No new Doyle money

<p>There will be no Doyle scholarships for incoming students this year at Santa Rosa Junior College and the once-dependable source of money that funds the popular program may not resume until 2010.</p><p>Exchange Bank’s top executives warned shareholders Friday the Santa Rosa bank is facing another tough year and they do not expect it will be able to pay any dividends in 2009.</p><p>The Doyle scholarship program, which has distributed more than $76 million to 115,000 SRJC students over the past six decades, relies on Exchange Bank dividends for its funding.</p><p>No new scholarships will be awarded this year and the prospects for 2010 are uncertain, said SRJC President Robert Agrella, who attended the bank’s annual shareholders meeting Friday.</p><p>The program is “absolutely put on hold,” Agrella said. But an estimated 1,100 SRJC students who received Doyle awards for the current academic year will get money if they continue their studies in 2009-10, he said. The size of the scholarships, however, is still unclear.</p><p>Exchange Bank executives told shareholders Friday the bank is making progress on its path back to profitability. But the bank, which reported its first annual loss in at least five decades, remains saddled with troubled loans and must regain meaningful profits before it will begin paying dividends again.</p><p>“The adversity in 2008 led us to the very painful decision to suspend this dividend. It is our best estimate that we will not be able to restore this dividend in 2009,” said Bruce DeCrona, the bank’s chief financial officer.</p><p>Exchange Bank stopped paying dividends last year because it continues to put more money into reserves to cover loan losses. The problem is largely centered in lending to homebuilders in the Sacramento area and Sonoma County caught in the teeth of the housing downturn.</p><p>In December, the bank borrowed $43 million from the Treasury Department under a program designed to shore up the nation’s financial sector and stimulate lending. Bolstered by the money, Exchange Bank launched a $75 million program this month to increase lending to borrowers who are buying a home, purchasing a car or operating a small business.</p><p>Still, bank executives cautioned that the slumping economy is a significant challenge as they attempt to steer the bank back to profitability.</p><p>“We’re making progress toward that,” said William Schrader, the bank’s president. “It would be premature and irresponsible to point to a date on the calendar where this rough spot will pass. This is going to be a rough year.”</p><p>More than 120 shareholders packed a meeting room at the Exchange Bank office building near the Sonoma County airport Friday to hear the bank’s executives discuss the challenges and opportunities facing the county’s largest community bank.</p><p>A handful in the audience asked questions, including the workings of the federal funding program and why the bank didn’t better anticipate risks in lending to builders during the housing boom.</p><p>“Did anyone stand up in those meetings when risk was being assessed and say ‘I don’t agree?’ Or did everyone follow like sheep?” asked shareholder Bobbi Reeser, of Santa Rosa. “It didn’t take a Philadelphia lawyer to figure out that this was all going to come crashing down. I trusted you guys.”</p><p>C. William Reinking, the bank’s chairman and chief executive, answered the question directly.</p><p>“Was there anybody at the board that stood up and said ‘no?’ No,” Reinking said.</p><p>Reinking said the bank’s loan review process was sound and loans were made to builders with long and successful track records. But he acknowledged the impact of the bank’s losses, including the suspension of the dividend.</p><p>“We’re not proud of what happened. But we’re going to get through this thing,” Reinking said.</p><p>While many companies allow journalists to attend their shareholders meetings, Exchange Bank officials denied an advance request by The Press Democrat for admission, saying it was open solely to shareholders. To gain admission to the meeting, The Press Democrat purchased a single share of stock on Wednesday.</p><p>At the meeting, shareholders asked how long the bank would hold onto the federal funds and how that affected the resumption of dividends. Bank executives said they expected to repay the money within five years, but would have to seek federal approval to resume paying dividends as a result of taking the funds.</p><p>“They pretty much had to take the money. It helps,” said Mark Christensen, a Santa Rosa shareholder. “I think they’re headed in the right direction, but it’s going to take a lot longer than they think.”</p><p>Shareholder Ron Marley said the suspension of the dividend was significant, and he hoped the bank would resume paying dividends sometime in 2010.</p><p>“That’s a bad thing for the community. They need to really work at getting that dividend back,” he said.</p><p>The largest beneficiary of the bank’s dividends is the Doyle scholarship program. Established by bank co-founder Frank Doyle in 1948, the scholarship program is funded by dividends paid to a trust that holds just over half of Exchange Bank’s shares.</p><p>Traditionally, about 4,000 Doyle scholarships are awarded each year, averaging $1,000 each. The number was scaled back last fall.</p><p>Doyle scholarships are currently $1,000 to $1,600 a year, and Agrella said he did not know what the amount would be next school year.</p><p>SRJC is confident it can find other resources for students who need financial help, he said.</p><p>The Doyle checks, issued every semester, are widely used by local students seeking money to pay for their education.</p><p>“It’s free money to stay in school,” said Erin Hartman of Santa Rosa, who received Doyle awards for three years after graduating from Ursuline High School in 2005.</p><p>“Everyone I knew had one,” said Hartman, now a student at UC Berkeley.</p><p>Staff Writer Guy Kovner contributed to this story. You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.</p>