Presidio Bank Reports Results for the Third Quarter 2016

SAN FRANCISCO--(BUSINESS WIRE)--Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the third quarter ended September 30, 2016 with Net Income of $1,184 thousand, up 3% from the quarter ended June 30, 2016 and up 72% from the third quarter 2015. For the nine months ended September 30, 2016, Net Income was $3,274 thousand, up 76% over the same period a year ago. Total assets were $738 million at September 30, 2016, up $90 million from June 30, 2016 and up $124 million over September 30, 2015.

“Presidio Bank posted another solid quarter,” said Presidio Bank President and CEO Steve Heitel. “With a record level of total assets, the Bank continues to show year-over-year improvement in profitability and efficiency.”

Financial Highlights

• Total Loans Outstanding were essentially flat from the quarter ending June 30, 2016 despite good growth in both Commercial and Industrial Loans and Commercial Real Estate Loans, which were up a combined $15 million. Construction and Land Development Loans were down $19 million for the quarter as projects continue to sell or refinance ahead of schedule due to the robust economy. New loan Commitments for the quarter were strong at $68 million, up from $44 million in the second quarter.
• Total Deposits increased by $116 million from the quarter ended June 30, 2016. The growth was aided by a single large money market deposit of $75 million that came in at the end of August and is expected to run-off in the fourth quarter. After declining in the second quarter, Demand Deposits rebounded with growth of $22 million in the quarter. Due to the large increase in Money Market Deposits, Demand Deposits declined to 34% of Total Deposits from 37% in the prior quarter.
• Net Interest Income of $6.1 million in the third quarter of 2016 was up 4% from the second quarter of 2016 and up 19% from the third quarter of 2015. YTD Net Interest Income is up 24%. Net Interest Margin decreased during the quarter to 3.59% from 3.70% in the second quarter of 2016, due primarily to higher levels of lower yielding liquid assets carried during the quarter. Loan Yields and Deposit Costs were essentially flat for the quarter. YTD Net Interest Margin is 3.71% compared to 3.49% for the same period in 2015.
• Operating Expenses increased by 2.4% over the second quarter of 2016. The majority of this increase came in Compensation and Benefits Expense and was related to growth-driven additions to staff and an increase to the accrual for incentive compensation due to higher than planned deposit balances. YTD Operating Expenses are up 11% compared to revenue growth of 23% during the same period. Net Income Applicable to Common Shareholders was $1,184 thousand for the third quarter of 2016, up 3% from the second quarter of 2016 and up 123% from the third quarter of 2015. The disproportionate increase over the third 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 remains strong although the Classified to Capital Ratio increased from 3.9% at June 30, 2016 to 5.4% at September 30, 2016 due to the downgrade of a commercial borrower during the quarter. The number of classified relationships now totals five. The Allowance for Loans Losses increased by $274 thousand to $6.6 million due to the increase in Classified Assets during the quarter along with the increase in Commercial & Industrial Loans outstanding. The Allowance for Loan Losses covers Non-Performing Loans by six times. The Bank continues to have one non-performing loan totaling $1.1 million.
• Diluted Earnings per Common Share were $0.19 for the quarter compared to $0.19 in the second quarter of 2016 and $0.09 in the third quarter of 2015.
• Book Value per Share increased to $11.04 per share as of September 30, 2016 from $10.82 per share at June 30, 2016 and $10.37 per share at September 30, 2015.

“We enter into our second decade of serving Bay Area businesses, real estate professionals, not-for-profit organizations and financially sophisticated individuals with strong momentum,” said Presidio Bank Chairman and Founder, Jim Woolwine. “While we are pleased with our success so far, this is just the beginning of what we are striving to achieve.”

3^rd Quarter 2016 Financial Results
(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
	9/30/2016			6/30/2016			Change		9/30/2015			Change		12/31/2015			Change
Cash and due from banks		6,743			9,430		-28.5	%		8,984		-24.9	%		6,175		9.2	%
Interest bearing due from banks		168,954			73,324		130.4	%		108,898		55.1	%		103,211		63.7	%
Total cash and equivalents		175,697			82,754		112.3	%		117,882		49.0	%		109,386		60.6	%
Investment securities		13,955			14,456		-3.5	%		14,203		-1.7	%		15,034		-7.2	%
Loans, net of fees		542,867			544,577		-0.3	%		475,466		14.2	%		523,815		3.6	%
Allowance for loan losses		(6,642	)		(6,368	)	4.3	%		(5,594	)	18.7	%		(6,301	)	5.4	%
Net loans		536,225			538,209		-0.4	%		469,872		14.1	%		517,514		3.6	%
Premises and equipment, net		1,041			1,101		-5.4	%		1,313		-20.7	%		1,231		-15.4	%
Other assets and interest receivable		10,952			11,264		-2.8	%		10,829		1.1	%		11,102		-1.4	%
Total assets		737,870			647,784		13.9	%		614,099		20.2	%		654,267		12.8	%
Non-interest-bearing demand		222,877			201,121		10.8	%		204,348		9.1	%		210,997		5.6	%
Interest bearing transaction		80,112			83,121		-3.6	%		69,142		15.9	%		78,359		2.2	%
Money market and savings accounts		291,551			213,227		36.7	%		216,602		34.6	%		249,876		16.7	%
Time deposits		61,404			42,755		43.6	%		44,388		38.3	%		40,118		53.1	%
Total deposits		655,944			540,224		21.4	%		534,480		22.7	%		579,350		13.2	%
Borrowings		9,770			37,510		-74.0	%		9,767		0.0	%		9,891		-1.2	%
Other liabilities		6,531			6,272		4.1	%		15,020		-56.5	%		7,472		-12.6	%
Total liabilities		672,245			584,006		15.1	%		559,267		20.2	%		596,713		12.7	%
Common stock		63,492			62,807		1.1	%		56,789		11.8	%		58,796		8.0	%
Retained earnings		2,174			989		319.8	%		(1,824	)	219.2	%		(1,100	)	297.6	%
Other comprehensive income		(41	)		(18	)	-127.8	%		(133	)	69.2	%		(142	)	71.1	%
Total shareholder’s equity		65,625			63,778		2.9	%		54,832		19.7	%		57,554		14.0	%
Total liabilities and equity		737,870			647,784		13.9	%		614,099		20.2	%		654,267		12.8	%
Book value per share
Book value per share	$	11.04		$	10.82				$	10.37				$	10.51
Total shares outstanding EOP		5,944			5,893					5,288					5,477
Capital Ratios
Common equity tier 1 capital ratio		10.3	%		10.1	%				9.7	%				9.4	%
Tier 1 risk-based capital ratio		10.3	%		10.1	%				9.7	%				9.4	%
Total risk-based capital ratio		12.9	%		12.8	%				12.6	%				12.2	%
Tier 1 leverage ratio		9.5	%		9.8	%				9.1	%				9.0	%

Condensed Statement of Income
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended													For the nine months ended
	9/30/2016			6/30/2016			Change Fav./ (Unfav.)		9/30/2015			Change Fav./ (Unfav.)		9/30/2016			9/30/2015			Change Fav./ (Unfav.)
Interest income		6,575			6,309		4.2	%		5,557		18.3	%		19,257			15,723		22.5	%
Interest expense		471			436		(8.0	%)		421		(11.9	%)		1,320			1,253		(5.3	%)
Net interest income		6,104			5,873		3.9	%		5,136		18.8	%		17,937			14,470		24.0	%
Provision for loan loss		274			67		NM			422		NM			341			422		NM
Net interest income after provision		5,830			5,806		0.4	%		4,714		23.7	%		17,596			14,048		25.3	%
Other income		177			161		9.9	%		191		(7.3	%)		510			543		(6.1	%)
Compensation and benefit expenses		2,546			2,424		(5.0	%)		2,331		(9.2	%)		8,014			7,227		(10.9	%)
Occupancy and equipment expenses		531			531		0.0	%		445		(19.3	%)		1,578			1,324		(19.2	%)
Data processing		320			304		(5.3	%)		289		(10.7	%)		947			853		(11.0	%)
Professional and legal		142			141		(0.7	%)		116		(22.4	%)		418			417		(0.2	%)
Other operating expenses		548			593		7.6	%		557		1.6	%		1,697			1,610		(5.4	%)
Total operating expenses		4,087			3,993		(2.4	%)		3,738		(9.3	%)		12,654			11,431		(10.7	%)
Net income before taxes		1,920			1,974		(2.7	%)		1,167		64.5	%		5,452			3,160		72.5	%
Income taxes		736			825		10.8	%		480		(53.3	%)		2,178			1,294		(68.3	%)
Net income		1,184			1,149		3.0	%		687		72.3	%		3,274			1,866		75.5	%
Preferred dividends		-			-		NM			155		NM			-			431		100.0	%
Net income to common		1,184			1,149		3.0	%		532		122.6	%		3,274			1,435		128.2	%
Earnings Per Share
Basic earnings per share	$	0.20		$	0.20				$	0.10				$	0.57		$	0.30
Diluted earnings per share	$	0.19		$	0.19				$	0.09				$	0.55		$	0.29
Basic shares outstanding		5,926			5,713					5,263					5,738			4,588
Diluted shares outstanding		6,096			5,922					5,515					5,943			4,827
Performance Ratios
Return on average assets		0.68	%		0.71	%				0.45	%				0.66	%		0.44	%
Return on average common equity		7.22	%		7.46	%				3.84	%				7.04	%		4.11	%
Net interest margin		3.59	%		3.70	%				3.44	%				3.71	%		3.49	%
Cost of funds		0.29	%		0.30	%				0.30	%				0.30	%		0.32	%
Efficiency ratio		65.1	%		66.2	%				70.2	%				68.6	%		76.1	%
Average Balances
Total assets		694,088			653,042					606,234					661,177			567,354
Earning assets		679,353			638,560					592,748					646,505			554,891
Total loans		547,748			531,739					453,483					534,020			430,768
Total deposits		603,428			568,518					527,295					576,746			498,136
Common equity		65,228			61,945					54,963					62,096			46,638
NM = Not Meaningful

Condensed Balance Sheet (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	9/30/2016			6/30/2016			3/31/2016			12/31/2015			9/30/2015
Cash and due from banks		6,743			9,430			12,723			6,175			8,984
Interest bearing due from banks		168,954			73,324			96,867			103,211			108,898
Total cash and equivalents		175,697			82,754			109,590			109,386			117,882
Investment securities		13,955			14,456			14,548			15,034			14,203
Loans, net of fees		542,867			544,577			522,942			523,815			475,466
Allowance for loan losses		(6,642	)		(6,368	)		(6,301	)		(6,301	)		(5,594	)
Net loans		536,225			538,209			516,641			517,514			469,872
Premises and equipment, net		1,041			1,101			1,155			1,231			1,313
Other assets and interest receivable		10,952			11,264			11,274			11,102			10,829
Total assets		737,870			647,784			653,208			654,267			614,099
Non-interest-bearing demand		222,877			201,121			210,872			210,997			204,348
Interest bearing transaction		80,112			83,121			104,147			78,359			69,142
Money market and savings accounts		291,551			213,227			220,936			249,876			216,602
Time deposits		61,404			42,755			40,827			40,118			44,388
Total deposits		655,944			540,224			576,782			579,350			534,480
Borrowings		9,770			37,510			9,773			9,891			9,767
Other liabilities		6,531			6,272			6,629			7,472			15,020
Total liabilities		672,245			584,006			593,184			596,713			559,267
Preferred stock								-			-			-
Common stock		63,492			62,807			60,248			58,796			56,789
Retained earnings		2,174			989			(160	)		(1,100	)		(1,824	)
Other comprehensive income		(41	)		(18	)		(64	)		(142	)		(133	)
Total shareholder’s equity		65,625			63,778			60,024			57,554			54,832
Total liabilities and equity		737,870			647,784			653,208			654,267			614,099
Book value per share
Book value per share	$	11.04		$	10.82		$	10.75		$	10.51		$	10.37
Total shares outstanding EOP		5,944			5,893			5,581			5,477			5,288
Capital Ratios
Tier 1 leverage ratio		9.5	%		9.8	%		9.5	%		9.0	%		9.1	%
Tier 1 risk-based capital ratio		10.3	%		10.1	%		9.8	%		9.4	%		9.7	%
Total risk-based capital ratio		12.9	%		12.8	%		12.5	%		12.2	%		12.6	%
Tangible common risk-based ratio		10.3	%		10.1	%		9.8	%		9.4	%		9.7	%

Condensed Statement of Income (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended
	9/30/2016			6/30/2016			3/31/2016			12/31/2015			9/30/2015
Interest income		6,575			6,309			6,372			5,860			5,557
Interest expense		471			436			413			409			421
Net interest income		6,104			5,873			5,959			5,451			5,136
Provision for loan loss		274			67			-			707			422
Net interest income after provision		5,830			5,806			5,959			4,744			4,714
Other income		177			161			171			158			191
Compensation and benefit expenses		2,546			2,424			3,044			2,441			2,331
Occupancy and equipment expenses		531			531			516			441			445
Data processing		320			304			323			299			289
Professional and legal		142			141			136			114			116
Other operating expenses		548			593			553			575			557
Total operating expenses		4,087			3,993			4,572			3,870			3,738
Net income before taxes		1,920			1,974			1,558			1,032			1,167
Income taxes		736			825			618			329			480
Net income		1,184			1,149			940			703			687
Preferred dividends		-			-			-			-			155
Net income to common		1,184			1,149			940			703			532
Earnings Per Share
Basic earnings per share	$	0.20		$	0.20		$	0.17		$	0.13		$	0.10
Diluted earnings per share	$	0.19		$	0.19		$	0.16		$	0.13		$	0.09
Average shares outstanding		5,926			5,713			5,517			5,328			5,263
Average diluted shares		6,096			5,922			5,756			5,598			5,515
Performance Ratios
Return on average assets		0.68	%		0.71	%		0.59	%		0.41	%		0.45	%
Return on average common equity		7.22	%		7.46	%		6.38	%		4.62	%		3.84	%
Net interest margin		3.59	%		3.70	%		3.86	%		3.48	%		3.44	%
Cost of funds		0.29	%		0.30	%		0.29	%		0.29	%		0.30	%
Efficiency ratio		65.1	%		66.2	%		74.6	%		70.0	%		70.2	%
Average Balances
Total assets		694,088			653,042			636,043			638,463			606,234
Earning assets		679,353			638,560			621,240			624,057			592,748
Total loans		547,748			531,739			522,422			484,924			453,483
Total deposits		603,428			568,518			558,000			564,379			527,295
Common equity		65,228			61,945			59,117			56,197			54,963

Loans (5 Quarter Data)
(Dollars in Thousands, unaudited)
	9/30/2016		6/30/2016		3/31/2016		12/31/2015		9/30/2015
Commercial real estate	248,646		244,457		226,555		224,220		207,595
Land and construction	20,025		38,714		47,960		42,493		35,109
Commercial	161,783		150,613		145,127		153,853		142,134
Personal	31,411		35,376		30,465		27,103		23,367
Residential	30,977		26,852		25,013		30,212		26,077
Multifamily	50,832		49,379		48,659		46,827		41,998
Deferred loan fees	(806	)	(813	)	(837	)	(893	)	(813	)
Loans	542,867		544,577		522,942		523,814		475,466
Allowance for loan losses	(6,642	)	(6,368	)	(6,301	)	(6,301	)	(5,594	)
Net loans	536,225		538,209		516,641		517,514		469,872

Non-Performing Assets (5 Quarter Data)
(Dollars in Thousands, unaudited)
	9/30/2016	6/30/2016	3/31/2016	12/31/2015	9/30/2015
Non-Accrual Loans	1,068	1,074	1,094	1,213	1,232
Non-Performing Loans (NPL)	1,068	1,074	1,094	1,213	1,232
Other Real Estate Owned	-	-	-	-	-
Non-Performing Assets (NPA)	1,068	1,074	1,094	1,213	1,232
90+ Days Delinquent	-	-	-	-	-
NPAs & 90 Day Delinquent	1,068	1,074	1,094	1,213	1,232
Quarterly Net Charge-off's	-	-	-	-	-
NPAs / Assets %	0.14%	0.17%	0.17%	0.19%	0.20%
NPAs & 90 Day / Assets %	0.14%	0.17%	0.17%	0.19%	0.20%
NPAs / Actual Loans and OREO %	0.14%	0.17%	0.17%	0.19%	0.20%
Loan Loss Reserves / Loans (%)	1.22%	1.17%	1.20%	1.20%	1.18%

Net Interest Income (Quarter Data)
(Dollars in Thousands, unaudited)
	For the Three Months Ended
	9/30/2016						9/30/2015
			Interest						Interest
	Average		Income/		Average		Average		Income/		Average
	Balance		Expense		Rate		Balance		Expense		Rate
Assets:
Interest-bearing deposits	$	117,438	$	152	0.51	%	$	125,139	$	74	0.23	%
Federal Reserve and Federal Home Loan Bank stock		4,114		78	7.52			3,540		71	7.91
Investment Securities		10,053		34	1.36			10,585		35	1.31
Loans: (2)
Commercial Real Estate		159,082		1,824	4.56			135,104		1,582	4.64
Land and Construction		32,357		444	5.46			32,908		452	5.45
Commercial Real Estate		245,259		2,833	4.60			201,246		2,418	4.77
Residential		28,502		301	4.20			24,860		258	4.12
Multifamily		49,347		582	4.69			39,482		468	4.70
Personal		33,202		327	3.91			19,883		200	3.99
Total Loans		547,748		6,311	4.58			453,483		5,377	4.70
Total Earning Assets		679,353		6,575	3.85			592,748		5,557	3.72
Allowance for loan losses		(6,306)						(6,306)
Cash and cash equivalents		9,824						7,651
Other assets		11,216						12,224
Total Assets	$	694,088					$	606,317
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	84,990	$	41	0.19	%	$	73,458	$	38	0.21	%
Money market deposits		243,111		145	0.24			210,093		114	0.22
Savings deposits		3,306		1	0.11			2,065		1	0.11
Certificates and other time deposits		55,932		57	0.41			50,224		57	0.45
Total Interest-bearing Deposits		387,340		244	0.25			335,839		210	0.25
Borrowings		19,198		222	4.59			9,846		211	8.50
Total Interest-bearing Liabilities		406,538		466	0.45			345,685		421	0.48
Noninterest-bearing deposits		216,691						191,456
Other liabilities		5,633						7,494
Total Liabilities		628,862						544,634
Stockholders' Equity		65,226						61,683
Total Liabilities and Stockholders' Equity	$	694,088					$	606,317
Net Interest Income			$	6,109					$	5,136
Net Interest Margin					3.57	%					3.44	%
Cost of funds					0.30	%					0.31	%

Net Interest Income (YTD)
(Dollars in Thousands, unaudited)
		For the Nine Months Ended
	9/30/2016							9/30/2015
				Interest							Interest
	Average			Income/		Average		Average			Income/		Average
	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-bearing deposits	$	97,970		$	379	0.52	%	$	109,910		$	201	0.24	%
Federal Reserve and Federal Home Loan Bank stock		3,949			213	7.21			3,319			239	9.62
Investment Securities		10,566			109	1.38			10,894			106	1.30
Loans: (2)
Commercial Real Estate		152,684			5,363	4.69			133,519			4,606	4.61
Land and Construction		39,519			1,524	5.15			21,967			878	5.34
Commercial Real Estate		234,298			8,185	4.67			195,925			7,088	4.84
Residential		27,536			866	4.20			24,525			761	4.15
Multifamily		47,752			1,657	4.64			36,684			1,295	4.72
Personal		32,231			960	3.98			18,147			550	4.06
Total Loans		534,020			18,556	4.64			430,768			15,178	4.71
Total Earning Assets		646,505			19,257	3.98			554,891			15,723	3.79
Allowance for loan losses		(6,306	)						(6,306	)
Cash and cash equivalents		9,485							7,762
Other assets		11,493							11,007
Total Assets	$	661,177						$	567,354
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	86,479		$	130	0.20	%	$	71,717		$	115	0.21	%
Money market deposits		228,441			395	0.23			199,383			328	0.22
Savings deposits		3,374			3	0.12			2,319			2	0.12
Certificates and other time deposits		45,874			141	0.41			50,681			175	0.46
Total Interest-bearing Deposits		364,167			668	0.25			324,099			620	0.26
Borrowings		15,499			652	5.62			9,880			633	8.57
Total Interest-bearing Liabilities		379,667			1,320	0.46			333,979			1,253	0.50
Noninterest-bearing deposits		212,579							174,037
Other liabilities		6,836							5,882
Total Liabilities		599,081							513,897
Stockholders' Equity		62,096							53,457
Total Liabilities and Stockholders' Equity	$	661,177						$	567,354
Net Interest Income				$	17,937						$	14,470
Net Interest Margin						3.71	%						3.49	%
Cost of funds						0.30	%						0.33	%

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.