Exchange Bank Profit Jumps 34% in First Quarter on Stronger Lending Income

Exchange Bank has reported higher first-quarter earnings, driven by stronger lending income and lower funding costs.

Net income rose to $7.51 million, up 33.9% from a year earlier, for the quarter ended March 31, compared with $5.61 million in the same period last year, the Santa Rosa-based community bank reported Thursday.

The bank’s core profitability measure, net interest income — the spread between interest earned on loans and investments and interest paid on deposits — increased 16.8% to $24.43 million. The growth was driven primarily by higher loan interest and fee income, while total interest expense declined, helping to expand margins.

Noninterest income, which includes fees from services rather than lending, was $6.33 million, unchanged from a year earlier. Noninterest expense, covering operating costs such as salaries and facilities, rose 4.3% to $20.63 million.

On the balance sheet, total assets were $3.27 billion, down 0.2% from a year earlier. Loans totaled $1.74 billion, up 8.1%, led by commercial real estate and residential lending.

Deposits totaled $2.84 billion, down 1.8%, as the bank cited “elevated competition for deposits,” with lenders offering higher rates and incentives to attract and retain customer funds.

Credit quality remained stable. Nonaccrual loans — those no longer generating interest income — were 0.9% of total loans, while the allowance for credit losses, a reserve set aside for potential defaults, was 1.75% of loans.

The bank recorded $4.38 million in net charge-offs, or loans written off as uncollectible, which management said were largely tied to “isolated events.” Liquidity — readily available cash and funding sources — remained strong at $861.51 million, or 26.4% of total assets.

Shares of the bank’s stock (OTC: EXSR) closed Friday, May 1, at $147.90, down 46 cents from the previous day.

The bank declared a first-quarter dividend of $1.30 a share. Because the Doyle Trust owns just over half the stock, it received about $1.1 million to fund Santa Rosa Junior College scholarships.

Founded in 1890, Exchange Bank operates 19 branches in Northern California, primarily in the North Bay.