Exchange Bank posted its 17th straight quarterly profit this summer, even though its loan growth was confined to real estate and not consumer or business loans.
Sonoma County's largest commercial bank on Wednesday reported net income jumped to $3.8 million in the quarter ending June 30, up 34 percent compared to a year earlier.
For the year's first six months, net income rose 21 percent to $7 million, compared to the same period for 2012.
William R. Schrader, the bank's president and chief executive officer, said the bank had performed well in what remains "a slow recovery."
"There's still a cautiousness as far as capital spending is concerned," Schrader said.
The bank's loan portfolio increased by $25 million from a year earlier to $1.06 billion. That growth came solely from real estate lending, which increased 6 percent. Consumer loans fell 9 percent and business loans declined 4 percent.
Even so, officials said they expect to see business and consumer lending pick up as the economy improves. And they said they see a few encouraging signs.
The bank recently committed to its first construction loan for a single-family housing project in five years, said Gary Hartwick, executive vice president and chief operating officer at Exchange Bank. Officials declined to name the project.
"It's evidence of renewed construction activity on a small scale," Hartwick said.
For the quarter, deposits increased 6 percent from a year earlier to $1.49 billion. Total assets rose 4 percent to $1.69 billion.
Schrader noted that in the current recovery, "not all sectors are moving forward at the same pace." He cited tourism, agriculture, tech and food processing as areas of strength.
The bank's delinquent loans, foreclosed properties and other nonperforming assets increased to $47 million at June 30, up from $39.5 million at the end of 2012. But officials noted the nonperforming assets had improved substantially since 2008, when they amounted to $75 million.
For the second quarter, the bank set aside $800,000 in reserves for potential loan losses for the second quarter, compared to $2.5 million a year earlier. The reserve on June 30 totaled $37.8 million, compared to $35.3 million a year earlier.
For the first six months of 2013, the bank charged off less than $100,000 in loan losses, compared to $1.6 million for the same period a year earlier.
The 123-year-old bank suffered steep losses in 2008 and 2009. Last September it restored its dividend for the first time in four years. The 25 cents per share quarterly dividend provides an estimated $850,000 a year for the Doyle scholarships offered at Santa Rosa Junior College.
Asked about the possibility of raising the dividend, Schrader suggested the bank needs to move cautiously, both to ensure it can weather any new economic downturn and to provide the funds needed to invest in the bank's future.
"Retaining capital is our last line of defense," Schrader said. "It's also how we prepare this bank to grow tomorrow."
The bank, which has about 400 full- and part-time employees, operates 18 branches in Sonoma County and one branch in Sacramento County.