Company: FSBC
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001628280-25-050090
Chunk: 171

Company: FIVE STAR BANCORP
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 8
Chunk 171
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$2,644 $— $3,534,606 

Loans designated as watch and substandard, which are not considered adversely classified, decreased to $111.3 million at September 30, 2025 from $126.0 million at December 31, 2024. During the three months ended September 30, 2025, one borrower with $11.6 million in total loans outstanding on a special purpose commercial real estate loan and a commercial line of credit, was downgraded from watch to substandard, which contributed to the decrease in loans designated as watch and the increase in loans designated as substandard compared to December 31, 2024. There were no loans with doubtful risk grades at September 30, 2025 or December 31, 2024.

53

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 September 30, 2025, the Company’s allowance for credit losses was $42.1 million, as compared to $37.8 million at December 31, 2024. The $4.3 million increase in the allowance is due to a $7.1 million provision for credit losses recorded during the nine months ended September 30, 2025, partially offset by net charge-offs of $2.8 million, primarily 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 20 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 20: Allocation of the Allowance for Credit LossesSeptember 30, 2025December 31, 2024(doll