Exchange Bank Announces Fourth Quarter and Year Ending 2023 Earnings

SANTA ROSA, Calif.–(BUSINESS WIRE)–#advisors–Exchange Bank (OTC: EXSR) today announced its unaudited financial results for the fourth quarter and year ending 2023, reporting net income after taxes of $6.77 million in the fourth quarter of 2023 and $20.19 million for the year ended 2023.


HIGHLIGHTS:

  • In 2023, the Bank grew gross loan balances by $84.77 million or 5.61%.
  • Loan quality remains strong, nonaccrual loans totaled $4.1 million, or 0.26% of gross loans, as of December 31, 2023.
  • The allowance for credit losses, which is based on estimating credit losses for the life of the loans in the portfolio, totaled $41.27 million, or 2.59% of total loans.
  • The Bank had year to date net income after taxes of $20.19 million, compared with $37.48 million for 2022. The decrease in income is partially related to a one-time charge of $9.10 million, net of taxes, related to the voluntary termination of the Exchange Bank Pension Plan in the second quarter of 2023. Additional decreases related to the increased costs of deposits and interest expense related to borrowings.
  • Fourth quarter net income after taxes was $6.77 million compared with $6.34 million for the previous quarter, an increase of 6.75%.
  • The Bank’s liquidity position remains strong with more than $1.59 billion in available liquidity as of December 31, 2023.
  • The Bank remains well-capitalized, and all capital ratios were well above regulatory requirements with a total risk-based capital ratio of 18.84% on December 31, 2023.

INCOME STATEMENT:

The Bank’s net interest income decreased from $99.14 million during the 12 months ended December 31, 2022, to $90.49 million for the same period in 2023, a decrease of 8.72%. The decrease in net interest income is due to the increased costs of deposits and interest expense related to borrowings. Total funding costs for 2023 were $25.06 million as compared to $2.08 million for 2022. Total funding costs are made up of interest paid to depositors of $16.72 million and $8.34 million paid on borrowings. For 2023, the cost of deposits was 0.59%, while the cost of total funding was 0.82%. In 2022, the total funding costs of 0.07% was nearly all allocated to interest paid to depositors. The Bank expects funding costs to remain elevated throughout 2024. The Bank’s net interest margin decreased from 3.01% in 2022 to 2.86% in 2023; the Bank anticipates the net interest margin will continue to decrease as funding costs remain elevated.

The increased interest costs were partially offset by positive trends in interest income. Interest income on assets increased in 2023 by $14.34 million, or 14.17%. Interest and fees earned on loans increased $10.48 million in 2023 to $81.92 million for the year due to increased volume and repricing of variable rate loans. Interest income on the investment portfolio increased year over year by $3.86 million or 12.95%.

Non-interest income for 12 months ended December 31, 2023 decreased from $24.37 million in 2022 to $23.66 million for the same 12-month period in 2023.

Non-interest expenses increased 17.74% from 2022 to $86.44 million for the year ended 2023. The increase in non-interest expenses primarily relates to the one-time charge in the second quarter related to the voluntary termination of the Exchange Bank Pension Plan.

The quality of the Bank’s loan portfolio remains strong; the Bank did not take a provision for loan losses in 2022 nor 2023.

During the 12 months ending December 30, 2023, the Bank achieved net earnings of $20.19 million after the one-time charge in the second quarter related to the voluntary termination of the Exchange Bank Pension Plan as compared with net income of $37.48 million for the same period in 2022. Excluding this one-time charge, earnings from the operations of Exchange Bank for the year ended 2023 were $29.25 million.

BALANCE SHEET:

Total assets increased to $3.37 billion as of December 31, 2023, up from $3.33 billion as of December 31, 2022.

The market value of the investment portfolio was $1.49 billion as of December 31, 2023, down $78.20 million from one year prior and up $39.76 million from September 30, 2023. The change in investments in the fourth quarter of 2023 is related primarily to an increase in the current fair market value of securities. Based on current rate conditions, the Bank estimates investment portfolio paydowns of approximately $200 million through the end of 2024. We continue to maintain our entire portfolio as available for sale, providing full transparency and management flexibility. The Bank’s portfolio has unrealized losses that are a direct result of market interest rates and not a result of credit quality concerns.

Gross loans have increased, ending with $1.59 billion as of December 31, 2023, representing an $84.77 million increase from December 31, 2022. The Bank’s largest loan types are commercial real estate loans, making up 39.70% of the portfolio, followed by 22.78% in residential loans and 9.95% in multifamily loans. Of the commercial real estate total, approximately 20% or $124.90 million is considered owner occupied and the remaining 80% or $507.14 million are non-owner occupied. The portfolio is well diversified between industries with no significant concentrations, including no material concentration in office space.

As mentioned previously, loan quality remains strong; nonaccrual loans totaled $4.12 million, or 0.26% of gross loans, as of December 31, 2023, compared to $3.15 million or 0.21% of gross loans as of December 31, 2022. The allowance for credit losses, which is based on estimating credit losses for the life of the loans in the portfolio, totaled $41.27 million, or 2.59% of total loans. Although the portfolio has grown, the Bank did not book provision expense as there is sufficient allowance for credit losses.

Deposits decreased $227.65 million, or 7.42%, in the 12 months ended December 31, 2023, ending at $2.84 billion. In the fourth quarter 2023, deposits decreased $79.07 million or 2.71% primarily due to customer tax payments from the IRS payment extension for natural disaster relief.

Non-interest-bearing deposits made up 34.43% of total deposits as of December 31, 2023, compared to 38.80% as of December 31, 2022. In addition, we estimate approximately 75% of all deposits were fully insured by the FDIC as of December 31, 2023. The Bank’s combined on-balance sheet liquidity and contingent liquidity equate to 453% of the estimated uninsured deposits.

The Bank had borrowings of $225.00 million as of December 31, 2023.

The Bank’s capital ratios remain well in excess of the regulatory minimums to be considered “well capitalized.” As of December 31, 2023, the Bank reported a total risk-based capital ratio of 18.84% and a leverage ratio of 10.52%. The Bank’s book equity increased $53.39 million, or 26.43%, since December 31, 2022, to a total of $225.41 million. The increase is due to a net income for the 2023 year of $20.19 million and positive changes in the unrealized losses on available for sale securities. The unrealized losses net of tax on December 31, 2023 were $110.30 million compared to $145.65 million on December 31, 2022. 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 unrealized 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 regulatory capital is not impacted by the changes in the market value of the investment securities in the Bank’s investment portfolio. The Bank’s regulatory capital, as defined by the FDIC, was $393.58 million as of December 31, 2023, an increase of $13.33 million, or 3.51%, over the same period in 2022.

On an ongoing basis, the Bank reviews its liquidity sources. As of December 31, 2023, the Bank has more than $1.59 billion in available borrowing capacity through numerous sources.

50.44% of the Bank’s cash dividend goes to the Doyle Trust which funds the Doyle Scholarships at the Santa Rosa Junior College. In 2023, dividends to the Doyle Trust totaled approximately $4.49 million.

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 $3.37 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, Marin County 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 an 18-year winner of the North Bay Business Journal’s Best Places to Work survey and the 2023 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 2023 and the Bohemian Magazine’s Best of the North Bay 2023 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)
 
December 31, 2023 and 2022
(In Thousands)
Change % Change
ASSETS

 

2023

 

 

2022

 

 

23/22

 

23/22

 

 
Cash and due from banks

$

35,645

 

$

35,529

 

$

116

 

0.33

%

Federal Reserve Bank

 

53,965

 

 

12,844

 

 

41,121

 

320.16

%

Total Cash and cash equivalents

 

89,610

 

 

48,373

 

 

41,237

 

85.25

%

 
Investments
Interest-earning deposits in other financial institutions

 

 

 

1,000

 

 

(1,000

)

-100.00

%

Securities available for sale

 

1,497,445

 

 

1,575,648

 

 

(78,203

)

-4.96

%

FHLB Stock

 

15,000

 

 

15,000

 

 

 

0.00

%

 
Loans and leases
Real estate

 

1,251,339

 

 

1,142,203

 

 

109,136

 

9.55

%

Consumer

 

146,310

 

 

148,874

 

 

(2,564

)

-1.72

%

Commercial

 

197,028

 

 

218,831

 

 

(21,803

)

-9.96

%

 

 

1,594,677

 

 

1,509,908

 

 

84,769

 

5.61

%

Less allowance for loan and lease losses

 

(41,268

)

 

(43,540

)

 

2,272

 

-5.22

%

 
Net loans and leases

 

1,553,409

 

 

1,466,368

 

 

87,041

 

5.94

%

 
Bank premises and equipment

 

17,472

 

 

17,217

 

 

255

 

1.48

%

Other assets

 

193,524

 

 

210,791

 

 

(17,267

)

-8.19

%

 
Total Assets

$

3,366,460

 

$

3,334,397

 

$

32,063

 

0.96

%

 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Deposits
Non-Interest Bearing Demand

$

977,426

 

$

1,189,742

 

$

(212,316

)

-17.85

%

Interest Bearing
Transaction

 

473,448

 

 

622,765

 

 

(149,317

)

-23.98

%

Money market

 

485,322

 

 

392,223

 

 

93,099

 

23.74

%

Savings

 

531,291

 

 

706,092

 

 

(174,801

)

-24.76

%

Time

 

371,140

 

 

155,459

 

 

215,681

 

138.74

%

 
Total Deposits

 

2,838,627

 

 

3,066,281

 

 

(227,654

)

-7.42

%

 
Borrowings

 

225,000

 

 

20,000

 

 

205,000

 

1025.00

%

Other liabilities

 

47,425

 

 

46,093

 

 

1,332

 

2.89

%

 
Total liabilities

 

3,111,052

 

 

3,132,374

 

 

(21,322

)

-0.68

%

 
Stockholders’ equity

 

255,408

 

 

202,023

 

 

53,385

 

26.43

%

 
Total Liabilities and Stockholder’s Equity

$

3,366,460

 

$

3,334,397

 

$

32,063

 

0.96

%

 
EXCHANGE BANK
and Subsidiaries
 
Consolidated Statements of Operations
(Unaudited)
 
For the Period Ended December 31, 2023 and 2022
(In Thousands, except per share amounts) Twelve Months Ended

Quarter Ended

 

Twelve Months Ended

 

Change

% Change

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

23/22

 

23/22

 

 
Interest Income
Interest and fees on loans

$

21,345

$

18,575

$

81,919

$

71,437

$

10,482

 

14.67

%

Interest on investments securities

 

8,973

 

8,489

 

33,629

 

29,773

 

3,856

 

12.95

%

 
Total interest income

 

30,318

 

27,064

 

115,548

 

101,210

 

14,338

 

14.17

%

 
Interest expense
Interest on deposits

 

6,647

 

803

 

16,716

 

2,035

 

14,681

 

721.43

%

Other interest expense

 

2,292

 

40

 

8,342

 

40

 

8,302

 

20755.00

%

Total interest expense

 

8,939

 

843

 

25,058

 

2,075

 

22,983

 

1107.61

%

 
Net interest income

 

21,379

 

26,221

 

90,490

 

99,135

 

(8,645

)

-8.72

%

 
Provision (reversal of) for losses on loans

 

 

 

 

 

 

-100.00

%

 
Net interest income after
provision for loan and leases

 

21,379

 

26,221

 

90,490

 

99,135

 

(8,645

)

-8.72

%

 
Non-interest income

 

5,970

 

5,691

 

23,660

 

24,368

 

(708

)

-2.91

%

 
Non interest expense
Salary and benefit costs

 

10,440

 

11,065

 

41,110

 

40,279

 

831

 

2.06

%

Pension Plan retirement

 

 

8,398

 

 

8,398

 

100.00

%

Other expenses

 

8,421

 

9,202

 

36,930

 

33,137

 

3,793

 

11.45

%

Total non-interest expense

 

18,861

 

20,267

 

86,438

 

73,416

 

13,022

 

17.74

%

 
Income before income taxes

 

8,488

 

11,645

 

27,712

 

50,086

 

(22,375

)

-44.67

%

 
Provision for income taxes

 

1,717

 

2,008

 

7,519

 

12,606

 

(5,087

)

-40.35

%

 
Net income

$

6,771

$

9,637

$

20,193

$

37,480

$

(17,288

)

-46.13

%

 
 
Basic earnings per common share

$

3.95

$

5.62

$

11.78

$

21.86

$

(10.08

)

-46.13

%

Dividends per share

$

1.30

$

1.25

$

5.20

$

4.90

$

0.30

 

6.12

%

 
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 2023 and 2022 was 1,714,344

 

Contacts

Charlotte Radmilovic, SVP, Chief Financial Officer

(707) 521-3751