Exchange Bank Santa Rosa CA : December 31, 2021 Audited Financials

EXCHANGE BANK AND SUBSIDIARIES

Santa Rosa, California

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021 and 2020

EXCHANGE BANK AND SUBSIDIARIES

Santa Rosa, California

FINANCIAL STATEMENTS

December 31, 2021 and 2020

CONTENTS

INDEPENDENT AUDITOR'S REPORT………………………………………………………………………...1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS..............................................................................................	3
CONSOLIDATED STATEMENTS OF INCOME ................................................................................	4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME................................................	5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ..........................	6
CONSOLIDATED STATEMENTS OF CASH FLOWS .......................................................................	7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............................................................	8

Crowe LLP

Independent Member Crowe Global

INDEPENDENT AUDITOR'S REPORT

To the Stockholders and

Board of Directors

Exchange Bank and Subsidiaries

Santa Rosa, California

Report on the Audit of the Financial Statements

Opinion

We have audited the consolidated financial statements of Exchange Bank and Subsidiaries, which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Exchange Bank and Subsidiaries as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with auditing standards generally accepted in the United States of America, Exchange Bank and Subsidiaries' internal control over financial reporting as of December 31, 2021, based on criteria established in the Internal Control-IntegratedFramework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) relevant to reporting objectives for the express purpose of meeting the regulatory requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) and our report dated February 15, 2022 expressed an unmodified opinion.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Exchange Bank and Subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Exchange Bank and Subsidiaries ability to continue as a going concern for one year from the date the consolidated financial statements are available to be issued.

(Continued)

1.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Exchange Bank and Subsidiaries' ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Crowe LLP

Sacramento, California

February 15, 2022

2.

EXCHANGE BANK AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2021 and 2020

(In thousands, except share and par value amounts)

ASSETS			2021				2020
Cash and due from banks	$	472,728		$	336,170
Short-term investments			241				241
Total cash and cash equivalents			472,969				336,411
Interest-bearing deposits in other financial institutions			17,000				38,000
Available-for-sale investment securities			1,407,247				919,705
Loans and leases			1,510,107				1,727,689
Less allowance for loan and lease losses			(43,847)			(41,668)
Net loans and leases			1,466,260				1,686,021
Federal Home Loan Bank stock			14,465				13,483
Bank premises and equipment, net			18,717				20,498
Bank owned life insurance			64,453				52,932
Other real estate owned			-				40
Accrued interest receivable and other assets			75,640			72,007
Total assets		$	3,536,751			$	3,139,097
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	1,232,666		$	1,118,093
Interest bearing			1,946,452				1,660,480
Total deposits			3,179,118				2,778,573
Federal Home Loan Bank Advance			-				5,000
Accrued interest payable and other liabilities			38,431				50,606
Total liabilities			3,217,549				2,834,179
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, 1,000,000 shares authorized:
None issued or outstanding			-				-
Common stock, $2.50 par value; 3,000,000 shares
authorized; 1,714,344 shares issued and outstanding			4,286				4,286
Additional paid-in capital			46,026				46,026
Retained earnings			276,294				248,113
Accumulated other comprehensive income (loss), net of taxes			(7,404)			6,493
Total stockholders' equity			319,202				304,918
Total liabilities and stockholders' equity		$	3,536,751		$	3,139,097

See accompanying notes to consolidated financial statements

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