2010 annual report - exchange bank

2010 ANNUAL REPORT

2010 ReportDraft #203.09.11

DANTE B. BENEDETTIClover Stornetta Farms, Inc. Trustee, Frank P. Doyle Trust

DANIEL G. LIBARLEPresident

Lace House Linen Company

CARLOS G. TAMAYOPresident and

Chairman of the Board La Tortilla Factory

MARLENE K. SOILANDPresident and Chief Executive Officer

Soiland Management Company Corporate Secretary, Exchange Bank

C. WILLIAM REINKINGChairman of the Board

Exchange Bank Trustee, Frank P. Doyle Trust

WILLIAM R. SCHRADERPresident and

Chief Executive Officer Exchange Bank

JAMES M. RYANPresident

Ryan Mortgage Company Trustee, Frank P. Doyle Trust

RICHARD W. ABBEY, ESQ.Partner

Abbey, Weitzenberg, Warren & Emery

BOARDOFDIRECTORS

PAGE22010REPORT


Inthesedifficulttimes,wearepleasedtoreportthattheBank’snetincomewas$10.3millionfor2010.TheBank’sperformancerepresentsasignificantimprovementinearningsoveroperatinglossesincurredin2008and2009.TheBank’snetincomein2010isreflectiveofexpensecontrolsinstitutedin2009,improvingnetinterestmargins,andareductioninloanlossprovisionsforproblemcredits.

During2010,theU.S.economycontinueditsslowrecoverywithmodestincreasesinconsumerspendingandrealGrossDomesticProduct.Inthisimprovingeconomicenvironment,themostsignificantpartsofourcreditportfoliohaveeitherstabilizedorimproved.Despitetheseencouragingsignsofimprovement,thelevelsofspendingandproductionremainbelowtheirexpansionpeaks,andthelocalandnationaleconomicenvironmentremainschallenging.Mostprominently,unemploymentandunderemploymentlevelsareelevatedandhouseholddebtlevelsarehigh,businessesremainreticenttohireandthelocalrealestatemarketsremainstressed.Theeconomicchallengeswithinourlocalcommunitiesaredeepandwidespreadasasignificantnumberoflong-timeclientscontinuetostruggletosurvivefinancially.Weestablishedaspecialteamofexperiencedlenderschargedwithfindingpracticalsolutionsonaborrowerbyborrowerbasis.Whiletheireffortstorestorestrengthandqualitybacktoourloanportfoliohavenotyetbeenfullycompleted,wearepleasedwiththeprogress.

Loancharge-offsdeclinedby61%in2010whencomparedto2009.Inaddition,theBankwasabletoreducenon-accrualloansandnon-performingassetsby$13.2millionand$10.4millionrespectively.Ourloanlossreservewasexpandedby$4.4milliontoarecordyear-endlevelequalto3.15%ofloanswiththeactionreflectingaprudentacknowledgmentofuncertaintyintoday’seconomicenvironment.

Whileoverallconditionsimprovedthisyear,2010stillpresentedachallengingenvironmentforthebankingindustry.Despitetheseheadwinds,ExchangeBanktookimportantstepsonanumberoffrontstopositiontheBankwellforthecurrentenvironmentandthefuture.We’vestrengthenedtheBank’scapitalpositiontoindustry-leadinglevelsandcontinuetomaintainstrongliquidityandsignificantuntappedlinesofcreditavailabletousassubstantialbackupstrengthtorespondtothelendingneedsthatwillinevitablyresurfaceasourmarketsslowlyrecover.Wehavedealtwithrootcausesofelevatedcreditlosses,whichweandourcompetitorsareexperiencing,andwehaveotherwisemaintainedstrongoperatingresultsthroughouttheeconomicdownturn.Duetotheseactions,webelieveourprospectsforsuccessarestrongaswemoveinto2011,ayearthatshouldprovideforimprovedresults,particularlyintermsofcredit.

Ourhighlightsfor2010includedanincreaseinourcapitalposition,liquidity,andloanlossreserves,andweremainedprofitablethroughouttheyear.

Weowemuchofoursuccesstoourhard-workingcommittedteamofemployees.TheyremaineddedicatedtokeepingourBanksafeandsound.Ouremployeesunderstandtheimportanceofteamwork,sacrifice,andcommitmenttosuperiorcustomerservice.WegreatlyappreciatethepriorityandcommitmenttheyhavegiventoourBank’ssuccess.

Whilethefinanciallandscapeandfinancialregulationcontinuetoevolve,webelieveourstrengthsintraditionalcommunitybasedlendinganddeposit-takingactivities;andourstrongcustomerservicepositionhasserveduswelloverthepast120yearsandwillserveuswellintothefuture.

Sincerely,

LETTERTOOURSHAREHOLDERS

C. WILLIAM REINKINGChairman of the Board

WILLIAM R. SCHRADERPresident and

Chief Executive Officer

PAGE32010REPORT


REPORT

FINANCIALS

December 31, 2010 and 2009(In Thousands, except share and par value amounts)

ASSETS 2010 2009

Cashandduefrombanks $ 39,551 $ 32,613Short-terminvestments 226 6,218

Total cash and cash equivalents 39,777 38,831

Available-for-saleinvestmentsecurities 318,376 304,032

Loansandleases 1,051,833 1,091,527Lessallowanceforloanandleaselosses (33,144) (28,781)

Net loans and leases 1,018,689 1,062,746

FederalHomeLoanBankstock 8,438 9,494Bankpremisesandequipment,net 17,606 19,170Bankownedlifeinsurance 32,741 31,518Otherrealestateowned 17,070 14,315Accruedinterestreceivableandotherassets 68,084 71,960

Total assets $ 1,520,781 $ 1,552,066

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits: Non-interestbearing $ 424,371 $ 427,850 Interestbearing 860,781 888,998

Total deposits 1,285,152 1,316,848

FederalHomeLoanBankadvancesandotherlong-termdebt 47,000 51,000Accruedinterestpayableandotherliabilities 31,403 34,068

Total liabilities 1,363,555 1,401,916

Commitmentsandcontingencies

Stockholders’equity: Preferredstock,1,000,000sharesauthorized: SeriesA,noncumulative,$1,000pershareliquidation preference;43,000sharesissuedandoutstanding 41,710 41,280 SeriesB,noncumulative,$1,000pershareliquidation preference;2,150sharesissuedandoutstanding 2,150 2,150 Commonstock,$2.50parvalue;3,000,000shares authorized;1,714,344sharesissuedandoutstanding 4,286 4,286 Additionalpaid-incapital 46,026 46,026 Retainedearnings 64,155 56,088 Accumulatedothercomprehensiveincome(loss),netoftaxes (1,101) 320

Total stockholders’ equity 157,226 150,150

Totalliabilitiesandstockholders’equity $ 1,520,781 $ 1,552,066

CONSOLIDATEDBALANCESHEETEXCHANGE BANK AND SUBSIDIARIES

– Unaudited –


FINANCIALS

PAGE52010REPORT

For the Years ended December 31, 2010 and 2009(In Thousands, except per share amounts)

2010 2009

Interestincome: Interestandfeesonloansandleases $ 66,376 69,199 Interestoninvestmentsecurities: Taxable 5,661 8,317 ExemptfromFederalincometaxes 4,084 4,563

Total interest income 76,121 82,079

Interestexpense: Interestondeposits 4,792 12,002 Interestonborrowings 1,962 3,858

Total interest expense 6,754 15,860

Net interest income before provision for loan and lease losses 69,366 66,219

Provisionforloanandleaselosses 19,500 41,000

Net interest income after provision for loan and lease losses 49,866 25,219

Non-interestincome: Servicechargesandfees 8,456 8,884 Trustincome 4,781 4,170 Merchantdiscountandinterchangefees 3,483 3,110 Gainonsaleofinvestmentsecurities 1,112 Incomefrombankownedlifeinsurance 1,340 1,382 Otherincome 2,317 1,950

Total non-interest income 20,377 20,608

Non-interestexpense: Salariesandemployeebenefits 27,406 28,585 Occupancyandequipment 6,888 6,407 Professionalfees 5,932 6,716 Lossonsaleofotherrealestateowned 3,141 3,652 FDICassessments 3,094 2,571 Otherexpenses 9,820 8,820

Total non-interest expense 56,281 56,751

Income (loss) before provision for (benefit from) income taxes 13,962 (10,924)

Provisionfor(benefitfrom)incometaxes 3,706 (7,061)

Net income (loss) $ 10,256 (3,863)

Basic and diluted earnings (loss) per common share1 $ 4.96 (3.49)Simple earnings per share2 $ 5.98 (2.25)

1Earnings(loss)pershareiscomputedbydividingnetincome(loss),lesspreferredstockdividends,bytheweightedaveragenumberofshares outstandingduringtheyear. 2Simpleearningspershareiscomputedbydividingnetincome(loss)bytheweightedaverageofsharesoutstandingduringtheyear.Totalaveragesharesoutstandingforboth2009and2010was1,714,344.

CONSOLIDATEDSTATEMENTOFOPERATIONSEXCHANGE BANK AND SUBSIDIARIES

–Unaudited–


Executive OfficersC. William ReinkingChairman of the BoardWilliam R. SchraderPresident and Chief Executive OfficerBruce DeCronaExecutive Vice President and Chief Operating OfficerGary HartwickExecutive Vice President and Chief Credit OfficerV. Anthony GhislaSenior Vice President and Senior Lending OfficerBrad HunterSenior Vice President and Chief Risk OfficerGreg JahnSenior Vice President and Chief Financial Officer

Administrative OfficersHoward DaultonSenior Vice President and Corporate and Business Development ManagerSamuel BrownSenior Vice President and Business Retention and Acquisition OfficerJim GalaudetVice President and Consumer Loan AdministratorKenn CunninghamAssistant Vice President and Sales Officer

AccountingShauna R. LorenzenVice President and Controller

Application SupportLinda G. WilsonAssistant Vice President and Application Support ManagerJudy P. RutledgeVice President and Loan Information Systems ManagerJane DanielAssistant Vice President and Project ManagerDiane BoggesApplication Support AnalystRobert J. WrightApplication Support Analyst

AuditingBruce W. RobinsonVice President and Auditor

Branch BankingRolf NelsonSenior Vice President and Retail Banking ManagerBeth RyanVice President and Retail Banking Officer

Business BankingJim CooneyVice President and Business Banking ManagerBill EspindolaVice President and Business Banking OfficerPaul GarayaldeVice President and Business Banking OfficerWilliam A. DeedyAssistant Vice President and Business Banking Officer

Cash ManagementByron D. WebbAssistant Vice President and Electronic Banking Manager

Commercial BankingSteve HerronSenior Vice President and Commercial Banking ManagerKristina T. ArmstrongVice President and Commercial Loan Officer Gregory S. DurbinVice President and Commercial Loan OfficerCody L. RadelfingerVice President and Commercial Loan OfficerTina SheldonVice President and Commercial Loan Officer

Construction and Mortgage LendingLouise MasonSenior Vice President and Real Estate Loan AdministratorColleen OllerVice President and Real Estate UnderwriterWynn SpainVice President and Real Estate Loan OfficerMarianne PowersReal Estate Loan Officer

Consumer LoansLori DeCostaVice President and Consumer Loan ManagerPatty BrookinsAssistant Vice President and Consumer Loan OfficerDenise TaitConsumer Loan Officer

Credit AdministrationEd GomezSenior Vice President and Credit AdministratorPamela L. CashaneVice President and Loan Portfolio ManagerCarolyn M. FultonVice President and Credit Risk ManagerGlenna D. DavidsonAssistant Vice President and Commercial Credit Risk OfficerRobert F. BorgognoniSenior Commercial Real Estate AppraiserJeffrey M. DemersReal Estate Credit Risk OfficerMary KilmerCommercial Credit Risk OfficerGerry SavelaCollections Operations Manager

Exchange Bank LeasingKenneth G. TaylorVice President and Leasing General ManagerTimothy TaylorLeasing Assistant ManagerArchie W. JulianBroker Relations Officer

Facilities and PurchasingSue MaddiganAssistant Vice President and Facilities and Purchasing Manager

Help DeskBren Boddy-ThomasHelp Desk Manager

Human ResourcesLori ZaretSenior Vice President and Chief Human Resources OfficerElizabeth RandolphCompensation and Benefits Manager

Information ServicesGary SearbySenior Vice President and Manager Information ServicesSherri TregaskisAssistant Vice President and Central Services Manager

Loan Service CenterAmy DarlingVice President and Loan Service Center ManagerCarie A. FletcherLoan Service Center Assistant ManagerSylvie G. BeersLoan Documentation Supervisor

Marketing Kitty RuppertVice President and Product and Sales ManagerSally J. TraughberAssistant Vice President and Marketing Services Manager

Merchant ServicesMary BesedaAssistant Vice President and Merchant Sales OfficerDona Vercelli-GodwinMerchant and ATM Services Operations Manager

Risk ManagementMichael J. LeonardAssistant Vice President and BSA and Security OfficerCyndi PerezAssistant Vice President and Deposit Compliance and Operational Risk ManagerPeter TomaszewskiInformation Security Officer

Roseville Commercial BankingAndrew T. WareSenior Vice President and Commercial Banking Regional ManagerJerry GamboaVice President and Real Estate Loan OfficerTeresa HofhenkeVice President and Business Services ManagerGeofry FongAssistant Vice President and Commercial Loan Officer

EXCHANGEBANKOFFICERS

PAGE62010REPORT


Donna J. SmithAssistant Vice President and Real Estate Closing and Disbursement Specialist

Small Business AdministrationSherrill J. StocktonSenior Vice President and Small Business Administration ManagerScott A. DykstraVice President and Small Business Administration Business Development OfficerRebecca K. RobertsVice President and Small Business Administration Business Development Officer

Special AssetsJeffrey A. OwenVice President and Special Assets ManagerAudrey NormanVice President and Real Estate Loan OfficerChristy SomersAssistant Vice President and Special Assets Officer

Technical ServicesRichard LewisSenior Vice President and Chief Information OfficerBrian DavidsonCore Systems Support ManagerDavid RussellTelecommunicatons Manager

Telephone Customer Service CenterDenise BridgmanAssistant Vice President and Telephone Customer Service Center Manager

TrainingTrudy JamiesonAssistant Vice President and Training DirectorErin WilliamsLearning and Development Manager

Wealth ManagementSteve JenkinsSenior Vice President and Managing Director of Investments and Fiduciary ServicesLinda BurilleVice President and Personal Trust OfficerCynthia D. CannamVice President and Personal Trust Officer Debbie KelleyVice President and Senior Fiduciary ManagerMichael MorganVice President and Business Development OfficerDavid S. RapoportVice President and Employee Benefit Trust OfficerDiana AngellAssistant Vice President and Personal Trust OfficerMatthew KelmanAssistant Vice President and Investment OfficerElisabeth PellegriniAssistant Vice President and Trust Operations and Compliance ManagerSusan PrestonAssistant Vice President and Employee Benefit Trust Officer

Timothy M. AdmirePortfolio ManagerEmily MenjouPersonal Trust OfficerDenise J. PalmerInvestment Officer

BRANCH MANAGERS AND OFFICERSSanta Rosa Main OfficeJohn MeislahnVice President and Branch ManagerLeAnn ChamberlinAssistant Vice President and Customer Service ManagerTiffany GriffithPremier Banking Officer

Bennett ValleyKelly DibbleeAssistant Vice President and Branch Manager

CloverdalePatti MannattVice President and Branch Manager

CoddingtownEugene PattersonAssistant Vice President and Branch ManagerTina VassarAssistant Vice President and Customer Service Manager

CollegeStoney NewtonVice President and Branch Manager

CotatiNadine WolfordAssistant Vice President and Branch Manager

DuttonCarmen R. GarciaVice President and Branch Manager

Golden EagleRick MossiVice President and Regional Branch ManagerRon MalnatiVice President and Regional Business Development OfficerAllison KalpakoffAssistant Vice President and Regional Customer Service Manager Dana O’HalloranPremier Banking Officer

HealdsburgMark L. DeckerVice President and Regional Branch ManagerDana S. AndersonVice President and Regional Business Development OfficerCassandra R. ZornAssistant Vice President and Regional Customer Service ManagerCody S. BakerPremier Banking Officer

LarkfieldLaura BuhrerVice President and Branch ManagerMontgomery VillageJames O. RuppertVice President and Regional Branch ManagerStacy SmallAssistant Vice President and Regional Customer Service ManagerKhamfone SisavathCustomer Service ManagerMadelyn DuMellePremier Banking Officer

Parkway PlazaEdie M. ChedaVice President and Branch Manager

Rohnert ParkJim CurryVice President and Branch ManagerDorothy SturdevantAssistant Vice President and Customer Service Manager

SebastopolDorothy RodellaVice President and Branch ManagerLinda ValePremier Banking Officer

SonomaJohn MatliVice President and Branch ManagerBecky ElsterVice President and Business Services ManagerCatherine HarrisonPremier Banking Officer

St. FrancisLynda M. AdamsVice President and Branch Manager

Stony PointBarbara SingerAssistant Vice President and Branch Manager

WindsorGus WolterVice President and Branch Manager

EXCHANGEBANKOFFICERS

PAGE72010REPORT

EXCHANGE BANK MARKET MAKERS:Fred PtuchaAndy SchnexnaydreTom RayFinancialWestGroup575WestCollegeAve.,Suite105SantaRosa,CA95401707.575.9680ForacopyoftheauditedFinancialStatementsforExchangeBank,pleasecontacttheExecutiveOfficesat707.524.3121.www.exchangebank.com


EMPLOYEESHELPINGTHECOMMUNITY


EqualOpportunityEmployer|MemberFDIC|EqualHousingLender

LyndaAdams,VicePresidentandBranchManagerofSt.FrancisBranch,

2010ChairmanAwardRecipient

ExchangeBankvolunteersataRebuildingTogetherworkday

inSantaRosa

BillSchraderandBillReinkingpresentadonationtoDavidGoodman,ExecutiveDirector,RedwoodEmpireFoodBank

ExchangeBankfloatatthe2010LutherBurbankRoseParade

andFestival

ExchangeBankparticipatesintheTownofSonoma’s4thofJuly

CelebrationandParade

ExchangeBankemployeesparticipateintheannualSebastopolApple

BlossomFestivalandParade

EXCHANGE BANK EMPLOYEES GIVING BACK

Since1890,ourfounder,FrankDoyle’svisionforExchangeBankhasnotchanged.Givingbacktoourcommunitieshasbeenapartofourrichlegacyandremainsadefiningpartofwhowearetoday.

In2010,ExchangeBankcontinuedtogivebackthroughcharitabledonationsandcommunityoutreach.

Ouremployeesarecommittedtoandactivelyinvolvedinthecommunitieswhereweserveandlive,asevidencedbythecountlesshoursofvolunteertimesupportinggoodworksandcharitableorganizationsthroughoutSonomaCountysuchasTheHumanRace,RelayforLife,UnitedWayandAsthmaWalk.

Contributionsweremade,bothmonetaryandin-kind-sponsorships,indirectsupportoflocalneedssuchas:homelessassistance,healthcare,foodbanks,theartsandnumerousyouthinitiatives.

ChairmanoftheBoard,BillReinking,presentedthe2010ChairmanAwardtoVicePresident/BranchManager,LyndaAdams,forhervolunteerworkwiththeAmericanCancerSociety’sRelayforLife.Lyndaisoneofmorethan400employeeswhoworktogetherasateamsharingtheirtime,talentandtreasuryforthebenefitofourcommunity.

2010 annual report - exchange bank

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