Exchange Bank Announces Fourth Quarter and Year Ending 2020 Earnings | Financial Buzz

Exchange Bank Announces Fourth Quarter and Year Ending 2020 Earnings

Exchange Bank (OTC: EXSR) today announced results for the fourth quarter and year ending 2020, reporting net income after taxes of $9.24 million in the fourth quarter of 2020, compared with $9.07 million for the same quarter in 2019, an increase of 1.87%. The Bank achieved net income for the year ended December 31, 2020 of $33.70 million.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210215005046/en/

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

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

“In a historically low interest rate environment, and in the midst of a significant economic disruption caused by the pandemic, the Bank posted solid operating results in 2020 by focusing on its core mission as a community bank—supporting our customers,” said Troy Sanderson, president and CEO.

The Bank continues to support its customers, providing payment deferrals to borrowers who have been negatively impacted by the COVID-19 virus. For a portion of 2020, the Bank also waived ATM and overdraft fees for their consumer and business customers. Exchange Bank expended tremendous internal resources participating in the SBA Paycheck Protection Program (PPP) under the CARES Act. As a result of this effort, they were successful in providing loans to 1,780 small businesses in the community with loan balances totaling approximately $260 million.

“I am extremely proud of our employees who worked tirelessly to secure this much needed financial support for our local small businesses through the PPP program,” said Sanderson. “Even more impressive, $22 million of these PPP loans were made to local nonprofit and charitable organizations, enabling them to continue to provide critical needed assistance to our community during these very difficult times.”

Exchange Bank’s net income for 2020 was $33.70 million, compared with $36.50 million in 2019. The decrease in earnings can be directly attributed to declines in net interest income, non-interest income and an increase in the provision for loan loss. The Bank’s 2020 results were heavily 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. The Bank’s net interest income declined slightly from $96.91 million during the 12 months ended December 31, 2019 to $96.38 million the same period in 2020. 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. As a result, the Bank experienced a decline of $531 thousand in net interest income for the 12 months ended December 31, 2020 compared with the similar period in 2019. The loss of interest income was somewhat offset by the increase in interest income as a result of the growth of $260 million in PPP loans and other liquid investments totaling approximately $180 million. The Bank’s net interest margin decreased from 3.89% in 2019 to 3.46% in 2020. The Bank expects net interest margin challenges to continue into 2021 with the expectation that treasury yields will remain low.

Non-interest income declined from $24.23 million in 2019 to $21.54 million in 2020. During 2020, the Bank witnessed significant declines in various elements of deposit service fee income that are directly associated with a weaker level of personal consumption and low interest rates, as well as a reduction in SBA revenue due to the lack of new business formation in the midst of this crisis.

The previously discussed declines in revenue were somewhat offset by the Bank’s focus on controlling operating expenses. Adjusting to an environment of generally slower business activity, the Bank was successful in reducing operating expenses during the 12 months ending December 31, 2020, by approximately $1.70 million or 2.41%. In addition, during 2020, the Bank had one-time expenses related to its core operating system conversion of approximately $2.3 million before taxes. Without such expenses, the Bank’s 2020 income would have been closer to its 2019 results.

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 $1.8 million during 2020. The Bank did not take a provision for loan loss during the similar period in 2019.

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 $3.14 billion as of December 31, 2020 up from $2.67 billion in 2019, an increase of 17.43%. Gross loans increased from $1.58 billion in 2019 to $1.73 billion in 2020.

The Bank experienced a dramatic increase in deposit balances which were up year-over-year by approximately $424 million or 18%. This increase in deposits mainly occurred during the second quarter of 2020, resulting from business deposits totaling approximately $260 million relating to the deposit of PPP loan funds received by Bank clients. An additional source of deposits totaling $176 million came from 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. The effect of the 2021 PPP loan program on deposit and loan balances is uncertain at this time, but could have a material impact on the Bank’s results during the coming year.

The Bank’s capital ratios remain well in excess of the regulatory definitions of “well capitalized.” As of December 31, 2020, the Bank reported total risk-based capital of 15.92%.

“While 2020 was a financially successful year for Exchange Bank, it was also a year focused on a substantial investment in the continuity of our legacy,” said Mr. Sanderson. “Now, with two very large information technology upgrades implemented within the past two years, Exchange Bank is well-positioned to leverage these new capabilities to better support and serve our clients and community for many years to come.”

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)
 
December 31, 2020 and 2019
(In Thousands)

Change

% Change

ASSETS

 

2020

 

 

2019

 

 

20/19

 

20/19

 

 
Cash and due from banks

$

35,316

 

$

33,346

 

$

1,970

 

5.91

%

Federal Reserve Bank

 

301,095

 

 

171,609

 

 

129,486

 

75.45

%

Total Cash and cash equivalents

 

336,411

 

 

204,955

 

 

131,456

 

64.14

%

 
Investments
Interest-earning deposits in other financial institutions

 

38,000

 

 

60,000

 

 

(22,000

)

-36.67

%

Securities available for sale

 

919,705

 

 

718,055

 

 

201,650

 

28.08

%

FHLB Stock

 

13,483

 

 

13,483

 

 

 

0.00

%

 
Loans and leases
Real estate

 

1,113,241

 

 

1,115,374

 

 

(2,133

)

-0.19

%

Consumer

 

477,518

 

 

130,483

 

 

347,035

 

265.96

%

Commercial

 

136,930

 

 

335,412

 

 

(198,482

)

-59.18

%

 

 

1,727,689

 

 

1,581,269

 

 

146,420

 

9.26

%

Less allowance for loan and lease losses

 

(41,668

)

 

(39,907

)

 

(1,761

)

4.41

%

 
Net loans and leases

 

1,686,021

 

 

1,541,362

 

 

144,659

 

9.39

%

 
Bank premises and equipment

 

20,498

 

 

18,335

 

 

2,163

 

11.80

%

Other assets

 

124,979

 

 

116,928

 

 

8,051

 

6.89

%

 
Total Assets

$

3,139,097

 

$

2,673,118

 

$

465,979

 

17.43

%

 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Deposits
Non-Interest Bearing Demand

$

1,118,093

 

$

867,878

 

$

250,215

 

28.83

%

Interest Bearing
Transaction

 

875,589

 

 

491,374

 

 

384,215

 

78.19

%

Money market

 

326,327

 

 

294,817

 

 

31,510

 

10.69

%

Savings

 

267,251

 

 

514,755

 

 

(247,504

)

-48.08

%

Time

 

191,313

 

 

186,180

 

 

5,133

 

2.76

%

 
Total Deposits

 

2,778,573

 

 

2,355,004

 

 

423,569

 

17.99

%

 
Other liabilities

 

55,607

 

 

47,301

 

 

8,306

 

17.56

%

 
Total liabilities

 

2,834,180

 

 

2,402,305

 

 

431,875

 

17.98

%

 
Stockholders’ equity

 

304,917

 

 

270,813

 

 

34,104

 

12.59

%

 
Total Liabilities and Stockholder’s Equity

$

3,139,097

 

$

2,673,118

 

$

465,979

 

17.43

%

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

Twelve Months Ended

Quarter Ended

Twelve Months Ended

Change

% Change

2020

2019

2020

2019

20/19

20/19

 
Interest Income
Interest and fees on loans

$21,953

$19,789

$82,339

$78,845

$

3,494

 

4.43

%

Interest on investments securities

3,867

5,274

17,337

22,744

 

(5,407

)

-23.77

%

 
Total interest income

25,820

25,063

99,676

101,589

 

(1,913

)

-1.88

%

 
Interest expense
Interest on deposits

613

1,181

3,297

4,679

 

(1,382

)

-29.54

%

Total interest expense

613

1,181

3,297

4,679

 

(1,382

)

-29.54

%

 
Net interest income

25,207

23,882

96,379

96,910

 

(531

)

-0.55

%

 
Provision (reversal of) for losses on loans

900

1,800

 

1,800

 

0.00

%

 
Net interest income after
provision for loan and leases

24,307

23,882

94,579

96,910

 

(2,331

)

-2.41

%

 
Non-interest income

5,704

6,137

21,535

24,231

 

(2,696

)

-11.13

%

 
Non interest expense
Salary and benefit costs

9,701

9,881

38,922

39,061

 

(139

)

-0.36

%

Other expenses

6,631

7,515

29,719

31,277

 

(1,558

)

-4.98

%

Total non-interest expense

16,332

17,396

68,641

70,338

 

(1,697

)

-2.41

%

 
Income before income taxes

13,679

12,623

47,473

50,803

 

(3,330

)

-6.55

%

 
Provision for income taxes

4,443

3,552

13,774

14,302

 

(528

)

-3.69

%

 
Net income

$9,236

$9,071

$33,699

$36,501

$

(2,802

)

-7.68

%

 
 
Basic earnings per common share

$5.39

$5.29

$19.66

$21.29

$

(1.63

)

-7.68

%

Dividends per share

$1.20

$1.15

$4.80

$4.40

$

0.40

 

9.09

%

 
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

Shari DeMaris

EVP, Chief Financial Officer

Exchange Bank

(707) 524-3067