RankingBanking 24 Digital (1) - Flipbook - Page 7
5
Bay Area. “Suddenly, there were a lot of disrupted
scheme doesn’t cap how much its bankers can
customers and a lot of really good bankers in the
make, inspiring them to produce. A laser focus on
market who didn’t have a horse to ride,” Beckwith
credit quality and an engaged board minimize the
recalls. “We were ready to respond quickly.”
downside risks and drive further growth. Most im-
Less than three months later, a team of five
former Signature bankers signed on as the initial
building blocks in what has become a full-out as-
portant might be its ability to quickly capitalize on
opportunities.
In 2023, Five Star’s performance
sault on the Bay Area banking market. Five Star
was strong enough to rank No.
now has 20 business development officers, or
18 overall in Bank Direc-
BDOs, working the metropolitan area’s small busi-
tor’s
ness community, most of them refugees from Sig-
study of the 300 largest
nature or First Republic. The bank later this year
publicly traded banks and
will open a branch in downtown San Francisco.
fifth among banks un-
“If there’s one thing we’ve tried to be consistent
der $5 billion in assets.
about over time it’s being opportunistic and taking
The ranking, compiled by
advantage of market displacements,” Beckwith
Piper Sandler & Co. using
says.
S&P Global Market Intelli-
Five Star’s Bay Area buildout represents a mas-
44%
RankingBanking
LOANS TO MANUFACTURED
HOMES AND RV PARKS AS
A PERCENTAGE OF FIVE
STAR’S CRE PORTFOLIO
gence data, combines a variety
sive ramp-up for a company with around 190 em-
of metrics around profitability, cap-
ployees and a market capitalization of $500 mil-
ital adequacy and asset quality to derive
lion, but it doesn’t necessarily feel out of character
a composite score.
to analysts who follow Five Star. The company,
Five Star reported a return on average assets
which in 2021 did the first post-pandemic bank
in 2023 of 1.44% and a return on average equity
IPO and then did a secondary offering in March
of 17.91%, both figures among the top 50 for all
2024 to help finance its expansion, has a reputa-
public banks.
tion for successfully seizing on opportunities when
they emerge.
Commercial real estate (CRE) concentrations,
as for many community banks, attract scrutiny.
“It’s a little surprising in the sense that they’ve
Fully 86.8% of Five Star’s loan portfolio at the
historically been centered on the Sacramento
end of 2023 was tied to CRE, valued at 682.7%
area,” says Gary Tenner, a managing director and
of its risk-based capital, according to company fil-
senior research analyst with D.A. Davidson Cos.
ings. That was well beyond the regulatory guidance
“But it’s also part of the nature of Five Star’s
subjecting banks with CRE loans of more than
management and board to say, ‘There’s all this
300% of risk-based capital to greater supervisory
talent shaking loose here. How can we take advan-
scrutiny. At a time of gloom and doom around the
tage of that to grow our business?’”
sector, such exposures can spark worry.
The 25-year-old company is defined and dif-
“The biggest concern I hear from investors is,
ferentiated by what it does and how it does it. A
‘How does this play out over time in terms of CRE
powerhouse lending niche in manufactured hous-
concentrations?’” says Andrew Terrell, a manag-
ing provides much of its earnings oomph with
ing director at Stephens. “There’s a lot of angst
relatively low risk. Equally important is a culture
about CRE.”
that is centered firmly on customers and grounded
Judging by the numbers, however, credit quali-
in immediacy and purpose. Five Star’s incentive
ty on the $2.69 billion CRE portfolio hasn’t been
