Company: FSBC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001275168-25-000038
Chunk: 117

Company: FIVE STAR BANCORP
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 117
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 each of the periods indicated.

3Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share.

49

RESULTS OF OPERATIONS

The following discussion of our results of operations compares the year ended December 31, 2024 to the year ended December 31, 2023.

Net Interest Income

Net interest income is the most significant contributor to our net income. Net interest income represents interest income from interest-earning assets, such as loans and investments, less interest expense on interest-bearing liabilities, such as deposits, subordinated notes, and other borrowings, which are used to fund those assets. In evaluating our net interest income, we measure and monitor yields/rates on our interest-earning assets and interest-bearing liabilities as well as trends in our net interest margin. Net interest margin is a ratio calculated as net interest income divided by total interest-earning assets for the same period. We manage our earning assets and funding sources in order to maximize this margin while limiting credit risk and interest rate sensitivity to our established risk appetite levels. Changes in market interest rates and competition in our market typically have the largest impact on periodic changes in our net interest margin.

Net interest income increased by $8.8 million, or 7.96%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, while our net interest margin decreased 10 basis points during the same period. The increase in net interest income was primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances and rates on deposits. Additional detail relating to net interest margin in each period is provided below.

Average balance sheet, interest, and yield/rate analysis. Table 3 presents average balance sheet information, interest income, interest expense, and the corresponding average yield earned or rate paid for each period reported. The average balances are daily averages and include both performing and nonperforming loans.

Table 3: Average Balances, Interest, and Yield/Rate(dollars in thousands)For the year ended December 31, 2024For the year endedDecember 31, 2023Average BalanceInterest Income/ExpenseAverage Yield/RateAverage BalanceInterest Income/ExpenseAverage Yield/Rate AssetsInterest-earning deposits in banks1$218,156 $11,080 5.08 %$184,103 $9,069 4.93 %