Company: FSBC
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001628280-25-050090
Chunk: 245

Company: FIVE STAR BANCORP
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 2
Chunk 245
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 CorporationSBAU.S. Small Business AdministrationFederal ReserveBoard of Governors of the Federal Reserve SystemSECSecurities and Exchange CommissionFFIECFederal Financial Institutions Examination CouncilSOFRSecured Overnight Financing Rate

65

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. As a financial institution, the Company experiences market risk arising primarily from interest rate risk inherent in lending and deposit-taking activities. Because the interest rates on the Company’s assets and liabilities do not necessarily change at the same speed or rate as market interest rates, sudden and/or substantial changes in interest rates may adversely impact our earnings. In particular, the Company’s financial results are sensitive to significant changes in the treasury yield curve, the federal funds rate, and the Wall Street Prime Index.

The Company’s total interest income was $64.8 million for the three months ended September 30, 2025 and $207.0 million for the year ended December 31, 2024. Our total interest expense was $25.5 million for the three months ended September 30, 2025 and $87.2 million for the year ended December 31, 2024. Overall, our net interest income was $39.3 million for the three months ended September 30, 2025 and $119.7 million for the year ended December 31, 2024.

Economic value of equity (“EVE”) measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point 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 September 30, 2025, the Company carried a slightly higher balance of assets than liabilities 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