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How Five Star Bank aims to fill gap left by San Francisco failures

Autor: John Reosti
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Five Star Bancorp in Rancho Cordova is expanding in San Francisco as part of a larger plan to fashion itself as Northern California’s premier business bank.

The disruption that shook the banking industry in March 2023, including the failures of two prominent San Francisco banks as well as New York-based Signature Bank, resulted in a tremendous state of flux. Five Star Bancorp in Rancho Cordova, California, wasted no time exploiting it.

CEO James Beckwith “called me that Sunday night Signature was taken over by the [Federal Deposit Insurance Corp.],” DJ Kurtze, a former Signature Bank senior vice president who helped that bank open its San Francisco office in 2018, said. “That’s how quickly Five Star saw the opportunity.”

Kurtze signed on as Five Star’s San Francisco Bay Area president in June 2023. Now one of his main tasks is to convince Bay Area businesses Five Star means business with its ambitious growth plans. Kurtze was quick to mention the bank signed a 10-year lease on its soon-to-open San Francisco branch, on California Street. 

San Francisco Bay Area President DJ Kurtz is leading Five Star Bancorp’s expansion in San Francisco.

“At the end of the day, San Francisco is the heart of the Bay area,” Kurtze said. “There’s a lot of fantastic markets, and you need to capture all of them if you’re going to be a great Northern California bank. It starts in San Francisco.”

Other banks, to be sure, are laying their own expansion plans in San Francisco and the Bay Area. The Providence, Rhode Island-based Citizens Financial Group is seeking to expand its private bank, with offices planned in San Francisco and Silicon Valley. Several California community banks, including the $5.9 billion-asset Poppy Bank in Santa Rosa and the $3.8 billion-asset Bank of Marin in Novato, have also sought to boost their profiles in the region. 

Few institutions, however, moved as quickly and dramatically toward that end as the $3.6 billion-asset Five Star, parent to Five Star Bank.  

The company, which focused on its core, Sacramento-area markets throughout most of its 25-year history, has been working to expand in the Bay Area since June 2023, adding more than 20 bankers to its San Francisco Bay Area team. It plans to open its first branch in downtown San Francisco later this summer. Meanwhile, a public offering completed in April generated $81.5 million of capital Five Star can use to pursue additional growth opportunities, Kurtze said.

Kurtze described the offering proceeds as “extra fuel.”

“If we see [another] market opportunity, we’ll be able to go after it more aggressively than maybe we would have without the raise,” Kurtze said. 

While the spate of bank failures in spring 2023 created a natural expansion opportunity for community banks eager to grow, problems in the San Francisco economy — crime, a housing shortage, a local recession — have acted as headwinds. Kurtze is convinced a rebound is inevitable, pointing to the Bay Area’s underlying economic strength. “Say what you will about the challenges San Francisco has had and is still working its way [through],” Kurtze said. “This area has been a place of innovation for decades. It’s always gotten out of every economic downturn really well, so I think there’s a huge opportunity.”

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BMO Capital Markets Chief U.S. Economist Scott Anderson expressed optimism about the Bay Area’s economic prospects entering 2025.

Scott Anderson, chief U.S. economist at BMO Capital Markets, indicated he agreed with Kurtze’s thesis “long-term,” though he added the market still hasn’t fully regained its economic footing. “Overall, we think the Bay Area will still lag the national economy in terms of job growth this year,” Anderson said in an interview. “It’s coming out of what was really a mild recession in 2023. … We actually had many months of negative job growth.”

In 2025, however, Anderson and BMO see regional job growth doubling to around 1%, housing starts returning to positive territory and personal and household income growing solidly. 

“The Bay Area still has a tremendous amount going for it,” Anderson, who works from San Francisco, said. “The biggest tech companies in the world are based here, there’s still a vibrant venture capital and private equity environment, especially for technology. We’re starting to see the next wave of the technological revolution happening in terms of artificial intelligence, and the Bay Area is certainly the epicenter.”

Five Star reported net income totaling $10.6 million for the quarter ending March 31, bolstered by $22.5 million in new deposits captured by its expanding Bay Area banking team, according to Beckwith. Kurtze called it a taste of things to come. 

“It’s really just beginning,” Kurtze said. “More than half  of our team has been on board for three to six months. They’re just hitting their stride.”

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