Exchange Bank Announces Message to the Community and Third Quarter Earnings

Exchange Bank (OTC: 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

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