SANTA ROSA -- Exchange Bank today announced that net income for all of 2012 had risen slightly versus income for 2011, meeting the bank's projections despite a lukewarm demand for financing from both households and businesses.

Net income of $12.26 million was a 0.68 percent increase from income in 2011, according to the bank. Net income of $3.27 million for the quarter ended Dec. 31 was equivalent to $1.71 per diluted share, up 13.2 percent versus the same period in 2011.

Net loans declined 1 percent for the year, to $1.01 billion. Yet demand rose for real estate financing, with $701.99 million in those loans in the bank's year-end portfolio represented an increase of 3.3 percent.

Non-performing loans in the bank's portfolio fell by 31 percent by year-end, and non-performing assets as a whole fell by 18 percent, according to the announcement. For the year, the bank had a $35.63 million allowance for loan losses, up from $31.75 million in 2011. The provision was down 45 percent comparing the final quarters of 2012 and 2011, at $1.8 million.

While loans declined slightly, net assets rose by 5.8 percent for the year, to $1.7 billion. That increase was partially attributed to a greater volume of cash and cash equivalents, up 47.9 percent, to $139.55 million.

At a time when many banks in the region are tweaking their portfolio to adjust to diminished returns from loans in a low-interest-rate environment, the bank added $16 million in interest-bearing deposits at other institutions this year, compared to none in 2011. Total investment securities rose 12.79 percent, to $395.5 million. The bank had a 0.72 percent return on average assets, near 0.76 percent for the prior year, and an efficiency ratio of 67.7 percent, compared to 63.9 percent in the prior year.

Total interest income fell 5.27 percent, to $67.3 million. Yet the bank's interest expense declined even further compared to the prior year -- down 26.49 percent, to $3.831 million.

Deposits, now totaling $1.46 billion, grew by $107 million for the year, up 8.06 percent. Amid a general increase in deposit types, a greater percentage of those deposits were non-interest bearing demand deposits in 2012 and represented 35.4 percent of total deposits versus 34.56 percent. Exchange Bank ended 2012 with a net interest margin for loans, investments and liabilities of 4.5 percent, compared to 4.8 percent at the end of 2011.

"We are pleased to have met our operating projections for 2012 and were very satisfied with the strong improvement in credit quality," said William Schrader, president and CEO of Exchange Bank, in the release. "We are seeing the very early signs of renewed growth and we are optimistic in a continued recovery for Sonoma County during 2013."