Exchange Bank Announces Second Quarter 2022 Earnings

Rhea-AI Summary

Exchange Bank (OTC: EXSR) reported a 15.82% increase in net income for Q2 2022, reaching $9.52 million compared to $8.22 million in Q2 2021. This growth was driven by a $1.3 million rise in net interest income, totaling $24.54 million, and a $0.8 million reduction in provision expense. However, the net interest margin decreased to 2.80%. Non-interest income also saw a minor increase to $6.07 million. The Bank's total assets rose to $3.45 billion.

The bank continues to maintain a strong liquidity position amidst rising interest rates.

Positive

• Net income increased 15.82% to $9.52 million.
• Net interest income grew by $1.3 million to $24.54 million.
• Non-interest income rose to $6.07 million, driven by increased usage fees.
• Total assets increased to $3.45 billion.

Negative

• Net interest margin decreased from 2.90% to 2.80%.
• Gross loans decreased from $1.68 billion to $1.52 billion.
• Book equity decreased by $91 million, or 29.45%, due to unrealized losses in the investment portfolio.

SANTA ROSA, Calif.--(BUSINESS WIRE)-- Exchange Bank (OTC: EXSR) today announced results for the second quarter of 2022, reporting net income after taxes of $9.52 million, compared with $8.22 million for the same quarter of 2021, an increase of 15.82%. The increase in earnings in the second quarter of 2022 can be attributed to increases in net interest income of $1.3 million and a decrease in provision expense of $0.8 million.

The Bank’s net interest income increased from $23.24 million during the three months ended June 30, 2021 to $24.54 million the same period in 2022. The increase in interest income is due in large part to a growth in core earning assets and interest income earned on the Bank’s investment portfolio. The investment portfolio interest was $2.80 million more in the second quarter of 2022 compared to the second quarter of 2021. In addition, interest earned on fed funds increased $350,000 in the 2022 quarter. These positive changes were offset by a decrease in PPP loans fees of $468,000 from 2021 to 2022. The Bank’s net interest margin decreased from 2.90% in 2021 to 2.80% in 2022. The Bank expects net interest margin challenges to continue into 2022 as market conditions for loans remain very competitive.

Non-interest income increased from $5.95 million in the second quarter of 2021 to $6.07 million in the similar period in 2022. This improvement can be attributed to an increase in consumer and business-related usage fees including interchange fees and ATM network fees. While not at pre-pandemic levels, usage-based fees have recovered from one year ago. Non-interest expenses increased 2.67% from 2021 to $17.47 million for the second quarter of 2022.

The quality of the Bank’s loan portfolio remains strong; the Bank did not take a provision for loan losses in the second quarter of 2022. Due to the economic uncertainty in the second quarter of 2021, the Bank elected to strengthen its reserve for potential future losses with a provision for loan loss totaling $0.8 million during the second quarter of 2021.

Total assets increased to $3.45 billion as of June 30, 2022 up from $3.43 million. The Bank’s cash position remains elevated at $163 million but down $336 million from $499 million in 2021. The excess cash remains from prior years and was related to PPP loans and economic stimulus received by our customers.

The Bank continues to deploy excess cash into its investment portfolio. The investment portfolio was $1.61 billion as of June 30, 2022 vs. $1.14 billion one year before. Gross loans decreased from $1.68 billion in 2021 to $1.52 billion in 2022. Overall, loan balances decreased $155 million with $189 million of the decrease coming from forgiveness of PPP loans. Core loans grew $34 million.

Deposits remain elevated with balances of $3.20 billion as of June 30, 2022. This is a year-over-year increase in core deposits of $126 million or 4%. It is possible the Bank could experience a certain level of 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.

During the six months ending June 30, 2022, the Bank achieved net earnings of $17.78 million, compared to $16.71 million during the similar six-month period in 2021, an increase of $1.06 million or 6.36%. The change was driven by factors related to net interest income and customer usage fees as described previously. Net interest income increased $0.41 million from $46.51 million for the six months ended June 30, 2021 to $46.92 million for the same period in 2022. $2.19 million of PPP loan fees are included in 2022 net interest income while $5.49 million was included in 2021, a decrease of $3.30 million. Interest on earning assets increased $3.71 million to more than cover the loss of PPP fee income. During the six months ending June 30, 2022, customer usage fees increased $0.82 million over 2021 to $4.25 million in 2022.

The Bank’s capital ratios remain well in excess of the regulatory minimums to be considered “well capitalized.” As of June 30, 2022, the Bank reported total risk-based capital of 19.37%. The Bank’s book equity decreased $91.0 million, or 29.45%, since June 30, 2021. This change in the Bank’s book equity is due to the unrealized losses associated with the investment portfolio. The unrealized losses have arisen due to the significant increase in interest rates since the end of 2021. The Bank has the intent and ability to hold the investments until maturity, expects full collection of the carrying amount of these securities, and does not expect to recognize the losses. The Bank does not view the temporary nature of the book unrealized losses to be a significant risk to its long-term capital position. The unrealized losses reduce the Bank’s accumulated other comprehensive income, which the Bank has opted to exclude from its common equity tier 1 capital. Therefore, the Bank’s tangible equity, which can also be described as regulatory capital, is not impacted by the changes in the market value of the debt securities in the Bank’s investment portfolio. The Bank’s tangible equity was $340.3 million as of June 30, 2022, an increase of $29 million over the same period in 2021 and an increase of $7.5 million since March 31, 2022.

“In this rising interest rate environment, the Bank continues to maintain a very strong and stable liquidity position, focusing on smart loan growth within our community while maintaining excellent portfolio credit quality,” said Troy Sanderson, president and CEO.

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 management services with 16 retail branches in Sonoma County, a commercial branch in Roseville and Trust & Investment Management 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. Exchange Bank is a 16-year winner of the North Bay Business Journal’s Best Places to Work survey and the 2022 San Francisco Business Times Corporate Philanthropy Award. Exchange Bank was named Best Consumer Bank by the NorthBay biz Magazine’s Best of the North Bay readers’ poll. The Petaluma Argus Courier People’s Choice Awards named Exchange Bank Best Local Bank 2022 and the Bohemian Magazine’s Best of the North Bay 2022 named Exchange Bank Best Business Bank and Best Consumer Bank. www.exchangebank.com.

Member FDIC — Equal Housing Lender — Equal Opportunity Employer

EXCHANGE BANK
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, 2022 and 2021
(In Thousands)
										Change			% Change
ASSETS			2022				2021				22/21		22/21
Cash and due from banks		$	33,272			$	26,700			$	6,572		24.61	%
Federal Reserve Bank			129,801				472,344				(342,543	)	-72.52	%
Total Cash and cash equivalents			163,073				499,045				(335,971	)	-67.32	%
Investments
Interest-earning deposits in other financial institutions			8,000				26,000				(18,000	)	-69.23	%
Securities available for sale			1,583,846				1,103,578				480,267		43.52	%
FHLB Stock			15,000				14,465				535		3.70	%
Loans and leases
Real estate			1,139,608				1,082,379				57,230		5.29	%
Consumer			143,864				132,491				11,373		8.58	%
Commercial			240,209				463,427				(223,218	)	-48.17	%
			1,523,681				1,678,297				(154,615	)	-9.21	%
Less allowance for loan and lease losses			(43,870	)			(43,790	)			(80	)	0.18	%
Net loans and leases			1,479,811				1,634,507				(154,696	)	-9.46	%
Bank premises and equipment			17,973				19,354				(1,382	)	-7.14	%
Other assets			186,868				134,050				52,818		39.40	%
Total Assets		$	3,454,571			$	3,430,999			$	23,572		0.69	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-Interest Bearing Demand		$	1,223,168			$	1,217,719			$	5,449		0.45	%
Interest Bearing													0.00	%
Transaction			634,386				573,803				60,583		10.56	%
Money market			433,638				452,325				(18,687	)	-4.13	%
Savings			739,806				654,235				85,571		13.08	%
Time			172,680				179,650				(6,970	)	-3.88	%
Total Deposits			3,203,678				3,077,731				125,946		4.09	%
Other liabilities			32,909				44,274				(11,364	)	-25.67	%
Total liabilities			3,236,587				3,122,005				114,582		3.67	%
Stockholders' equity			217,984				308,994				(91,010	)	-29.45	%
Total Liabilities and Stockholder's Equity		$	3,454,571			$	3,430,999			$	23,572		0.69	%

EXCHANGE BANK
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Period Ended June 30, 2022 and 2021
(In Thousands, except per share amounts)															Six months Ended
			Quarter Ended						Six months Ended						Change			% Change
				2022			2021			2022			2021			22/21		22/21
Interest Income
Interest and fees on loans			$	17,702		$	19,570		$	34,808		$	39,476		$	(4,669	)	-11.83	%
Interest on investments securities				7,247			4,098			12,924			7,947			4,977		62.63	%
Total interest income				24,950			23,668			47,731			47,423			309		0.65	%
Interest expense
Interest on deposits				407			431			808			912			(104	)	-11.43	%
Total interest expense				407			431			808			912			(104	)	-11.43	%
Net interest income				24,543			23,237			46,924			46,511			413		0.89	%
Provision (reversal of) for losses on loans				-			800			-			2,000			(2,000	)	-100.00	%
Net interest income after provision for loan and leases				24,543			22,437			46,924			44,511			2,413		5.42	%
Non-interest income				6,072			5,947			12,176			11,355			821		7.23	%
Non interest expense
Salary and benefit costs				9,479			9,360			19,157			18,035			1,122		6.22	%
Other expenses				7,992			7,656			15,416			14,701			715		4.86	%
Total non-interest expense				17,471			17,016			34,572			32,735			1,837		5.61	%
Income before income taxes				13,144			11,368			24,528			23,131			1,397		6.04	%
Provision for income taxes				3,628			3,148			6,751			6,418			334		5.20	%
Net income			$	9,517		$	8,219		$	17,777		$	16,713		$	1,063		6.36	%
Basic earnings per common share			$	5.55		$	4.79		$	10.37		$	9.75		$	0.62		6.36	%
Dividends per share			$	1.20		$	1.20		$	2.40		$	2.40		$	-		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 2022 and 2021 was 1,714,344

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220728005857/en/

Shari DeMaris

EVP, Chief Financial Officer

Exchange Bank

(707) 524-3067

Source: Exchange Bank

FAQ

What were Exchange Bank's net earnings for Q2 2022?

Exchange Bank reported net earnings of $9.52 million for Q2 2022, up 15.82% from $8.22 million in Q2 2021.

How did net interest income change for EXSR in Q2 2022?

Net interest income for Exchange Bank increased by $1.3 million, totaling $24.54 million in Q2 2022.

What is the current net interest margin for Exchange Bank?

The net interest margin for Exchange Bank decreased to 2.80% in Q2 2022, down from 2.90% in the previous year.

How much did the Bank's total assets grow to by June 30, 2022?

As of June 30, 2022, Exchange Bank's total assets increased to $3.45 billion.

What was the change in book equity for Exchange Bank in 2022?

Exchange Bank's book equity decreased by $91 million, or 29.45%, compared to June 30, 2021, due to unrealized losses.