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Exchange Bank Announces Fourth Quarter and Year Ending 2016 Earnings

EXSR | February 7, 2017

Exchange Bank Announces Fourth Quarter and Year Ending 2016 Earnings

Exchange Bank reported net income of $5.45 million in the fourth quarter of 2016, compared to $5.14 million for the same period in 2015, an increase of 6.1%. Net income for the year ending December 31, 2016, totaled $21.5 million, compared to $21.0 million a year ago, an increase of 2.3%. The Bank’s core earnings however, which represents income before provision for income taxes and excluding provision for loan loss, increased $2.9 million or 9.4% above the reported core earnings of $30.8 million reported in 2015. The largest component of the adjustment to core earnings was the decline in the reversal of the provision for loan losses, which declined from $3.2 million in 2015 to $900 thousand in 2016. “Given the continued low interest rate environment within which the Bank operated through most of the year, the Bank’s increase in earnings is truly noteworthy. All things considered, we are very pleased with the significant improvement in the financial results and overall condition of the Bank,” stated Gary Hartwick, President and CEO.

The core earnings of the Bank were driven primarily by continued growth in loans, which were funded by significant growth in deposits. The growth in loans led to an increase in net interest income of approximately $4.9 million for the year ending December 31, 2016, a 7.3% increase over the year ending December 31, 2015. The Bank experienced loan growth of approximately $148 million or 11.6% over 2015, which represented the strongest year of loan growth we have witnessed since the economic downturn in 2008. This growth in loans was funded primarily by growth in deposits of approximately $104 million, an increase of 5.7% over 2015. “The Bank’s financial accomplishments and the success in growing the loan portfolio is a reflection of the continued improvement in the local economies in which we operate. The Bank’s ability to grow the loan portfolio can be further attributed to the dedicated efforts of our team at Exchange Bank, and our customers’ confidence in Exchange Bank to help meet their financing needs,” said Gary Hartwick, President and CEO.

Contributing to the increase in core earnings was the Bank’s Trust and Investment Division which experienced a growth in revenues during 2016 of 4.5% to approximately $6.4 million as compared to $6.1 million for the 2015 period. Additionally, the Bank’s focus on efficiency led to a modest 2.1% growth in total operating expenses. “Despite many uncertainties, such as the impacts of potential changes to fiscal and monetary policy, we believe the Bank is well positioned to deal with the challenges ahead,” stated Greg Jahn, Executive Vice President and CFO.

The Bank’s credit quality remains strong, with non-accrual loans declining to just 0.17% of total loans at December 31, 2016, from 0.33% of total loans a year ago. Despite our significant loan growth, as a result of the continued improvement in asset quality and net loan recoveries, the Bank did not make any provision for loan losses in 2016, and was able to maintain a strong ratio of loan loss reserves to total loans of 2.68%. In addition, the Bank’s capital ratios remain in excess of the regulatory definitions of “well capitalized.” As of December 31, 2016, the Bank reported total risk-based capital of 12.71%.

Exchange Bank paid a quarterly cash dividend of $0.75 per share on common stock outstanding to shareholders on December 9, 2016. Total dividends paid to Exchange Bank common shareholders during 2016 were $4.8 million and represented an increase of approximately 26% above total dividends of $3.8 million paid to common shareholders during 2015. The Doyle Trust, which funds the Doyle Scholarships at the Santa Rosa Junior College, receives 51% of all cash dividends paid by the Bank.

About Exchange Bank

Founded in 1890 and headquartered in Sonoma County with assets of $2.2 billion, Exchange Bank is a premier community bank providing a wide range of personal, commercial and trust and investment services. Exchange Bank has 18 branches in Sonoma County and a commercial and SBA lending office in Roseville and Marin, California. 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 an 11-time winner of the North Bay Business Journal’s North Bay Best Places to Work survey and received the 2016 Healthiest Companies in the North Bay award. NorthBay biz magazine named Exchange Bank 2016 Best Business Bank. Exchange Bank can also be found in the North Bay Business Journal’s listing of leading SBA 7(a) Lenders, Wealth Management Advisors and Wine Industry Lenders. www.exchangebank.com.

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.


EXCHANGE BANK
and Subsidiaries

Consolidated Balance Sheets
(Unaudited)

December 31, 2016 and 2015
(In Thousands)
							Change			% Change
ASSETS	2016			2015			16/15			16/15

Cash and due from banks	$	31,519		$	27,688		$	3,831		13.84	%
Fed Funds Sold		36,470			95,244			(58,774	)	-61.71	%
Total Cash and cash equivalents		67,989			122,932			(54,943	)	-44.69	%

Investments
Interest-earning deposits in other financial institutions		76,500			76,000			500		0.66	%
Securities available for sale		514,245			495,250			18,995		3.84	%
FHLB Stock		10,015			9,036			979		10.83	%

Loans and leases
Real estate		994,452			875,285			119,167		13.61	%
Consumer		114,261			104,266			9,995		9.59	%
Commercial		317,979			299,354			18,625		6.22	%

		1,426,692			1,278,905			147,787		11.56	%
Less allowance for loan and lease losses		(38,009	)		(37,830	)		(179	)	0.47	%

Net loans and leases		1,388,683			1,241,075			147,608		11.89	%

Bank premises and equipment		17,681			16,478			1,203		7.30	%
Other assets		105,850			101,737			4,113		4.04	%

Total Assets	$	2,180,963		$	2,062,508		$	118,455		5.74	%


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
Non-Interest Bearing Demand	$	726,107		$	677,539		$	48,568		7.17	%
Interest Bearing
Transaction		369,441			331,565			37,876		11.42	%
Money market		261,296			238,181			23,115		9.70	%
Savings		396,591			377,549			19,042		5.04	%
Time		189,975			214,143			(24,168	)	-11.29	%

Total Deposits		1,943,410			1,838,977			104,433		5.68	%

Other borrowings		8,000			8,000			-		0.00	%
Other liabilities		40,381			42,423			(2,042	)	-4.81	%

Total liabilities		1,991,791			1,889,400			102,391		5.42	%

Stockholders' equity		189,172			173,108			16,064		9.28	%

Total Liabilities and Stockholder's Equity	$	2,180,963		$	2,062,508		$	118,455		5.74	%


EXCHANGE BANK
and Subsidiaries

Consolidated Statements of Operations
(Unaudited)

For the Period Ended December 31, 2016 and 2015
(In Thousands, except per share amounts)											Twelve Months Ended
	Quarter Ended				Twelve Months Ended						Change			% Change
	2016		2015		2016			2015			16/15			16/15

Interest Income
Interest and fees on loans	$	16,474	$	15,160	$	63,226		$	59,379		$	3,847		6.48	%
Interest on investments securities		2,890		2,635		10,868			10,402			466		4.48	%

Total interest income		19,364		17,795		74,094			69,781			4,313		6.18	%

Interest expense
Interest on deposits		182		225		767			1,018			(251	)	-24.66	%
Other interest expense		96		96		382			753			(371	)	-49.27	%
Total interest expense		278		321		1,149			1,771			(622	)	-35.12	%

Net interest income		19,086		17,474		72,945			68,010			4,935		7.26	%

Provision (reversal of) for losses on loans		-		-		(900	)		(3,200	)		2,300		-71.88	%

Net interest income after provision for loan and leases		19,086		17,474		73,845			71,210			2,635		3.70	%

Non-interest income		4,948		5,028		20,304			21,056			(752	)	-3.57	%

Non interest expense
Salary and benefit costs		8,673		7,387		34,029			31,212			2,817		9.03	%
Other expenses		6,564		7,466		25,451			27,034			(1,583	)	-5.86	%
Total non-interest expense		15,237		14,853		59,480			58,246			1,234		2.12	%

Income before income taxes		8,797		7,649		34,669			34,020			649		1.91	%

Provision for income taxes		3,346		2,528		13,167			12,992			175		1.35	%

Net income	$	5,451	$	5,121	$	21,502		$	21,028		$	474		2.25	%


Basic earnings per common share	$	3.18	$	2.99	$	12.54		$	12.27		$	0.28		2.25	%
Dividends per share	$	0.75	$	0.60	$	2.80		$	2.20		$	0.60		27.27	%

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 2016 and 2015 was 1,714,344