Exchange Bank reported its 13th straight quarterly profit on Wednesday, but Sonoma County's largest community bank saw its earnings dip nearly 6 percent in the second quarter to $2.84 million.
Bank officials cited ongoing economic sluggishness and historically low interest rates for the decline in profits.
"This is a recovery with still very weak legs underneath it," said William R. Schrader, the bank's president and CEO. He called the recovery unusual "because it's without any meaningful growth in jobs and without any meaningful growth in consumer spending."
While the bank has been profitable for more than three years, executives said they still cannot resume dividend payments that funded the long-standing Doyle Scholarship program for Santa Rosa Junior College students.
"We're working on it," Schrader said.
The 122-year-old bank lost more than $22 million in 2008 and 2009, forcing it to suspend dividends and take a $45 million loan from the federal government as part of a program to strengthen the U.S. financial system.
The bank cannot resume the dividend until it repays the 2008 loan or the Treasury Department sells the stock it received from Exchange Bank to secure the loan.
The Treasury Department has started selling off stock in other banks that received similar federal loans. It has told Exchange Bank it intends to divest its shares in the Santa Rosa bank, but has not yet announced when that will occur, Schrader said.
If the Treasury Department drops those plans, the bank will devise a plan to repay the loan, he said.
In the second quarter, the bank's total assets rose to $1.6 billion, an increase of nearly 8 percent, or $119 million, from a year earlier.
The bank's non-performing assets — both loans and real estate — declined by 22 percent to $40.9 million, Schrader said. To underscore the bank's performance, he noted that non-performing assets had totaled $75.2 million at the end of 2008.
The bank set aside $2.5 million for loan losses during the second quarter, down from $3 million a year earlier.
Deposits increased nearly 9 percent from a year earlier to $1.6 billion.
Low interest rates helped spur growth in new residential loans last year, officials said. But lower rates also has meant that banks are earning less for the money they loan out.
As well, many parts of the local economy have seen little growth.
"Businesses are still not expanding for the most part," said Gary Hartwick, the bank's chief credit officer.
Tourism, technology and the wine industry are three bright spots in business this year, Schrader said.
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