Customer service gets more than lip service.(interview with Exchange Bank CEO William Reinking)(Interview)

C. William Reinking, just beyond baby-boomerdom, is president and CEO of $800 million Exchange Bank in his hometown of Santa Rosa, California. Bill joined Exchange Bank in 1964, fresh out of the University of Oregon with a degree in economics. Staying with one employer for 35 years seems like a dream to many of us who aren't all that sure where we'll be next year or even next month. But that's one of the beauties of Exchange Bank, owned 51% by the Doyle Trust. It can never be sold. If you're good at what you do, you can look forward to a long career. The 17-branch bank is snugly situated within a stable economy and beautiful environment, give or take an earthquake. And this bank proves year after year that you don't have to be a giant to live well among giants - you just have to be better.

JLCRM: In a previous interview, I asked a community banker about his strategies to remain independent. He replied that as long as the shareholders are happy, there's not a problem. That bank has since been sold. Your bank is considerably larger, and it is 51% owned by a Trust. How does Trust ownership work and how does it affect your M&A status?

CWR: Frank Doyle, our second president, set up the Doyle Trust, which owns 51% of the bank. Mr. Doyle stated that $2,000, which at that time represented two-thirds of the income of the Trust, would go to a community park he gave to the city in memory of his son. Any other income generated in the Trust would go to our Santa Rosa Junior College for scholarships. We've grown and become more profitable, and, while the city continues to get $2,000, the college now gets $4 million annually. We like to say that we feel better about fertilizing minds than fertilizing grass.

Mr. Doyle also stipulated that we cannot be bought or sold; we must always remain an independent bank. I don't know of another situation like this. So we don't get involved in mergers and acquisitions.

Further, we can't raise capital by issuing stock in the normal way, that is, going out and selling it in the marketplace. The Trust always must maintain 51% and the Trust has no cash to buy stock because its money goes to the college. The only way we can do things is through our own capital, and so we gain capital the old-fashioned way - we earn it. We've always been a highly capitalized bank; therefore, our return on equity may not look great to an outsider, who may say we haven't leveraged the bank enough. Well, that's on purpose. For example, when we buy some deposits from Bank of America at a branch they are closing, we need capital to do it. And we need capital to weather any bad storms we may encounter. Our best strategy is to use our capital to acquire good talent and, occasionally, pick up branches of banks that are merging or closing.

JLCRM: How does that play out with your employees?

CWR: It's very positive. Everyone takes great pride in what we do. Some 25,000 students have had a Doyle Scholarship, for example. What we do benefits this community to a large degree and we have a huge impact on the education of young minds.

Our mission is to remain an independent bank. We must do things, therefore, that other banks may talk about doing but don't do. All our actions have the long term in mind and we know we can't afford mistakes. If you let your service get bad or get a bad reputation, you lose business.

Also, our employees are secure in the knowledge that we won't be bought or sold, but they also know we have a very high standard to maintain.

Our credit quality has always been outstanding. For awhile, we may have had a reputation of being a little on the conservative side. We don't think we were conservative, however; we just considered ourselves to be intelligent risk-takers. And we continue to grow because a lot of people appreciate what we have to offer.

JLCRM: Does Trust ownership pose any special regulatory issues or unique management reporting challenges ?

CWR: No, we don't have any reporting issues that are different from any other bank. The Trust itself is audited by the Department of Labor - they look at our trustees to ensure that they are performing their fiduciary responsibilities. And we have the regular examinations by the state and the FDIC.

JLCRM: So many banks today are faced with slow growth of DDA and all deposits. You've done …