Presidio Bank Reports Results for the Second Quarter 2016

SAN FRANCISCO--(BUSINESS WIRE)--Presidio Bank (OTCBB:PDOB), a Bay Area business bank, today reported unaudited results for the second quarter ended June 30, 2016 with Net Income of $1,149 thousand, up 22% from the quarter ended March 31, 2016 and up 65% from the second quarter 2015. For the six months ended June 30, 2016, Net Income was $2,090 thousand, up 77% over the same period a year ago.

“We are pleased to report another quarter of strong profit growth,” said Presidio Bank President and CEO Steve Heitel. “Compared to the same quarter last year, loans were up almost $100 million, revenue was up 22% and expenses increased by only 7%. This represents another significant step to achieving the profitability and efficiency metrics we are striving for.”

Financial Highlights

• Total Loans Outstanding increased $22 million or 4% from the quarter ended March 31, 2016 and increased $99 million or 22% over the second quarter 2015. Despite a somewhat higher than average loan payoffs anticipated in the second half of the year, the loan pipeline remains solid and net loan growth is expected to continue.
• Total Deposits decreased by $37 million from the quarter ended March 31, 2016 but increased by $24 million from the second quarter of 2015. This decline had been expected due to a build-up of temporary deposits in the past three quarters. Non-Interest Bearing Demand Deposits remain at 37% of Total Deposits.
• Net Interest Income of $5.9 million in the second quarter of 2016 was down 1% from the first quarter of 2016 and up 24% from the second quarter of 2015. The decline from the first quarter of 2016 was primarily due to a decrease in loan fees recognized in the second quarter. Net Interest Margin decreased during the quarter to 3.70% from 3.86% in the first quarter of 2016 due to lower loan fees and a 6 basis point decline in loan yields during the quarter. Deposit costs and cost of funds were flat for the quarter. Net Interest Margin was 3.40% for the second quarter of 2015.
• Operating Expenses decreased 13% from the first quarter of 2016. Compensation and Benefits Expense is seasonally high in the first quarter. In addition, there were a number of one-time expense items in the first quarter that inflated expense totals for that period. Operating Expenses increased 7% over the second quarter of 2015. Compensation and Benefits Expense was up 5% due to a modest increase in headcount; Occupancy and Equipment Expense was up 3% due to a lease extension on the San Francisco Office; and Data Processing Expense was up 10% due to higher volumes. Net Income Applicable to Common Shareholders was $1,149 thousand for the second quarter of 2016, up 22% from the first quarter of 2016 and up 112% from the second quarter of 2015. The disproportionate increase over the second quarter of 2015 is due primarily to elimination of dividends on the Bank’s Perpetual Preferred Stock which was fully redeemed in the third quarter of 2015.
• Credit quality is unchanged and strong with a classified to capital ratio of 3.9%, up slightly from 3.8% in the first quarter due to a nominally higher balance on a classified line of credit. The number of classified borrowers declined during the quarter from six to four. The Allowance for Loans Losses increased by $67 thousand to $6.4 million due to loan growth during the quarter. The Allowance for Loan Losses now covers Non-Performing Loans by almost six times. The Bank has one non-performing loan totaling $1.1 million.
• Diluted earnings per common share were $0.19 for the quarter compared to $0.16 in the first quarter of 2016 and $0.12 in the second quarter of 2015.
• Book value per share increased to $10.82 per share as of June, 2016 from $10.75 per share at March 31, 2016 and $10.27 per share at June 30, 2015. The increase in book value was muted by stock option exercises that have added nearly $6 million of capital during the first half of 2016 and raised the Tier 1 Risk-Based Capital ratio to above 10% at quarter end.

“On July 26, 2016, Presidio Bank will be celebrating its Tenth Anniversary,” said Presidio Bank Chairman and Founder, Jim Woolwine. “During this time, the Bank has built a great team, established five offices in key Bay Area locations, grown to more than $600 million in assets and made significant contributions to the communities that we serve. We look forward to building on this strong foundation.”

2^nd Quarter 2016 Financial Results
(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
	6/30/2016	3/31/2016	Change	6/30/2015	Change	12/31/2015	Change
Cash and due from banks	9,430	12,723	-25.9%	501	1782.2%	6,175	52.7%
Interest bearing due from banks	73,324	96,867	-24.3%	126,275	-41.9%	103,211	-29.0%
Total cash and equivalents	82,754	109,590	-24.5%	126,776	-34.7%	109,386	-24.3%
Investment securities	14,456	14,548	-0.6%	14,191	1.9%	15,034	-3.8%
Loans, net of fees	544,577	522,942	4.1%	446,068	22.1%	523,815	4.0%
Allowance for loan losses	(6,368)	(6,301)	1.1%	(5,172)	23.1%	(6,301)	1.1%
Net loans	538,209	516,641	4.2%	440,896	22.1%	517,514	4.0%
Premises and equipment, net	1,101	1,155	-4.7%	1,381	-20.3%	1,231	-10.6%
Other assets and interest receivable	11,264	11,274	-0.1%	10,660	5.7%	11,102	1.5%
Total assets	647,784	653,208	-0.8%	594,308	9.0%	654,267	-1.0%
Non-interest-bearing demand	201,121	210,872	-4.6%	190,129	5.8%	210,997	-4.7%
Interest bearing transaction	83,121	104,147	-20.2%	67,403	23.3%	78,359	6.1%
Money market and savings accounts	213,227	220,936	-3.5%	207,446	2.8%	249,876	-14.7%
Time deposits	42,755	40,827	4.7%	51,046	-16.2%	40,118	6.6%
Total deposits	540,224	576,782	-6.3%	516,024	4.7%	579,350	-6.8%
Borrowings	37,510	9,773	283.8%	9,880	NM	9,891	279.2%
Other liabilities	6,272	6,629	-5.4%	7,079	-11.4%	7,472	-16.1%
Total liabilities	584,006	593,184	-1.5%	532,983	9.6%	596,713	-2.1%
Preferred stock	-	-	NM	6,869	-100.0%	-	NM
Common stock	62,807	60,248	4.2%	56,375	11.4%	58,796	6.8%
Retained earnings	989	(160)	718.1%	(2,264)	143.7%	(1,100)	189.9%
Other comprehensive income	(18)	(64)	71.9%	(59)	69.5%	(142)	87.3%
Total shareholder’s equity	63,778	60,024	6.3%	60,921	4.7%	57,554	10.8%
Total liabilities and equity	647,784	653,208	-0.8%	593,904	9.1%	654,267	-1.0%
Book value per share
Book value per share	$ 10.82	$ 10.75		$ 10.27		$ 10.51
Total shares outstanding EOP	5,893	5,581		5,261		5,477
Capital Ratios
Tier 1 leverage ratio	9.8%	9.5%		10.6%		9.0%
Tier 1 risk-based capital ratio	10.1%	9.8%		11.7%		9.4%
Total risk-based capital ratio	12.8%	12.5%		14.7%		12.2%
Tangible common risk-based ratio	10.1%	9.8%		10.4%		9.4%

Condensed Statement of Income
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended					For the six months ended
	6/30/2016	3/31/2016	Change	6/30/2015	Change	6/30/2016	6/30/2015	Change
			Fav./		Fav./			Fav./
			(Unfav.)		(Unfav.)			(Unfav.)
Interest income	6,309	6,372	(1.0%)	5,171	22.0%	12,681	10,167	24.7%
Interest expense	436	413	(5.6%)	428	(1.9%)	849	833	(1.9%)
Net interest income	5,873	5,959	(1.4%)	4,743	23.8%	11,832	9,334	26.8%
Provision for loan loss	67	-	NM	-	NM	67	-	NM
Net interest income after provision	5,806	5,959	(2.6%)	4,743	22.4%	11,765	9,334	26.0%
Other income	161	171	(5.8%)	183	(12.0%)	333	352	(5.4%)
Compensation and benefit expenses	2,424	3,044	20.4%	2,301	(5.3%)	5,468	4,896	(11.7%)
Occupancy and equipment expenses	531	516	(2.9%)	432	(22.9%)	1,046	878	(19.1%)
Data processing	304	323	5.9%	277	(9.7%)	627	564	(11.2%)
Professional and legal	141	136	(3.7%)	191	26.2%	276	301	8.3%
Other operating expenses	593	553	(7.2%)	542	(9.4%)	1,149	1,053	(9.1%)
Total operating expenses	3,993	4,572	12.7%	3,743	(6.7%)	8,566	7,692	(11.4%)
Net income before taxes	1,974	1,558	26.7%	1,183	66.9%	3,532	1,994	77.1%
Income taxes	825	618	(33.5%)	487	(69.4%)	1,442	815	(76.9%)
Net income	1,149	940	22.2%	696	65.1%	2,090	1,179	77.3%
Preferred dividends	-	-	NM	155	NM	-	276	100.0%
Net income to common	1,149	940	22.2%	541	112.4%	2,090	903	131.5%
Earnings Per Share
Basic earnings per share	$ 0.20	$ 0.17		$ 0.13		$ 0.37	$ 0.21
Diluted earnings per share	$ 0.19	$ 0.16		$ 0.12		$ 0.36	$ 0.20
Basic shares outstanding	5,713	5,517		4,315		5,614	4,268
Diluted shares outstanding	5,922	5,756		4,546		5,838	4,504
Performance Ratios
Return on average assets	0.71%	0.59%		0.48%		0.65%	0.43%
Return on average common equity	7.46%	6.40%		5.00%		6.95%	4.28%
Net interest margin	3.70%	3.86%		3.40%		3.78%	3.51%
Cost of funds	0.30%	0.29%		0.33%		0.30%	0.34%
Efficiency ratio	66.2%	74.6%		76.1%		70.4%	79.5%
Average Balances
Total assets	653,042	636,043		575,636		644,540	547,550
Earning assets	638,560	621,240		561,247		629,900	535,648
Total loans	531,739	522,422		424,455		527,081	419,222
Total deposits	568,518	558,000		508,336		563,259	483,315
Common equity	61,945	59,117		43,205		60,514	42,406
NM = Not Meaningful

Condensed Balance Sheet (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	6/30/2016	3/31/2016	12/31/2015	9/30/2015	6/30/2015
Cash and due from banks	9,430	12,723	6,175	8,984	501
Interest bearing due from banks	73,324	96,867	103,211	108,898	126,275
Total cash and equivalents	82,754	109,590	109,386	117,882	126,776
Investment securities	14,456	14,548	15,034	14,203	14,191
Loans, net of fees	544,577	522,942	523,815	475,466	446,068
Allowance for loan losses	(6,368)	(6,301)	(6,301)	(5,594)	(5,172)
Net loans	538,209	516,641	517,514	469,872	440,896
Premises and equipment, net	1,101	1,155	1,231	1,313	1,381
Other assets and interest receivable	11,264	11,274	11,102	10,829	10,660
Total assets	647,784	653,208	654,267	614,099	593,904
Non-interest-bearing demand	201,121	210,872	210,997	204,348	190,129
Interest bearing transaction	83,121	104,147	78,359	69,142	67,403
Money market and savings accounts	213,227	220,936	249,876	216,602	207,446
Time deposits	42,755	40,827	40,118	44,388	51,046
Total deposits	540,224	576,782	579,350	534,480	516,024
Borrowings	37,510	9,773	9,891	9,767	9,880
Other liabilities	6,272	6,629	7,472	15,020	7,079
Total liabilities	584,006	593,184	596,713	559,267	532,983
Preferred stock		-	-	-	6,869
Common stock	62,807	60,248	58,796	56,789	56,375
Retained earnings	989	(160)	(1,100)	(1,824)	(2,264)
Other comprehensive income	(18)	(64)	(142)	(133)	(59)
Total shareholder’s equity	63,778	60,024	57,554	54,832	60,921
Total liabilities and equity	647,784	653,208	654,267	614,099	593,904
Book value per share
Book value per share	$ 10.82	$ 10.75	$ 10.51	$ 10.37	$ 10.27
Total shares outstanding EOP	5,893	5,581	5,477	5,288	5,261
Capital Ratios
Tier 1 leverage ratio	9.8%	9.5%	9.0%	9.1%	10.6%
Tier 1 risk-based capital ratio	10.1%	9.8%	9.4%	9.7%	11.6%
Total risk-based capital ratio	12.8%	12.5%	12.2%	12.6%	14.6%
Tangible common risk-based ratio	10.1%	9.8%	9.4%	9.7%	10.3%

Condensed Statement of Income (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended
	6/30/2016	3/31/2016	12/31/2015	9/30/2015	6/30/2015
Interest income	6,309	6,372	5,860	5,557	5,171
Interest expense	436	413	409	421	428
Net interest income	5,873	5,959	5,451	5,136	4,743
Provision for loan loss	67	-	707	422	-
Net interest income after provision	5,806	5,959	4,744	4,714	4,743
Other income	161	171	158	191	183
Compensation and benefit expenses	2,424	3,044	2,441	2,331	2,301
Occupancy and equipment expenses	531	516	441	445	432
Data processing	304	323	299	289	277
Professional and legal	141	136	114	116	191
Other operating expenses	593	553	575	584	542
Total operating expenses	3,993	4,572	3,870	3,765	3,743
Net income before taxes	1,974	1,558	1,032	1,140	1,183
Income taxes	825	618	329	480	487
Net income	1,149	940	703	660	696
Preferred dividends	-	-	-	231	155
Net income to common	1,149	940	703	429	541
Earnings Per Share
Basic earnings per share	$ 0.20	$ 0.17	$ 0.13	$ 0.04	$ 0.13
Diluted earnings per share	$ 0.19	$ 0.16	$ 0.13	$ 0.08	$ 0.12
Average shares outstanding	5,713	5,517	5,328	5,263	4,296
Average diluted shares	5,922	5,756	5,598	5,515	4,526
Performance Ratios
Return on average assets	0.71%	0.59%	0.41%	0.45%	0.48%
Return on average common equity	7.46%	6.38%	4.62%	3.84%	5.00%
Net interest margin	3.70%	3.86%	3.48%	3.43%	3.43%
Cost of funds	0.30%	0.29%	0.29%	0.30%	0.32%
Efficiency ratio	66.2%	74.6%	70.0%	70.2%	76.1%
Average Balances
Total assets	653,042	636,043	638,463	606,634	575,636
Earning assets	638,560	621,240	624,057	592,748	561,247
Total loans	531,739	522,422	484,924	453,483	424,455
Total deposits	568,518	558,000	564,379	527,295	508,336
Common equity	61,945	59,117	56,197	54,963	43,205

Loans (5 Quarter Data)
(Dollars in Thousands, unaudited)
	6/30/2016	3/31/2016	12/31/2015	9/30/2015	6/30/2015
Commercial real estate	244,457	226,555	224,220	207,595	205,796
Land and construction	38,714	47,960	42,493	35,109	29,380
Commercial	150,613	145,127	153,853	142,134	131,263
Personal	35,376	30,465	27,103	23,367	17,214
Residential	26,852	25,013	30,212	26,077	27,589
Multifamily	49,379	48,659	46,827	41,998	35,584
Deferred loan fees	(813)	(837)	(893)	(813)	(758)
Loans	544,577	522,942	523,814	475,466	446,068
Allowance for loan losses	(6,368)	(6,301)	(6,301)	(5,594)	(5,172)
Net loans	538,209	516,641	517,514	469,872	440,896

Non-Performing Assets (5 Quarter Data)
(Dollars in Thousands, unaudited)
	6/30/2016	3/31/2016	12/31/2015	9/30/2015	6/30/2015
Non-Accrual Loans	1,074	1,094	1,213	1,232	1,252
Non-Performing Loans (NPL)	1,074	1,094	1,213	1,232	1,252
Other Real Estate Owned	-	-	-	-	-
Non-Performing Assets (NPA)	1,074	1,094	1,213	1,232	1,252
90+ Days Delinquent	-	-	-	-	-
NPAs & 90 Day Delinquent	1,074	1,094	1,213	1,232	1,252
Quarterly Net Charge-off's	-	-	-	-	-
NPAs / Assets %	0.17%	0.17%	0.19%	0.20%	0.21%
NPAs & 90 Day / Assets %	0.17%	0.17%	0.19%	0.20%	0.21%
NPAs / Actual Loans and OREO %	0.17%	0.17%	0.19%	0.20%	0.21%
Loan Loss Reserves / Loans (%)	1.17%	1.20%	1.20%	1.18%	1.16%

Net Interest Income
(Dollars in Thousands, unaudited)
	For the Three Months Ended
	6/30/2016					6/30/2015
		Interest						Interest
	Average	Income /	Average			Average		Income /	Average
	Balance	Expense	Rate			Balance		Expense	Rate
Assets:
Interest-bearing deposits	$ 92,265	$ 110	0.48	%	$	122,557	$	79	0.26	%
Federal Reserve and Federal Home Loan Bank stock	3,969	69	7.02			3,319		117	14.14
Investment Securities	10,587	37	1.39			10,917		35	1.29
Loans: (2)
Commercial Real Estate	148,278	1,687	4.58			134,739		1,544	4.60
Land and Construction	41,350	493	4.80			18,179		241	5.31
Commercial Real Estate	232,950	2,721	4.70			192,965		2,300	4.78
Residential	26,389	276	4.21			24,761		256	4.15
Multifamily	48,959	579	4.75			35,971		422	4.70
Personal	33,814	338	4.02			17,840		177	3.99
Total Loans	531,739	6,093	4.61			424,455		4,941	4.67
Total Earning Assets	638,560	6,309	3.97			561,248		5,172	3.70
Allowance for loan losses	(6,306)					(6,306)
Cash and cash equivalents	9,298					7,638
Other assets	11,491					13,056
Total Assets	$ 653,042				$	575,636
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$ 91,645	$ 46	0.20	%	$	72,765	$	39	0.22	%
Money market deposits	223,106	127	0.23			206,924		118	0.23
Savings deposits	3,666	1	0.12			2,357		1	0.11
Certificates and other time deposits	42,288	44	0.42			50,924		59	0.47
Total Interest-bearing Deposits	360,705	219	0.24			332,970		217	0.26
Borrowings	15,863	217	5.51			9,884		211	8.66
Total Interest-bearing Liabilities	376,568	436	0.47			342,854		428	0.51
Noninterest-bearing deposits	208,142					175,367
Other liabilities	6,417					7,344
Total Liabilities	591,127					525,565
Stockholders' Equity	61,915					50,071
Total Liabilities and Stockholders' Equity	$ 653,042				$	575,636
Net Interest Income		$ 5,873					$	4,743
Net Interest Margin			3.70	%					3.40	%
Cost of funds			0.30	%					0.33	%

Net Interest Income
(Dollars in Thousands, unaudited)
		For the Six Months Ended
		6/30/2016					6/30/2015
				Interest						Interest
		Average		Income/	Average		Average			Income/	Average
		Balance		Expense	Rate		Balance			Expense	Rate
Assets:
Interest-bearing deposits	$	88,129	$	227	0.52	%	$	102,169	$	127	0.25	%
Federal Reserve and Federal Home Loan Bank stock		3,865		135	7.05			3,206		168	10.59
Investment Securities		10,826		75	1.39			11,051		71	1.29
Loans: (2)
Commercial Real Estate		149,450		3,531	4.75			132,714		3,058	4.65
Land and Construction		43,139		1,076	5.01			16,406		446	5.48
Commercial Real Estate		228,758		5,341	4.70			193,220		4,624	4.83
Residential		27,048		565	4.20			24,355		503	4.16
Multifamily		46,946		1,098	4.71			35,262		820	4.69
Personal		31,740		633	4.01			17,265		351	4.09
Total Loans		527,081		12,245	4.67			419,222		9,801	4.71
Total Earning Assets		629,900		12,681	4.05			535,648		10,167	3.83
Allowance for loan losses		(6,306)						(6,306)
Cash and cash equivalents		9,313						7,819
Other assets		11,633						10,388
Total Assets	$	644,540					$	547,550
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	87,231	$	89	0.20	%	$	70,832	$	77	0.22	%
Money market deposits		221,025		250	0.23			193,939		214	0.22
Savings deposits		3,408		2	0.13			2,448		1	0.12
Certificates and other time deposits		41,095		79	0.38			50,913		118	0.47
Total Interest-bearing Deposits		352,759		419	0.24			318,132		410	0.26
Borrowings		13,630		430	6.34			9,897		422	8.60
Total Interest-bearing Liabilities		366,389		849	0.47			328,029		833	0.51
Noninterest-bearing deposits		210,500						165,183
Other liabilities		7,138						5,062
Total Liabilities		584,027						498,274
Stockholders' Equity		60,514						49,275
Total Liabilities and Stockholders' Equity	$	644,540					$	547,550
Net Interest Income			$	11,832					$	9,334
Net Interest Margin					3.78	%					3.51	%
Cost of funds					0.30	%					0.34	%

About Presidio Bank

Presidio Bank celebrates ten years of providing business banking services to small and mid-size businesses, including professional service firms, real estate developers and investors, and not-for-profit organizations, and to their owners who desire personalized, responsive service with access to local decision makers. Presidio Bank offers clients the resources of a large bank combined with the personalized services of a neighborhood bank. Presidio Bank is headquartered in San Francisco, California and currently operates five banking offices in San Francisco, Walnut Creek, San Rafael, San Mateo and Palo Alto. More information is available at www.presidiobank.com. Presidio Bank is a member of FDIC and an Equal Housing Lender.

This press release contains certain forward-looking statements that involve risk and uncertainties. These statements are identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “plan,” “estimate,” “project,” or similar expressions. The risks and uncertainties that may affect the operations, performance, development, growth projections and results of Presidio Bank’s business include, but are not limited to, the growth of the economy, interest rate movements, timely development by Presidio Bank of technology enhancements for its products and operating systems, the impact of competitive products, services and pricing, client-based requirements, Congressional legislation, changes in regulatory or generally accepted accounting principles and similar matters. Readers are cautioned not to place undue reliance on forward-looking statements which are subject to influence by the named risk factors and unanticipated future events. Actual results, accordingly, may differ materially from management expectations.