Company: FSBC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001275168-25-000038
Chunk: 136

Company: FIVE STAR BANCORP
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 136
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976 

Loans designated as watch and substandard, which are not considered adversely classified, increased to $126.0 million at December 31, 2024 from $41.6 million at December 31, 2023. The increase related primarily to an $83.8 million increase in loans designated as watch for loans which have indicators of deficient loan quality and potential significant issues which are expected to be temporary in nature. There were no loans with doubtful risk grades at December 31, 2024 or December 31, 2023.

61

Allowance for Credit Losses

The allowance for credit losses is established through a provision for credit losses charged to operations. Provisions are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses.

The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

At December 31, 2024, the Company’s allowance for credit losses was $37.8 million, compared to $34.4 million at December 31, 2023. The $3.4 million increase in the allowance is due to a $7.5 million provision for credit losses, partially offset by net charge-offs of $4.1 million during the year ended December 31, 2024, mainly attributable to commercial and industrial loans, during the same period.

While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 15 represents management’s allocation of our allowance for credit losses by loan category, and the balance of loans in each category as a percentage of total loans, for the periods indicated.

Table 15: Allocation of the Allowance for Credit LossesDecember 31, 2024December 31, 2023(dollars in thousands)Allowance for Credit Losses% of Loans to Total LoansAllowance for Credit Losses% of Loans to Total LoansReal estate:Commercial$25,864 80.75 %$29,015 86.76 %Commercial land and