Five Star: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Oct. 27, 2026, Five Star (NASDAQ:FSBC) announced a 13% quarter-over-quarter net income increase to $21.9 million. The bank is translating fresh equity into balance sheet growth while expanding its net interest margin, the difference between interest earned on loans and interest paid on deposits. That balance sheet expansion gives the company capital to scale its commercial banking teams across California.

Three takeaways from management explain how this growth strategy affects long-term value.

1. Fresh Capital Fueling Statewide Commercial Expansion

Five Star raised approximately $130 million in net proceeds through a public stock offering in July. Management is deploying that fresh equity to add business development officers and open offices across California, absorbing minor short-term share dilution to build higher earning capacity.

The offering was completed to support general corporate purposes, continued growth, including through the investments in the bank to pursue growth opportunities, and for working capital.
-- James Beckwith, President and Chief Executive Officer

2. Earning Asset Repricing Driving Net Interest Margin Expansion

With 73% of loans carrying floating or adjustable rates, the bank captures higher yields as assets reprice faster than deposit costs rise. That favorable repricing gap expanded the net interest margin to 3.69% during the quarter.

Looking ahead, we continue to expect loan yield, deposit pricing discipline and our funding mix to remain supportive of margin performance, although future rate actions and competitive market conditions may influence quarterly results.
-- Heather Luck, Executive Vice President and Chief Financial Officer

3. High-Value Client Tenure Securing Low-Cost Deposit Base

Core funding stability relies on deep commercial relationships rather than volatile broker deposits. By replacing $50 million in wholesale funding with $75.1 million in nonwholesale deposits, the bank keeps its average deposit cost down to 2.19%.

Approximately 62% of our deposit relationships exceed $5 million with an average tenure of approximately 7 years.
-- James Beckwith, President and Chief Executive Officer

Looking Ahead

Loan demand remains active across commercial real estate and business lending, supporting management's target of 10% to 12% loan growth into 2027. The bank relies on conservative underwriting, including a 56% weighted average loan-to-value ratio in commercial real estate, alongside long-standing local deposit relationships. Management is keeping a close watch on deposit pricing discipline as market interest rates move.

While economic and policy uncertainty remains elevated, client activity continues to be constructive, and our pipelines remain healthy.
-- James Beckwith, President and Chief Executive Officer

New administrative offices in Calabasas and Palo Alto give the bank physical footprints in high-value California markets. Expanding its business development officer team from 45 to 50 positions Five Star to capture core deposits and commercial accounts from larger competitors.

We entered the fourth quarter focused on serving our clients, executing our strategic initiatives and pursuing profitable growth while maintaining disciplined risk management.
-- James Beckwith, President and Chief Executive Officer

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