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Exchange Bank reports $11.5 million loss as it ups reserves for housing loans

SANTA ROSA, Oct. 29, 2008 – Exchange Bank today reported a loss of $11.5 million for the third quarter and $11 million for the nine months ending Sept. 30, largely due to additional reserves on sour residential construction loans.

“Exchange Bank has been a construction lender for generations. The virtually unprecedented downturn in the real estate industry has been a blow to an important sector of the economy in our community, and we are seeing this impact with our customers engaged in that industry,” said William Reinking, chief executive officer of the bank. “As disclosed earlier in the quarter, we have moved decisively to identify problem loans, make changes and take prudent reserves.”

Approximately 10 percent of the bank’s $1.2 billion loan portfolio was in residential real estate as of Sept. 30.

In September the board of directors of the bank voted to stop paying its longtime dividend, and the decision resulted in the suspension of the Doyle scholarship. The scholarship for Santa Rosa Junior College students has awarded roughly $78 million in the 58 years the trust has been in existence.

Apart from the addition to loan-loss reserves and real estate contingencies, the $1.7 billion bank reported increases in deposits, loans and non-interest income.

“We are working diligently to move through these challenges and restore profitability,” Mr. Reinking continued. “Exchange Bank is a strong institution with an important legacy. The support we have seen from the community over these past few months has been reassuring and inspiring. Our problems are in an isolated segment of our loan portfolio – one that we have identified and moved quickly to correct,” he said.

Exchange Bank stock was trading today at $50 a share. Its 52-week high was $131.60.