Company: FSBC
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001275168-25-000106
Chunk: 78

Company: FIVE STAR BANCORP
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 1
Chunk 78
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 in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet, assuming that the rate change remains in effect over the life of the current balance sheet. As of March 31, 2025, the Company carried a slightly higher balance of liabilities than assets that will reprice within the next twelve months in the event that interest rates fall.

Our policies and procedures provide management with guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. This is overseen and adjusted as needed by our Management Asset Liability Committee on a monthly basis and our Director Asset Liability Committee on a quarterly basis. We have historically managed our sensitivity position within our established guidelines. With the intent of stabilizing or increasing net interest income, management typically deploys the Company’s excess liquidity and seeks to migrate certain earning assets into higher-yielding categories (from investment securities into loans, for example). However, in situations where deposit balances contract, management relies upon various borrowing facilities and/or the use of brokered deposits. The Company monitors the impact of interest rate risk on EVE by reviewing and managing assets and liabilities with varying interest rate risks, such as cash and time deposits. Assets and liabilities are subject to fluctuations at each measurement date based on the composition of the balance sheet at each measurement date. EVE results are compared to previous periods and established policies on a quarterly basis. 

As of March 31, 2025, the overnight Federal Funds rate (the rate used in the interest rate shock scenarios listed below) was 4.33%, remaining constant from December 31, 2024. The scenarios presented assume that interest rates change instantaneously (“shock”) and that there are no significant changes in the structure of the Company’s balance sheet over the twelve months being measured.

Table 26 summarizes the estimated effect on net interest income and EVE from changing interest rates as measured against a flat rate (no interest rate change) instantaneous parallel shock scenario over a twelve-month period utilizing an interest sensitivity (GAP) analysis based on the Company’s specific mix of interest-earning assets and interest-bearing liabilities as of March 31, 2025 and December 31, 2024. 

Table 26: Estimated Effect on Net Interest Income and EVE from Changing Interest RatesMarch 31, 2025December 31, 2024Change in Interest RatesEstimated Change in NII(as % of NII)Estimated Change in EVE(as