Copyright Santa Rosa Press Democrat
Exchange Bank (OTC: EXSR) reported its third-quarter soared 75% from a year before. The Santa Rosa-based institution attributed that to higher net interest income and a one-time gain from the sale of a branch office, alongside growing loan volumes and reduced borrowings. Quarterly net income — the profit remaining after all expenses, including taxes — was $8.6 million, up from $4.9 million a year earlier, the community bank reported Oct. 29. Net interest income, which is a key banking metric figured from the difference between interest earned on loans and investments minus interest paid on deposits and borrowings, climbed 17% to $23.3 million from a year before. The institution said this growth was driven by increased interest on loans and fees from more lending, together with lower borrowing costs. Total funding costs last quarter fell to $9.5 million from $11.6 million a year earlier. Interest paid on borrowing to support lending dropped to $407,000 from $2.9 million, as borrowings declined sharply to $40 million from $245 million. Noninterest income, which is revenue from sources like fees, service charges and asset sales rather than interest, rose 25% to $7.4 million, boosted by a $1.4 million gain on the sale of bank premises no longer used. The institution sold a former Santa Rosa branch at 2201 Mendocino Ave. to Joyeria Torres Soccer Sport Inc. on Aug. 21 for $1.95 million, the Journal reported. For the nine months ended Sept. 30, net income was $21.2 million, a 41% year-over-year jump, with net interest income up 10% to $66.7 million. Noninterest income grew 18% to $20.4 million, aided by a second-quarter life insurance benefit and the sale of bank real estate. Non-interest expenses, which include operational costs like salaries, rent and marketing, year-to-date remained nearly flat, rising less than 1% to $58.4 million, with no reported layoffs or new branch openings. Exchange Bank has been expanding its lending while reducing indicators of bad debt. The loan portfolio overall grew 6.5% year-over-year to $1.71 billion in the third quarter, driven by increases in commercial real estate (up $65.4 million or 10%), multifamily (up $52.6 million or 29%), and commercial and industrial loans (up $42.6 million or 27%). Commercial real estate makes up 42% of the loan portfolio, followed by residential (20%) and multifamily (14%) properties. The institution said it has diversified across industries to mitigate sector-specific risks. Total lending was up $71.7 million from the second quarter. Meanwhile, the bank has mitigated bad debt risks. Such loans declined to $2.8 million (0.17% of gross loans) from $6 million (0.37%) in the third quarter of 2024 and $5.3 million (0.32%) in the middle of this year. The institution attributed this improvement primarily to loan payoffs, including a $2.3 million nonaccrual loan in the third quarter, and a return to accrual status for others in prior quarters. To balance this, Exchange Bank maintained allowance for credit losses at $34 million (2.03% of total loans), down from $41.0 million (2.56%) a year earlier but still without having to dip into that so far in 2025. Deposits, the core of a bank’s funding, were $2.89 billion, up 2.5% from a year earlier and a 0.6% quarterly increase. Non-interest-bearing deposits (typically, checking accounts) fell to 30% of the total from 32%. Total assets dipped 3% to $3.31 billion from $3.41 billion in the second quarter. The bank had $915.7 million (28% of assets) in liquidity, plus $1 billion in borrowing capacity. The bank’s total risk-based capital ratio — a measure of financial stability, comparing capital to risk-weighted assets such as loans — at the end of the third quarter was 19.46%, well above regulatory minimums (at least 10%) for “well-capitalized” status. Founded in 1890, Exchange Bank operates 17 retail branches across Sonoma County and Roseville and a wealth-management office in Santa Rosa. The institution directs half of dividends to the Doyle Trust for Santa Rosa Junior College scholarships, totaling $3.3 million in the first nine months of this year. The price of the bank’s stock on OTC Markets was $118 a share Wednesday Nov. 12, up from $116 on Oct. 29 but down from $119.75 on Nov. 4, the highest closing price since December 2022. Jeff Quackenbush joined North Bay Business Journal in May 1999. He covers primarily wine, construction and real estate. Reach him at jeff@nbbj.news or 707-521-4256.
