Exchange Bank reports 3 percent decline in earnings

Exchange Bank announced on Friday a 3-percent decrease in after-tax profit in the second quarter compared to the same period last year.

The Santa Rosa-based institution said it had a net income of $5.46 million for the three months ending on June 30, compared to $5.63 million in the second quarter of 2015.

“The decline in earnings for the second quarter does not tell the true story of strength in core earnings. Absent a decline in non-recurring income in the form of reversal of provision for loan loss, which fell from $2.5 million in the second quarter of 2015 to a recovery of $400,000 during the second quarter of 2016, core earnings would have demonstrated continued improvement,” said Gary Hartwick, president and CEO, in a statement.

Exchange Bank has been buoyed by a strong Bay Area economy as well increases in loans backed by growth in deposits. The bank had loan growth of $113 million, or 9 percent, during the year ending on June 30. That was funded by deposit growth of $105 million, or 6 percent.

Like other banks, Exchange Bank has been hampered by a lower interest environment from the Federal Reserve. Higher interest rates would boost bank profits because it would widen their net interest margin, which is the difference between what they pay out for deposits and what they can charge in interest for loans.