Banking On Character

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This bank's headquarters is exactly where you would expect it: In a brand new tilt-up office park in the new boomtown of Natomas. "We call them 108s," Beckwith explains. "108,000 square feet."

Five Star's president is a CPA, dressed in shirtsleeves, no tie, an energetic man with an intellectual bent, and has thought a lot about the migration patterns of people in California: "I'm a big fan of the demographer Joel Kotkin and his theory of the Third California -- the movement of people from the coasts inland in California." He thinks the governor's infrastructure bond measure, passed last year, will only accelerate the development of the entire region.

Based on its capital, the bank can lend just over $7 million, and looks at deals up to about $20 million -- "We're a pretty active participating bank with other lenders -- the largest deal we've ever done was a commercial real-estate construction deal for $22 million," says Beckwith. The bank's focus is mainly office, retail industrial, special purpose, a lot of owner-occupied projects, some apartments and business condominiums. To date the bank hasn't had any foreclosures and has no exposure in the sub-prime arena.

A key issue for Five Star is its ability to handle family and intergenerational financing. "There are a lot of families in the real-estate game. You're dealing with grandpa or grandma who are getting on in age," Beckwith says, "and you're dealing with the son and the next generation and everyone wants to make a mark. Everybody has a vested interest, and you see this over and over again. Families are successful because of the knowledge and the capital invested for the next generation -- there's a desire to create a legacy, to make sure that the next generation does better than they did. We see a lot of experienced families."

Five Star also speaks to its investors. The developer Buzz Oates founded an earlier bank, American River (see page 39), which is publicly traded. Five Star however is a sub-chapter S corporation  a limited partnership -- which means most profits are returned to the 50 plus investors as dividends -- but each investor has to be rich and liquid enough to pony up money when the bank calls for capital. "Our strategy is to try and distribute every dollar we make back to the investors," Beckwith says. "We have about $26 million in invested capital. We have about $270 million in deposits." The result is a $220 million loan portfolio and Beckwith claims to be producing a 25 percent annual return for our investors.

While commercial real estate is the main language Five Star speaks, Beckwith is working hard to get his whole organization to learn a new one. "The capital region needs to grow its own. We need to develop our technology and clean energy infrastructure. Incubators, startups, the emerging business space. We're trying to embrace this as a bank. We want to help entrepreneurs grow their businesses, and support business infrastructure at organizations like SARTA and TechCoire, and Velocity Capital."

Beckwith is determined to make the bank a leader in a new area of regional banking both in business services, and in the way it loans and attracts deposits. Five Star has created an online Capital Green savings account, an individual savings account that bears a strong interest rate along the lines of the Orange Savings account at ING Bank and other online only accounts, but "we will then use the account to loan to green projects in the capital region," he says. "It can be green real estate, green businesses, whatever. So here's a way to do something green, and help local businesses that are doing the right thing, and get a high rate of return."

Will it work? With nothing but online advertising? Time will tell. Fluent in real-estate development, learning a new language in high tech/clean green entrepreneurialism, Beckwith thinks that Five Star can help develop the business landscape in this region.

Mechanics Bank

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