Exchange Bank Announces Second Quarter Earnings

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Jul 22, 2016, 04:08 ET

SANTA ROSA, Calif., July 22, 2016 /PRNewswire/ -- Today, Exchange Bank (OTC:EXSR) announced results for the second quarter of 2016 with a profit after tax of $5.46 million, compared to $5.63 million in the second quarter of 2015. This represents a decrease of $173 thousand or a 3% decline compared to the same period a year ago. "The decline in earnings for the second quarter does not tell the true story of strength in core earnings. Absent a decline in non-recurring income in the form of reversal of provision for loan loss, which fell from $2.5 million in the second quarter of 2015 to a recovery of $400 thousand during the second quarter of 2016, core earnings would have demonstrated continued improvement," stated Gary Hartwick, President and CEO. As a result of the significant improvement in our credit quality and the recovery of loans previously charged off, $2.5 million in provision for loan losses was reversed during the second quarter of 2015 compared to a recovery of loans previously charged off of just $400 thousand during the second quarter of 2016. The Bank's level of reserves to support future loan losses remains robust in comparison to industry standards and is supported by the Bank's strong asset quality.

The core earnings of the Bank, absent the non-recurring elements of income and expense, are driven primarily by continued growth in loans which were funded by growth in deposits. Loan growth of $113 million or 9.3% during the 12 months ending June 30, 2016 was funded by deposit growth of $105 million or 6.1%.This asset growth led to an increase in net interest income of approximately $800 thousand during the second quarter of 2016, a 4.7% increase over the similar quarter in 2015.

During the six-months ending June 30, 2016, the Bank achieved net earnings of $10.66 million, compared to $10.77MM during the similar six-month period in 2015. During the six-months ending June 30, 2016 the Bank's core earnings as measured by net interest income increased $2.1 million over the similar six-month period in 2015, an increase of 6.3%. Earnings were generally flat year-over-year as this increase in net interest income was offset by the decline in the recapture of provision for loan loss which fell from $2.9 million for the six-months ending June 30, 2015 to $900 thousand during the similar six month period ending June 30, 2016.

"Given the headwinds created by a slowing global economy and Treasury yields that have fallen recently to all-time lows, 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 $113 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 Mr. Hartwick. "The challenges of operating in this historically low interest rate environment will be a difficult hurdle to overcome as we attempt to continue growing the Bank's earnings in future periods," said Greg Jahn Executive Vice President and CFO.

Exchange Bank paid a quarterly cash dividend of $0.70 per share on common stock outstanding to shareholders on June 17, 2016. 51% of the 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.

EXCHANGE BANK
and Subsidiaries

Consolidated Balance Sheet
(Unaudited)

June 30, 2016 and 2015
(In Thousands)
			Change	% Change
ASSETS	2016	2015	16/15	16/15

Cash and due from banks	$ 31,971	$ 31,753	218	0.69%
Fed Funds Sold	25,510	81,535	(56,025)	-68.71%
Total Cash and cash equivalents	57,481	113,288	(55,807)	-49.26%

Investments
Interest-earning deposits in other financial institutions	77,500	63,000	14,500	23.02%
Securities available for sale	513,395	475,070	38,325	8.07%
FHLB Stock	10,015	9,036	979	10.83%

Loans and leases
Real estate	919,551	800,610	118,941	14.86%
Consumer	110,118	96,957	13,161	13.57%
Commercial	297,380	316,143	(18,763)	-5.93%

	1,327,049	1,213,710	113,339	9.34%
Less allowance for loan and lease losses	(37,854)	(37,512)	(342)	0.91%

Net loans and leases	1,289,195	1,176,198	112,997	9.61%

Bank premises and equipment	17,180	16,312	868	5.32%
Other assets	81,020	69,747	11,273	16.16%

Total Assets	$ 2,045,786	$ 1,922,651	123,135	6.40%


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
Non-Interest Bearing Demand	667,853	648,014	19,839	3.06%
Interest Bearing
Transaction	325,172	279,143	46,029	16.49%
Money market	261,860	229,472	32,388	14.11%
Savings	380,415	356,745	23,670	6.63%
Time	198,921	215,709	(16,788)	-7.78%

Total Deposits	1,834,221	1,729,083	105,138	6.08%

Other borrowings	8,000	8,000	-	0.00%
Other liabilities	20,293	16,914	3,379	19.98%

Total liabilities	1,862,514	1,753,997	108,517	6.19%

Stockholders' equity	183,272	168,654	14,618	8.67%

Total Liabilities and Stockholder's Equity	$ 2,045,786	$ 1,922,651	123,135	6.40%

EXCHANGE BANK
and Subsidiaries

Consolidated Statement of Operations
(Unaudited)

For the Period Ended June 30, 2016 and 2015
(In Thousands, except per share amounts)					Six Months Ending
	Quarter		Six Months Ending		Change	% Change
	2016	2015	2016	2015	16/15	16/15

Interest Income
Interest and fees on loans	$ 15,526	$ 14,978	$ 30,968	$ 29,589	$ 1,379	4.66%
Interest on investments securities	2,672	2,775	5,350	5,153	197	3.83%

Total interest income	18,198	17,753	36,318	34,742	1,576	4.54%

Interest expense
Interest on deposits	191	254	397	560	(163)	-29.09%
Other interest expense	95	383	190	562	(372)	-66.18%
Total interest expense	286	637	587	1,122	(535)	-47.66%

Net interest income	17,912	17,116	35,731	33,620	2,111	6.28%

Provision (reversal of) for losses on loans	(400)	(2,500)	(900)	(2,900)	2,000	-68.97%

Net interest income after provision for loan and leases	18,312	19,616	36,631	36,520	111	0.30%

Non-interest income	5,120	5,020	9,883	10,621	(738)	-6.95%

Non interest expense
Salary and benefit costs	8,246	8,652	16,941	16,395	546	3.33%
Other expenses	6,352	6,565	12,378	12,854	(476)	-3.70%
Total non-interest expense	14,598	15,217	29,319	29,249	70	0.24%

Income before income taxes	8,834	9,419	17,194	17,892	(698)	-3.90%

Provision for income taxes	3,372	3,784	6,538	7,123	(585)	-8.21%

Net income	$ 5,462	$ 5,635	$ 10,656	$ 10,769	$ (113)	-1.05%


Basic earnings per common share	$ 3.19	$ 3.29	$ 6.22	$ 6.28	$ (0.07)	-1.05%
Dividends per share	$ 0.70	$ 0.55	$ 1.35	$ 1.05	$ 0.30	28.57%