Exchange Bank on Tuesday reported its second straight annual profit, putting more distance between it and the dark days of 2008 and 2009 when the bank lost more than $22 million.
But executives say the bank still is not in a position to resume paying a dividend, the sole source of revenue for the Doyle Scholarship that has helped generations of students attend Santa Rosa Junior College until its suspension in 2008.
Sonoma County's largest and oldest community bank netted $12.2 million in 2011, up 19 percent from 2010, a welcome sign to those who see the bank as a regional economic barometer.
"To me it's a very positive sign," said Ben Stone, director of the Sonoma County's Economic Development Board. "The fact they are swinging back to profitability is broader sign of recovery."
The trust that administers the Doyle scholarship is Exchange Bank's majority shareholder, an arrangement established by the bank's co-founder, Frank Doyle,
"The work that we need to do is unfinished," said Bill Schrader, Exchange's president and CEO. "Maintaining capital is the prudent action to take in periods of uncertainty."
The bank's caution has become a source of frustration for some. In December, about a hundred protestors, including many college students, descended on Exchange's Roseland branch, urging the bank to resume its dividend.
But bank officials say they're still nursing the bank back to health. Even after posting fourth-quarter earnings of $3.2 million on Tuesday, its eleventh straight quarter in the black, the bank remains saddled with $48.3 million in delinquent loans, foreclosed properties and other non-performing assets.
That figure is down from $75 million at the height of the recession, but it remains well above the bank's stated target of $35 million.
Additionally, its financial health is entwined with the county as a whole, which has shown an uneven pace of recovery, Schrader said.
"The healing of the job market has been very slow and the demand for housing remains very soft," Schrader said.
Still Schrader and Bruce DeCrona, the bank chief operating officer, said they see numerous reasons for optimism, including a marked drop in the number of delinquent loans.
This time last year, the bank would resolve a problem with one troubled borrower only for another to come in through the back door.
But starting in the latter half of 2011, far fewer borrowers have been getting into problems while the bank has been able to sell more foreclosed properties, DeCrona said.
"That back door is not open as wide as it used to be," he said. "The pipeline of distressed loans has certainly shrunk."
As a result, the bank's provisions for loan losses plunged from $19.5 million in 2010 to $12.5 million last year, a cost-savings that offset a steep drop in lending income that the bank attributes to historically low interest rates and weak demand for loans.
Recent improvements to the county unemployment rate and in the forecast for grape sales also suggest the local economy is gaining momentum, DeCrona said.
He hedged by saying that factors ranging from poor growing weather to Middle Eastern unrest could still derail progress, but he said he sees the chances of a double-dip recession growing more remote.
"The risks of slipping backwards into recession are getting smaller and smaller," he said.