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Exchange Bank Announces First Quarter 2021 Earnings
[May 06, 2021]

Exchange Bank Announces First Quarter 2021 Earnings


Exchange Bank (OTC: EXSR) today announced results for the first quarter of 2021, reporting net income after taxes of $8.49 million, compared with $8.63 million for the same quarter in 2020, a decrease of 1.60%. The decrease in earnings in the first quarter of 2021 can be directly attributed to declines in net interest income, non-interest income and the resumption of provisioning for loan losses.

"In response to the pandemic and the resulting societal and economic disruptions, the Bank began provisioning for loan losses in the third quarter of 2020 in a defensive posture," said Troy Sanderson, president and CEO. "If not for the provision of $1.2 million in the first quarter of 2021, year-over-year first quarter income would actually be up 12.28%."

The Bank's net interest income declined slightly from $23.90 million during the three months ended March 31, 2020 to $23.27 million the same period in 2021. During a period of time when treasury yields remained anchored near historic lows, the Bank's margin was negatively impacted by declines in yields on loans and investments that surpassed the Bank's ability to affect a similar decline in interest expense through a lower cost of funds. The loss of interest income was somewhat offset by the PPP loans booked in both 2020 and 2021. As of March 31, 2021, the Bank had a total of $227 million in PPP loans. Other liquid investments increased approximately $226 million between March 31, 2020 and 2021. The Bank's net interest margin decreased from 3.89% in 2020 to 3.08% in 2021. The Bank expects net interest margin challenges to continue into 2021 with the expectation that treasury yields will remain low.

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 declined from $5.87 million in the first quarter of 2020 to $5.41 million in the similar period in 2021. This decline can be attributed to three main factors: 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 dramatically reduced consumer spending; and lower SBA fee income due to diminished business activities during this period.

The previously discussed declines in revenue were somewhat offset by the Bank's focus on controlling operating expenses. The Bank was successful in reducing operating expenses during the three months ending March 31, 2021 by approximately $2.07 million or 11.62% in comparison to the three months ended March 31, 2020. In 2020, the Bank had one-time expenses related to its core operating system conversion.

The quality of the Bank's loan portfolio remains strong; however, due to the economic uncertainty that exists today, the Bank elected to strengthen its reserve for potential future losses with a provision for loan loss totaling $1.2 million during the first quarter of 2021. The Bank did not take a provision for loan loss during the similar period in 2020.

The Bank experienced a dramatic increase in deposit balances which were up year-over-year by approximately $624 million or 27%. 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 December 31, 2020 was bolstered by the PPP loans and deposit growth as previously noted. Total assets increased to $3.29 billion as of March 31, 2021 up from $2.64 billion in 2020, an increase of 24.76%. Gross loans increased from $1.59 billion in 2020 to $1.72 billion in 2021.

The Bank's capital ratios remain well in excess of the regulatory definitions of "well capitalized." As of March 31, 2021, the Bank reported total risk-based capital of 19.09%.

"The Bank again posted solid earnings in the first quarter of 2021 while maintaining strong capital, liquidity and credit quality," said Mr. Sanderson. "As we look forward to the promise of post-pandemic days ahead, we continue to stand ready to serve as our community's cornerstone financial institution, assisting our customers, friends and neighbors as only a locally-run and independent community bank can do."

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 $3.1 billion. Exchange Bank provides a wide range of personal, commercial and trust and investment services with 18 branches in Sonoma County and a commercial branch in Roseville, 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 15-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 Bank and Best Business Bank. The Petaluma People's Choice Awards named Exchange Bank the Best Local Bank and 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 2020. www.exchangebank.com.

Member FDIC - Equal Housing Lender - Equal Opportunity Employer





EXCHANGE BANK
and Subsidiaries
 
Consolidated Balance Sheets
(Unaudited)
 
March 31, 2021 and 2020
(In Thousands)

 

 

 

 

Change

 

% Change

ASSETS

2021

 

2020

 

21/20

 

21/20

 
Cash and due from banks

$

26,093

 

$

32,385

 

$

(6,292

)

-19.43

%

Federal Reserve Bank

 

401,696

 

 

108,659

 

 

293,037

 

269.68

%

Total Cash and cash equivalents

 

427,789

 

 

141,044

 

 

286,745

 

203.30

%

 
Investments
Interest-earning deposits in other financial institutions

 

31,000

 

 

51,000

 

 

(20,000

)

-39.22

%

Securities available for sale

 

1,002,417

 

 

756,453

 

 

245,964

 

32.52

%

FHLB Stock

 

13,483

 

 

13,483

 

 

-

 

0.00

%

 
Loans and leases
Real estate

 

1,088,199

 

 

1,127,525

 

 

(39,326

)

-3.49

%

Consumer

 

134,223

 

 

132,641

 

 

1,582

 

1.19

%

Commercial

 

496,178

 

 

328,527

 

 

167,651

 

51.03

%

 

 

1,718,600

 

 

1,588,693

 

 

129,907

 

8.18

%

Less allowance for loan and lease losses

 

(42,724

)

 

(39,959

)

 

(2,765

)

6.92

%

 
Net loans and leases

 

1,675,876

 

 

1,548,734

 

 

127,142

 

8.21

%

 
Bank premises and equipment

 

19,987

 

 

18,181

 

 

1,806

 

9.93

%

Other assets

 

123,658

 

 

111,593

 

 

12,065

 

10.81

%

 
Total Assets

$

3,294,210

 

$

2,640,488

 

$

653,722

 

24.76

%

 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deposits
Non-Interest Bearing Demand

$

1,188,364

 

$

871,011

 

$

317,353

 

36.44

%

Interest Bearing
Transaction

 

566,228

 

 

470,210

 

 

96,018

 

20.42

%

Money market

 

358,731

 

 

277,523

 

 

81,208

 

29.26

%

Savings

 

641,057

 

 

504,231

 

 

136,826

 

27.14

%

Time

 

186,267

 

 

194,092

 

 

(7,825

)

-4.03

%

 
Total Deposits

 

2,940,647

 

 

2,317,067

 

 

623,580

 

26.91

%

 
Other liabilities

 

49,239

 

 

42,510

 

 

6,729

 

15.83

%

 
Total liabilities

 

2,989,886

 

 

2,359,577

 

 

630,309

 

26.71

%

 
Stockholders' equity

 

304,324

 

 

280,911

 

 

23,413

 

8.33

%

 
Total Liabilities and Stockholder's Equity

$

3,294,210

 

$

2,640,488

 

$

653,722

 

24.76

%


EXCHANGE BANK

and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Operations

(Unaudited)

 
For the Period Ended March 31, 2021 and 2020
(In Thousands, except per share amounts)

 

Three Months Ended

Quarter Ended

 

Three Months Ended

 

Change

 

% Change

2021

 

2020

 

2021

 

2020

 

21/20

 

21/20

 
Interest Income
Interest and fees on loans

$

19,906

$

19,790

$

19,906

$

19,790

$

116

 

0.59

%

Interest on investments securities

 

3,849

 

5,222

 

3,849

 

5,222

 

(1,373

)

-26.29

%

 
Total interest income

 

23,755

 

25,012

 

23,755

 

25,012

 

(1,257

)

-5.03

%

 
Interest expense
Interest on deposits

 

481

 

1,109

 

481

 

1,109

 

(628

)

-56.63

%

Total interest expense

 

481

 

1,109

 

481

 

1,109

 

(628

)

-56.63

%

 
Net interest income

 

23,274

 

23,903

 

23,274

 

23,903

 

(629

)

-2.63

%

 
Provision (reversal of) for losses on loans  

 

1,200

 

-

 

1,200

 

-

 

1,200

 

0.00

%

 
Net interest income after provision for loan and leases

 

22,074

 

23,903

 

22,074

 

23,903

 

(1,829

)

-7.65

%

 
Non-interest income

 

5,408

 

5,870

 

5,408

 

5,870

 

(462

)

-7.87

%

 
Non interest expense
Salary and benefit costs

 

8,674

 

10,026

 

8,674

 

10,026

 

(1,352

)

-13.48

%

Other expenses

 

7,045

 

7,759

 

7,045

 

7,759

 

(714

)

-9.20

%

Total non-interest expense

 

15,719

 

17,785

 

15,719

 

17,785

 

(2,066

)

-11.62

%

 
Income before income taxes

 

11,763

 

11,988

 

11,763

 

11,988

 

(225

)

-1.88

%

 
Provision for income taxes

 

3,269

 

3,356

 

3,269

 

3,356

 

(87

)

-2.59

%

 
Net income

$

8,494

$

8,632

$

8,494

$

8,632

$

(138

)

-1.60

%

 
 
Basic earnings per common share

$

4.95

$

5.04

$

4.95

$

5.04

$

(0.09

)

-1.60

%

Dividends per share

$

1.20

$

1.20

$

1.20

$

1.20

$

-

 

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

 


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