Five Star Bancorp surges on earnings beat, dividend boost
California regional bank raises dividend 25% as net interest margin expands to 3.66%
Five Star Bancorp shares rallied roughly 6% on Monday after the California regional bank reported fourth-quarter earnings that exceeded analyst expectations and announced a 25% dividend increase, reflecting stronger-than-anticipated performance in a challenging interest rate environment.
The Rancho Cordova-based lender reported earnings per share of $0.83 for the quarter ended December 31, 2025, surpassing the consensus estimate of $0.71 by 17.2%, according to regulatory filings. Revenue climbed 7.7% above projections, adding $3.2 million to the top line.
The dividend increase to $0.25 per share from $0.20 marks the bank's confidence in its earnings power and capital generation. With the new dividend, shares offer an approximate 2.6% yield at current levels, based on a recent price near $38.58. The stock is now trading within 5% of its 52-week high of $40.31, having more than doubled from its yearly low of $21.79 reached in early 2025.
Five Star's net interest margin, a key profitability metric for banks, expanded 30 basis points year-over-year to 3.66%, demonstrating the lender's ability to maintain pricing power despite the Federal Reserve's elevated interest rate stance. The expansion came as loan growth accelerated 15.4% annually, while deposits increased 18.1%, indicating strong customer acquisition and retention in its core markets.
The bank's return on equity reached 15.97% for the quarter, well above the typical 10-12% threshold that investors consider healthy for regional lenders. Efficiency, measured by the efficiency ratio, improved to 41.03%, meaning the bank spent roughly 41 cents to generate each dollar of revenue—a figure that puts Five Star among the more efficient operators in its peer group.
Five Star Bancorp, the parent company of Five Star Bank, operates primarily in Northern California and focuses on small and medium-sized enterprises and individual consumers. The bank's market capitalization stands at approximately $817 million, with a price-to-earnings ratio of 14.16 times trailing earnings and a price-to-book ratio of 1.89.
Analysts have maintained a generally positive outlook on the shares. Of five analysts covering the stock, one rates it a strong buy and two recommend buy, with two suggesting hold positions, according to recent data. The consensus target price of $40.80 represents roughly 5.8% upside from current levels.
The quarterly results build on Five Star's momentum from fiscal 2025, which saw earnings growth of 49% and revenue expansion of 33.8% year-over-year. Profit margins have remained robust at 40.4%, reflecting the bank's disciplined underwriting and expense management.
Institutional investors hold 57.3% of shares outstanding, while insiders own 28.2%, suggesting confidence from management and sophisticated investors alike. The company's low beta of 0.50 indicates its stock has historically been less volatile than the broader market.
Looking ahead, shareholders should focus on Five Star's ability to sustain net interest margin expansion as the Federal Reserve potentially adjusts its policy stance in 2026. The next dividend payment of $0.25 per share is scheduled for February 9, 2026, with an ex-dividend date of February 2.
The strong quarterly performance positions Five Star well to capitalize on opportunities in California's competitive banking landscape, particularly as loan demand remains solid and deposit growth continues to outpace many regional peers.