Exchange Bank Announces Third Quarter 2021 Earnings

Rhea-AI Summary

Exchange Bank (OTC: EXSR) reported a 23.43% increase in net income for Q3 2021, totaling $9.85 million, up from $7.98 million in Q3 2020. Despite a slight decline in net interest income to $23.99 million, the Bank recognized $1.82 million in PPP loan fees, contributing positively to results. Non-interest income rose to $5.55 million, led by Trust and Investment Management. Deposits surged by 18.59% to $497 million. However, challenges remain with net interest margins expected to decrease, while total assets increased to $3.53 billion.

Positive

• Net income increased by 23.43% to $9.85 million for Q3 2021.
• Non-interest income rose to $5.55 million, driven by Trust and Investment Management income.
• Deposits increased by approximately $497 million, or 18.59%, year-over-year.
• Total assets increased to $3.53 billion, up 16.37% from the previous year.

Negative

• Net interest income declined slightly to $23.99 million in Q3 2021.
• Gross loans decreased from $1.82 billion in 2020 to $1.59 billion in 2021, partially due to a drop in PPP loans.
• Net interest margin expected to face challenges due to low treasury yields.

SANTA ROSA, Calif.--(BUSINESS WIRE)-- Exchange Bank (OTC: EXSR) today announced results for the third quarter of 2021, reporting net income after taxes of $9.85 million, compared with $7.98 million for the same quarter in 2020, an increase of 23.43%.

The Bank’s net interest income decreased slightly from $24.08 million during the three months ended September 30, 2020 to $23.99 million during the same period in 2021. The 2021 interest income was supported by the PPP loans booked in both 2020 and 2021 and the fees associated with these loans. In the third quarter of 2021, the Bank recognized $1.82 million in PPP loan fees.

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 increased from $5.22 million in the third quarter of 2020 to $5.55 million in the similar period in 2021. A highlight of the favorable non-interest income is Trust and Investment Management with an increase of $0.45 million over the third quarter of 2020 to $2.52 million for the three months ended September 30, 2021. This favorable income was offset by three main factors: slightly 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 reduced consumer spending; and lower SBA fee income due to diminished business activities during this period. These fee-based decreases are a continuing trend from 2020 which the Bank expects to continue for the remainder of 2021.

The quality of the Bank’s loan portfolio remains strong and the Bank did not add to its reserve during the third quarter of 2021. The Bank did take a provision for loan loss of $0.9 million during the similar period in 2020.

The previously discussed increases in revenue were supplemented by the Bank’s decreased operating expenses. The Bank had a decrease operating expenses during the three months ending September 30, 2021 of $1.53 million or 8.80% in comparison to the three months ended September 30, 2020. The 2020 expenses include approximately $2.00 million related to the Bank’s core system conversion.

The Bank experienced a dramatic increase in deposit balances which were up year-over-year by approximately $497 million or 18.59%. 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 September 30, 2021 was bolstered by the PPP loans and deposit growth as previously noted. Total assets increased to $3.53 billion as of September 30, 2021 up from $3.04 billion as of September 30, 2020, an increase of 16.37%. Gross loans decreased from $1.82 billion in 2020 to $1.59 billion in 2021. A significant portion of the decrease relates to PPP loans which had a balance of $260 million as of September 30, 2020 vs. $110 million as of September 30, 2021. The Bank’s investment portfolio increased $435 million during the 12 months ended September 30, 2021. The Bank expects net interest margin to be a challenge for the remainder of 2021 and into the near future with the expectation that treasury yields will remain low.

During the nine months ending September 30, 2021, the Bank achieved net earnings of $26.56 million, compared with $24.46 million during the similar nine-month period in 2020, an increase of $2.10 million or 8.58%. The change was driven by the same factors related to net interest income and non-interest income as described previously. Net interest income declined $0.67 million from $71.17 million for the nine months ended September 30, 2020 to $70.50 million for the same period in 2021. $7.30 million of PPP loan fees are included in 2021 net interest income. During the nine months ending September 30, 2021, the growth in the Bank’s Trust and Investment Management income, which was up approximately $1.45 million, helped offset declines in deposit fee and SBA income, compared with the similar nine-month period in 2020.

The Bank’s capital ratios remain well in excess of the regulatory definitions of “well capitalized.” As of September 30, 2021, the Bank reported total risk-based capital of 20.29%.

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 $3.5 billion. Exchange Bank provides a wide range of personal, commercial and trust and investment services with 18 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 a 16-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 2020 Healthiest Companies in the North Bay Award. The Press Democrat Best of Sonoma County Reader’s Choice 2021 named Exchange Bank Best Bank and the NorthBay biz magazine named Exchange Bank the 2020 Best Consumer Bank and Best Business Bank. The Sonoma Valley People’s Choice awards named Exchange Bank the Best Local Bank 2021 and the North Bay Bohemian’s Best of 2020 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—retaining 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)
September 30, 2021 and 2020
(In Thousands)
										Change			% Change
ASSETS		2021				2020				21/20			21/20
Cash and due from banks		$	32,870			$	47,398			$	(14,528	)	-30.65	%
Federal Reserve Bank			523,081				208,182				314,899		151.26	%
Total Cash and cash equivalents			555,951				255,580				300,371		117.53	%
Investments
Interest-earning deposits in other financial institutions			17,000				41,000				(24,000	)	-58.54	%
Securities available for sale			1,244,297				809,046				435,251		53.80	%
FHLB Stock			14,465				13,483				982		7.28	%
Loans and leases
Real estate			1,077,009				1,159,649				(82,640	)	-7.13	%
Consumer			131,542				134,910				(3,368	)	-2.50	%
Commercial			383,618				528,474				(144,856	)	-27.41	%
			1,592,169				1,823,033				(230,864	)	-12.66	%
Less allowance for loan and lease losses			(43,638	)			(40,443	)			(3,195	)	7.90	%
Net loans and leases			1,548,531				1,782,590				(234,059	)	-13.13	%
Bank premises and equipment			18,955				20,265				(1,310	)	-6.46	%
Other assets			135,244				115,240				20,004		17.36	%
Total Assets		$	3,534,443			$	3,037,204			$	497,239		16.37	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-Interest Bearing Demand		$	1,256,952			$	1,076,938			$	180,014		16.72	%
Interest Bearing
Transaction			614,291				501,106				113,185		22.59	%
Money market			408,423				322,945				85,478		26.47	%
Savings			713,497				582,954				130,543		22.39	%
Time			178,680				190,683				(12,003	)	-6.29	%
Total Deposits			3,171,843				2,674,626				497,217		18.59	%
Other liabilities			46,541				64,501				(17,960	)	-27.84	%
Total liabilities			3,218,384				2,739,127				479,257		17.50	%
Stockholders' equity			316,059				298,077				17,982		6.03	%
Total Liabilities and Stockholder's Equity		$	3,534,443			$	3,037,204			$	497,239		16.37	%

EXCHANGE BANK
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Period Ended September 30, 2021 and 2020
(In Thousands, except per share amounts)														Nine Months Ended
		Quarter Ended						Nine Months Ended						Change			% Change
		2021			2020			2021			2020			21/20			21/20
Interest Income
Interest and fees on loans		$	19,870		$	20,821		$	59,346		$	60,386		$	(1,040	)	-1.72	%
Interest on investments securities			4,542			3,980			12,488			13,470			(982	)	-7.29	%
Total interest income			24,412			24,801			71,834			73,856			(2,022	)	-2.74	%
Interest expense
Interest on deposits			424			717			1,336			2,684			(1,348	)	-50.22	%
Total interest expense			424			717			1,336			2,684			(1,348	)	-50.22	%
Net interest income			23,988			24,084			70,498			71,172			(674	)	-0.95	%
Provision (reversal of) for losses on loans			-			900			2,000			900			1,100		0.00	%
Net interest income after provision for loan and leases			23,988			23,184			68,498			70,272			(1,774	)	-2.52	%
Non-interest income			5,550			5,218			16,905			15,831			1,074		6.78	%
Non interest expense
Salary and benefit costs			9,385			9,786			27,419			29,221			(1,802	)	-6.17	%
Other expenses			6,485			7,615			21,185			23,088			(1,903	)	-8.24	%
Total non-interest expense			15,870			17,401			48,604			52,309			(3,705	)	-7.08	%
Income before income taxes			13,668			11,001			36,799			33,794			3,005		8.89	%
Provision for income taxes			3,821			3,023			10,238			9,331			907		9.72	%
Net income		$	9,847		$	7,978		$	26,561		$	24,463		$	2,098		8.58	%
Basic earnings per common share		$	5.74		$	4.65		$	15.49		$	14.27		$	1.22		8.58	%
Dividends per share		$	1.20		$	1.20		$	3.60		$	3.60		$	-		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/20211102005463/en/

Shari DeMaris

EVP, Chief Financial Officer

Exchange Bank

(707) 524-3067

Source: Exchange Bank

FAQ

What were Exchange Bank's earnings for Q3 2021?

Exchange Bank reported net income of $9.85 million for Q3 2021.

How much did deposits increase at Exchange Bank in 2021?

Deposits increased by approximately $497 million or 18.59% year-over-year.

What challenges is Exchange Bank facing regarding net interest income?

Net interest income declined slightly and the bank expects challenges in net interest margin due to low treasury yields.

What was the total asset growth for Exchange Bank in 2021?

Total assets increased to $3.53 billion, representing a 16.37% growth from the previous year.