Exchange Bank will resume its regular quarterly shareholder dividend, a first step towards restoring the iconic Doyle scholarship that has been awarded to more than 100,000 students attending Santa Rosa Junior College since it was enacted in 1948.
The bank’s board of directors voted to resume the dividend during its regular meeting today. Exchange Bank suspended its dividend during the height of the financial crisis in 2008, and was prevented from restoring payments by rules connected to the $45 million in funds it received through the U.S. Department of the Treasury’s Troubled Asset Relief Program, widely known as TARP.
Treasury sold its stake in Exchange Bank for $39.7 million in July, freeing the bank from restrictions connected to those funds.
The Doyle Scholarship, suspended along with the dividend, is expected to be restored in the fall semester of 2013, said Frank Chong, president of Santa Rosa Junior College.
“Today marks a major milestone in our comeback. It is a very positive step for both the bank and the community, and we are very grateful for the steady support we have received from our dedicated employees and our loyal customers,” said William Schrader, president and CEO of Exchange Bank.
Per an agreement with Treasury, buyers of those securities, which could include Exchange Bank itself, are currently confidential, said Bruce DeCrona, executive vice president and chief operating officer of the bank.
The quarterly dividend of 25 cents per common stock, the first in four years, will be payable on Sept. 21 to shareholders of record as of Sept. 7.
Mr. Schrader said that payment represented a “practical first step,” balancing Exchange Bank’s desire to maintain a high level of capital while restoring the much-anticipated dividend.
That payment, smaller than in past years, still represents a 1.8 percent dividend yield that Mr. DeCrona ranks high among other bank stocks.
The Frank P. Doyle and Polly O’Meara Doyle Trust, responsible for the Doyle Scholarship at Santa Rosa Junior College, is the largest shareholder of Exchange Bank and is funded by the bank’s shareholder dividend.
When payment is made in September, Mr. DeCrona said that the trust, which holds 51 percent of the bank’s shares, would receive approximately $200,000. It would then be up to the trust to determine how and when to allocate those funds.
“For 60 years, this special arrangement between a private business and the community has done some powerful things,” said Mr. Schrader. “This is the first step. It’s a major accomplishment marking the progress of our bank.”
Santa Rosa Junior College announced a $5 million anonymous donation in April, one of the largest ever for the California Community College system and an indication of the region’s strong support for the 94-year-old institution, Dr. Chong said. That donation helped to fund student scholarships, along with the $668,000 in donations allocated to students during the past four years through the “Bridging the Doyle” scholarship.
“The generosity of the people in Sonoma County is unparalleled,” Dr. Chong said. “The Doyle is just one of many other mechanisms that students can use to get assistance. It has never been the only game in town, but it is unique to SRJC.”
“Several generations of Sonoma County residents have benefited from the Doyle scholarship. It has been a long-time gift,” he said.
Exchange Bank reported $160 million in the highest-tier capital used for regulatory purposes as of June 30, with a 10 percent tier one leverage ratio against the risk of other assets and a 15.8 percent total risk-based capital ratio.
At the same time in 2008, when many borrowers were struggling to pay interest on their loans, the bank had $132.7 million in tier 1 capital, a tier one leverage ratio of 7 percent and a risk-based capital ratio of 11 percent.
The bank reported an after-tax profit of $2.84 million for the quarter ended June 30, nearly level with earnings during the same quarter in 2011. Non-performing assets decreased 22 percent over the prior twelve months, and the bank reported $1.6 billion in total assets and $1 billion in loans.
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