Exchange Bank Announces Second Quarter Earnings

SANTA ROSA, Calif., July 22, 2016 /PRNewswire/ -- Today, Exchange Bank (OTC:EXSR) announced results for the second quarter of 2016 with a profit after tax of $5.46 million, compared to $5.63 million in the second quarter of 2015. This represents a decrease of $173 thousand or a 3% decline compared to the same period a year ago. "The decline in earnings for the second quarter does not tell the true story of strength in core earnings. Absent a decline in non-recurring income in the form of reversal of provision for loan loss, which fell from $2.5 million in the second quarter of 2015 to a recovery of $400 thousand during the second quarter of 2016, core earnings would have demonstrated continued improvement," stated Gary Hartwick, President and CEO.  As a result of the significant improvement in our credit quality and the recovery of loans previously charged off, $2.5 million in provision for loan losses was reversed during the second quarter of 2015 compared to a recovery of loans previously charged off of just $400 thousand during the second quarter of 2016. The Bank's level of reserves to support future loan losses remains robust in comparison to industry standards and is supported by the Bank's strong asset quality.

The core earnings of the Bank, absent the non-recurring elements of income and expense, are driven primarily by continued growth in loans which were funded by growth in deposits. Loan growth of $113 million or 9.3% during the 12 months ending June 30, 2016 was funded by deposit growth of $105 million or 6.1%.This asset growth led to an increase in net interest income of approximately $800 thousand during the second quarter of 2016, a 4.7% increase over the similar quarter in 2015.

During the six-months ending June 30, 2016, the Bank achieved net earnings of $10.66 million, compared to $10.77MM during the similar six-month period in 2015. During the six-months ending June 30, 2016 the Bank's core earnings as measured by net interest income increased $2.1 million over the similar six-month period in 2015, an increase of 6.3%. Earnings were generally flat year-over-year as this increase in net interest income was offset by  the decline in the recapture of provision for loan loss which fell from $2.9 million for the six-months ending June 30, 2015 to $900 thousand during the similar six month period ending June 30, 2016.

"Given the headwinds created by a slowing global economy and Treasury yields that have fallen recently to all-time lows, we are pleased with the results of the Bank. The ability to fund the credit needs of the communities we serve with net loan growth of $113 million is both the result of the dedication and hard work of our employees as well as the confidence the community places in Exchange Bank", stated Mr. Hartwick. "The challenges of operating in this historically low interest rate environment will be a difficult hurdle to overcome as we attempt to continue growing the Bank's earnings in future periods," said Greg Jahn Executive Vice President and CFO. 

Exchange Bank paid a quarterly cash dividend of $0.70 per share on common stock outstanding to shareholders on June 17, 2016. 51% of the 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.

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