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Exchange Bank Not For Sale---but Their TARP Loan Is

Exchange Bank, Santa Rosa, California, active in equipment leasing (formerly Dumac Leasing), particularly in California, is one of a dozen banks that the Treasury Department has announced will sell off stakes it holds in a dozen banks that received rescue funds at the height of the financial crisis.

The public auction of preferred stock and subordinated debt will begin July 23, 2012, according to the US Treasury Department. Leasing News was unable to obtain a statement from Exchange Bank as to why they were not paying the TARP loan back or even what the amount today is.

Exchange Bank received $43 million in the US Treasury Capital Purchase Program January, 2009. The bank had a $18.5 million loss for 2011 million for the nine months ending Sept. 30, largely due to additional reserves on sour residential construction loans. Four Sacramento properties for which Santa-Rosa-based Exchange Bank was the lender for are being abandoned by Kobra Properties, a Sacramento County-based developer who recently filed Chapter 11 bankruptcy. Kobra's effort to move the properties out of the bankruptcy process could allow Exchange Bank to take back the properties through foreclosure. Since the bank has written off the debt, any sale of the properly would be a profit. In July, J. Barrie Graham suddenly resigned as president due to the commercial real estate loans, as he felt responsible. The bank had charged off $58.5 million that year, $50.8 million in construction and land development alone. 2009 saw $39.4 million charged off with $29.7 million.

More than three years after the launch of the Troubled Asset Relief Program, the federal government still owns stakes in 325 banks-mostly small institutions that have been unable to fully pay back the government. 325 banks owe about $11 billion to the government from the Troubled Asset Relief Program (TARP), most are small institutions that have been unable to fully pay back what they borrowed, so the stock and subordinated debt will go to a public auction.

Charge Offs

2006 $1.1 ($811,000 commercial and industrial, $177,000 individuals, $109,000 leasing)
2007 $12.6 ($11.0 construction/land development, $515,000 leasing, $401,000 individuals, $343,000 commercial/industrial, $300,000 1-4 family homes)
2008 $58.5 ($50.8 construction/land development, $6.2 commercial/industrial, $452,000 leasing, $429,000 individuals, $258,000 nonfarm/nores., $273,000 1-4 family)
2009 $39.4 ($28.7 construction/land, $5.0 commercial/industrial, $2.5 nonfarm/nonres., $974,000 leasing, $782,000 loans to individuals, $528,000 1-4 family, $454,000 other loans, $415,000 farmland)
2010 $15.1 ($7.7 construction/land, $3.4 nonfarm/nonres.,$3.0 commercial/industrial, $1.2 leasing, $$677,000 1-4 family, $216,000 loans to individuals.)
2011 $13.9 ($6.2 nonfarm/nonres., $4.0 construction/land, $1.37 farmland, $1.3 1-4 family, $524,000 commercial, industrial, $312,000 leasing, $161,000 individuals
3/31 $559,000 ($441,000 construction/land, $339,000 nonfarm, $136,000 commercial, Industrial, $90,000 construction/land, $32,000 leasing, $12,000 1-4 family, -$13,000 automobile loans, -$8,000 individuals).

Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm

Non-Residential loans.

As noted below, the bank returned to profitability in 2010, improving its equity as well as bringing its Tier 1 risk-based capital ratio to $13.12%

(in millions, unless otherwise)

Net Equity
2006 $128
2007 $134.3
2008 $154.5
2009 $150.1
2010 $157.2
2011 $163.0
3/31 $165.1

2006 $21.6
2007 $13.3
2008 -$18.5
2009 -$3.8
2010 $10.2
2011 $12.2
3/31 $2.9

Non-Current Loans
2006 $3.6
2007 $29.6
2008 $66.4
2009 $48.6
2010 $35.6
2011 $29.6
3/31 $39.3

Joining Exchange Bank in the auction are: First Western Financial Inc. of Denver; CBS Banc-Corp of Russellville, Ala.; Market Street Bancshares Inc. of Mount Vernon, Ill.; Fidelity Financial Corp. of Wichata, Kan.; Marquette National Corp. of Chicago; Premier Financial Bancorp Inc. PFBI +2.90%of Huntington, W. Va.; Diamond Bancorp Inc. of Washington, Mo.; Park Bancorporation Inc. of Madison, Wisc.; Trinity Capital Corp. TRC.LN -1.77%of Los Alamos, N.M.; First Community Financial Corp. FMGI 0.00%of Joliet, Ill.; and Commonwealth Bancshares Inc. of Louisville, Ky.

Founded May 1, 1890, Exchange Bank had 404 full-time employees as of March 31, 2012 at its 21 offices: ten in Santa Rosa, 2 in Petaluma, and one each in Cloverdale, Cotati, Healdsburg, Rancho Cordova, Roseville, Sebastopol, Sonoma, and Windsor. In 2007, Exchange had 434 full time employees.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.