Exchange Bank reported another profitable quarter Wednesday, but bank officials remain cautious about future growth as the economy continues to sputter.
The bank reported a profit of $2.98 million for the first three months of the year, a 40 percent improvement over the same period last year and its sixth straight quarter with positive earnings.
The bank did not reinstate its dividend, which for 60 years funded the Doyle scholarship program for Santa Rosa Junior College students until it was suspended in 2009 due to a lack of funding.
Bank insiders expect the dividend, which was suspended in 2008, will be renewed this year as the county's largest and oldest community bank returns to financial health.
"The dividend continues to be our top priority," said Bill Schrader, president of Exchange Bank.
The bank earned $10.2 million last year, after losing a combined $22.4 million in 2008 and 2009.
Its loan portfolio continues to recover from the downturn, when borrowers defaulted on tens of millions of dollars of loans. This year, Exchange Bank spent about half as much to cover future loan losses, setting aside $3.25 million in the first quarter compared to $6 million during the same period a year ago.
But its $1 billion loan portfolio continued to decline - down $50 million from a year ago. A bank's revenues are largely tied to how much money it lends, and its loan portfolio is considered its biggest asset.
Like other financial institutions, Exchange Bank has grown more cautions about lending money, but continues to lend to qualified borrowers, Schrader said.
"We cannot exacerbate things by bringing on more troubled assets," he said. "But we know our community, and look at lending opportunities on a case by case basis."
When a bank slows its lending, its total portfolio of loans can shrink as some borrowers begin paying back their maturing loans or it writes off troubled accounts. Bank officials expect the economy to pick up in the second half of this year and that more businesses will begin to borrow money in order to expand. As a result, they predict their loan portfolio is nearly done shrinking.
"If it does shrink more, I don't expect it to be more than 2 percent," Schrader said.
The number of the bank's troubled loans increased about 5 percent in the first quarter, from $52.7 million to $55.4 million.
"We're not totally out of the woods yet," said Bruce DeCrona, the bank's chief operating officer.
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