Business Wire | Nov 2, 2021 11:00AM EDT

Exchange Bank Announces Third Quarter 2021 Earnings

Nov. 02, 2021

SANTA ROSA, Calif.--(BUSINESS WIRE)--Nov. 02, 2021--Exchange Bank (OTC: EXSR) today announced results for the third quarter of 2021, reporting net income after taxes of $9.85 million, compared with $7.98 million for the same quarter in 2020, an increase of 23.43%.

The Bank's net interest income decreased slightly from $24.08 million during the three months ended September 30, 2020 to $23.99 million during the same period in 2021. The 2021 interest income was supported by the PPP loans booked in both 2020 and 2021 and the fees associated with these loans. In the third quarter of 2021, the Bank recognized $1.82 million in PPP loan fees.

The Bank's results continue to be influenced by the changing patterns of behavior by both business and consumer clients as well as the fiscal and monetary response of the U.S. Government to the coronavirus pandemic. Non-interest income increased from $5.22 million in the third quarter of 2020 to $5.55 million in the similar period in 2021. A highlight of the favorable non-interest income is Trust and Investment Management with an increase of $0.45 million over the third quarter of 2020 to $2.52 million for the three months ended September 30, 2021. This favorable income was offset by three main factors: slightly lower account service fees due to higher than normal compensating balances across both business and consumer deposit accounts; a decline in interchange fees as a result of reduced consumer spending; and lower SBA fee income due to diminished business activities during this period. These fee-based decreases are a continuing trend from 2020 which the Bank expects to continue for the remainder of 2021.

The quality of the Bank's loan portfolio remains strong and the Bank did not add to its reserve during the third quarter of 2021. The Bank did take a provision for loan loss of $0.9 million during the similar period in 2020.

The previously discussed increases in revenue were supplemented by the Bank's decreased operating expenses. The Bank had a decrease operating expenses during the three months ending September 30, 2021 of $1.53 million or 8.80% in comparison to the three months ended September 30, 2020. The 2020 expenses include approximately $2.00 million related to the Bank's core system conversion.

The Bank experienced a dramatic increase in deposit balances which were up year-over-year by approximately $497 million or 18.59%. This increase in deposits started during the second quarter of 2020, resulting from business deposits relating to the deposit of PPP loan funds received by Bank clients. The PPP loans issued in 2021 have added to the increase in deposits. Additional sources of the increase in deposits are the economic stimulus received by our customers and both business and consumer customers who chose to hold more liquid assets during this period of great uncertainty. The increase in deposits led to a material decline in deposit service fee income as a result of the waiver of fees associated with higher customer compensating balances. It is possible the Bank could experience a significant runoff of the excess deposits due to their unusual and short-term nature as they are used to support small business and consumer-related expenses over the next year.

Overall, the Bank's balance sheet growth for the year-ending September 30, 2021 was bolstered by the PPP loans and deposit growth as previously noted. Total assets increased to $3.53 billion as of September 30, 2021 up from $3.04 billion as of September 30, 2020, an increase of 16.37%. Gross loans decreased from $1.82 billion in 2020 to $1.59 billion in 2021. A significant portion of the decrease relates to PPP loans which had a balance of $260 million as of September 30, 2020 vs. $110 million as of September 30, 2021. The Bank's investment portfolio increased $435 million during the 12 months ended September 30, 2021. The Bank expects net interest margin to be a challenge for the remainder of 2021 and into the near future with the expectation that treasury yields will remain low.

During the nine months ending September 30, 2021, the Bank achieved net earnings of $26.56 million, compared with $24.46 million during the similar nine-month period in 2020, an increase of $2.10 million or 8.58%. The change was driven by the same factors related to net interest income and non-interest income as described previously. Net interest income declined $0.67 million from $71.17 million for the nine months ended September 30, 2020 to $70.50 million for the same period in 2021. $7.30 million of PPP loan fees are included in 2021 net interest income. During the nine months ending September 30, 2021, the growth in the Bank's Trust and Investment Management income, which was up approximately $1.45 million, helped offset declines in deposit fee and SBA income, compared with the similar nine-month period in 2020.

The Bank's capital ratios remain well in excess of the regulatory definitions of "well capitalized." As of September 30, 2021, the Bank reported total risk-based capital of 20.29%.

50.44% of the Bank's cash dividend goes to the Doyle Trust which funds the Doyle Scholarships at the Santa Rosa Junior College.

FORWARD-LOOKING INFORMATION:

The following appears in accordance with the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking statements about the Company, including descriptions of plans or objectives of its management for future operations, products or services, and forecasts of its revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may."

Forward-looking statements, by their nature, are subject to risks and uncertainties. A number of factors - many of which are beyond the Company's control - could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date forward looking statements are made.

About Exchange Bank

Headquartered in Sonoma County and founded in 1890, Exchange Bank is a premier community bank with assets of $3.5 billion. Exchange Bank provides a wide range of personal, commercial and trust and investment services with 18 retail branches in Sonoma County, a commercial branch in Roseville, and trust and investment offices in Santa Rosa, Roseville and Silicon Valley. The Bank's legacy of financial leadership and community support is grounded in its core values of Commitment, Respect, Integrity and Teamwork.

Exchange Bank is a 16-time winner of the North Bay Business Journal's (NBBJ) Best Places to Work survey, a recipient of the 2020 North Bay Community Philanthropy Award and the 2020 Healthiest Companies in the North Bay Award. The Press Democrat Best of Sonoma County Reader's Choice 2021 named Exchange Bank Best Bank and the NorthBay biz magazine named Exchange Bank the 2020 Best Consumer Bank and Best Business Bank. The Sonoma Valley People's Choice awards named Exchange Bank the Best Local Bank 2021 and the North Bay Bohemian's Best of 2020 Readers Poll named Exchange Bank the Best Business Bank and Best Consumer Bank. Exchange Bank can also be found in the NBBJ's Book of Lists as a leading lender and wealth management advisor-retaining the #1 position in SBA 7(a) lending in Sonoma County for 2020. www.exchangebank.com.

Member FDIC - Equal Housing Lender - Equal Opportunity Employer

EXCHANGE BANKand Subsidiaries Consolidated Balance Sheets(Unaudited) September 30, 2021 and2020(In Thousands) Change % Change

ASSETS 2021 2020 21/20 21/20

Cash and due from banks $ 32,870 $ 47,398 $ (14,528 ) -30.65 %

Federal Reserve Bank 523,081 208,182 314,899 151.26 %

Total Cash and cash 555,951 255,580 300,371 117.53 %equivalents InvestmentsInterest-earning 17,000 41,000 (24,000 ) -58.54 %deposits in otherfinancial institutionsSecurities available for 1,244,297 809,046 435,251 53.80 %saleFHLB Stock 14,465 13,483 982 7.28 %

Loans and leasesReal estate 1,077,009 1,159,649 (82,640 ) -7.13 %

Consumer 131,542 134,910 (3,368 ) -2.50 %

Commercial 383,618 528,474 (144,856 ) -27.41 %

1,592,169 1,823,033 (230,864 ) -12.66 %

Less allowance for loan (43,638 ) (40,443 ) (3,195 ) 7.90 %and lease losses Net loans and leases 1,548,531 1,782,590 (234,059 ) -13.13 %

Bank premises and 18,955 20,265 (1,310 ) -6.46 %equipmentOther assets 135,244 115,240 20,004 17.36 %

Total Assets $ 3,534,443 $ 3,037,204 $ 497,239 16.37 %

LIABILITIES ANDSTOCKHOLDERS' EQUITY DepositsNon-Interest Bearing $ 1,256,952 $ 1,076,938 $ 180,014 16.72 %DemandInterest BearingTransaction 614,291 501,106 113,185 22.59 %

Money market 408,423 322,945 85,478 26.47 %

Savings 713,497 582,954 130,543 22.39 %

Time 178,680 190,683 (12,003 ) -6.29 %

Total Deposits 3,171,843 2,674,626 497,217 18.59 %

Other liabilities 46,541 64,501 (17,960 ) -27.84 %

Total liabilities 3,218,384 2,739,127 479,257 17.50 %

Stockholders' equity 316,059 298,077 17,982 6.03 %

Total Liabilities and $ 3,534,443 $ 3,037,204 $ 497,239 16.37 %Stockholder's EquityEXCHANGE BANKand SubsidiariesConsolidated Statements of Operations(Unaudited)For the Period Ended September 30, 2021 and 2020(In Thousands, except per share amounts)Nine Months Ended

Quarter Ended

Nine Months Ended

Change

% Change

2021

2020

2021

2020

21/20

21/20

Interest IncomeInterest and fees on loans$

19,870

$

20,821

$

59,346

$

60,386

$

(1,040

)

-1.72

%

Interest on investments securities4,542

3,980

12,488

13,470

(982

)

-7.29

%

Total interest income24,412

24,801

71,834

73,856

(2,022

)

-2.74

%

Interest expenseInterest on deposits424

717

1,336

2,684

(1,348

)

-50.22

%

Total interest expense424

717

1,336

2,684

(1,348

)

-50.22

%

Net interest income23,988

24,084

70,498

71,172

(674

)

-0.95

%

Provision (reversal of) for losses on loans-

900

2,000

900

1,100

0.00

%

Net interest income after provision for loan and leases23,988

23,184

68,498

70,272

(1,774

)

-2.52

%

Non-interest income5,550

5,218

16,905

15,831

1,074

6.78

%

Non interest expenseSalary and benefit costs9,385

9,786

27,419

29,221

(1,802

)

-6.17

%

Other expenses6,485

7,615

21,185

23,088

(1,903

)

-8.24

%

Total non-interest expense15,870

17,401

48,604

52,309

(3,705

)

-7.08

%

Income before income taxes13,668

11,001

36,799

33,794

3,005

8.89

%

Provision for income taxes3,821

3,023

10,238

9,331

907

9.72

%

Net income$

9,847

$

7,978

$

26,561

$

24,463

$

2,098

8.58

%

Basic earnings per common share$

5.74

$

4.65

$

15.49

$

14.27

$

1.22

8.58

%

Dividends per share$

1.20

$

1.20

$

3.60

$

3.60

$

-

0.00

%

Earnings per share is computed by dividing net income, by the weighted averaged number of shares outstanding during the year.Total average shares outstanding for both 2021 and 2020 was 1,714,344 View source version on businesswire.com: https://www.businesswire.com/news/home/20211102005463/en/

CONTACT: Shari DeMaris EVP, Chief Financial Officer Exchange Bank (707) 524-3067