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Exchange Bank Announces Second Quarter Earnings

EXSR | July 25, 2017

Exchange Bank Announces Second Quarter Earnings

Exchange Bank (OTC: EXSR) today announced results for the second quarter of 2017 with a profit after tax of $6.51 million, compared to $5.45 million in the second quarter of 2016. This represents a 20% increase compared to the same period a year ago. Core earnings for the Bank continue to experience solid growth as evidenced by an increase in net interest income of $1.4 million or 7.9% for the quarter ending June 30, 2017 compared to the similar quarter in 2016. Contributing to the positive trend in net interest income was growth in the loan portfolio of $131 million or a 10% increase in loans outstanding as of June 30, 2016. This strong loan growth was funded by an increase in deposits totaling $169 million, an increase of 9.2% above deposit balances at June 30, 2016.

Second quarter earnings were positively influenced by a couple of unusual events. During the quarter ending June 30, 2017 the Bank experienced a gain of $1.4 million relating to a litigation settlement. This unusual and nonrecurring event was somewhat offset by a one-time expense of $220 thousand recorded as interest expense relating to the early payoff of $6 million in high rate paying borrowings from the Federal Home Loan Bank.

During the six-months ending June 30, 2017, the Bank achieved net earnings of $13.15 million, compared to $10.66 million during the similar six-month period in 2016, an increase of approximately $2.5 million or 23.4%. During the six-months ending June 30, 2017, the Bank’s core earnings as measured by net interest income increased $2.9 million over the similar six-month period in 2016, an increase of 8.1%. Noninterest income for the six-months ending June 30, 2017 was positively influenced by the aforementioned litigation settlement of $1.4 million in the second quarter as well as gains on sale of other real estate totaling approximately $1.38 million in the first quarter of 2017. Similarly, earnings during the six months ending June 20, 2016 were positively influenced by recovery of provision for loan loss totaling $900 thousand, while no such recoveries were recognized during 2017.

“Given the volatility we have witnessed over this past year in the direction of interest rates, and the continued uncertainty relating to the direction of fiscal and monetary policy, we are pleased with the results of the Bank. The ability to fund the credit needs of the communities we serve with net loan growth of $131 million is both the result of the dedication and hard work of our employees as well as the confidence the community places in Exchange Bank,” stated President and Chief Executive Officer, Gary Hartwick.

Exchange Bank paid a quarterly cash dividend of $0.85 per share on common stock outstanding to shareholders on June 16, 2017. 50.44% of the cash dividend goes to the Doyle Trust which funds the Doyle Scholarships at the Santa Rosa Junior College.

Forward looking information

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 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 with 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 2017 Best Consumer 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.


EXCHANGE BANK
and Subsidiaries

Consolidated Balance Sheets
(Unaudited)

June 30, 2017 and 2016
(In Thousands)
							Change			% Change
ASSETS		2017			2016			17/16		17/16

Cash and due from banks	$	35,482		$	31,971		$	3,511		10.98	%
Fed Funds Sold		27,886			25,510			2,376		9.31	%
Total Cash and cash equivalents		63,368			57,481			5,887		10.24	%

Investments
Interest-earning deposits in other financial institutions		65,305			77,500			(12,195	)	-15.74	%
Securities available for sale		567,629			513,395			54,234		10.56	%
FHLB Stock		10,015			10,015			-		0.00	%

Loans and leases
Real estate		1,029,194			919,551			109,643		11.92	%
Consumer		114,042			110,118			3,924		3.56	%
Commercial		315,096			297,380			17,716		5.96	%

		1,458,332			1,327,049			131,283		9.89	%
Less allowance for loan and lease losses		(39,093	)		(37,854	)		(1,239	)	3.27	%

Net loans and leases		1,419,239			1,289,195			130,044		10.09	%

Bank premises and equipment		17,790			17,180			610		3.55	%
Other assets		100,295			81,020			19,275		23.79	%

Total Assets	$	2,243,641		$	2,045,786		$	197,855		9.67	%


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
Non-Interest Bearing Demand	$	728,081		$	667,853		$	60,228		9.02	%
Interest Bearing
Transaction		383,619			325,172			58,447		17.97	%
Money market		294,233			261,860			32,373		12.36	%
Savings		411,195			380,415			30,780		8.09	%
Time		185,963			198,921			(12,958	)	-6.51	%

Total Deposits		2,003,091			1,834,221			168,870		9.21	%

Other borrowings		2,000			8,000			(6,000	)	-75.00	%
Other liabilities		37,281			20,293			16,988		83.71	%

Total liabilities		2,042,372			1,862,514			179,858		9.66	%

Stockholders' equity		201,269			183,272			17,997		9.82	%

Total Liabilities and Stockholder's Equity	$	2,243,641		$	2,045,786		$	197,855		9.67	%


EXCHANGE BANK
and Subsidiaries

Consolidated Statements of Operations
(Unaudited)

For the Period Ended June 30, 2017 and 2016
(In Thousands, except per share amounts)											Six Months Ended
	Quarter Ended					Six Months Ended					Change			% Change
	2017		2016			2017		2016			17/16			17/16

Interest Income
Interest and fees on loans	$	16,917	$	15,526		$	33,781	$	30,968		$	2,813		9.08	%
Interest on investments securities		2,905		2,672			5,626		5,350			276		5.16	%

Total interest income		19,822		18,198			39,407		36,318			3,089		8.51	%

Interest expense
Interest on deposits		188		191			363		397			(34	)	-8.56	%
Other interest expense		313		95			407		190			217		114.21	%
Total interest expense		501		286			770		587			183		31.18	%

Net interest income		19,321		17,912			38,637		35,731			2,906		8.13	%

Provision (reversal of) for losses on loans		-		(400	)		-		(900	)		900		-100.00	%

Net interest income after provision for loan and leases		19,321		18,312			38,637		36,631			2,006		5.48	%

Non-interest income		6,714		5,120			13,505		9,883			3,622		36.65	%

Non interest expense
Salary and benefit costs		8,448		8,246			16,865		16,941			(76	)	-0.45	%
Other expenses		6,833		6,368			13,553		12,378			1,174		9.48	%
Total non-interest expense		15,281		14,614			30,418		29,319			1,098		3.75	%

Income before income taxes		10,754		8,817			21,724		17,194			4,530		26.35	%

Provision for income taxes		4,245		3,372			8,578		6,538			2,040		31.20	%

Net income	$	6,509	$	5,445		$	13,146	$	10,656		$	2,490		23.37	%


Basic earnings per common share	$	3.80	$	3.18		$	7.67	$	6.22		$	1.45		23.37	%
Dividends per share	$	0.85	$	0.70		$	1.65	$	1.35		$	0.30		22.22	%