Earnings at Santa Rosa’s Exchange Bank grew 19 percent to $4.5 million in the second quarter, fueled by increased lending and a drop in problem loans.

Sonoma County’s largest community bank reported Thursday that its loan portfolio grew 10.5 percent in the quarter to $1.17 billion. The increased lending reflects a greater confidence by both business owners and consumers, said Greg Jahn, the bank’s chief financial officer.

“We think there are positive things in the economy, and we think we’re seeing that in loan demand,” Jahn said.

Key sectors remain tourism, wine, agriculture, food processing and technology.

Founded in 1890, the bank has remained profitable for five straight years after suffering steep losses in 2008 and early 2009, primarily because of troubled real estate loans.

In 2008, the bank halted its stock dividend, which in turn temporarily ended new Doyle scholarships for Santa Rosa Junior College students. The scholarships are funded by the Frank P. Doyle and Polly O’Meara Doyle Trust, which owns a majority of Exchange Bank’s stock.

The bank resumed the dividend in 2011 and on June 20 paid shareholders 35 cents per share on common stock. That amounts to an annual payment to the trust of about $1.2 million.

Bank President and CEO Gary Hartwick said in a statement that the bank’s core earnings “continue to improve as demonstrated by the increase in net interest income.”

Deposits increased 6 percent from a year earlier to nearly $1.58 billion. Assets increased 5 percent to $1.76 billion.

The bank reported that by June 30 nonperforming loans declined to 1.75 percent of its portfolio, compared to 3.36 percent a year ago. As such, in the second quarter the bank didn’t make additional provisions for loan losses, compared to $800,000 a year ago.

When the bank first returned to profitability, it was mostly because of a reduction in problem loans, Jahn said. But nearly a year ago loan activity began to increase as hiring improved and businesses began to increase spending.

The economy “certainly has been stuck in low gear for an extended period of time,” Jahn said. And while still not robust, “it is picking up a bit of momentum.”

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit