Exchange Bank Announces First Quarter Earnings

Exchange Bank EXSR today announced results for the first quarter of 2017 with a profit after tax of $6.63 million, compared to $5.21 million in the first quarter of 2016. This represents an increase of $1.42 million or 27.3% over the same period a year ago.

The increase in earnings can be attributed to both an increase in core earnings of the Bank as a result of increased net interest income as well as nonrecurring earnings in the form of gains on the sale of other real estate owned (OREO). During the first quarter of 2017, the Bank successfully completed the sale of OREO, which contributed pretax gains of approximately $1.38 million. There was no such gain on the sale of assets during the similar quarter in 2016. Conversely, in 2016 the Bank recognized a recovery of a $500 thousand provision for loan loss reserves that was taken back into income. There was no similar recapture of provision for loan losses during the first quarter of 2017. The Bank did not make any provision for losses on loans during the first quarter of 2017 or 2016. The Bank's level of reserves to support future loan losses remains strong in comparison to industry standards and is further supported by reductions in problem assets and the ongoing decline in net loan charge-offs.

"While this was another strong quarter of financial performance, as demonstrated by the increased net interest income, it is important to note that the unusual nature of the gains on the sale of other real estate owned totaling almost $1.38 million is not anticipated in future periods," said Greg Jahn, executive vice president and CFO.

The strength in core earnings was driven primarily by continued growth in loans and deposits, leading to an increase in net interest income of approximately $1.5 million during the first quarter of 2017, an 8% increase over the similar quarter in 2016. Loans grew by approximately $151 million over the 12 months ending March 31, 2017, an increase of 11.9%. Deposits increased by approximately $124 million over totals reported as of March 31, 2016, an increase of 6.8%.

Absent the gain on sale of OREO, the Bank's non-interest income increased by approximately $650 thousand during the first quarter of 2017 compared to the similar quarter in 2016, and was driven by increases in gain on sale of Small Business Administration (SBA) loans, as well as income generated by the Bank's Trust and Investment business.

"We are pleased to report strong earnings this quarter driven by significant loan growth in the fourth quarter of 2016 and strong growth in our core deposits," said Gary Hartwick, president and CEO. "In support of our mission, we are committed to building strong long-term relationships with our clients while maintaining strong credit quality."

Exchange Bank paid a quarterly cash dividend of $0.80 per share on common stock outstanding to shareholders on March 17, 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 an 11-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 2016 Best Business 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.

EXCHANGE BANK
and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31, 2017 and 2016
(In Thousands)
													Change					% Change
ASSETS			2017					2016					17/16					17/16
Cash and due from banks			$	33,962				$	25,211				$	8,751				34.71	%
Fed Funds Sold				41,568					90,227					(48,659	)			-53.93	%
Total Cash and cash equivalents				75,530					115,438					(39,908	)			-34.57	%
Investments
Interest-earning deposits in other financial institutions				70,000					77,000					(7,000	)			-9.09	%
Securities available for sale				546,438					514,348					32,090				6.24	%
FHLB Stock				10,015					9,036					979				10.83	%
Loans and leases
Real estate				1,000,245					887,948					112,297				12.65	%
Consumer				110,300					106,307					3,993				3.76	%
Commercial				315,186					279,895					35,291				12.61	%
				1,425,731					1,274,150					151,581				11.90	%
Less allowance for loan and lease losses				(38,403	)				(37,831	)				(572	)			1.51	%
Net loans and leases				1,387,328					1,236,319					151,009				12.21	%
Bank premises and equipment				17,814					17,165					649				3.78	%
Other assets				100,236					77,891					22,345				28.69	%
Total Assets			$	2,207,361				$	2,047,197				$	160,164				7.82	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-Interest Bearing Demand			$	729,133				$	678,424				$	50,709				7.47	%
Interest Bearing
Transaction				368,787					318,417					50,370				15.82	%
Money market				270,269					256,600					13,669				5.33	%
Savings				410,174					381,786					28,388				7.44	%
Time				186,295					205,186					(18,891	)			-9.21	%
Total Deposits				1,964,658					1,840,413					124,245				6.75	%
Other borrowings				8,000					8,000					-				0.00	%
Other liabilities				39,752					20,162					19,590				97.16	%
Total liabilities				2,012,410					1,868,575					143,835				7.70	%
Stockholders' equity				194,951					178,622					16,329				9.14	%
Total Liabilities and Stockholder's Equity			$	2,207,361				$	2,047,197				$	160,164				7.82	%

EXCHANGE BANK
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Period Ended March 31, 2017 and 2016
(In Thousands, except per share amounts)
												Twelve Months Ended
			Three Months Ended									Change					% Change
			2017				2016					17/16					17/16
Interest Income
Interest and fees on loans			$	16,864			$	15,442				$	1,422				9.21	%
Interest on investments securities				2,720				2,678					42				1.57	%
Total interest income				19,584				18,120					1,464				8.08	%
Interest expense
Interest on deposits				175				206					(31	)			-15.05	%
Other interest expense				94				95					(1	)			-1.05	%
Total interest expense				269				301					(32	)			-10.63	%
Net interest income				19,315				17,819					1,496				8.40	%
Provision (reversal of) for losses on loans-								(500	)				500				-
Net interest income after provision for loan and leases				19,315				18,319					996				5.44	%
Non-interest income				6,791				4,763					2,028				42.58	%
Non interest expense
Salary and benefit costs				8,417				8,695					(278	)			-3.20	%
Other expenses				6,724				6,010					714				11.88	%
Total non-interest expense				15,141				14,705					436				2.96	%
Income before income taxes				10,965				8,377					2,588				30.89	%
Provision for income taxes				4,332				3,166					1,166				36.83	%
Net income			$	6,633			$	5,211				$	1,422				27.29	%
Basic earnings per common share			$	3.87			$	3.04				$	0.83				27.30	%
Dividends per share			$	0.80			$	0.65				$	0.15				23.08	%
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

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