Presidio Bank Reports Results for the Second Quarter of 2018

SAN FRANCISCO--(BUSINESS WIRE)--Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the second quarter ended June 30, 2018 with Net Income of $2.8 million, up $600 thousand (27%) from the first quarter of 2018 and up $1.2 million (78%) from the second quarter of 2017. Total Assets were $853 million at June 30, 2018, up $3 million from March 31, 2018 and up $107 million from June 30, 2017.

“While asset growth was modest in the second quarter, the Bank continues to significantly improve its profitability and efficiency,” said Presidio Bank CEO Steve Heitel. “Our Return on Assets and Return on Equity are both up more than 50% from the same period a year ago.”

Financial Highlights

• Total Loans Outstanding were up $3 million from the quarter ending March 31, 2018 and up $50 million from June 30, 2017 or 8%. New Loan Originations were $50 million, down from $80 million in the exceptionally strong first quarter of 2018. Loan growth was centered in Commercial Real Estate and Multi Family loans, which offset a decline in Commercial and Industrial loans. The decline in Commercial and Industrial loans was due to seasonal pay downs and several borrowers that sold assets during the quarter and reduced line of credit balances with the proceeds.
• Total Deposits decreased by $1 million from the quarter ended March 31, 2018 and increased by $98 million from June 30, 2017 or 15%. Year-to-date, deposits are up $53 million. During the quarter ended June 30, 2018, the decline in Non-Interest Bearing Demand Deposits was offset by a like increase in Money Market Deposits. Despite the decline, Non-Interest Bearing Demand Deposits still represent 39% of Total Deposits.
• Net Interest Income of $8.3 million in the second quarter of 2018 was up 3% from the first quarter of 2018 and up 21% from the second quarter of 2017. This increase is due to higher average loan balances, increased loan yields, and increased interest rates on liquid assets invested by the Bank. Net Interest Margin decreased during the quarter to 4.20% from 4.27% in the first quarter of 2018 due to higher deposit costs and higher levels of liquid assets maintained during the quarter which more than offset higher loan yields. Cost of Deposits increased from 0.16% to 0.27% as the Bank increased rates on deposits in response to market forces. In June, the Bank increased its investment securities portfolio by $30 million which should increase the yield on liquid assets in future quarters.
• Operating Expenses decreased by 2% over the first quarter of 2018. This decrease was largely due to a reduction in Employer Paid Taxes and Employee Benefits Expense from the seasonal high in the first quarter, which more than offset an increase in incentive compensation due to above budget deposit growth in the first half of the year. Operating Expenses increased 17% over the second quarter of 2017 due to growth related increases in Compensation and Benefits, higher occupancy costs due to the lease and leasehold improvements on our new Walnut Creek facility and higher data processing costs. The Bank’s efficiency ratio improved from 62% in the first quarter of 2018 to 59% in the second quarter of 2018.
• Year-over-year revenue growth is 24% while year-over-year expense growth is 14%.
• Credit Quality remains stable and strong with a Classified to Capital Ratio of 2.6% at June, 30 2018. The Loan Loss Provision Expense for the second quarter was zero due to modest growth in the loan portfolio and a $500 thousand reduction in Classified Loans. Total Criticized and Classified Loans are up $5 million from March 31, 2018 and represent 5% of Loan Commitments and 4% of Loans Outstanding at June 30, 2018. The Bank has no Non-Performing Loans.
• Diluted Earnings per Common Share were $0.44 for the quarter, up from $0.34 in the first quarter of 2018 and up from $0.26 in the second quarter of 2017
• Book Value per Share increased to $13.06 per share at June 30, 2018 from $12.68 per share at March 31, 2018 and $11.75 per share at June 30, 2017.

“With the recent promotions of Clay Jones to President and Karol Watson to Executive Vice President, Chief Operations Officer, the Bank has internally filled two important roles and evidenced its management depth,” said Presidio Bank Chairman and Founder, Jim Woolwine. “These moves reward two executives that have been instrumental in our success and position the Bank for continued growth.”

2nd Quarter 2018 Financial Results
(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
		6/30/2018		3/31/2018	Change		6/30/2017	Change		12/31/2017	Change
Cash and due from banks		8,842		14,682	-39.8%		9,789	-9.7%		7,613	16.2%
Interest bearing due from banks		130,412		154,434	-15.6%		101,532	28.4%		129,952	0.4%
Total cash and equivalents		139,254		169,116	-17.7%		111,321	25.1%		137,565	1.2%
Investment securities		41,326		11,810	249.9%		12,736	224.5%		12,313	235.6%
Loans, net of fees		653,226		649,994	0.5%		603,689	8.2%		626,282	4.3%
Allowance for loan losses		(7,325)		(7,325)	0.0%		(7,014)	4.4%		(7,166)	2.2%
Net loans		645,901		642,669	0.5%		596,675	8.3%		619,116	4.3%
Premises and equipment, net		2,464		2,537	-2.9%		1,335	84.6%		2,627	-6.2%
Other assets and interest receivable		24,373		23,796	2.4%		24,159	0.9%		22,237	9.6%
Total assets		853,318		849,928	0.4%		746,226	14.4%		793,858	7.5%
Non-interest-bearing demand		298,354		337,201	-11.5%		250,344	19.2%		295,070	1.1%
Interest bearing transaction		108,338		108,399	-0.1%		103,727	4.4%		120,109	-9.8%
Money market and savings accounts		302,077		262,503	15.1%		258,564	16.8%		238,706	26.5%
Time deposits		48,698		50,082	-2.8%		47,293	3.0%		50,269	-3.1%
Total deposits		757,467		758,185	-0.1%		659,928	14.8%		704,154	7.6%
Borrowings		9,961		10,059	-1.0%		10,152	NM		10,174	-2.1%
Other liabilities		5,152		4,466	15.4%		4,837	6.5%		4,767	8.1%
Total liabilities		772,580		772,710	0.0%		674,917	14.5%		719,095	7.4%
Common stock		66,995		66,241	1.1%		65,185	2.8%		65,960	1.6%
Retained earnings		13,908		11,079	25.5%		6,173	125.3%		8,854	57.1%
Other comprehensive income		(165)		(102)	61.4%		(49)	236.1%		(51)	220.2%
Total shareholder’s equity		80,738		77,218	4.6%		71,309	13.2%		74,763	8.0%
Total liabilities and equity		853,318		849,928	0.4%		746,226	14.4%		793,858	7.5%
Book value per share
Book value per share	$	13.06	$	12.68		$	11.75		$	12.29
Total shares outstanding EOP		6,184		6,090			6,069			6,084
Capital Ratios
Tier 1 leverage ratio		9.8%		9.7%			10.0%			9.7%
Tier 1 risk-based capital ratio		9.9%		9.5%			9.6%			9.8%
Tangible common risk-based ratio		9.9%		9.5%			9.6%			9.8%
Total risk-based capital ratio		12.1%		11.7%			12.0%			12.1%

Condensed Statement of Income
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended								For the six months ended
		6/30/2018		3/31/2018	Change Fav./ (Unfav.)		6/30/2017	Change Fav./ (Unfav.)		6/30/2018		6/30/2017	Change Fav./ (Unfav.)
Interest income		9,042		8,570	5.5%		7,349	23.0%		17,612		14,202	24.0%
Interest expense		707		487	(45.0%)		442	(59.9%)		1,194		865	(38.1%)
Net interest income		8,335		8,083	3.1%		6,907	20.7%		16,418		13,337	23.1%
Provision for loan loss		-		159	NM		198	NM		159		198	19.7%
Net interest income after provision		8,335		7,924	5.2%		6,709	24.2%		16,259		13,139	23.7%
Other income		309		320	(3.5%)		191	61.5%		629		393	60.1%
Compensation and benefit expenses		3,254		3,283	0.9%		2,736	(18.9%)		6,537		5,674	(15.2%)
Occupancy and equipment expenses		602		616	2.3%		518	(16.2%)		1,218		1,038	(17.4%)
Data processing		400		385	(4.1%)		326	(22.6%)		785		632	(24.1%)
Professional and legal		278		147	(89.2%)		203	(37.1%)		425		342	(24.3%)
Other operating expenses		571		777	26.5%		586	2.5%		1,348		1,387	2.8%
Total operating expenses		5,105		5,208	2.0%		4,369	(16.9%)		10,313		9,073	(13.7%)
Net income before taxes		3,539		3,036	16.6%		2,531	39.8%		6,575		4,459	47.5%
Income taxes		710		811	12.5%		939	24.4%		1,521		1,663	8.5%
Net income		2,829		2,225	27.2%		1,592	77.7%		5,054		2,796	80.8%
Earnings Per Share
Basic earnings per share	$	0.46	$	0.36	26.6%	$	0.27	73.2%	$	0.83	$	0.47	76.0%
Diluted earnings per share	$	0.44	$	0.34	26.8%	$	0.26	70.5%	$	0.78	$	0.45	73.0%
Average shares outstanding		6,053		6,025			5,899			6,038		5,881
Average diluted shares		6,419		6,398			6,157			6,409		6,136
Performance Ratios
Return on average assets		1.38%		1.14%			0.90%			1.26%		0.79%
Return on average common equity		14.31%		11.78%			9.03%			13.06%		8.07%
Net interest margin		4.20%		4.27%			3.98%			4.23%		3.86%
Cost of funds		0.38%		0.28%			0.28%			0.33%		0.27%
Efficiency ratio		59.1%		62.1%			61.6%			60.6%		66.3%
Average Balances
Total assets		822,750		794,442			711,847			808,674		711,982
Earning assets		795,498		768,150			695,297			781,899		696,726
Total loans		642,855		635,039			588,980			638,968		578,445
Total deposits		728,532		703,081			627,004			715,877		627,310
Common equity		79,177		76,591			70,741			77,891		69,756
NM = Not Meaningful

Condensed Balance Sheet (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
		6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Cash and due from banks		8,842		14,682		7,613		10,677		9,789
Interest bearing due from banks		130,412		154,434		129,952		126,277		101,532
Total cash and equivalents		139,254		169,116		137,565		136,954		111,321
Investment securities		41,326		11,810		12,313		12,801		12,736
Loans, net of fees		653,226		649,994		626,282		617,269		603,689
Allowance for loan losses		(7,325)		(7,325)		(7,166)		(7,166)		(7,014)
Net loans		645,901		642,669		619,116		610,103		596,675
Premises and equipment, net		2,464		2,537		2,627		2,452		1,335
Other assets and interest receivable		24,373		23,796		22,237		23,312		24,159
Total assets		853,318		849,928		793,858		785,622		746,226
Non-interest-bearing demand		298,354		337,201		295,070		304,726		250,344
Interest bearing transaction		108,338		108,399		120,109		98,019		103,727
Money market and savings accounts		302,077		262,503		238,706		247,857		258,564
Time deposits		48,698		50,082		50,269		46,871		47,293
Total deposits		757,467		758,185		704,154		697,473		659,928
Borrowings		9,961		10,059		10,174		10,346		10,152
Other liabilities		5,152		4,466		4,767		4,001		4,837
Total liabilities		772,580		772,710		719,095		711,820		674,917
Common stock		66,995		66,241		65,960		65,585		65,185
Retained earnings		13,908		11,079		8,854		8,252		6,173
Other comprehensive income		(165)		(102)		(51)		(35)		(49)
Total shareholder’s equity		80,738		77,218		74,763		73,802		71,309
Total liabilities and equity		853,318		849,928		793,858		785,622		746,226
Book value per share
Book value per share	$	13.06	$	12.68	$	12.29	$	12.15	$	11.75
Total shares outstanding EOP		6,184		6,090		6,084		6,074		6,069
Capital Ratios
Tier 1 leverage ratio		9.8%		9.7%		9.7%		9.9%		10.0%
Common equity tier 1 capital ratio		9.9%		9.5%		9.8%		9.8%		9.6%
Tier 1 risk-based capital ratio		9.9%		9.5%		9.8%		9.8%		9.6%
Total risk-based capital ratio		12.1%		11.7%		12.1%		12.2%		12.0%

Condensed Statement of Income (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	For the three months ended
		6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Interest income		9,042		8,570		8,236		8,362		7,349
Interest expense		707		487		483		472		442
Net interest income		8,335		8,083		7,753		7,890		6,907
Provision for loan loss		-		159		-		100		198
Net interest income after provision		8,335		7,924		7,753		7,790		6,709
Other income		309		320		287		268		191
Compensation and benefit expenses		3,254		3,283		2,814		3,036		2,736
Occupancy and equipment expenses		602		616		617		628		518
Data processing		400		385		388		346		326
Professional and legal		278		147		155		77		203
Other operating expenses		571		777		627		533		586
Total operating expenses		5,105		5,208		4,601		4,620		4,369
Net income before taxes		3,539		3,036		3,439		3,438		2,531
Income taxes		710		811		2,838		1,358		939
Net income		2,829		2,225		601		2,080		1,592
Earnings Per Share
Basic earnings per share	$	0.46	$	0.36	$	0.10	$	0.33	$	0.27
Diluted earnings per share	$	0.44	$	0.34	$	0.09	$	0.32	$	0.26
Average shares outstanding		6,053		6,025		6,009		6,001		5,899
Average diluted shares		6,419		6,398		6,328		6,277		6,157
Performance Ratios
Return on average assets		1.38%		1.14%		0.32%		1.10%		0.90%
Return on average common equity		14.31%		11.78%		3.25%		11.31%		9.03%
Net interest margin		4.20%		4.27%		4.11%		4.34%		3.98%
Cost of funds		0.38%		0.28%		0.28%		0.28%		0.28%
Efficiency ratio		59.1%		62.1%		57.4%		57.0%		61.6%
Average Balances
Total assets		822,750		794,442		774,015		748,229		711,847
Earning assets		795,498		768,150		747,679		721,374		695,297
Total loans		642,855		635,039		608,584		612,493		588,980
Total deposits		728,532		703,081		684,233		660,790		627,004
Common equity		79,177		76,591		75,531		73,108		70,741

Loans (5 Quarter Data)
(Dollars in Thousands, unaudited)
	6/30/2018	3/31/2018	12/31/2017	9/30/2017	6/30/2017
Commercial real estate	303,444	283,238	271,346	268,357	275,189
Land and construction	53,771	54,088	44,714	39,599	22,657
Commercial	180,783	201,094	197,748	194,884	187,537
Personal	13,709	17,172	16,295	21,292	23,008
Residential	31,011	33,114	34,174	34,389	33,671
Multifamily	71,505	62,325	63,024	59,764	62,634
Deferred loan fees	(997)	(1,037)	(1,019)	(1,016)	(1,007)
Loans	653,226	649,994	626,282	617,269	603,689
Allowance for loan losses	(7,325)	(7,325)	(7,166)	(7,166)	(7,015)
Net loans	645,901	642,669	619,116	610,103	596,675

Non-Performing Assets (5 Quarter Data)
(Dollars in Thousands, unaudited)
	6/30/2018	3/31/2018	12/31/2017	9/30/2017	6/30/2017
Non-Accrual Loans	-	-	-	-	991
Non-Performing Loans (NPL)	-	-	-	-	991
Other Real Estate Owned	-	-	-	-	-
Non-Performing Assets (NPA)	-	-	-	-	991
90+ Days Delinquent	-	-	-	-	-
NPAs & 90 Day Delinquent	-	-	-	-	991
Quarterly Net Charge-off's	-	-	-	(51)	51
NPAs / Assets %	0.00%	0.00%	0.00%	0.00%	0.13%
NPAs & 90 Day / Assets %	0.00%	0.00%	0.00%	0.00%	0.13%
NPAs / Actual Loans and OREO %	0.00%	0.00%	0.00%	0.00%	0.13%
Loan Loss Reserves / Loans (%)	1.12%	1.13%	1.14%	1.16%	1.16%

Net Interest Income (Quarterly Data)
(Dollars in Thousands, unaudited)
	For the Three Months Ended
		6/30/2018					3/31/2018
				Interest						Interest
		Average		Income/	Average			Average		Income/	Average
		Balance		Expense	Rate			Balance		Expense	Rate
Assets:
Interest-bearing deposits	$	135,803	$	569	1.68	%	$	121,072	$	501	1.68	%
Federal Reserve and Federal Home Loan Bank stock		4,806		76	6.35			4,655		77	6.70
Investment Securities		12,034		78	2.59			7,384		31	1.69
Loans: (2)
Commercial		190,167		2,589	5.46			199,340		2,579	5.25
Land and Construction		52,828		762	5.79			45,791		772	6.83
Commercial Real Estate		288,246		3,619	5.04			278,540		3,317	4.83
Residential		31,297		426	5.46			32,592		412	5.12
Multifamily		67,247		776	4.63			62,715		708	4.58
Personal		13,070		147	4.51			16,061		173	4.37
Total Loans		642,855		8,319	5.19			635,039		7,961	5.08
Total Earning Assets		795,498		9,042	4.56			768,150		8,570	4.52
Allowance for loan losses		(7,325)						(7,219)
Cash and cash equivalents		9,295						9,543
Other assets		25,282						23,968
Total Assets	$	822,750					$	794,442
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	112,088	$	67	0.24	%	$	107,657	$	41	0.15	%
Money market deposits		258,372		306	0.47			236,876		138	0.24
Savings deposits		3,846		2	0.25			3,812		1	0.14
Certificates and other time deposits		49,729		121	0.97			50,230		96	0.78
Total Interest-bearing Deposits		424,035		496	0.47			398,575		276	0.28
Borrowings		10,059		211	8.41			10,088		211	8.48
Total Interest-bearing Liabilities		434,094		707	0.65			408,663		487	0.48
Noninterest-bearing deposits		304,497						304,506
Other liabilities		4,982						4,682
Total Liabilities		743,573						717,851
Stockholders' Equity		79,177						76,591
Total Liabilities and Stockholders' Equity	$	822,750					$	794,442
Net Interest Income			$	8,335					$	8,083
Net Interest Margin					4.20	%					4.27	%
Cost of Funds					0.38	%					0.28	%
Cost of Deposits					0.27	%					0.16	%

Net Interest Income (Annual Data)
(Dollars in Thousands, unaudited)
		For the Six Months Ended
		6/30/2018					6/30/2017
				Interest						Interest
		Average		Income/	Average			Average		Income/	Average
		Balance		Expense	Rate			Balance		Expense	Rate
Assets:
Interest-bearing deposits	$	128,478	$	1,071	1.68	%	$	105,319	$	483	0.93	%
Federal Reserve and Federal Home Loan Bank stock	4,731			153	6.52			4,374		151	6.95
Investment Securities		9,722		108	2.25			8,589		64	1.50
Loans: (2)
Commercial		194,728		5,189	5.37			174,400		4,133	4.78
Land and Construction		49,329		1,588	6.49			15,360		469	6.15
Commercial Real Estate		283,420		6,862	4.88			267,966		6,227	4.69
Residential		31,941		838	5.29			29,446		666	4.56
Multifamily		64,993		1,484	4.60			61,279		1,393	4.58
Personal		14,557		319	4.41			29,994		616	4.14
Total Loans		638,968		16,280	5.14			578,445		13,504	4.71
Total Earning Assets		781,899		17,612	4.54			696,726		14,202	4.11
Allowance for loan losses		(7,272)						(6,884)
Cash and cash equivalents		9,418						9,144
Other assets		24,629						12,996
Total Assets	$	808,674					$	711,982
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	109,885	$	108	0.20	%	$	102,725	$	95	0.19	%
Money market deposits		247,683		444	0.36			234,166		235	0.20
Savings deposits		3,829		4	0.20			4,393		2	0.09
Certificates and other time deposits		49,978		216	0.88			46,943		110	0.47
Total Interest-bearing Deposits		411,375		772	0.38			388,228		443	0.23
Borrowings		10,074		422	8.45			9,884		422	8.61
Total Interest-bearing Liabilities		421,449		1,194	0.57			398,113		865	0.44
Noninterest-bearing deposits		304,502						239,082
Other liabilities		4,832						5,032
Total Liabilities		730,783						642,226
Stockholders' Equity		77,891						69,756
Total Liabilities and Stockholders' Equity	$	808,674					$	711,982
Net Interest Income			$	16,418					$	13,337
Net Interest Margin					4.23	%					3.86	%
Cost of Funds					0.33	%					0.27	%
Cost of Deposits					0.22	%					0.14	%

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.