Presidio Bank Reports Results for the Third Quarter of 2017

SAN FRANCISCO--(BUSINESS WIRE)--Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the third quarter ended September 30, 2017 with Net Income of $2.1 million, up 31% from the second quarter of 2017. Net Income for the nine months ended September 30, 2017 was up 49% from the same period a year ago. Total Assets were $786 million at September 30, 2017, up 5% from June 30, 2017.

“Aided by successful collection of our only non-performing loan, the Bank had another solid quarter of revenue and profitability growth,” said Presidio Bank President and CEO Steve Heitel. “We are continuing to execute our strategy of disciplined organic growth.”

Financial Highlights

• Total Loans Outstanding were up $14 million from the quarter ending June 30, 2017 and up $74 million from September 30, 2016 or 14%. New Loan Originations however were soft for the quarter at $44 million, down from $76 million in the second quarter. The loan pipeline remains solid and continued loan growth is expected. Loan growth came as expected from funding of previously originated Land and Construction loans which grew $17 million in the quarter. Commercial and Industrial loans grew $7 million while Commercial Real Estate declined by $7 million. Unfunded Construction Loans declined $8 million during the quarter but still total $48 million which continues to exceed historical averages.
• Total Deposits increased by $38 million from the quarter ended June 30, 2017. During the quarter, a $30 million escrow deposit was distributed out of the Bank as scheduled to its beneficiaries. On the last day of the quarter, another depositor brought in a $30 million deposit that was distributed out on the first business day of the fourth quarter, inflating the deposit total at the end of the third quarter.
• Net Interest Income of $7.8 million in the third quarter of 2017 was up 14% from the second quarter of 2017 and up 29% from the third quarter of 2016. This increase is due to higher average loan balances and the impact of rate increases by the Federal Reserve. The increase was also augmented by the collection of the Bank’s only non-performing loan, which resulted in the recognition of $420 thousand in interest and fees. Without this one-time event, Net Interest Income would have increased 8%. Net Interest Margin increased during the quarter to 4.34% from 3.98% in the second quarter of 2017 due to higher Loan Yields and flat Cost of Funds. Excluding the interest related to the non-performing loan payoff, Net Interest Margin would have been 4.11%
• Operating Expenses increased by 6% over the second quarter of 2017. This increase was largely due to an increase in the incentive compensation accrual due to above plan year-to-date performance and the commencement of lease expense on our newly relocated and expanded Walnut Creek Office. These increases were somewhat offset by reimbursement for previously expensed legal and foreclosure costs related to the collection of the non-performing loan. The Efficiency Ratio improved to 57% from 62% in the second quarter of 2017.
• Year-to-date revenue growth is 18.6% while year-to-date expense growth is 8.2%.
• Credit Quality remains stable and strong with a Classified to Capital Ratio of 3.6% at September 30, 2017. The Loan Loss Provision Expense for the second quarter was $100 thousand driven by growth in the loan portfolio, offset by the $51 thousand recovery of the previously charged off portion of the non-performing loan. Over the past two quarters, we have seen two commercial relationships downgraded to special mention. The Bank is well-secured in each of these relationships and feels that appropriate action plans are in place.
• Diluted Earnings per Common Share were $0.32 for the quarter, up from $0.26 from the quarter ended June 30, 2017.
• Book Value per Share increased to $12.15 per share at September 30, 2017 from $11.75 per share at June 30, 2017 and $11.04 per share at September 30, 2016.

“The Bank is also pleased to report that it successfully completed the relocation of its Walnut Creek Office to a larger and more visible location adjacent to the Walnut Creek BART station,” said Presidio Bank Chairman and Founder, Jim Woolwine. “The new office will also serve as the hub for the Bank’s Central and Loan Operations teams.”

3^rd Quarter 2017 Financial Results
(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
	9/30/2017			6/30/2017			Change		9/30/2016			Change		12/31/2016			Change
Cash and due from banks		10,677			9,789		9.1	%		6,743		58.3	%		6,035		76.9	%
Interest bearing due from banks		126,277			101,532		24.4	%		168,954		-25.3	%		150,159		-15.9	%
Total cash and equivalents		136,954			111,321		23.0	%		175,697		-22.1	%		156,194		-12.3	%
Investment securities		12,801			12,736		0.5	%		13,955		-8.3	%		13,249		-3.4	%
Loans, net of fees		617,269			603,689		2.2	%		542,867		13.7	%		572,780		7.8	%
Allowance for loan losses		(7,166	)		(7,014	)	-2.2	%		(6,642	)	-7.9	%		(6,868	)	-4.3	%
Net loans		610,103			596,675		2.3	%		536,225		13.8	%		565,912		7.8	%
Premises and equipment, net		2,452			1,335		83.7	%		1,041		135.6	%		1,020		140.4	%
Other assets and interest receivable		23,312			24,159		-3.5	%		10,952		112.9	%		11,128		109.5	%
Total assets		785,622			746,226		5.3	%		737,870		6.5	%		747,503		5.1	%
Non-interest-bearing demand		304,726			250,344		21.7	%		222,877		36.7	%		257,757		18.2	%
Interest bearing transaction		98,019			103,727		-5.5	%		80,112		22.4	%		99,604		-1.6	%
Money market and savings accounts		247,857			258,564		-4.1	%		291,551		-15.0	%		259,711		-4.6	%
Time deposits		46,871			47,293		-0.9	%		61,404		-23.7	%		46,412		1.0	%
Total deposits		697,473			659,928		5.7	%		655,944		6.3	%		663,484		5.1	%
Borrowings		10,346			10,152		1.9	%		9,770		5.9	%		9,845		5.1	%
Other liabilities		4,001			4,837		-17.3	%		6,531		-38.7	%		6,812		-41.3	%
Total liabilities		711,820			674,917		5.5	%		672,245		5.9	%		680,140		4.7	%
Common stock		65,585			65,185		0.6	%		63,492		3.3	%		64,122		2.3	%
Retained earnings		8,252			6,173		33.7	%		2,174		279.6	%		3,377		144.3	%
Other comprehensive income		(35	)		(49	)	29.0	%		(41	)	15.1	%		(137	)	74.6	%
Total shareholder’s equity		73,802			71,309		3.5	%		65,625		12.5	%		67,362		9.6	%
Total liabilities and equity		785,622			746,226		5.3	%		737,870		6.5	%		747,503		5.1	%
Book value per share
Book value per share	$	12.15		$	11.75				$	11.04				$	11.31
Total shares outstanding EOP		6,074			6,069					5,944					5,957
Capital Ratios
Tier 1 leverage ratio		9.9	%		10.0	%				9.5	%				9.1	%
Tier 1 risk-based capital ratio		9.8	%		9.6	%				10.3	%				10.1	%
Tangible common risk-based ratio		9.8	%		9.6	%				10.3	%				10.1	%
Total risk-based capital ratio		12.2	%		12.0	%				12.9	%				12.7	%

Condensed Statement of Income
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended													For the Nine months ended
	9/30/2017			6/30/2017			Change Fav./ (Unfav.)		9/30/2016			Change Fav./ (Unfav.)		9/30/2017			9/30/2016			Change Fav./ (Unfav.)
Interest income		8,362			7,349		13.8	%		6,575		27.2	%		22,563			19,257		17.2	%
Interest expense		472			442		(6.7	%)		471		(0.1	%)		1,336			1,320		(1.2	%)
Net interest income		7,890			6,907		14.2	%		6,104		29.3	%		21,227			17,937		18.3	%
Provision for loan loss		100			198		49.5	%		274		63.5	%		298			341		12.6	%
Net interest income after provision		7,790			6,709		16.1	%		5,830		33.6	%		20,929			17,596		18.9	%
Other income		268			191		40.1	%		177		51.2	%		660			510		29.5	%
Compensation and benefit expenses		3,036			2,736		(11.0	%)		2,546		(19.3	%)		8,711			8,014		(8.7	%)
Occupancy and equipment expenses		628			518		(21.2	%)		531		(18.3	%)		1,665			1,578		(5.5	%)
Data processing		346			326		(6.0	%)		320		(8.0	%)		977			947		(3.2	%)
Professional and legal		77			203		67.6	%		142		53.7	%		419			418		7.6	%
Other operating expenses		533			586		7.2	%		548		0.8	%		1,921			1,697		(15.1	%)
Total operating expenses		4,620			4,369		(5.7	%)		4,087		(13.0	%)		13,693			12,654		(8.2	%)
Net income before taxes		3,438			2,531		35.8	%		1,920		79.0	%		7,896			5,452		44.8	%
Income taxes		1,358			939		(44.6	%)		736		(84.5	%)		3,021			2,178		(38.7	%)
Net income		2,080			1,592		30.7	%		1,184		75.7	%		4,875			3,274		48.9	%
Earnings Per Share
Basic earnings per share	$	0.33		$	0.27				$	0.20				$	0.81		$	0.57
Diluted earnings per share	$	0.32		$	0.26				$	0.19				$	0.77		$	0.55
Average shares outstanding		6,001			5,899					5,886					5,968			5,697
Average diluted shares		6,277			6,157					6,146					6,232			5,903
Performance Ratios
Return on average assets		1.10	%		0.90	%				0.68	%				0.90	%		0.66	%
Return on average common equity		11.31	%		9.03	%				7.22	%				9.16	%		7.04	%
Net interest margin		4.34	%		3.98	%				3.59	%				4.03	%		3.71	%
Cost of funds		0.28	%		0.28	%				0.29	%				0.28	%		0.30	%
Efficiency ratio		57.0	%		61.6	%				65.1	%				63.1	%		68.6	%
Average Balances
Total assets		748,229			711,847					694,088					724,197			661,177
Earning assets		721,374			695,297					679,353					705,032			646,505
Total loans		612,493			588,980					547,748					589,918			534,020
Total deposits		660,790			627,004					603,428					638,390			576,746
Common equity		73,108			70,741					65,228					70,886			62,096
NM = Not Meaningful

Condensed Balance Sheet (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Cash and due from banks		10,677			9,789			6,239			6,035			6,743
Interest bearing due from banks		126,277			101,532			88,944			150,159			168,954
Total cash and equivalents		136,954			111,321			95,183			156,194			175,697
Investment securities		12,801			12,736			12,893			13,249			13,955
Loans, net of fees		617,269			603,689			578,033			572,780			542,867
Allowance for loan losses		(7,166	)		(7,014	)		(6,868	)		(6,868	)		(6,642	)
Net loans		610,103			596,675			571,165			565,912			536,225
Premises and equipment, net		2,452			1,335			1,005			1,020			1,041
Other assets and interest receivable		23,312			24,159			11,610			11,128			10,952
Total assets		785,622			746,226			691,856			747,503			737,870
Non-interest-bearing demand		304,726			250,344			233,059			257,757			222,877
Interest bearing transaction		98,019			103,727			98,560			99,604			80,112
Money market and savings accounts		247,857			258,564			228,801			259,711			291,551
Time deposits		46,871			47,293			48,016			46,412			61,404
Total deposits		697,473			659,928			608,436			663,484			655,944
Borrowings		10,346			10,152			9,860			9,845			9,770
Other liabilities		4,001			4,837			4,233			6,812			6,531
Total liabilities		711,820			674,917			622,529			680,140			672,245
Common stock		65,585			65,185			64,801			64,122			63,492
Retained earnings		8,252			6,173			4,581			3,377			2,174
Other comprehensive income		(35	)		(49	)		(55	)		(137	)		(41	)
Total shareholder’s equity		73,802			71,309			69,327			67,362			65,625
Total liabilities and equity		785,622			746,226			691,856			747,503			737,870
Book value per share
Book value per share	$	12.15		$	11.75		$	11.50		$	11.31		$	11.04
Total shares outstanding EOP		6,074			6,069			6,030			5,957			5,944
Capital Ratios
Tier 1 leverage ratio		9.9	%		10.0	%		9.7	%		9.1	%		9.5	%
Common equity tier 1 capital ratio		9.8	%		9.6	%		10.1	%		10.1	%		10.3	%
Tier 1 risk-based capital ratio		9.8	%		9.6	%		10.1	%		10.1	%		10.3	%
Total risk-based capital ratio		12.2	%		12.0	%		12.6	%		12.7	%		12.9	%

Condensed Statement of Income (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016
Interest income		8,362			7,349			6,853			6,736			6,575
Interest expense		472			442			422			455			471
Net interest income		7,890			6,907			6,431			6,281			6,104
Provision for loan loss		100			198			-			226			274
Net interest income after provision		7,790			6,709			6,431			6,055			5,830
Other income		268			191			202			189			177
Compensation and benefit expenses		3,036			2,736			2,938			2,657			2,546
Occupancy and equipment expenses		628			518			520			547			531
Data processing		346			326			306			340			320
Professional and legal		77			203			139			121			142
Other operating expenses		533			586			801			612			548
Total operating expenses		4,620			4,369			4,704			4,277			4,087
Net income before taxes		3,438			2,531			1,929			1,967			1,920
Income taxes		1,358			939			725			763			736
Net income		2,080			1,592			1,204			1,204			1,184
Earnings Per Share
Basic earnings per share	$	0.33		$	0.27		$	0.20		$	0.20		$	0.20
Diluted earnings per share	$	0.32		$	0.26		$	0.19		$	0.19		$	0.19
Average shares outstanding		6,001			5,899			5,932			5,906			5,886
Average diluted shares		6,277			6,157			6,185			6,146			6,146
Performance Ratios
Return on average assets		1.10	%		0.90	%		0.69	%		0.65	%		0.68	%
Return on average common equity		11.31	%		9.03	%		7.09	%		7.15	%		7.22	%
Net interest margin		4.34	%		3.98	%		3.74	%		3.45	%		3.59	%
Cost of funds		0.28	%		0.28	%		0.27	%		0.27	%		0.29	%
Efficiency ratio		57.0	%		61.6	%		71.0	%		66.1	%		65.1	%
Average Balances
Total assets		748,229			711,847			712,119			738,307			694,088
Earning assets		721,374			695,297			698,171			725,247			679,353
Total loans		612,493			588,980			567,792			537,641			547,748
Total deposits		660,790			627,004			628,228			655,149			603,428
Common equity		73,108			70,741			68,760			66,788			65,228

Loans (5 Quarter Data) (Dollars in Thousands, unaudited)
	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016
Commercial real estate	268,357		275,189		268,334		263,463		248,646
Land and construction	39,599		22,657		13,629		12,298		20,025
Commercial	194,884		187,537		176,073		180,412		161,783
Personal	21,292		23,008		30,992		31,352		31,411
Residential	34,389		33,671		27,077		30,510		30,977
Multifamily	59,764		62,634		62,898		55,593		50,832
Deferred loan fees	(1,016	)	(1,007	)	(970	)	(848	)	(806	)
Loans	617,269		603,689		578,033		572,779		542,867
Allowance for loan losses	(7,166	)	(7,015	)	(6,868	)	(6,868	)	(6,642	)
Net loans	610,103		596,675		571,165		565,912		536,225

Non-Performing Assets (5 Quarter Data) (Dollars in Thousands, unaudited)
	9/30/2017		6/30/2017		3/31/2017		12/31/2016		9/30/2016
Non-Accrual Loans	-		991		1,042		1,055		1,068
Non-Performing Loans (NPL)	-		991		1,042		1,055		1,068
Other Real Estate Owned	-		-		-		-		-
Non-Performing Assets (NPA)	-		991		1,042		1,055		1,068
90+ Days Delinquent	-		-		-		-		-
NPAs & 90 Day Delinquent	-		991		1,042		1,055		1,068
Quarterly Net Charge-off's	(51	)	51		-		-		-
NPAs / Assets %	0.00	%	0.13	%	0.15	%	0.14	%	0.14	%
NPAs & 90 Day / Assets %	0.00	%	0.13	%	0.15	%	0.14	%	0.14	%
NPAs / Actual Loans and OREO %	0.00	%	0.13	%	0.15	%	0.14	%	0.14	%
Loan Loss Reserves / Loans (%)	1.16	%	1.16	%	1.19	%	1.20	%	1.22	%

Net Interest Income (Quarter Data) (Dollars in Thousands, unaudited)
	For the Three Months Ended
	9/30/2017							6/30/2017
				Interest							Interest
	Average			Income/		Average		Average			Income/		Average
	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-bearing deposits	$	96,029		$	324	1.34	%	$	93,405		$	223	0.96	%
Federal Reserve and Federal Home Loan Bank stock		4,625			74	6.38			4,518			69	6.13
Investment Securities		8,227			32	1.56			8,395			31	1.49
Loans: (2)
Commercial		187,888			2,777	5.86			182,033			2,191	4.83
Land and Construction		32,792			524	6.33			17,072			269	6.33
Commercial Real Estate		274,847			3,278	4.73			267,931			3,183	4.77
Residential		33,997			420	4.90			31,139			366	4.71
Multifamily		60,424			690	4.53			63,085			718	4.56
Personal		22,545			243	4.28			27,720			298	4.31
Total Loans		612,493			7,932	5.14			588,980			7,025	4.78
Total Earning Assets		721,374			8,362	4.60			695,297			7,349	4.24
Allowance for loan losses		(7,149	)						(6,900	)
Cash and cash equivalents		8,639							9,055
Other assets		25,365							14,395
Total Assets	$	748,229						$	711,847
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	103,364		$	47	0.18	%	$	104,413		$	51	0.20	%
Money market deposits		248,786			137	0.22			234,203			120	0.21
Savings deposits		5,066			1	0.10			5,258			1	0.09
Certificates and other time deposits		47,612			76	0.64			47,988			59	0.49
Total Interest-bearing Deposits		404,828			261	0.26			391,862			231	0.24
Borrowings		10,327			211	8.11			9,981			211	8.48
Total Interest-bearing Liabilities		415,155			472	0.45			401,844			442	0.44
Noninterest-bearing deposits		255,962							235,141
Other liabilities		4,004							4,122
Total Liabilities		675,121							641,107
Stockholders' Equity		73,108							70,741
Total Liabilities and Stockholders' Equity	$	748,229						$	711,847
Net Interest Income				$	7,890						$	6,907
Net Interest Margin						4.34	%						3.98	%
Cost of funds						0.28	%						0.28	%

Net Interest Income (Quarter Data) (Dollars in Thousands, unaudited)
	For the Nine Months Ended
	9/30/2017							9/30/2016
				Interest							Interest
	Average			Income/		Average		Average			Income/		Average
	Balance			Expense		Rate		Balance			Expense		Rate
Assets:
Interest-bearing deposits	$	102,188		$	807	1.06	%	$	97,970		$	379	0.52	%
Federal Reserve and Federal Home Loan Bank stock		4,459			225	6.75			3,949			213	7.21
Investment Securities		8,467			96	1.52			10,566			109	1.38
Loans: (2)
Commercial		178,945			6,910	5.16			152,684			5,363	4.69
Land and Construction		21,234			992	6.25			39,519			1,524	5.15
Commercial Real Estate		270,284			9,505	4.70			234,298			8,185	4.67
Residential		30,980			1,086	4.69			27,536			866	4.20
Multifamily		60,991			2,083	4.57			47,752			1,657	4.64
Personal		27,484			859	4.18			32,231			960	3.98
Total Loans		589,918			21,435	4.86			534,020			18,556	4.64
Total Earning Assets		705,032			22,563	4.28			646,505			19,257	3.98
Allowance for loan losses		(6,972	)						(6,306	)
Cash and cash equivalents		8,974							9,485
Other assets		17,163							11,493
Total Assets	$	724,197						$	661,177
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	102,941		$	142	0.18	%	$	86,479		$	130	0.20	%
Money market deposits		239,093			372	0.21			228,441			395	0.23
Savings deposits		4,620			3	0.09			3,374			3	0.12
Certificates and other time deposits		46,965			186	0.53			45,874			141	0.41
Total Interest-bearing Deposits		393,619			703	0.24			364,167			668	0.25
Borrowings		10,033			633	8.44			15,499			652	5.62
Total Interest-bearing Liabilities		403,652			1,336	0.44			379,667			1,320	0.46
Noninterest-bearing deposits		244,771							212,579
Other liabilities		4,888							6,836
Total Liabilities		653,311							599,081
Stockholders' Equity		70,886							62,096
Total Liabilities and Stockholders' Equity	$	724,197						$	661,177
Net Interest Income				$	21,227						$	17,937
Net Interest Margin						4.03	%						3.71	%
Cost of funds						0.28	%						0.30	%

About Presidio Bank

Presidio Bank provides 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.