Investors banking on Santa Rosa

<p>TIMOTHY JORSTAD Founding chairman of the proposed Atlantic Pacific Bank in Santa Rosa, discusses the banking environment in Sonoma County.</p><p>PRESS DEMOCRAT: You and eight business leaders from Sonoma and Marin counties are proposing to start Atlantic Pacific Bank, a business bank, in Santa Rosa next year. Why did you pick Santa Rosa?</p><p>JORSTAD: When we operated Business Bank of California, a San Rafael bank that was acquired by Union Bank last year, we noticed many of our customers were expanding or relocating into Sonoma County, particularly around the Santa Rosa area. Taking a closer look, we were very impressed with the recent growth in the level of loans and deposits of the financial institutions with offices in Sonoma County.</p><p>We also saw a diversified business base, stable economic growth and positive demographic trends within the region.</p><p>The purchase of National Bank of the Redwoods by Westamerica Bank was another positive factor in our decision to choose Santa Rosa for our first branch. These characteristics are certainly reasons to look into the formation of a new, independent business bank in Santa Rosa.</p><p>The organizers believe the economy in Santa Rosa, as well as Sonoma County in general, is going to continue to expand at a healthy pace.</p><p>The bank hopes to partner with the success of the area, serving the needs of commercial businesses, community retail and wholesale trade businesses, single-family residential developers and builders, light manufacturing companies, private organizations and individual professionals.</p><p>PRESS DEMOCRAT: How did you pick the name Atlantic Pacific Bank?</p><p>JORSTAD: After having to change our former bank's name several times when we acquired other institutions in new markets, we wanted a name that was not specific to a particular local area, given we may expand into other communities in the future. The Atlantic Pacific Bank name will also allow us to offer bank products which may involve marketing in peripheral geographies around Sonoma County.</p><p>While we will be a local Sonoma County business bank, brand flexibility is important.</p><p>PRESS DEMOCRAT: Sonoma County already has more than two dozen commercial banks. What makes your group feel there's room here for another bank?</p><p>JORSTAD: The Federal Deposit Insurance Corp. statistics on financial institutions headquartered in Sonoma County show these local banks have done exceptionally well in terms of growth and performance ratios compared to financial institutions in other areas.</p><p>In aggregate, the deposit base here in Sonoma County increased 46 percent between 2000 and 2005. Importantly, the number of banks doing business here has remained stable over the same period, as well as the number of branches within the county. In fact, the FDIC reports there were 30 financial institutions here in Sonoma County in 1994 compared with 23 today.</p><p>The growth of deposits compared with the growth in the number of bank branches indicate there is room for another well-run business bank. The banking environment in Sonoma County is vibrant and growing, and there is opportunity for another financial institution.</p><p>PRESS DEMOCRAT: Your group hopes to raise $20 million to $25 million from investors, and you have said you expect your offering may be over subscribed. Why are investors being attracted to financial institutions?</p><p>JORSTAD: Shareholders of independent banks have received good returns on their investment over the last 10 years. A case study of the statistics by the American Banker showed that over the past five years, start-up community banks quickly achieved profitability measures rivaling those of older community banks. They grew rapidly and provided solid returns to their investors.</p><p>Also, consolidations in the banking industry should continue to provide opportunities for new banks to grow and prosper which should, in turn, continue to provide investors with above average returns on their investment in bank stock.</p><p>PRESS DEMOCRAT: Bank earnings and assets have been growing at a healthy pace in Sonoma County. Why is the industry doing so well?</p><p>JORSTAD: There has been a substantial increase in wealth, in general. California with its very large and growing population generates demand for housing and everything else that a growing population requires to sustain itself. Banking becomes an integral resource to providing the funds which enable businesses, which provide those goods and services to this growing population, to expand. As for Sonoma County in particular, banks in areas of economic expansion tend to perform better than those banks in areas where the economy is stagnant.</p><p>PRESS DEMOCRAT: What do you feel are the key ingredients to successful business banking?</p><p>JORSTAD: Excellent service provided by experienced bank staff is the key ingredient to the success of any business bank.</p><p>The ability to tailor loans to customers' particular needs is very important. Understanding our customers' businesses allows a business bank to provide highly specialized banking services. Another ingredient is hiring experienced and successful business bankers who have proven credit and business development skills.</p><p>In order to differentiate our bank within the Sonoma County markets, the bank intends to use prompt local decision making as well as the product flexibilities that a locally owned independent business bank can provide. This includes a business culture that emphasizes meeting the service expectations of our community businesses and individuals and stresses personal contact by the bank's directors, officers and employees.</p><p>PRESS DEMOCRAT: You have said that much of Atlantic Pacific's lending will be secured with real estate or will be real estate related in some way. How might Atlantic Pacific be affected if the real estate market cools off in the coming year, as some economists are predicting?</p><p>JORSTAD: We experienced several economic cycles with our former bank, which was formed in 1989, and successfully navigated through these very trying times. I am confident that our management staff and directors have the experience to handle lending in an increasing interest rate environment and a potential soft real estate market.</p><p>PRESS DEMOCRAT: What are the biggest problems facing bankers these days?</p><p>JORSTAD: Well, given the high-profile failures of Enron, WorldCom and other companies, I think the regulatory environment has changed significantly. It is much more expensive today to be fully compliant with the provisions of Sarbanes Oxley and all of the other regulations to which banks and publicly owned companies are subject.</p><p>Hiring and retaining excellent personnel and quality directors is also more challenging in the current environment.</p>