Exchange Bank Sold

One of the nice benefits of owning the small Exchange Bank of Santa Rosa was that I could read through earnings earlier than most shareholders by checking the FDIC Call Thrift Data instead of just waiting for the company to release it. Exchange Bank's 4th Quarter report was published with the FDIC yesterday and it showed that business had deteriorated- rapidly.

Below is what underwriting looked like before the current quarter.

Including the 4th Quarter results...

Within the span of three months, $13 million in loans had to be charged-off, and about $25 million in loans were added to delinquencies, mostly non-performing. One, that makes their total allowance of $24 million look weak. Second, this quarter calls into question whether EXSR's underwriting can be considered much better than average. If we adjust the income statement to take this into account, their earnings power is considerably reduced and the company is no longer very cheap.

Given that things seem poised to get worse in the credit markets and that I was given a golden opportunity, I decided to sell my holding at $113. I wasn't unscathed though, and I had to realize a loss of 16.3%, the first for the site.