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Before co-founding AltaPacific, Charles Hall, CEO of Santa Rosa-based AltaPacific Bank, served as president of Business Bancorp and CEO of Business Bank of California until it was acquired by UnionBanCal in 2004.

The bank’s board has local directors including chairman Timothy Jorstad, a Marin County accountant and co-founder of Metro Commerce Bank. Richard Dowd is an engineer in Santa Rosa. Attorney Joseph Zils, also from Santa Rosa, worked for JDS Uniphase, formerly OCLI. Randy DeCaminada, longtime PG&E employee, is from Cloverdale.

Frank Basirico, president and chief operating officer, runs the bank’s operations in southern California, where AltaPacific has branches in Riverside, Ontario, Covina, Temecula and soon San Bernardino.

For nearly a decade, AltaPacific leased offies near Sonoma County airport. Last year it moved to headquarters it owns, 4845 Old Redwood Highway in Santa Rosa.

The Business Journal spoke with Hall about the institution’s approach to business banking and its growth through three mergers in the past five years.

You are a founder, roughly a decade ago?

CHARLES HALL: Yes, one of them. July 2006.

You located here?

HALL: Yes. I had a non-compete agreement with Union Bank for three years. I had been CEO of Business Bank of California. Union Bank bought it. I had to stay outside a 15-mile radius of branches in northern and southern California.

Most of your branches are in southern California — Riverside, Temecula?

HALL: We are doing tenant-improvements on a new branch in San Bernardino. We also have branches in Ontario and Covina.

You lived there?

HALL: Yes. I worked for Chino Valley Bank, now called Citizens Business Bank, for 12 years. I moved [to Marin] when the CEO became a major shareholder of Marin Community Bank, which became Metro Commerce Bank. [MCB Financial merged in 2001 with Business Bancorp, parent of Business Bank of California in San Bernardino.]

We ended up with five branches up north and 10 in the Inland Empire — 15 total. [And assets about $580 million.]

You built that bank up?

HALL: I built the one up and then we did a merger of equals. We had a branch down there already. When we started this one, the writing was on the wall that things were going to get heated [financial crisis].

My background was credit, chief credit officer. We decided to not grow as fast as we had planned. People were giving too much money out, to creditworthy people, but not to the extent they were doing it.

Credit was overextended?

HALL: Right. A lot of my career was with Wells Fargo and Citizens Business Bank in the Inland Empire, similar to Sacramento. When things get heated, they grow very fast.

Everybody is moving there. It’s hard to time it. Sometimes you think it’s going to happen soon [a decline] and it doesn’t happen for three or four years.

Then you have limited your business expansion?

HALL: Right. It’s harder to be behind the curve.

As a banker, you always want to be ahead?

HALL: Yes. I thought prime was going to start moving up about five years ago. It’s tough to decide what to do. We went through the same thing with the dot.com bust.

We were headquartered in Marin. We had some loans we had to pay more attention to. We didn’t have any loss years or any big charge-offs.

You came through the 2008 situation pretty cleanly?

HALL: We had some stuff we had to pay attention to. But our net charge-offs over 11 years were only $200,000.

Compared to bigger banks with massive losses?

HALL: Yes. We’re somewhat insulated, a small institution, all word-of-mouth. A lot of folks here and in southern California have been banking with us for 25, 30 years. It’s a more labor-intensive model, all business loans that we do.

Your entire model is business loans?

HALL: Right. We’ll do lines of credit to attorneys, CPAs, manufacturing companies. We do a lot of commercial real estate loans — the bread and butter of community banks.

Most of our clients have been in the business of what they’re doing for a long time, not trying to leverage. They are established businesses with good cash flows.

When they buy a piece of property, they’re not asking what’s the smallest they can put down as a down payment. They put 50 percent down.

They’re creditworthy?

HALL: Yes. Creditworthy in good times and bad times. That’s good for us. Down south, with Stellar [Business Bank, acquired] in 2012 [for $17.4 million in stock, adding a Covina branch, combined to $190 million assets], they weren’t growing as fast as the board would have liked. They had a clean portfolio.

We had contacts on the board that Frank and I knew. [Frank Basirico, president and chief operating officer, runs bank’s operations in Southern California.]

You did merger two in 2014?

HALL: Yes. We did Mission Oaks National Bank in 2014. [It was acquired for $3.5 million, adding the Temecula branch.] We looked at that one for a long time. It had been established longer, had grown to four branches, $225 million in assets.

They got hit hard. They rode that wave up then had credit issues.

You bought them for a bargain?

HALL:I wouldn’t say a bargain. They got to the point where they didn’t have any tangible equity. We talked to them for almost five years.

Finally, the last time we looked, it was looking good. So we brought in a team and looked at everything. They had gone from four branches down to two when we bought them. One was an in-store branch, which isn’t what we’re into.

They needed deposits. The bank was still nearly $100 million [in assets]. They had debt that they got from the government — TruPS [trust-preferred securities, a hybrid of subordinated debt and preferred stock].

Mission brought you up about half again in assets?

HALL: Right. [The Mission acquisition increased AltaPacific assets from $267 million to $335 million.]

That turned out to be a good acquisition. We haven’t had any surprises on the credit side. You never want surprises — unless it’s a good one.

What was that acquisition price?

HALL: It was around $3.5 million — pretty much the assumption of that debt. They didn’t have any tangible equity. We had to do reserves for all the loans. We did that with cash.

Stellar we did as an equity deal.

You have a recent acquisition started in September, Commerce Bank in Temecula?

HALL: That hasn’t closed yet. It will be our smallest, at $75 million in assets.

Stellar took us four months. Mission was even quicker, a cash deal.

This one is taking longer because it has a large shareholder, a Mexican national, Enrique Schon, who came in at the end of 2015, bought a block of stock, about 34 percent ownership.

He was also involved [as a former board chairman] in another bank in Chula Vista. [Vibra Bank, near San Diego, opened 2008, acquired by Pacific Commerce Bank in 2015.]

He is for the sale or against it?

HALL: He is against the sale.

You have to overcome his opposition?

HALL: We haven’t yet. It made the process longer.

Now we are waiting for the Department of Business Oversight. We got approval from the state Division of Financial Institutions and the [Federal Reserve Bank]. We are waiting for the answer on the fairness opinion, extended because it was contested by the shareholder.

You have approval from the other two-thirds of shareholders?

HALL: Right. It’s not that we’re not going to get it from [Schon]. It’s just how long it’s going to take. It’s frustrating from our perspective.

It’s likely to go through?

HALL: The votes at the board were to do it. He and his son and daughter are on the board. They just didn’t have the votes. We are waiting to see what happens at the shareholders meeting.

You have to have 50 percent plus one vote. We are really hopeful. We like the bank, the location, the people working there.

The deal will close in April or May?

HALL: We have to issue the proxy statement [to shareholders]. They need 30 days for that. We’re looking for the middle of April. We had hoped to close the deal by the end of 2016. They are very close to our Temecula branch.

You now have five branches?

HALL: Yes. San Bernardino will give us the sixth. With the Riverside branch, when the bank they had been at got purchased, we picked up talent, account managers, lenders.

You will have seven branches if this closes?

HALL: Yes.

Are your plans to expand primarily in the Inland Empire, or in this area?

HALL: We have had plans to expand up here since the beginning. [He laughs.] We hoped to expand in the greater Bay Area. We got close on one [acquisition] in the South Bay.

We made the decision to grow by acquisition.

You clearly have M&A talent?

HALL: Yes. My team or Frank Basirico, president and COO in Southern California. He has a credit background too. He has been instrumental in mergers and acquisitions.

You have to look for opportunities. If they are not a business bank, it shrinks the pool. You look at the portfolio, it gets even smaller. [Credit quality may be too low or too many broker-originated loans with no ongoing business relationship in local community.]

There have been more people in our target range in southern California than up here. There are a few in San Francisco, but some are ethnic banks. It’s hard for us to go into Chinatown. We looked extensively in the East Bay.

Mission [Oaks National Bank] had SBA loans in 12 different states. That’s not our model, but it was easy to quantify. It wasn’t a lot of loans.

Your model is to do banking services for businesses, with ongoing relationships?

HALL: Right. Build a franchise.

Particular kinds of businesses?

HALL: We do distribution (businesses), all kinds of things. We don’t do mortgage lending, auto lending, except as an accommodation for a (regular) customer.

Your business clients in terms of their revenue, $5 million and above?

HALL: Not even that high. It could be $1 million.

We have stuff in the $20 million, $30 million, $40 million range. That’s unusual to get that high.

Mostly $1 million to $10 million?

HALL: Somewhere in that ballpark. Bigger businesses, it’s a better fit for them to be with a major bank that offers more products than we can offer.

But they are strict too — want companies with strong cash flow, audited financial statements. We don’t have a ton of audited statements.

It’s less formal?

HALL: Yes, we can have compiled statements. That doesn’t meet the criteria of big banks.

Have you fended off attempts to acquire AltaPacific?

HALL: No.

You are in the $400 million asset range. Are you an attractive target? Is it hard to be profitable?

HALL: We hear that all the time but don’t agree. We do business with people we know. We get away from consumer-compliance issues.

We’re not into cash-intensive businesses — supermarkets or check-cashers. There are a lot of regulations. But we keep what we do confined, push for efficiencies.

When we merged with Stellar, they had two compliance officers, one with loans, one with operations. We got rid of both. Our compliance person stepped right in.

You run a very lean ship?

HALL: Yes. When we started the bank, there were challenges with the economy. We turned cash-positive at the end of the first year at $35 million [in assets]. We turned profitable at the end of the second year, at $50 million. We never looked back.

You have been profitable ever since?

HALL: Right. It’s not true you have to be $200 million, $250 million. I don’t like losing money.

How many shareholders does AltaPacific have?

HALL: About 300. Most are up here — Sonoma, Marin, San Francisco. We brought in a number from the Stellar deal (2012 equity merger).

We typically do a 5 percent stock dividend. In growth mode, you don’t want cash dividends. We have plenty of equity — $60 million. We don’t want to deploy it in a manner that is not thoughtful.

You do due diligence very carefully?

HALL: You have to be disciplined. Our margins are higher, among the top percentile in the country.

If Commerce Bank closes, assets will go to about $430 million?

HALL: Yes, a little bit higher. We’ll have the other branch open [in San Bernardino], maybe $450. By the end of the year we’ll be pushing half a billion.

How many people total?

HALL: Around 50, with 13 of those in Sonoma County, mostly administrative. Four people manage construction, a book of business mostly in San Francisco, Noe Valley, Cole Valley neighborhoods, people developing residential, condominiums, small-scale.

It’s hard with new branches. Riverside just turned profitable after 18 months. It will take a while for the San Bernardino branch.

That’s an advantage of acquisitions. If you do it right, you know what cost savings will be. You can have challenges if you lose people. Everything has risk. It’s a question of managing risk.

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at james.dunn@busjrnl.com or 707-521-4257