v3.26.1
Shareholders’ Equity
 6 Months Ended
Jun. 30, 2026
Equity [Abstract]  
Shareholders' Equity Shareholders’ Equity
(a) Earnings per Share (“EPS”)
Basic EPS is net income divided by the weighted average number of common shares outstanding during the period less average unvested restricted stock awards (“RSAs”). Diluted EPS includes the dilutive effect of additional potential common shares related to unvested RSAs and unvested performance-based restricted stock awards (“PSUs”) using the treasury stock method. The Company has two forms of outstanding common stock: common stock and unvested RSAs. Holders of unvested RSAs receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings, and therefore the RSAs are considered participating securities. However, under the two-class method, the difference in EPS is not significant for these participating securities. PSUs represent the right to receive shares of common stock upon the achievement of specified performance conditions over a defined performance period. Unlike RSAs, PSUs do not carry voting rights or dividend rights prior to vesting, and the number of shares ultimately issued may range from zero to a maximum payout factor depending on the level of performance achieved relative to pre-established targets. PSUs are included in the diluted EPS calculation using the treasury stock method only to the extent the applicable performance conditions have been met or are considered probable of being met as of the end of the reporting period.
Table 7.1: EPS
Three months endedSix months ended
(in thousands, except share and per share data)
June 30, 2026June 30, 2025June 30, 2026June 30, 2025
Net income$19,399 $14,508 $38,020 $27,619 
Basic weighted average common shares outstanding21,273,902 21,225,831 21,263,551 21,217,900 
Add: Dilutive effects of assumed vesting of restricted and performance-based stock65,001 43,434 68,178 43,570 
Total dilutive weighted average common shares outstanding21,338,903 21,269,265 21,331,729 21,261,470 
Earnings per common share:
Basic EPS$0.91 $0.68 $1.79 $1.30 
Diluted EPS$0.91 $0.68 $1.78 $1.30 
The Company did not have any anti-dilutive shares at June 30, 2026 or June 30, 2025.
(b) Dividends
The board of directors declared on April 16, 2026, and the Company subsequently paid, a cash dividend of $0.25 per share, totaling $5.3 million.
(c) Stock-Based Incentive Arrangement
The Company’s stock-based compensation consists of RSAs granted under its historical stock-based incentive arrangement (the “Historical Incentive Plan”) and RSAs and PSUs issued under the Five Star Bancorp 2021 Equity Incentive Plan (the “Equity Incentive Plan”).
The Historical Incentive Plan consisted of RSAs for certain executive officers of the Company. The arrangement provided that these executive officers would receive shares of restricted common stock of the Company that vested over three years, with the number of shares granted based upon achieving certain performance objectives. These objectives included, but
were not limited to, net income adjusted for the provision for credit losses, deposit growth, efficiency ratio, net interest margin, and asset quality. Compensation expense for RSAs granted under the Historical Incentive Plan is recognized over the service period, which is equal to the vesting period of the shares based on the fair value of the shares at issue date.
In connection with its IPO in May 2021, the Company granted RSAs under the Equity Incentive Plan to certain employees, officers, executives, and non-employee directors. Shares granted to non-employee directors vested immediately upon grant, while shares granted to certain employees, officers, and executives vest ratably over three, five, or seven years (as defined in the respective agreements). Since the completion of the IPO, the Company has granted RSAs under the Equity Incentive Plan to certain officers and executives, which vest ratably over three or five years (as defined in the respective agreements), and to directors, which vest over one year. All RSAs were granted at the fair value of common stock at the time of the award. The RSAs are considered fixed awards, as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the service period.
Beginning in 2025, the Company has granted PSUs under the Equity Incentive Plan to certain executives. Performance is measured over a three-year period and such PSUs cliff vest. Based on the achievement of certain pre-established goals, actual payouts can range from 0% to 150% of the target award. All PSUs were granted at the fair value of common stock at the time of the award. As such, the PSUs are considered variable awards, as the number of shares and fair value are not known at the date of grant. An estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. This estimate is re-evaluated quarterly, and total compensation expense is adjusted for any change in the current period. The estimate of the number of shares expected to vest is also used to accrue for dividends to be paid at the end of the vesting period. As of June 30, 2026, there were 1,277,489 shares available for future grant under the Equity Incentive Plan; this figure reflects shares reserved for RSA grants and shares reserved for outstanding PSU awards at target performance. The actual number of shares to be issued in connection with outstanding PSU awards remains variable and is contingent upon the achievement of the applicable performance conditions at the end of the performance period, and therefore the shares ultimately issued may differ from the target amounts reflected herein.
The Company recognized $0.5 million and $0.4 million of non-cash stock compensation expense for the three months ended June 30, 2026 and June 30, 2025, respectively. The Company recognized $0.9 million and $0.6 million of non-cash stock compensation expense for the six months ended June 30, 2026 and June 30, 2025, respectively.
As of June 30, 2026, there was approximately $3.1 million of unrecognized compensation expense related to the 120,761 unvested RSAs. The holders of unvested RSAs are entitled to dividends at the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested RSAs are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable. Such tax benefits and related expense are expected to be recognized over the weighted average term remaining on the unvested RSAs of 1.74 years as of June 30, 2026. The impact of tax benefits for dividends paid on unvested RSAs on the Company’s unaudited consolidated statements of income for the three and six months ended June 30, 2026 and June 30, 2025 was immaterial.
Table 7.2 summarizes activity related to restricted shares for the periods indicated.
Table 7.2: Unvested RSA Activity
For the three months ended June 30,
For the six months ended June 30,
2026202520262025
Shares Weighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Beginning of the period balance116,103 $24.89 111,786 $22.08 124,747 $23.25 120,577 $21.36 
Shares granted26,711 42.00 31,756 27.55 35,477 41.38 42,241 28.38 
Shares vested(22,053)22.72 (14,094)20.00 (39,463)22.39 (33,037)21.33 
Shares forfeited— — — — — — (333)21.97 
End of the period balance120,761 $29.07 129,448 $23.65 120,761 $29.07 129,448 $23.65 
As of June 30, 2026, there was approximately $1.4 million of unrecognized compensation expense related to the 48,900 unvested PSUs (at target).
Table 7.3 summarizes information about unvested PSUs. The weighted average grant date fair value is based on the fair value at the time of grant. The vesting of PSUs is subject to achievement of specified performance targets and continued employment.
Table 7.3: Unvested PSU Activity
For the three months ended June 30,
For the six months ended June 30,
2026202520262025
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Beginning of the period balance23,110 $31.15 — $— 23,110 $31.15 — $— 
Shares granted25,790 42.00 — — 25,790 42.00 — — 
End of the period balance48,900 $36.87 — $— 48,900 $36.87 — $— 
Table 7.3 shows the target number of PSUs awarded. Vesting of the PSUs is based on achievement of the Company’s three-year average return on average assets for the performance period relative to a peer group of publicly traded banks and bank holding companies utilizing the S&P Global Broad Market Index - Western Region. If the Company’s performance is at the 60th percentile, 70th percentile, and 80th percentile or higher, the recipients are entitled to receive 50%, 100%, and 150% of their target award grant, respectively.