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Santa Cruz County Bank announces dividend

May 24, 2013

Sentinel - By Jondi Gumz

When Santa Cruz County Bank chairman George Gallucci announced a 5-cents per share cash dividend at the end of the annual meeting Thursday, stockholders broke into applause.

The dividend, the first since the bank opened in 2004, is payable July 10 to stockholders of record on June 28.

About 70 of the bank's 400 stockholders attended the meeting at Bittersweet Bistro.

Stockholders had asked about the prospects for a dividend at previous meetings but Bank President and CEO David Heald said it reflects past performance and confidence about future performance.

"American Banker recognized us as one of the top 200 banks," he said during his report. "We were ranked 103."

He said new loan production was $100 million last year, with loans growing 18 percent compared to an average of 4 percent nationwide.

Efforts to expand in Watsonville are paying off, he added, citing growth in deposits in Watsonville from $60 million to $72 million since bank Vice President Fred Caiocca was assigned to work there.

"The little bit of loan demand out there we wanted to get," Heald said, citing the "We are lending" campaign started two years ago.

As of March 31, Santa Cruz County Bank ranked 30th out of 199 lenders for Small Business Administration-backed loans in California.

Heald said $16 million in SBA loans were made in six months and projects $32 million for the year.

The bank's cost of funds is .15 percent,which means there's "not a lot of room to go lower," Heald said.

Non-interest expenses are 3.15 percent, compared to a standard of 3 percent, and the bank's goal is 2.5 percent, Heald said.

From 2004 to 2012, Santa Cruz County Bank stock was up 50 percent while the S&P 500 gained 40 percent during those years, Heald noted, adding, "We're going to focus on making shareholder value."

Gary Findley of The Findley Cos., a banking consulting firm, and a shareholder of Santa Cruz County Bank, said he was pleased with the bank's performance.

The return on average equity was 10.14 percent, "which makes it exceptional," Findley said, noting returns for eight other banks that opened in 2004 ranged from 9.43 percent to negative 2.1 percent.

Asked about executive compensation, Heald said it was "in the middle." Gallucci said the board wants pay to be "adequate and reward employees."

Stockholder Tom Foster of Coast 1031 in Scotts Valley was satisfied.

"The management is handling the needs of the community and the shareholders extremely well," he said. "Of course, it's easier when you're profitable."

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