average loan yield, 4.56 % 4.66 % 4.94 %excluding PPP loans

For the year ended Average loan yield, excluding PPP loans December 31, December 31, (dollars in thousands) 2021 2020Interest income on loans $ 78,894 $ 71,405 Less: interest income on PPP loans 7,417 6,535 Interest income on loans, excluding PPP 71,477 64,870 loans (numerator) Average total loans $ 1,637,280 $ 1,439,380 Less: average PPP loans 116,652 165,414 Average total loans, excluding PPP loans 1,520,628 1,273,966 (denominator)Average loan yield, excluding PPP loans 4.70 % 5.09 %

Allowance for loan losses to total loans, December 31, December 31,excluding PPP loans 2021 2020 (dollars in thousands)Allowance for loan losses (numerator) $ 23,243 $ 22,189 Total loans 1,945,131 1,507,979 Less: PPP loans 22,124 147,965 Total loans, excluding PPP loans 1,923,007 1,360,014 (denominator)Allowance for loan losses to total loans, 1.21 % 1.63 %excluding PPP loans

Media Contact:Heather Luck, CFOFive Star Bancorp(916) 626-5008hluck@fivestarbank.com

Shelley Wetton, CMOFive Star Bancorp(916) 284-7827swetton@fivestarbank.com