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an issue. Nonperforming loans at the end of 2023
annually and performs regular site inspections.
accounted for just 0.06% of loans and other real
It’s also a national business: 42% of the manu-
estate owned, among the lowest in Bank Director’s
factured housing park portfolio comes from out-
ranking.
side of California, providing valuable geographic
“If you just pulled up our call report, you’d
diversification.
be like, ‘Yikes, they are seriously concentrated in
“CRE is the lifeblood of most community banks.
CRE,’” admits Heather Luck, Five Star’s chief fi-
It’s how you diversify inside CRE that matters,”
nancial officer. “But it’s all about how we manage
says Robert Perry-Smith, Five Star’s chairperson
the program and the granularity of the loans.”
and a longtime accountant to the banking industry.
“We believe there is a high degree of safety in mo-
A Unique Niche
To understand what drives Five Star’s success
in CRE, look first at the portfolio’s composition:
bile home communities. If everything goes to heck
in a handbasket, people still need a place to live,
and this is pretty affordable.”
Office loans account for just 5% of CRE loans and
By all accounts, regulators understand the port-
are mostly for two- or three-story suburban office
folio’s dynamics well enough to approve. “They’ve
buildings, not downtown high rises. Some targeted
taken a lot of time educating regulators on the
customer niches, including faith-based communi-
types of loans they’re underwriting,” Terrell says,
ties, multifamily, industrial and mini-storage facil-
and it appears to have worked. “It seems like
ities, each generate about 7% of the company’s
there’s a lot of regulatory support for them being
CRE loans. Most of the rest, a whopping 44% of
at the level they’re at, as opposed to pushing them
the entire CRE portfolio, are loans to manufac-
lower.”
tured home communities and RV parks.
The borrowers are professional park operators,
“Fell Into” the Business
not people who own mobile homes. Most of those
Beckwith admits he “fell into” the business af-
firms own dozens, if not hundreds, of small housing
ter a long-time client asked if Five Star would re-
communities that charge homeowners — ranging
finance some mobile home park notes that were
from retirees to two-income families who typical-
coming due. He reviewed the underlying assets and
ly pay between $100,000 and $200,000 for their
was impressed. Even during the Great Recession,
abodes — $500 or $600 per month in rent for
manufactured housing held its value. “They all
the space and hookups. In total, there are about
underwrote extremely well — very granular rents,
44,000 such communities around the country,
stable occupancy, good yields. I thought, ‘Wow, I
most of them mom-and-pop shops, and the space
wonder if they’re all like this? Maybe we should
is consolidating rapidly.
do more of them.’”
Five Star picks its clients carefully, working only
Five Star began lending to the niche in Sac-
with experienced park operators. A typical loan
ramento late last decade and did a good job. As
might be $2 million to finance the acquisition of
the bank’s reputation and knowledge base grew,
a park or upgrade its utilities or pavement so the
customers came from around the country. At the
operators can charge a bit more in rent. The credit
end of 2023 it had about $1.2 billion in loans to
quality is superb, Beckwith says, the data easy to
manufactured home communities and RV parks
track and digest.
on the books, with an average loan size of about
To add comfort, Five Star’s team re-underwrites every park loan worth more than $2 million
$2.4 million.
Most of those borrowers value the relationship
