SANTA ROSA -- One year after announcing that it would reinstate the quarterly shareholder dividend that funds the Doyle Scholarship at Santa Rosa Junior College, the board of directors of Santa Rosa-based Exchange Bank (OTCM: EXSR) voted to increase its dividend by 20 percent, the bank announced Wednesday.
Exchange Bank will pay a dividend of 30 cents per share on Sept. 20 to shareholders as of Sept. 6. The bank had reinstated a quarterly dividend of 25 cents per share in August of last year, after suspending payments of 50 cents a share amid the height of the financial crisis in 2008.
As the largest shareholder of Exchange Bank and administrator of the Doyle Scholarship, the Frank P. Doyle and Polly O'Meara Doyle Trust will receive about $262,294 from the disbursement. The trust began funding scholarships again for this year, and has received more than $874,000 since the bank resumed the dividend.
Exchange Bank has experienced improving asset quality and profitability in recent years, a trend that executives have said would have allowed an earlier resumption of payments had it not been for rules connected to $45 million it received through the Troubled Asset Relief Program, or TARP, in 2008. The bank was freed of those restrictions when the U.S. Department of the Treasury sold the shares of Exchange Bank that it purchased through the program.
Most recently, Exchange Bank reported a 34 percent year-over-year increase in net income for the three-month period ended June 30, driven by new loan demand and improving asset quality. It's shares are currently priced at $65.50.
"We're invested in every part of this county, from Cloverdale to Petaluma. We're invested in agriculture, manufacturing, households," said Bill Schrader, president and chief executive of Exchange Bank. "As we improve, it's something of a bellwether for this economy."
Fred Ptucha, a financial adviser and community bank analyst with Progressive Asset Management Group in Santa Rosa, noted that the increased dividend would represent a 1.8 percent annualized return that compared favorably to other investments in the current low-interest-rate environment. While less than the $1 quarterly payments that Exchange Bank distributed to shareholders in the late 1990's and early 2000's, it still placed the stock's dividend in the middle of those listed on the S&P 500.
"When a company has increased its dividend, they rarely go backward. It's a strong sign that they feel it is sustainable," he said. "My belief is -- it has been a whole year. If things keep going the way they are going for the bank, perhaps we will see another dividend increase."