FIVE STAR BANCORPFSBC
FIVE STAR BANCORP Commitments Disclosure
Commitments and Contingencies
Financial Instruments with Off-Balance Sheet Risk
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Substantially all of these commitments are at variable interest rates, based on an index, and have fixed expiration dates.
Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The Company uses the same credit policies in making commitments to originate loans and lines of credit as it does for on-balance sheet instruments, including obtaining collateral at exercise of the commitment. The contractual
amounts of unfunded loan commitments and standby letters of credit not reflected in the consolidated balance sheets are shown in Table 15.1.
Table 15.1: Unfunded Loan Commitments and Standby Letters of Credit | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Commercial lines of credit | $ | 287,988 | $ | 230,063 | ||||||||||
| Undisbursed commercial real estate loans | 94,559 | 98,508 | ||||||||||||
| Undisbursed construction loans | 82,420 | 74,671 | ||||||||||||
| Agricultural lines of credit | 26,236 | 21,155 | ||||||||||||
| Undisbursed residential real estate loans | 5,965 | 7,225 | ||||||||||||
| Undisbursed agricultural real estate loans | 4,470 | — | ||||||||||||
| Other | 1,627 | 1,973 | ||||||||||||
| Total commitments and standby letters of credit | $ | 503,265 | $ | 433,595 | ||||||||||
The Company records an allowance for credit losses on unfunded loan commitments at the consolidated balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and historical loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments totaled $697,000 and $747,000 as of December 31, 2025 and 2024, respectively, which is recorded in “Interest payable and other liabilities” in the consolidated balance sheets.
Concentrations of credit risk: The Company grants real estate mortgage, real estate construction, commercial, and consumer loans to customers primarily in Northern California. Although the Company has a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate.
In management’s judgment, a concentration of loans exists in real estate related loans, which represented approximately 86.07% of the Company’s loan portfolio at December 31, 2025 and 86.41% of the Company’s loan portfolio at December 31, 2024. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectability of these loans. Personal and business incomes represent the primary source of repayment for the majority of these loans.
Deposit concentrations: At December 31, 2025, the Company had 129 deposit relationships that exceeded $5,000,000 each, totaling $2,558,312,000, or approximately 60.90% of total deposits. The Company’s largest single deposit relationship at December 31, 2025 totaled $290,000,000, or approximately 6.90% of total deposits. At December 31, 2024, the Company had 104 deposit relationships that exceeded $5,000,000 each, totaling $2,166,080,000, or approximately 60.88% of total deposits. The Company’s largest single deposit relationship at December 31, 2024 totaled $300,000,000, or approximately 8.43% of total deposits. Management maintains the Company’s liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors.
Correspondent banking agreements: The Company maintains funds on deposit with other FDIC-insured financial institutions under correspondent banking agreements. Uninsured deposits through these agreements totaled $27,356,000 and $29,154,000 at December 31, 2025 and 2024, respectively.
Equity investments: The Company has committed to and is invested in a limited number of venture funds. As of December 31, 2025 and 2024, the balance of these investments totaled approximately $12,111,000 and $9,328,000, respectively. As of December 31, 2025 and 2024, the estimated remaining commitment for these funds totaled $13,695,000 and $10,833,000, respectively.
Leases
The Company leases office space for its banking operations under non-cancelable operating leases of various terms. The leases expire at dates through 2036 and provide for renewal options from to five years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties. All leases include predefined rental increases over the term of the lease.
The Company has a sublease agreement for space adjacent to the Redding location. The sublease has renewal terms extended to December 31, 2026.
The Company leases its Sacramento administrative office from a partnership comprised of certain shareholders and members of the Company’s board of directors. The Sacramento administrative office lease extends through May 2026. Rent expense paid to the partnership was $33,000, $32,000, and $28,000 for the years ended December 31, 2025, 2024, and 2023, respectively, under this lease.
Until the opening of a full service branch in San Francisco in September 2024, the Company leased a temporary administrative office in San Francisco from an entity affiliated with a member of our board of directors. No rent expense was paid to this entity for the year ended December 31, 2025. Rent expense paid to this entity was $40,000 and $19,000 for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2025, the Company’s ROUA and lease liability were $10,802,000 and $11,872,000, respectively.
Table 15.2 presents the components of lease expense for the years shown.
Table 15.2: Components of Lease Expense | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Operating lease expense | $ | 1,727 | $ | 1,609 | $ | 1,261 | ||||||||||||||
| Sublease income | (26) | (26) | (22) | |||||||||||||||||
| Total lease expense | $ | 1,701 | $ | 1,583 | $ | 1,239 | ||||||||||||||
Table 15.3 presents the weighted average operating lease term, discount rate, and operating cash flows at the dates indicated.
Table 15.3: Other Lease Information | ||||||||||||||||||||
| (in thousands, except for average remaining lease term and discount rate) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Weighted average remaining lease term | 7.68 years | 6.33 years | 5.28 years | |||||||||||||||||
| Weighted average discount rate | 4.99 | % | 4.99 | % | 4.11 | % | ||||||||||||||
| Operating cash flows for operating leases | $ | 1,117 | $ | 916 | $ | 900 | ||||||||||||||
| ROUA obtained in exchange for operating lease liabilities | 6,132 | 2,170 | 2,281 | |||||||||||||||||
Table 15.4 shows the future minimum lease payments under the Company’s operating lease arrangements as of December 31, 2025.
Table 15.4: Future Minimum Lease Payments | ||||||||
| (in thousands) | December 31, 2025 | |||||||
| 2026 | $ | 1,996 | ||||||
| 2027 | 2,112 | |||||||
| 2028 | 2,052 | |||||||
| 2029 | 1,668 | |||||||
| 2030 | 1,454 | |||||||
| Thereafter | 5,231 | |||||||
| Total expected operating lease payments | 14,513 | |||||||
| Discount for present value of expected cash flows | (2,641) | |||||||
Operating lease liability at December 31, 2025 | $ | 11,872 | ||||||
Litigation Matters
The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or results of operations of the Company.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.