Exchange Bank Reports First Quarter Earnings with Focus on Community Support

Exchange Bank main office in downtown Santa Rosa (545 Fourth Street) (Photo: Business Wire)

SANTA ROSA, Calif.--()--Exchange Bank (OTC: EXSR) today announced results for the first quarter of 2020 with a profit after tax of $8.63 million, compared to $9.07 million in the previous quarter ending December 31, 2019.

“We are in unprecedented times,” said Gary Hartwick, president and CEO. “During the first quarter, Exchange Bank responded to the needs of our customers as a result of the COVID-19 pandemic. Since our founding in 1890, we have stood by our customers through the best and worst of economic times. Our current focus is on the health and wellbeing of our employees and customers. Before we begin discussion of our first quarter financial results, we want to let our customers and community know that we are here to provide support during this crisis. To this end, we have provided support to all of our employees by retaining them at full pay, even with reductions in work schedules. In support of our customers, we have waived certain deposit related fees and provided payment deferrals to many loan clients who have been negatively impacted by the coronavirus crisis. We have also expended tremendous resources participating in the SBA Paycheck Protection Program under the CARES Act. The tireless work and dedication of our employees to meet the needs of our customers in nothing short of spectacular,” stated Hartwick.

The Bank’s net income of $8.63 million, compared to $9.07 million in the first quarter of 2019, shows a decrease in earnings which can be attributed to a slight decline in net interest income during a period of declining interest rates, combined with normally scheduled increases in operating expenses. The Bank’s net interest income declined marginally from $24.1 million during the first quarter of 2019 to $23.9 million during the first quarter of 2020. “During a period of time when treasury yields were in a long, steady downward decline that accelerated to record lows with the onset of the coronavirus pandemic, prudent management of the Bank’s balance sheet contributed to a margin that declined only slightly, falling from 3.83% during the first quarter of 2019 to 3.82% during the first quarter of 2020,” stated Greg Jahn, executive vice president and CFO.

The Bank’s margin was bolstered by a better mix of interest earning assets, as higher yielding loans increased by approximately $80 million year-over-year, funded primarily by a decrease in lower-yielding investment securities. Credit quality remains strong, as such—there was no provision for loan losses in the first quarter. The slight decline of $28 million in deposits masks the true growth in underlying core deposits. The decline in deposits is distorted by the withdrawal of approximately $137 million in fire-related insurance deposits which had been temporarily placed at the Bank as a result of the devasting wildfires occurring late in 2017. As the rebuild efforts have continued, those clients have had the opportunity to utilize cash reserves from their insurance proceeds held at the Bank to rebuild or relocate their primary residence. The Bank expects this trend of deposits utilized to support the rebuild efforts to continue throughout 2020. The deposit decline of $28 million, after accounting for runoff of $137 million in insurance related deposits, resulted in the growth in the stable base of core deposits of approximately $109 million.

While non-interest income during the first quarter of 2020 was almost unchanged from the $5.86 million recognized during the first quarter of 2019, the Bank began to witness significant declines in several areas of non-interest income that are associated with the weakening in personal consumption, such as interchange fees and overdraft fee income. These declines, which began to surface as a result of the coronavirus pandemic and the associated implementation of social distancing measures, were generally offset by an increase in Trust and Investment Management fees. The increase in Trust revenue was positively impacted by the acquisition of approximately $70 million of Trust assets from First American Trust and Savings in the South Bay market. This acquisition was completed in the second quarter of 2019 and added revenues of approximately $250 thousand during the quarter ending March 31, 2020.

Exchange Bank paid a quarterly cash dividend of $1.20 per share on common stock outstanding to shareholders on March 20, 2020. 50.44% of the cash dividend goes to the Doyle Trust which funds the Doyle Scholarships at the Santa Rosa Junior College.

About Exchange Bank

Headquartered in Sonoma County and founded in 1890, Exchange Bank is a premier community bank with assets of $2.6 billion. Exchange Bank provides 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 a 14-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 2019 Healthiest Companies in the North Bay Award. NorthBay biz magazine named Exchange Bank the 2020 Best Consumer and Best Business Bank. The North Bay Bohemian’s Best of 2019 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—claiming the #1 position in SBA 7(a) lending in Sonoma County for 2019. www.exchangebank.com.

Member FDIC — Equal Housing Lender — Equal Opportunity Employer

EXCHANGE BANK
and Subsidiaries
     
Consolidated Balance Sheets
(Unaudited)
     
March 31, 2020 and 2019    
(In Thousands)    
  Change   % Change
ASSETS

2020

2019

 

20/19

 

20/19

     
Cash and due from banks

$

32,085

 

$

40,625

 

 

$

(8,540

)

 

-21.02

%

Federal Reserve Bank

 

108,659

 

 

85,581

 

 

 

23,078

 

 

26.97

%

Total Cash and cash equivalents

 

140,744

 

 

126,206

 

 

 

14,538

 

 

11.52

%

     
Investments    
Interest-earning deposits in other financial institutions

 

51,000

 

 

54,000

 

 

 

(3,000

)

 

-5.56

%

Securities available for sale

 

756,453

 

 

842,747

 

 

 

(86,294

)

 

-10.24

%

FHLB Stock

 

13,483

 

 

11,303

 

 

 

2,180

 

 

19.29

%

     
Loans and leases    
Real estate

 

1,127,525

 

 

1,040,163

 

 

 

87,362

 

 

8.40

%

Consumer

 

132,641

 

 

125,454

 

 

 

7,187

 

 

5.73

%

Commercial

 

328,527

 

 

343,118

 

 

 

(14,591

)

 

-4.25

%

     

 

1,588,693

 

 

1,508,735

 

 

 

79,958

 

 

5.30

%

Less allowance for loan and lease losses

 

(39,959

)

 

(39,577

)

 

 

(382

)

 

0.97

%

     
Net loans and leases

 

1,548,734

 

 

1,469,158

 

 

 

79,576

 

 

5.42

%

     
Bank premises and equipment

 

18,180

 

 

18,499

 

 

 

(319

)

 

-1.72

%

Other assets

 

111,594

 

 

110,525

 

 

 

1,069

 

 

0.97

%

     
Total Assets

$

2,640,188

 

$

2,632,438

 

 

$

7,750

 

 

0.29

%

     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Deposits    
Non-Interest Bearing Demand

$

870,713

 

$

829,263

 

 

$

41,450

 

 

5.00

%

Interest Bearing    
Transaction

 

470,210

 

 

499,524

 

 

 

(29,314

)

 

-5.87

%

Money market

 

277,522

 

 

305,570

 

 

 

(28,048

)

 

-9.18

%

Savings

 

504,230

 

 

526,727

 

 

 

(22,497

)

 

-4.27

%

Time

 

194,092

 

 

184,022

 

 

 

10,070

 

 

5.47

%

     
Total Deposits

 

2,316,767

 

 

2,345,106

 

 

 

(28,339

)

 

-1.21

%

     
Other liabilities

 

42,509

 

 

44,439

 

 

 

(1,930

)

 

-4.34

%

     
Total liabilities

 

2,359,276

 

 

2,389,545

 

 

 

(30,269

)

 

-1.27

%

     
Stockholders' equity

 

280,912

 

 

242,893

 

 

 

38,019

 

 

15.65

%

     
Total Liabilities and Stockholder's Equity

$

2,640,188

 

$

2,632,438

 

 

$

7,750

 

 

0.29

%

EXCHANGE BANK
and Subsidiaries
     
Consolidated Statements of Operations
(Unaudited)
     
For the Period Ended March 31, 2020 and 2019
(In Thousands, except per share amounts)   Three Months Ended
Three Months Ended   Change   % Change

2020

2019

 

20/19

 

20/19

     
Interest Income    
Interest and fees on loans

$

19,790

$

19,193

 

$

597

 

 

3.11

%

Interest on investments securities

 

5,222

 

5,970

 

 

(748

)

 

-12.53

%

     
Total interest income

 

25,012

 

25,163

 

 

(151

)

 

-0.60

%

     
Interest expense    
Interest on deposits

 

1,109

 

1,068

 

 

41

 

 

3.84

%

Total interest expense

 

1,109

 

1,068

 

 

41

 

 

3.84

%

     
Net interest income

 

23,903

 

24,095

 

 

(192

)

 

-0.80

%

     
Provision (reversal of) for losses on loans

 

-

 

-

 

 

-

 

 

0.00

%

     
Net interest income after provision for loan and leases

 

23,903

 

24,095

 

 

(192

)

 

-0.80

%

     
Non-interest income

 

5,870

 

5,858

 

 

12

 

 

0.20

%

     
Non interest expense    
Salary and benefit costs

 

10,026

 

9,743

 

 

283

 

 

2.90

%

Other expenses

 

7,759

 

7,562

 

 

197

 

 

2.61

%

Total non-interest expense

 

17,785

 

17,305

 

 

480

 

 

2.77

%

     
Income before income taxes

 

11,988

 

12,648

 

 

(660

)

 

-5.22

%

     
Provision for income taxes

 

3,356

 

3,581

 

 

(225

)

 

-6.28

%

     
Net income

$

8,632

$

9,067

 

$

(435

)

 

-4.80

%

     
     
Basic earnings per common share

$

5.04

$

5.29

 

$

(0.25

)

 

-4.80

%

Dividends per share

$

1.20

$

1.05

 

$

0.15

 

 

14.29

%

     
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 2020 and 2019 was 1,714,344

 

Contacts

Greg Jahn
EVP, Chief Financial Officer
Exchange Bank
(707) 524-3218

Contacts

Greg Jahn
EVP, Chief Financial Officer
Exchange Bank
(707) 524-3218