This episode of CEO Spotlight features Five Star Bank CEO James Beckwith speaking with KCBS Business Reporter Jason Brooks.
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00:00KCBS presents CEO Spotlight, a weekly conversation with Bay Area's business leaders in discussion
00:07with KCBS business reporter Jason Brooks. Thanks for joining us here on the CEO Spotlight. I'm
00:13Jason Brooks, KCBS Money Watch editor, and I'm joined with James Beckwith, CEO of Five Star Bank,
00:21based in Rancho Cordova, and a pretty heavy presence around Sacramento with plans to
00:26have a big presence here in the San Francisco Bay Area. James, thanks for joining us here today.
00:31Jason, thank you for having me. I was looking forward to this conversation.
00:35Same with me. And before we get into the nuts and bolts of the business and the industry,
00:39tell us a little bit about yourself. Where are you from and how did you get to this point in
00:44your life? Sure. You have a half hour, an hour or so? I know you can condense it a little bit.
00:50Sure. Let's see. Grew up in Santa Rosa, up in the North Bay. Went to college at San Francisco State.
00:58Got my accounting degree. Started in San Francisco. Was hired by what at that time was a big aid firm,
01:06Touche Ross, which is now Deloitte. And spent five years down here in San Francisco. So,
01:12very, very fond memories of San Francisco in my early career.
01:16Five Star Bank, I believe, was founded in 1999. So, been around for a quarter century. How long
01:22have you been with Five Star Bank and what encouraged you to join the bank?
01:25I'm well tenured. I started in September of 2003. And so, I've been there quite some time.
01:37We're excited about what we're doing in San Francisco and in Northern California in particular.
01:45You know, we're a commercial bank. I'm going to give you a little background. We're a commercial
01:49bank. We also have a real estate concentration. But we're a business bank. We're not necessarily
01:56a retail bank. We're a business bank. And so, everybody involved with the bank has some
02:03deep connection to San Francisco. So, I'm going to tell you why we're here, maybe, if I could,
02:10Jason. There was a great, I'm going to call it the great turmoil that happened last March
02:18in 2023 with Silicon Valley Bank and then Signature Bank and then subsequently First
02:25Republic Bank. Opened up a pretty significant opportunity for somebody who is opportunistic,
02:30of which we've always been. And so, given our connections down here, we decided to jump in
02:38with both feet. We thought we could be part of what I would call the clearing process
02:44and provide great service along the lines of First Republic Bank, which, by the way,
02:49was a great brand, in order to really get a foothold down here. And so far, so good.
02:57We plan to open our office in September of this year. We're going to be located at 345 California
03:05Street, up on the 28th floor. And we're awfully excited about what we're doing. We've hired,
03:11to date, 20 people. And we expect to maybe, over the next 24 months, we'll double that size. So,
03:20we're in it to win it here down in the Bay Area. And before we go further into San Francisco and
03:25why you came here, how many branches does Five Star Bank have? Right now, we have eight offices,
03:32four in the Capital Region, one up in Yuba City, one in Chico, and one in Redding. So,
03:36we're up in the Sacramento Valley, if you will. But we think, in big picture,
03:45that in order to be the preeminent commercial bank in Northern California, you have to have
03:50a significant presence in the Capital Region, but also down here in the Bay Area. We think we've got
03:57the Capital Region covered at this point. And our big mission right now is really coming down here
04:04and making things happen for folks that are looking for a new relationship in their banking
04:11and to help us really grow the franchise. The regional banking crisis that you mentioned
04:16was a huge blow for the Bay Area. Silicon Valley Bank, First Republic, those banks had heavy
04:22exposure to VC startups, and that led to their problems. How does Five Star differentiate from
04:29that so you don't fall into that same trap? Well, it's really about balance. It's really about
04:34not taking an inordinate amount of risk in any particular, quote-unquote, vertical, if you will.
04:40So, we do like that business, the venture business, but that's just one part of a much
04:46bigger pie, if you will. We do a bunch of different things in the commercial space,
04:52and we think it's really all about balance and not making one singular bet that
05:01when things may turn against that industry would be harmful to the bank. So, it's really about being
05:06in balance with the market. S&P Global Market Intelligence in 2022 ranked Five Star Bank
05:14as the number one community bank in the $3 billion to $10 billion asset class.
05:20What did that mean for Five Star Bank, and how do you build upon something like that? Well,
05:29when we were acknowledged as actually perfect timing, this was a week after the great crisis,
05:35if you will, in March of 2023, in which a lot of people were asking the question,
05:41are you guys okay? And asking every bank, are you guys okay? And so,
05:45when that information came out, it was just to further bolster our position is that, hey,
05:53we are diversified. We're not a single play. We do have a lot of capital. We do have a lot
05:58of liquidity. We didn't go long in our securities portfolio. We didn't take an inordinate amount of
06:04interest rate risk, and I think it was in recognition of that that people got comfortable
06:09with us. But it was good press at the right time. Diversification and liquidity, those are
06:15two words I hear a lot about in the financial industry. I know you have exposure to commercial
06:21real estate. That's been a tough industry in the past couple of years. Where do you see that going,
06:27and how does Five Star Bank work with that? Well, great question. If you looked at us at
06:3240,000 feet, you'd say, jeez, you have a lot of commercial real estate loans. But when you peel
06:37away the onion, Jason, we're a little different, and I would argue a lot different. Our commercial
06:43real estate exposure is really in mobile home parks, and we make these loans throughout California,
06:49Oregon, Washington, and indeed, throughout the United States. And usually, most of these loans
06:54are very small in nature, so our portfolio is very granular, and they're great investments.
07:00I think if you knew somebody that owned one, they would say, yeah, jeez, I love this investment. And
07:04we really like it from a credit profile perspective. Very stable rents, well-located
07:11properties, some barriers to entrance in terms of those markets, and we work with the professional
07:18owners and operators. And it's a big market across the United States, and we're just scratching the
07:25surface of it right now. So our real estate book, if you will, commercial real estate book,
07:30looks a lot different than somebody else's. It's not including all those big skyscrapers
07:34that we're seeing go for $0.10 on the dollar of late in San Francisco. No, our office commercial
07:42real estate portfolio is very small. It's less than 5% of our total portfolio. Could that be
07:48an opportunity, given that prices have gone down so much? Well, I'm going to say, certainly from
07:52an investor perspective, and we've seen some activity down here in San Francisco in the
07:58financial district about people getting really good deals. And that's just part of the clearing
08:06process. Markets correct, markets adjust. And ever so often, you see that. I've been in this
08:13business for a long time, and I've seen cycles in which prices are a little bit overflated,
08:19cap rates are too low, something happens, the investors lose the property, the lender
08:26usually doesn't come out very well in those situations. But the property itself is repositioned
08:32with the right ownership, the right equity structure, and generally speaking, improves
08:38the property because that capital expenditure will come in to make the property even better
08:43than before, tenancy will come back, and it creates a much more vibrant, if you will,
08:50community. And that's what we're all looking for down here in downtown San Francisco,
08:54to rebound. And we think it is. I mean, it's a great place, certainly a lot different in terms
09:01of people on the street five years ago, but we see a rebound coming and we want to be part of
09:08that process. James, you're investing into San Francisco, you've got an office that's opening
09:13up, you've got employees already hired. What do you think it's going to take to get more people
09:19into downtown, get more workers into offices? Well, first of all, the narrative is changing,
09:27and I think you have to be part of that narrative changing. And so we work with and are owned by
09:35some investors back on the East Coast that really don't have an idea what's going on in downtown San
09:40Francisco. And I argue before you make any conclusions, come see us, come visit us,
09:49experience what this city's all about. Happened to go to the ballgame last night,
09:56nice Giants win, it is great. And it's such a beautiful place. You can't keep this city down
10:04on a long-term basis. It's going to rebound because it's just, it's iconic in every way to
10:10describe being iconic San Francisco is. I was walking around here four years ago after the
10:17pandemic and there were very few people walking around in the city. It was a very eerie experience.
10:22It's much different now. And I think people are starting to realize that we're seeing many more
10:27tourists come through midday around here. It's very busy. How do you convince those
10:33investors to come out here if they've had such a firm narrative in their minds about San Francisco?
10:39Well, first of all, invite them. You have to ask somebody to get them to do something
10:45and to have them come out here. I think that there's a lot of initiatives going on right now
10:51in that really speak to San Francisco's vibrancy in terms of probably three or four that I'm aware
11:00of that say, Hey, we love San Francisco. Our tagline with respect to San Francisco is that
11:10we believe in San Francisco and we actually use that in some of our media outreach. So I think
11:17it's just being part of the positive narrative. And when you get a chance, if somebody is speaking
11:26negatively about San Francisco, you know, advise them as such as that. Well, that's really not
11:32the case. And there's a business opportunity for you if you want to come out and see. Happy to host
11:38you. And that's a great way to put it. The financial district has always been a centerpiece
11:43of San Francisco, and you're a part of it now. Can banks help drive that revival of San Francisco?
11:51Oh, absolutely. And, you know, we're just one of many banks that are trying to help this market
11:56clear. And so, you know, there's some great competitors are out there. And what you want
12:03is to have a competitive environment that helps everything. And so people are jumping in. Other
12:09banks are jumping in to kind of help, if you will, create a more normal environment. And
12:16that's a good thing. That's good for everybody. Your first office is opening up soon. Do you think
12:24that you'll have many offices around San Francisco once you establish this one, much like you do in
12:29Sacramento? I do. I think that the Bay Area is a big place. So but, you know, to put the stake in
12:37the ground in San Francisco, that's where you always want to start from my perspective. But
12:42there's going to be, hopefully, we believe there will be opportunities in other parts of the Bay,
12:47the East Bay, the South Bay, maybe even the North Bay. As a kid from Santa Rosa, now you're going
12:54to open up your first bank here in San Francisco. What is that going to mean to you on the day of
13:00that opening? Oh, gosh. Just a, you know, coming full circle, if you will. You know, here's where
13:08I started my career down in San Francisco. And being able to come back and be part of something
13:15that's much bigger than myself would be a great feeling. James, good to have you in five-star
13:22bank in the community. Well, thank you so much, Jason. All right, James, been great to have you
13:27here today. Been a real pleasure chatting with you. Thank you so much. We've been speaking with
13:31James Beckwith, CEO of Five Star Bank based in Rancho Cordova. I'm Jason Brooks with KCBS Radio,
13:38and you've been listening to the CEO Spotlight. CEO Spotlight is every Wednesday evening at 6.53
13:45p.m. and Saturdays at 7.50 a.m. on the Bay Area's news station. All news 106.9 and a.m. 740. KCBS
13:55and streaming on the Odyssey app and kcbsradio.com.