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Shareholders’ Equity | 6 Months Ended
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Jun. 30, 2024
Equity [Abstract] |
Shareholders' Equity | Shareholders’ Equity (a) EPS Basic EPS is net income divided by the weighted average number of common shares outstanding during the period less average unvested restricted stock awards (“RSAs”). Diluted EPS includes the dilutive effect of additional potential common shares related to unvested RSAs using the treasury stock method. The Company has two forms of outstanding common stock: common stock and unvested RSAs. Holders of unvested RSAs receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings, and therefore the RSAs are considered participating securities. However, under the two-class method, the difference in EPS is not significant for these participating securities.
Table 7.1: EPS
|  | Three months ended |  | Six months ended
(in thousands, except share count and earnings per common share) |  | June 30, 2024 |  | June 30, 2023 |  | June 30, 2024 |  | June 30, 2023
Net income |  | $ | 10,782 |  |  | $ | 12,729 |  |  | $ | 21,413 |  |  | $ | 25,890 |
Basic weighted average common shares outstanding |  | 21,039,798 |  |  | 17,165,344 |  |  | 19,115,333 |  |  | 17,157,801 |
Add: Dilutive effects of assumed vesting of restricted stock |  | 18,287 |  |  | 3,651 |  |  | 50,207 |  |  | 24,067 |
Total dilutive weighted average common shares outstanding |  | 21,058,085 |  |  | 17,168,995 |  |  | 19,165,540 |  |  | 17,181,868 |
Earnings per common share: |  |  |  |  |  |  |  |
Basic EPS |  | $ | 0.51 |  |  | $ | 0.74 |  |  | $ | 1.12 |  |  | $ | 1.51 |
Diluted EPS |  | $ | 0.51 |  |  | $ | 0.74 |  |  | 1.12 |  |  | 1.51 |
The Company did not have any anti-dilutive shares at June 30, 2024 or June 30, 2023. (b) Dividends On April 18, 2024, the board of directors declared a $0.20 per common share dividend, totaling $4.3 million. (c) Stock-Based Incentive Arrangement The Company’s stock-based compensation consists of RSAs granted under its historical stock-based incentive arrangement (the “Historical Incentive Plan”) and RSAs issued under the Five Star Bancorp 2021 Equity Incentive Plan (the “Equity Incentive Plan”). The Historical Incentive Plan consisted of RSAs for certain executive officers of the Company. The arrangement provided that these executive officers would receive shares of restricted common stock of the Company that vested over three years, with the number of shares granted based upon achieving certain performance objectives. These objectives included, but were not limited to, net income adjusted for the provision for credit losses, deposit growth, efficiency ratio, net interest margin, and asset quality. Compensation expense for RSAs granted under the Historical Incentive Plan is recognized over the service period, which is equal to the vesting period of the shares based on the fair value of the shares at issue date. In connection with its IPO in May 2021, the Company granted RSAs under the Equity Incentive Plan to certain employees, officers, executives, and non-employee directors. Shares granted to non-employee directors vested immediately upon grant, while shares granted to certain employees, officers, and executives vest ratably over three, five, or seven years (as defined in the respective agreements). Since the completion of the IPO, the Company has granted RSAs under the Equity Incentive Plan to certain executives, which vest ratably over three or five years (as defined in the respective agreements), and to directors, which vest over one year. All RSAs were granted at the fair value of common stock at the time of the award. The RSAs are considered fixed awards, as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the service period. Non-cash stock compensation expense recognized for the three months ended June 30, 2024 and 2023 was $0.3 million and $0.2 million, respectively. Non-cash stock compensation expense recognized for the six months ended June 30, 2024 and 2023 was $0.6 million and $0.5 million, respectively. At June 30, 2024 and 2023, there were 137,457 and 82,324 unvested restricted shares, respectively. As of June 30, 2024, there was approximately $2.6 million of unrecognized compensation expense related to the 137,457 unvested restricted shares. The holders of unvested RSAs are entitled to dividends at the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested RSAs are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable. Such tax benefits are expected to be recognized over the weighted average term remaining on the unvested restricted shares of 3.39 years as of June 30, 2024. The impact of tax benefits for dividends paid on unvested restricted stock on the Company’s unaudited consolidated statements of income for the three and six months ended June 30, 2024 and 2023 was immaterial. Table 7.2 summarizes activity related to restricted shares for the periods indicated.
Table 7.2: Restricted Share Activity
|  | For the three months ended June 30, |  | For the six months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| Shares |  | Weighted Average Grant Date Fair Value |  | Shares |  | Weighted Average Grant Date Fair Value |  | Shares |  | Weighted Average Grant Date Fair Value |  | Shares |  | Weighted Average Grant Date Fair Value
Beginning of the period balance |  | 162,348 |  |  | $ | 21.22 |  |  | 108,363 |  |  | $ | 21.43 |  |  | 69,338 |  |  | $ | 20.53 |  |  | 96,826 |  |  | $ | 20.34 |
Shares granted |  | — |  |  | — |  |  | — |  |  | — |  |  | 96,380 |  |  | 21.97 |  |  | 16,978 |  |  | 28.52 |
Shares vested |  | (23,723) |  |  | 20.00 |  |  | (24,492) |  |  | 20.00 |  |  | (26,975) |  |  | 21.03 |  |  | (29,933) |  |  | 20.78 |
Shares forfeited |  | (1,168) |  |  | 21.69 |  |  | (1,547) |  |  | 26.95 |  |  | (1,286) |  |  | 21.54 |  |  | (1,547) |  |  | 26.95 |
End of the period balance |  | 137,457 |  |  | $ | 21.43 |  |  | 82,324 |  |  | $ | 21.75 |  |  | 137,457 |  |  | $ | 21.43 |  |  | 82,324 |  |  | $ | 21.75 |

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