Exchange Bank reports 5 percent earnings increase

Exchange Bank on Wednesday reported a 5 percent increase in earnings for the third quarter, buoyed by a growth in its loan portfolio, especially in the commercial sector.

The Santa Rosa-based institution said it had an after-tax profit of $5.4 million for the three-month period ending Sept. 30 compared to $5.1 million from the same period in 2015. Exchange is the third largest local bank in the North Bay based on assets.

The bank’s profits come at a more difficult time for the industry in a low-rate environment created by the Federal Reserve. Bankers want higher interest rates because it increases their net interest margin, which is the difference between what they pay out for deposits and what they can charge in interest for loans. That in turn increases their profits.

Over the last year, Exchange has seen a loan growth increase of 12 percent, $140 million. Those loans were funded by a 7.2 percent increase in deposits, which registered at $127 million.

Its net interest income grew at 5.3 percent in the quarter at about $900,000.

“The meaningful increases we have witnessed during this past year in both loan and deposit volumes, are a result of the hard work and dedication of our employees, as well as the continued loyalty of our clients and support from the communities we serve,” Gary Hartwick, President and CEO, said in a statement.

While the bank has seen a bump in home-equity loans and refinancings, the loan growth for Exchange has been primarily driven in the commercial realm in the North Bay area, mirroring the growth in the region’s economy.

“We’re seeing a pretty strong demand,” Greg Jahn, Exchange’s executive vice president, said in an interview.

The vacancy rate for office space in Sonoma County for the third quarter was at 15 percent; it was 17.6 percent in the fourth quarter of 2014, according to Keegan & Coppin/Oncor International, a commercial brokerage. Industrial space is at 5 percent; it was 7.7 percent during the fourth quarter of 2014.

Some businesses that are flush with cash are buying their office buildings, looking to generate higher yields through rents in a low-yield environment, Jahn said.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.