Community banking involves its own financial risks. However, there are common challenges wherever CFOs operate.
One is that the role of finance is becoming increasingly complex. Heather Luck, chief financial officer at Roseville, Calif.-based Five Star Bank, spoke with CFO leadership about mitigating risk, wearing multiple hats, and learning better communication skills.
What drew you to joining a community bank?
Prior to joining Five Star Bank, he spent eight years as an auditor at Ernst & Young's Sacramento and Los Angeles offices. During my tenure, I have been fortunate to serve clients in a variety of industries of varying size and complexity. That was my favorite part of public accounting.
From that perspective, community banking was a great fit for me because our customers operate in a variety of industries. We can now become more involved in supporting our customers' growth by offering a complete suite of banking and financial services to meet their specific needs.
What is it like to be a CFO at a community bank?
I wear many hats at Five Star Bank. These include significant involvement on our board of directors, oversight of SEC reporting and investor information, regulatory reporting and compliance, financial management, periodic and periodic financial statement audits, budgeting and forecasting, and human resources.
What are the bank's specific financial goals?
One of our financial goals is to grow our depositor base, and we are accomplishing this through expansion into the San Francisco Bay Area and Central Valley. The company opened its first San Francisco branch in the Downtown Financial District in September 2024 and recently announced its expansion into the Walnut Creek market.
Another priority is the continued expansion and improvement of financial reporting. As we went public in 2021, our first few years focused on building our SEC reporting capabilities, including implementing a robust financial reporting system and platform to file reports directly with the SEC. This has improved both the accuracy and speed of completing reports and submissions.
Now that we have completed these builds, we are leveraging the technology to create a profitability module that provides management teams and boards of directors with advanced visibility into operating performance.
What are best practices for managing risk and communicating with stakeholders during economic uncertainty?
The best way to ensure proper risk management is to have a clear understanding of where risks can arise from both internal and external factors. Once risks are identified, solutions and processes can be identified and implemented to mitigate them.
During times of economic uncertainty, the best strategy is to communicate clearly, effectively and frequently to ensure all stakeholders are informed as new developments occur.
Please detail two or three examples of specific risks to which your bank is exposed and how you are involved in managing those risks.
One of the risks facing the community banking sector is liquidity risk. This is the risk to earnings and capital resulting from a failure to meet obligations as they fall due.
My team has a robust and mature program in place for liquidity management. This includes monitoring liquidity on a daily, weekly, and monthly basis, as well as liquidity forecasting to ensure you anticipate as many fluctuations as possible. We also work closely with business development and operations teams in the event of unexpected outflows or inflows.
The other is operational risk. This is the risk to revenue or capital that arises from inadequate or failing internal processes, people, or systems, or from external events.
To manage this risk, I oversee internal control audits to ensure that deficiencies identified in relation to controls surrounding all of the bank's critical processes are audited and remediated. This ensures that the process completes quickly and as designed.
What are some cross-sector transferable skills for CFOs and other financial professionals considering a career change?
A deep understanding of accounting is critical for CFOs, no matter what industry they work in. Once you've done that, you can add industry-specific requirements for people looking to change jobs.
Additionally, being able to understand complex issues and communicate in a clear and concise manner is a skill that is difficult to master, but once mastered, it is highly effective.
