Exchange Bank to close McDowell branch

Exchange Bank laid off 10 employees this week and will close a Petaluma branch in cost-cutting moves that follow last month's closure of its Rocklin branch outside Sacramento, bank officials said Friday.

Despite returning to profitability in this year's second quarter, officials said the cuts are needed to steer the bank through a sluggish recovery from the real estate downturn and the lingering recession.

In all, Exchange Bank has reduced its workforce by 6.6 percent since the beginning of the year and now has 410 employees. Following the closure of the Petaluma branch, the bank will have 18 branches in Sonoma County and one in Roseville, outside Sacramento.

It is the area's largest and oldest bank.

"These are tough times. Maybe we're near the bottom. But this is not going to be a rapid recovery," said William Schrader, the bank president. "Business conditions are very fragile, they're very uneven. We must continue to look at ways to control operating expenses."

The deepest of the cost cutting moves came Thursday and Friday when 10 back office and middle management employees were laid off. Each will receive severance pay plus additional money based on how long they worked for the bank, said Craig Van Selow, vice president of retail banking.

A week earlier, bank officials announced their intent to close the Petaluma branch on South McDowell Boulevard in early November. Federal regulators require banks to give customers 90 days notice of a branch closure.

Those workers, however, will be placed in jobs at other branches in Sonoma County, officials said.

Exchange Bank's first layoffs in some five years began with the closure of its Rocklin branch the end of July and the loss of seven jobs in that office.

An additional 12 positions in Sonoma County have been eliminated this year by not filling vacant positions, Van Selow said.

"We think this is the largest reduction in the workforce we'll have," Van Selow said.

But the bank will continue looking for ways to make operations more efficient and reduce its workforce through attrition, he said.

Exchange Bank has been struggling for nearly two years with losses pegged to troubled loans primarily made to home builders hit hard by the housing downturn.

The bank reported its first quarterly loss in at least a half-century during the fourth quarter of 2007. After a profitable first quarter last year, the bank suffered four consecutive quarterly losses before rebounding in this year's second quarter with a $2.4 million profit.

But bank officials warn that continued loan losses and weak demand for new loans remain significant challenges.

"Loan demand is very soft. Transactions are down. It's important to control costs when revenue is not growing," Schrader said. "All businesses today are struggling to control operating expenses and find ways to increase their efficiencies and streamline their processes and that's exactly what we're trying to do."

The Rocklin branch was closed as Exchange Bank pulled back from a significant expansion into the Sacramento area. That region's housing market and builders with Exchange Bank loans were hammered when sales and prices plunged.

"We had to consolidate our resources where they were most needed," Schrader said.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.