Exchange Bank Reports Strong Third Quarter 2025 Financial Performance, Highlighting Growth in Core Banking Operations and Solid Capital Position
Exchange Bank (OTC: EXSR) has reported its unaudited financial results for the third quarter of 2025, delivering a meaningful increase in profitability, continued loan growth, healthy liquidity levels, and strong capital ratios. For the quarter ended September 30, 2025, the Bank reported net income after taxes of $8.6 million, representing a significant increase from $4.9 million earned in the same period of the prior year. The third-quarter results underscore the Bank’s strengthened earnings capacity, disciplined asset-liability strategy, and focus on maintaining high-quality lending practices and stable funding sources.
Quarterly Performance Highlights
- Net income after taxes improved to $8.6 million, compared to $4.9 million in the third quarter of 2024.
- Net interest income increased by $3.3 million, or 17%, primarily driven by higher loan volumes and lower borrowing costs.
- Non-interest income rose by $1.5 million, or 25%, largely due to a one-time gain of $1.4 million from the sale of premises no longer in use.
- Gross loans increased by $103.9 million, or 6%, year-over-year, while asset quality remained strong.
- On-balance sheet liquidity totaled $915.7 million, or 28% of total assets, as of September 30, 2025.
- Available borrowing capacity remains robust at approximately $1 billion, reinforcing a strong liquidity position.
- The Bank remained well-capitalized, reporting a total risk-based capital ratio of 19.46%.
Income Statement Review
During the third quarter of 2025, Exchange Bank generated net income after taxes of $8.6 million, reflecting strong operational performance and effective management of funding and interest rate environments. By comparison, the Bank earned $4.9 million in the same quarter of 2024, demonstrating notable year-over-year earnings growth.
Net interest income for the quarter rose to $23.3 million, an increase of 17%. The improvement was driven primarily by higher loan interest and fee revenue tied to increased lending activity, as well as a meaningful reduction in borrowing expenses. Funding costs for the third quarter were $9.5 million, compared with $11.6 million in the prior-year period. The decline in borrowing expense reflects a substantial reduction in the volume of borrowings, which fell from $245 million in September 2024 to just $40 million at the end of September 2025. Interest paid to depositors remained relatively stable at $9.1 million for the third quarter of 2025, compared with $8.7 million in the same quarter of 2024.
Non-interest income increased from $5.9 million in the third quarter of 2024 to $7.4 million in the third quarter of 2025. The 25% increase was driven primarily by a $1.4 million gain on the sale of bank premises no longer in use, highlighting the Bank’s ongoing efforts to strategically manage physical infrastructure and operating efficiency.
On a year-to-date basis, net income totaled $21.2 million for the first nine months of 2025, compared with $15.0 million during the same period in 2024. Net interest income increased 10% year-to-date to $66.7 million, due largely to higher loan volume, favorable repricing of variable rate loans, and lower interest expense associated with reduced borrowings. Year-to-date non-interest income rose to $20.4 million, benefiting from both the second-quarter life insurance benefit and the third-quarter gain on premises. Meanwhile, non-interest expenses remained well controlled, increasing less than 1% to $58.4 million, reflecting disciplined cost management amidst growth.
Balance Sheet and Financial Condition
As of September 30, 2025, total assets were $3.31 billion, compared with $3.41 billion one year earlier. While loan balances grew, total assets declined modestly due to shifts in investment portfolio balances and strategic reductions in borrowings.
Cash and cash equivalents totaled $196.8 million, representing a 3% decrease year-over-year. However, cash increased by $36.6 million since June 30, 2025, reflecting strong liquidity inflows during the third quarter.
The Bank’s investment portfolio was valued at $1.24 billion as of September 30, 2025, down approximately $191.8 million from the prior year and $63.5 million from June 30, 2025. The reduction was primarily due to scheduled paydowns in the portfolio. The Bank expects approximately $45 million in additional portfolio paydowns before year-end. The Bank maintains its entire investment portfolio as available for sale, providing transparency and flexibility. Unrealized losses remain primarily linked to interest rate fluctuations, not credit deterioration.
Gross loans totaled $1.7 billion, up $103.9 million year-over-year and $71.7 million since June 30, 2025. The Bank’s loan portfolio is well diversified, with:
- 42% commercial real estate loans
- 20% residential mortgages
- 14% multifamily loans
Asset quality remains strong. Non-accrual loans decreased to $2.8 million (0.17% of total loans), down from $6.0 million in September 2024 and $5.3 million in June 2025. The allowance for credit losses stood at $34.0 million (2.03% of total loans).
Deposits increased to $2.89 billion, representing growth of $69.7 million year-over-year and $15.9 million during the third quarter alone. The Bank continued to face competitive deposit market conditions, but prioritized maintaining core customer relationships. Non-interest-bearing deposits accounted for 30% of total deposits, and approximately 75.6% of deposits were FDIC insured.
Capital Strength and Shareholder Impact
Exchange Bank remains solidly well-capitalized. As of September 30, 2025:
- Total risk-based capital ratio: 19.46%
- Leverage ratio: 11.81%
- Book equity: $332.7 million, up $38.8 million from the prior year.
The Bank noted that unrealized losses in the investment portfolio do not affect regulatory capital, as they are excluded from common equity tier 1 calculations. Regulatory capital totaled $423.8 million, up 6% from a year earlier.
Notably, 50.44% of the Bank’s cash dividend supports the Doyle Trust, which funds the Doyle Scholarships at Santa Rosa Junior College. In the first nine months of 2025, the scholarship trust received approximately $3.3 million in dividends, reinforcing the Bank’s long-standing commitment to community reinvestment and education.
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