Exchange Bank Announces Fourth Quarter and Year Ending 2021 Earnings

Rhea-AI Summary

Exchange Bank (OTC: EXSR) reported a net income of $9.85 million for Q4 2021, up 6.60% from $9.24 million in Q4 2020. For the full year, net income reached $36.41 million, compared to $33.70 million in 2020. The rise in earnings is attributed to a $2.11 million increase in non-interest income and a $4 million decrease in non-interest expense. However, net interest income declined from $96.38 million to $93.55 million, impacting the net interest margin, which decreased from 3.46% to 2.87%. Total assets increased to $3.53 billion, with deposits rising by $401 million.

Positive

• Q4 2021 net income of $9.85 million, up 6.60% YoY.
• Full-year net income of $36.41 million, compared to $33.70 million in 2020.
• Non-interest income increased by $2.11 million.
• Non-interest expenses decreased by $4 million.
• Deposit growth of $401 million (14.42%) driven by PPP loan funds and cash holdings.

Negative

• Net interest income declined from $96.38 million to $93.55 million.
• Net interest margin decreased from 3.46% to 2.87%.
• Potential runoff of excess deposits may impact future liquidity.

SANTA ROSA, Calif.--(BUSINESS WIRE)-- Exchange Bank (OTC: EXSR) today announced results for the fourth quarter and year ending 2021, reporting net income after taxes of $9.85 million in the fourth quarter of 2021, compared with $9.24 million for the same quarter in 2020, an increase of 6.60%. The Bank achieved net income for the year ended December 31, 2021 of $36.41 million.

“We achieved these solid financial results again with a steady focus on our core mission—assisting our customers, especially our commercial customers, during very difficult economic times,” 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. Exchange Bank expended tremendous internal resources participating in the 2021 round of the SBA Paycheck Protection Program (PPP) under the CARES Act. As a result of this effort, they were successful in providing loans to 1,094 small businesses in the community with loan balances totaling approximately $125 million. This is in addition to the $260 million in PPP loans made by the Bank in 2020.

“We are extremely proud of our lending teams,” said Sanderson. “Their work on the PPP loan program in 2021 again provided a desperately needed lifeline to over one thousand small businesses, many family owned, in our community.”

Exchange Bank’s net income for 2021 was $36.41 million, compared with $33.70 million in 2020. The increase in earnings can be attributed to increases in non-interest income of $2.11 million and decreases of non-interest expense of $4 million. These increases in net income were offset by the decline in net interest income. The Bank’s 2021 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 from $96.38 million during the 12 months ended December 31, 2020 to $93.55 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. As a result, the Bank experienced a decline of $2.83 million in net interest income for the 12 months ended December 31, 2021 compared with the similar period in 2020. The loss of interest income was somewhat offset by the increase in interest income as a result of the recognition of SBA fees related to PPP loans of $8.87 million and the growth of other liquid investments totaling approximately $466.54 million. The Bank’s net interest margin decreased from 3.46% in 2020 to 2.87% in 2021. The Bank expects net interest margin challenges to continue into 2022.

Non-interest income increased from $21.54 million in 2020 to $23.65 million in 2021. The Bank’s Trust & Investment Management department exceeded $10 million in income for the first time, ending the year with $10.48 million in income as compared to $8.95 million for 2020. During 2021, the Bank continued to witness 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. Fees related to customer account usage were down $435 thousand in 2021 when compared to 2020.

Also adding to the increased net income for 2021 was 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, 2021, by approximately $4 million or 5.82%. During 2020, the Bank had one-time expenses related to its core operating system conversion of approximately $2.3 million before taxes.

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 $2.00 million during 2021. The Bank took a provision for loan loss of $1.80 million during the similar period in 2020.

Overall, the Bank’s balance sheet growth for the year ending December 31, 2021 was bolstered by deposit growth. Total assets increased to $3.53 billion as of December 31, 2021, up from $3.14 billion in 2020, an increase of 12.67%. Gross loans decreased from $1.73 billion in 2020 to $1.51 billion in 2021. Forgiveness of SBA PPP loans accounted for $133.22 million of the decrease.

The Bank experienced a dramatic increase in deposit balances which were up year-over-year by approximately $401 million or 14.42%. This increase in deposits was due in part to the business deposits totaling approximately $125 million relating to the deposit of PPP loan funds received by Bank clients. In addition, proceeds from loan forgiveness and paydowns of $133 million added to cash balances. An additional source of deposits totaling $144 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 Bank also grew its investment portfolio by $467 million in 2021 as a result of the increase in deposits during 2021.

The Bank’s capital ratios remain well in excess of the regulatory definitions of “well capitalized.” As of December 31, 2021, the Bank reported total risk-based capital of 21.50%.

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 full-service community bank with assets of $3.5 billion. Exchange Bank provides a wide range of personal, commercial and trust and investment services with 17 retail branches in Sonoma County, a commercial branch in Roseville, and trust and investment offices in Santa Rosa, Roseville and Silicon Valley. 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 known for its people who care about their customers, their company, and the communities where they live and work. The Bank is a 16-year winner of the North Bay Business Journal’s Best Places to Work survey and was named Best Bank by the Press Democrat’s 2021 Best of Sonoma County Reader’s Choice awards. The Sonoma Valley People’s Choice awards named Exchange Bank the Best Local Bank 2021. www.exchangebank.com.

Member FDIC — Equal Housing Lender — Equal Opportunity Employer

EXCHANGE BANK
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
December 31, 2021 and 2020
(In Thousands)
										Change				% Change
ASSETS		2021				2020				21/20				21/20
Cash and due from banks		$	24,712			$	35,316			$	(10,604	)		-30.03	%
Federal Reserve Bank			448,257				301,095				147,162			48.88	%
Total Cash and cash equivalents			472,969				336,411				136,558			40.59	%
Investments
Interest-earning deposits in other financial institutions			17,000				38,000				(21,000	)		-55.26	%
Securities available for sale			1,407,247				919,705				487,542			53.01	%
FHLB Stock			14,465				13,483				982			7.28	%
Loans and leases
Real estate			1,076,593				1,113,241				(36,648	)		-3.29	%
Consumer			135,446				477,518				(342,072	)		-71.64	%
Commercial			298,068				136,930				161,138			117.68	%
			1,510,107				1,727,689				(217,582	)		-12.59	%
Less allowance for loan and lease losses			(43,847	)			(41,668	)			(2,179	)		5.23	%
Net loans and leases			1,466,260				1,686,021				(219,761	)		-13.03	%
Bank premises and equipment			18,717				20,498				(1,781	)		-8.69	%
Other assets			140,093				124,979				15,114			12.09	%
Total Assets		$	3,536,751			$	3,139,097			$	397,654			12.67	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-Interest Bearing Demand		$	1,232,666			$	1,118,093			$	114,573			10.25	%
Interest Bearing
Transaction			642,026				875,589				(233,563	)		-26.67	%
Money market			420,451				326,327				94,124			28.84	%
Savings			706,719				267,251				439,468			164.44	%
Time			177,256				191,313				(14,057	)		-7.35	%
Total Deposits			3,179,118				2,778,573				400,545			14.42	%
Other liabilities			38,431				55,606				(17,175	)		-30.89	%
Total liabilities			3,217,549				2,834,179				383,370			13.53	%
Stockholders' equity			319,202				304,918				14,284			4.68	%
Total Liabilities and Stockholder's Equity		$	3,536,751			$	3,139,097			$	397,654			12.67	%

EXCHANGE BANK
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Period Ended December 31, 2021 and 2020
(In Thousands, except per share amounts)															Twelve Months Ended
			Quarter Ended						Twelve Months Ended						Change			% Change
			2021			2020			2021			2020			21/20			21/20
Interest Income
Interest and fees on loans			$	18,533		$	21,953		$	77,880		$	82,339		$	(4,459	)	-5.42	%
Interest on investments securities				4,938			3,867			17,426			17,337			89		0.51	%
Total interest income				23,471			25,820			95,306			99,676			(4,370	)	-4.38	%
Interest expense
Interest on deposits				421			613			1,757			3,297			(1,540	)	-46.71	%
Total interest expense				421			613			1,757			3,297			(1,540	)	-46.71	%
Net interest income				23,050			25,207			93,549			96,379			(2,830	)	-2.94	%
Provision (reversal of) for losses on loans				-			900			2,000			1,800			200		0.00	%
Net interest income after
provision for loan and leases				23,050			24,307			91,549			94,579			(3,030	)	-3.20	%
Non-interest income				6,740			5,704			23,645			21,535			2,110		9.80	%
Non interest expense
Salary and benefit costs				8,203			9,701			35,622			38,922			(3,300	)	-8.48	%
Other expenses				7,838			6,631			29,024			29,719			(695	)	-2.34	%
Total non-interest expense				16,041			16,332			64,646			68,641			(3,995	)	-5.82	%
Income before income taxes				13,749			13,679			50,548			47,473			3,075		6.48	%
Provision for income taxes				3,899			4,443			14,138			13,774			364		2.64	%
Net income			$	9,850		$	9,236		$	36,410		$	33,699		$	2,711		8.04	%
Basic earnings per common share			$	5.75		$	5.39		$	21.24		$	19.66		$	1.58		8.04	%
Dividends per share			$	1.20		$	1.20		$	4.80		$	4.80		$	-		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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220217005323/en/

Shari DeMaris

EVP, Chief Financial Officer

Exchange Bank

(707) 524-3067

Source: Exchange Bank

FAQ

What were Exchange Bank's earnings for Q4 2021?

Exchange Bank reported a net income of $9.85 million for Q4 2021.

How much did Exchange Bank earn for the full year 2021?

For the full year 2021, Exchange Bank reported net income of $36.41 million.

What is the stock symbol for Exchange Bank?

The stock symbol for Exchange Bank is EXSR.

How has Exchange Bank's net interest income changed in 2021?

Exchange Bank's net interest income declined from $96.38 million in 2020 to $93.55 million in 2021.

What caused the increase in Exchange Bank's deposits in 2021?

Deposits increased by approximately $401 million due to PPP loan funds and a shift to cash holdings.