Exchange Bank continued its return to profitability in the first quarter of 2013 despite a drop in the size of its loan portfolio.
Sonoma County's largest community bank on Wednesday announced net income of $3.2 million in the quarter ended March 31, a 9 percent increase over the same quarter last year.
The bank posted the profit even though its loan portfolio declined by $30 million in the quarter, resulting in an 11 percent drop in interest income.
Net interest income fell from $16.5 million in the first quarter of 2012 to $14.6 million this quarter.
The value of the bank's loan portfolio slid to just over $1 billion.
Soft demand for new loans and competition from other banks contributed to the decline, said William Schrader, the bank's president and chief executive officer. He said the bank has added staff to aggressively pursue new loan opportunities.
"Like any home team, we're going to fiercely defend our home turf," Schrader said.
Schrader said the "pace of economic activity is slowly improving" in industries like tourism, food manufacturing and technology, and he expected the bank's profitability to improve along with them.
There are even some early signs of renewed interest in construction lending as builders assess the low levels of standing inventory, Schrader said.
"All the key indicators are moving in a positive direction for the Exchange Bank," Schrader said.
One of those indicators is loan losses, which stood at their lowest level in years in the quarter.
The bank lost just $520,000 on loans in the quarter, versus $5.3 million for 2012 and $13.9 million for 2011. The change meant the bank had to set aside less money for bad loans. Schrader attributed the reduction to a combination of "good credit management and an improved economy."
Total assets increased 3.8 percent to $1.69 billion, while total deposits increased 5 percent to $1.47 billion.
It was the 16th straight quarter that the bank has been profitable after recovering from steep losses in 2008 and 2009. In September, the 123-year-old bank restored its dividends for the first time in four years. The 25 cents per share quarterly dividend now provides about $850,000 a year for scholarships to Santa Rosa Junior College.
Schrader declined to speculate about whether the bank's board of directors would consider increasing the dividend at its May meeting.
You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. OnTwitter @citybeater
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