Exchange Bank Announces Message to the Community and Third Quarter Earnings

Exchange Bank EXSR announces results for the third quarter of 2017. Exchange Bank's third quarter earnings release had been delayed as our efforts at the Bank have been focused on taking care of our employees and the needs of our clients and community during this period of unprecedented loss due to the recent wildfires. Our hearts are with all of the people of Sonoma, Napa, Mendocino and Lake Counties who have been affected by the most devastating fires in California's history. We applaud and thank the firefighters, first responders, members of law enforcement and medical personnel who have worked tirelessly to aid our community. Our employees and their families are volunteering throughout the community and we are actively engaged with business and civic leaders to address the issues created by these horrific fires: housing, jobs and public safety. From a community standpoint, the Bank has responded in a significant way, increasing its charitable giving to the many non-profit organizations that are directly impacting the relief efforts to support the victims of this disaster.

Exchange Bank announces results for the third quarter of 2017 with net income after tax of $6.6 million, compared to $5.4 million in the third quarter of 2016. This represents an increase of $1.2 million or a 23% increase compared to the same period a year ago. The Bank singled out the continued expansion of the Bank's Trust and Investment Management business as well as increased activity in our SBA (Small Business Administration) business, as key contributors to the success in financial results.

The primary source of earnings for the Bank is net interest income, the difference between income earned on loans and investments less expenses paid on deposits and borrowings. During the quarter ending September 30, 2017 the Bank's net interest income increased by $2.3 million or 13% above the similar quarter ending September 30, 2016. The Bank's increase in net interest income was driven primarily by continued growth in loans which were funded by growth in deposits. Loan growth of $77 million or 5.5% during the 12 month period ending September 30, 2017 was funded by deposit growth of $112 million or 5.9%. Contributing to the increase in net interest income has been the rise in Treasury yields over this past year, which has allowed the Bank to reinvest in loans and investments at more attractive yields compared to the previous periods.

During the nine-months ending September 30, 2017, the Bank achieved net earnings of $19.8 million, compared to $16.1 million during the similar nine-month period in 2016, an increase of approximately $3.7 million or 23.3%. During the nine months ending September 30, 2017, the Bank's net interest income increased $5.2 million over the similar nine-month period in 2016, an increase of 9.7%. Non-interest income for the nine months ending September 30, 2017 was positively influenced by a litigation settlement of $1.4 million in the second quarter as well as gains on sale of other real estate owned totaling approximately $1.38 million in the first quarter of 2017.

Exchange Bank paid a quarterly cash dividend of $0.85 per share on common stock outstanding to shareholders on September 15, 2017. 50.44% of the cash dividend goes to the Doyle Trust which funds the Doyle Scholarships at the Santa Rosa Junior College.

Forward looking information

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 with assets of $2.2 billion, Exchange Bank is a premier community bank providing a wide range of personal, commercial and trust and investment services with 18 branches in Sonoma County and a commercial and SBA lending office in Roseville and Marin, California. 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 12-time winner of the North Bay Business Journal's North Bay Best Places to Work survey and received the 2016 Healthiest Companies in the North Bay award. NorthBay biz magazine named Exchange Bank 2017 Best Consumer Bank. Exchange Bank can also be found in the North Bay Business Journal's listing of leading SBA 7(a) Lenders, Wealth Management Advisors and Wine Industry Lenders. www.exchangebank.com.

Member FDIC — Equal Housing Lender — Equal Opportunity Employer

EXCHANGE BANK
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, 2017 and 2016
(In Thousands)
										Change				% Change
ASSETS		2017				2016				17/16				17/16
Cash and due from banks		$	36,187			$	31,249			$	4,938			15.80	%
Fed Funds Sold			32,495				31,507				988			3.14	%
Total Cash and cash equivalents			68,682				62,756				5,926			9.44	%
Investments
Interest-earning deposits in other financial institutions			57,500				78,500				(21,000	)		-26.75	%
Securities available for sale			577,108				518,612				58,496			11.28	%
FHLB Stock			10,015				10,015				-			0.00	%
Loans and leases
Real estate			1,025,904				937,385				88,519			9.44	%
Consumer			119,553				113,975				5,578			4.89	%
Commercial			320,110				337,211				(17,101	)		-5.07	%
			1,465,567				1,388,571				76,996			5.54	%
Less allowance for loan and lease losses			(39,096	)			(37,962	)			(1,134	)		2.99	%
Net loans and leases			1,426,471				1,350,609				75,862			5.62	%
Bank premises and equipment			18,082				17,372				710			4.09	%
Other assets			100,966				81,404				19,562			24.03	%
Total Assets		$	2,258,824			$	2,119,268			$	139,556			6.59	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-Interest Bearing Demand		$	732,484			$	712,334			$	20,150			2.83	%
Interest Bearing
Transaction			387,732				339,570				48,162			14.18	%
Money market			288,617				262,923				25,694			9.77	%
Savings			419,317				393,237				26,080			6.63	%
Time			184,780				193,136				(8,356	)		-4.33	%
Total Deposits			2,012,930				1,901,200				111,730			5.88	%
Other borrowings			2,000				8,000				(6,000	)		-75.00	%
Other liabilities			37,789				22,801				14,988			65.73	%
Total liabilities			2,052,719				1,932,001				120,718			6.25	%
Stockholders' equity			206,105				187,267				18,838			10.06	%
Total Liabilities and Stockholder's Equity		$	2,258,824			$	2,119,268			$	139,556			6.59	%

EXCHANGE BANK
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Period Ended September 30, 2017 and 2016
(In Thousands, except per share amounts)																	Nine Months Ended
				Quarter Ended						Nine Months Ended							Change				% Change
				2017			2016			2017			2016				17/16				17/16
Interest Income
Interest and fees on loans				$	17,649		$	15,784		$	51,430		$	46,752			$	4,678			10.01	%
Interest on investments securities					3,059			2,628			8,685			7,978				707			8.86	%
Total interest income					20,708			18,412			60,115			54,730				5,385			9.84	%
Interest expense
Interest on deposits					212			187			576			585				(9	)		-1.54	%
Other interest expense					25			96			432			286				146			51.05	%
Total interest expense					237			283			1,008			871				137			15.73	%
Net interest income					20,471			18,129			59,107			53,859				5,248			9.74	%
Provision (reversal of) for losses on loans					-			-			-			(900	)			900			-100.00	%
Net interest income after provision for loan and leases					20,471			18,129			59,107			54,759				4,348			7.94	%
Non-interest income					5,562			5,474			19,067			15,356				3,711			24.17	%
Non interest expense
Salary and benefit costs					8,311			8,415			25,176			25,356				(180	)		-0.71	%
Other expenses					6,738			6,510			20,291			18,888				1,402			7.42	%
Total non-interest expense					15,049			14,925			45,467			44,244				1,222			2.76	%
Income before income taxes					10,984			8,678			32,707			25,871				6,837			26.43	%
Provision for income taxes					4,330			3,282			12,908			9,821				3,087			31.43	%
Net income				$	6,654		$	5,396		$	19,799		$	16,050			$	3,750			23.36	%
Basic earnings per common share				$	3.88		$	3.15		$	11.55		$	9.36			$	2.19			23.46	%
Dividends per share				$	0.85		$	0.70		$	2.50		$	2.05			$	0.45			21.95	%
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 2017 and 2016 was 1,714,344

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006429/en/