Presidio Bank Reports Financial Results for the Third Quarter of 2018

SAN FRANCISCO--(BUSINESS WIRE)--Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the third quarter ended September 30, 2018 with Net Income of $3.5 million, up $664 thousand (24%) from the second quarter of 2018 and up $1.4 million (68%) from the third quarter of 2017. Diluted Earnings per Share were $0.53 for the quarter, up from $0.44 in the second quarter of 2018 and up from $0.32 in the third quarter of 2017. Total Assets were $834 million at September 30, 2018, down $19 million from June 30, 2018 but up $49 million from September 30, 2017.

“Moderate loan growth combined with good expense control and increasing margins resulted in another quarter of strong profitability growth for the Bank,” said Presidio Bank CEO Steve Heitel. “Our Return on Assets and Return on Equity once again reached new highs.”

Financial Highlights

• Total Loans Outstanding were up $16 million from the quarter ending June 30, 2018 and up $52 million from September 30, 2017 or 8%. New Loan Originations were $42 million, down from $50 million in the second quarter of 2018. Loan growth was centered in Personal Lines of Credit and Home Equity Lines. Despite relatively soft originations in the third quarter, the loan pipeline remains solid heading into the fourth quarter.
• Total Deposits decreased by $23 million from the quarter ended June 30, 2018 and increased by $37 million from September 30, 2017 or 5%. During the quarter ended June 30, 2018, the decline in Money Market Deposits and Time Deposits was partially offset by an increase in Demand Deposits which now account for 43% of total deposits. The decline in Time Deposits was due to the Bank’s decision to not renew a $10 million Certificate of Deposit from the State of California.
• Net Interest Income of $9.1 million in the third quarter of 2018 was up 9% from the second quarter of 2018 and up 15.5% from the third quarter of 2017. This increase is due to higher average loan and securities balances, increased loan yields, and increased interest rates on liquid assets invested by the Bank. Net Interest Margin increased during the quarter to 4.32% from 4.20% in the second quarter of 2018 due to lower levels of liquid assets maintained combined with higher loan yields, and a larger securities portfolio. The Bank’s Cost of Funds remained essentially flat from the second quarter.
• Operating Expenses decreased by 3.4% over the second quarter of 2018. This decrease was largely due to a reduction in Professional and Legal Expense due to some one-time expenses that were incurred in the second quarter. In addition, the Loss Reserve for Unfunded Loans was decreased by $113 thousand, booked as a contra expense. This decrease was due primarily to a decrease in unfunded construction loans. The Bank’s efficiency ratio improved from 59% in the second quarter of 2018 to 53% in the third quarter of 2018.
• Year-over-year revenue growth is 21% while year-over-year expense growth is 11%.
• Credit Quality remains stable and strong with a Classified to Capital Ratio of 2.6% at September 30, 2018. The Loan Loss Provision Expense for the third quarter was $98 thousand due to growth in the loan portfolio. The Bank has one classified relationship and thirteen criticized relationships. Balances on Classified and Criticized Loans increased by $1.2 million during the quarter. Total Criticized and Classified Loans represent 3% of Loan Commitments and 4% of Loans Outstanding at September 30, 2018. The Bank has no Non-Performing Loans.
• Book Value per Share increased to $13.59 per share at September 30, 2018 from $13.06 per share at June 30, 2018 and $12.15 per share at September 30, 2017.

“Presidio Bank is honored to be nominated as one of three finalists for the San Francisco Chamber of Commerce 2018 Excellence in Business Award,” said Presidio Bank Chairman and Founder, Jim Woolwine. “In addition, the Bank was once again recognized by the San Francisco Business Times as one of the Bay Area’s top corporate philanthropists.”

3rd Quarter 2018 Financial Results
(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
		9/30/2018		6/30/2018	Change		9/30/2017	Change		12/31/2017	Change
Cash and due from banks		9,041		8,842	2.3%		10,677	-15.3%		7,613	18.8%
Interest bearing due from banks		78,598		130,412	-39.7%		126,277	-37.8%		129,952	-39.5%
Total cash and equivalents		87,639		139,254	-37.1%		136,954	-36.0%		137,565	-36.3%
Investment securities		59,282		41,326	43.4%		12,801	363.1%		12,313	381.5%
Loans, net of fees		668,934		653,226	2.4%		617,269	8.4%		626,282	6.8%
Allowance for loan losses		(7,423)		(7,325)	1.3%		(7,166)	3.6%		(7,166)	3.6%
Net loans		661,511		645,901	2.4%		610,103	8.4%		619,116	6.8%
Premises and equipment, net		2,371		2,464	-3.8%		2,452	-3.3%		2,627	-9.8%
Other assets and interest receivable		23,366		24,373	-4.1%		23,312	0.2%		22,237	5.1%
Total assets		834,169		853,318	-2.2%		785,622	6.2%		793,858	5.1%
Non-interest-bearing demand		315,493		298,354	5.7%		304,726	3.5%		295,070	6.9%
Interest bearing transaction		101,712		108,338	-6.1%		98,019	3.8%		120,109	-15.3%
Money market and savings accounts		278,867		302,077	-7.7%		247,857	12.5%		238,706	16.8%
Time deposits		38,400		48,698	-21.1%		46,871	-18.1%		50,269	-23.6%
Total deposits		734,472		757,467	-3.0%		697,473	5.3%		704,154	4.3%
Borrowings		9,928		9,961	-0.3%		10,346	-4.0%		10,174	-2.4%
Other liabilities		5,014		5,152	-2.7%		4,001	25.3%		4,767	5.2%
Total liabilities		749,414		772,580	-3.0%		711,820	5.3%		719,095	4.2%
Common stock		67,783		66,995	1.2%		65,585	3.4%		65,960	2.8%
Retained earnings		17,401		13,908	25.1%		8,252	110.9%		8,854	96.5%
Other comprehensive income		(429)		(165)	160.3%		(35)	1131.9%		(51)	733.6%
Total shareholder’s equity		84,755		80,738	5.0%		73,802	14.8%		74,763	13.4%
Total liabilities and equity		834,169		853,318	-2.2%		785,622	6.2%		793,858	5.1%
Book value per share
Book value per share	$	13.59	$	13.06		$	12.15		$	12.29
Total shares outstanding EOP		6,238		6,184			6,074			6,084
Capital Ratios
Tier 1 leverage ratio		9.9%		9.8%			9.9%			9.7%
Tier 1 risk-based capital ratio		10.0%		9.9%			9.8%			9.8%
Tangible common risk-based ratio		10.0%		9.9%			9.8%			9.8%
Total risk-based capital ratio		12.2%		12.1%			12.2%			12.1%

Condensed Statement of Income
(Dollars in thousands, except per share amounts, unaudited)
	For the Three Months Ended								For the Nine Months Ended
		9/30/2018		6/30/2018	Change Fav./ (Unfav.)		9/30/2017	Change Fav./ (Unfav.)		9/30/2018		9/30/2017	Change Fav./ (Unfav.)
Interest income		9,866		9,042	9.1%		8,362	18.0%		27,478		22,563	21.8%
Interest expense		752		707	(6.4%)		472	(59.4%)		1,946		1,336	(45.6%)
Net interest income		9,114		8,335	9.3%		7,890	15.5%		25,532		21,227	20.3%
Provision for loan loss		98		-	NM		100	2.2%		257		298	13.7%
Net interest income after provision		9,016		8,335	8.2%		7,790	15.7%		25,275		20,929	20.8%
Other income		279		309	(9.7%)		268	4.1%		907		660	37.3%
Compensation and benefit expenses		3,301		3,254	(1.4%)		3,036	(8.7%)		9,838		8,711	(12.9%)
Occupancy and equipment expenses		625		602	(3.9%)		628	0.4%		1,844		1,665	(10.7%)
Data processing		388		400	3.1%		346	(12.2%)		1,173		977	(20.0%)
Professional and legal		145		278	48.0%		77	(89.0%)		570		419	(36.1%)
Other operating expenses		473		571	17.2%		533	11.2%		1,818		1,921	5.4%
Total operating expenses		4,932		5,105	3.4%		4,620	(6.8%)		15,243		13,693	(11.3%)
Net income before taxes		4,363		3,539	23.3%		3,438	26.9%		10,939		7,896	38.5%
Income taxes		870		710	(22.5%)		1,358	35.9%		2,391		3,021	20.9%
Net income		3,493		2,829	23.5%		2,080	67.9%		8,548		4,875	75.3%
Earnings Per Share
Basic earnings per share	$	0.56	$	0.46	21.9%	$	0.33	69.2%	$	1.39	$	0.81	72.7%
Diluted earnings per share	$	0.53	$	0.44	22.9%	$	0.32	68.2%	$	1.31	$	0.77	70.4%
Average shares outstanding		6,132		6,053			6,001			6,070		5,968
Average diluted shares		6,454		6,419			6,277			6,424		6,232
Performance Ratios
Return on average assets		1.60%		1.38%			1.10%			1.37%		0.90%
Return on average common equity		16.64%		14.31%			11.31%			14.27%		9.16%
Net interest margin		4.32%		4.20%			4.34%			4.27%		4.03%
Cost of funds		0.39%		0.38%			0.28%			0.35%		0.28%
Efficiency ratio		52.5%		59.1%			57.0%			57.9%		63.1%
Average Balances
Total assets		864,605		822,750			748,229			827,522		724,197
Earning assets		836,348		795,498			721,374			800,248		705,032
Total loans		665,655		642,855			612,493			647,961		589,918
Total deposits		763,647		728,532			660,790			731,975		638,390
Common equity		83,346		79,177			73,108			79,730		70,886
NM = Not Meaningful

Condensed Balance Sheet (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
		9/30/2018		6/30/2018		3/31/2018		12/31/2017		9/30/2017
Cash and due from banks		9,041		8,842		14,682		7,613		10,677
Interest bearing due from banks		78,598		130,412		154,434		129,952		126,277
Total cash and equivalents		87,639		139,254		169,116		137,565		136,954
Investment securities		59,282		41,326		11,810		12,313		12,801
Loans, net of fees		668,934		653,226		649,994		626,282		617,269
Allowance for loan losses		(7,423)		(7,325)		(7,325)		(7,166)		(7,166)
Net loans		661,511		645,901		642,669		619,116		610,103
Premises and equipment, net		2,371		2,464		2,537		2,627		2,452
Other assets and interest receivable		23,366		24,373		23,796		22,237		23,312
Total assets		834,169		853,318		849,928		793,858		785,622
Non-interest-bearing demand		315,493		298,354		337,201		295,070		304,726
Interest bearing transaction		101,712		108,338		108,399		120,109		98,019
Money market and savings accounts		278,867		302,077		262,503		238,706		247,857
Time deposits		38,400		48,698		50,082		50,269		46,871
Total deposits		734,472		757,467		758,185		704,154		697,473
Borrowings		9,928		9,961		10,059		10,174		10,346
Other liabilities		5,014		5,152		4,466		4,767		4,001
Total liabilities		749,414		772,580		772,710		719,095		711,820
Common stock		67,783		66,995		66,241		65,960		65,585
Retained earnings		17,401		13,908		11,079		8,854		8,252
Other comprehensive income		(429)		(165)		(102)		(51)		(35)
Total shareholder’s equity		84,755		80,738		77,218		74,763		73,802
Total liabilities and equity		834,169		853,318		849,928		793,858		785,622
Book value per share
Book value per share	$	13.59	$	13.06	$	12.68	$	12.29	$	12.15
Total shares outstanding EOP		6,238		6,184		6,090		6,084		6,074
Capital Ratios
Tier 1 leverage ratio		9.9%		9.8%		9.7%		9.7%		9.9%
Common equity tier 1 capital ratio		10.0%		9.9%		9.5%		9.8%		9.8%
Tier 1 risk-based capital ratio		10.0%		9.9%		9.5%		9.8%		9.8%
Total risk-based capital ratio		12.2%		12.1%		11.7%		12.1%		12.2%

Condensed Statement of Income (5 Quarter Data)
(Dollars in thousands, except per share amounts, unaudited)
	For the Three Months Ended
		9/30/2018		6/30/2018		3/31/2018		12/31/2017		9/30/2017
Interest income		9,866		9,042		8,570		8,236		8,362
Interest expense		752		707		487		483		472
Net interest income		9,114		8,335		8,083		7,753		7,890
Provision for loan loss		98		-		159		-		100
Net interest income after provision		9,016		8,335		7,924		7,753		7,790
Other income		279		309		320		287		268
Compensation and benefit expenses		3,301		3,254		3,283		2,814		3,036
Occupancy and equipment expenses		625		602		616		617		628
Data processing		388		400		385		388		346
Professional and legal		145		278		147		155		77
Other operating expenses		473		571		777		627		533
Total operating expenses		4,932		5,105		5,208		4,601		4,620
Net income before taxes		4,363		3,539		3,036		3,439		3,438
Income taxes		870		710		811		2,838		1,358
Net income		3,493		2,829		2,225		601		2,080
Earnings Per Share
Basic earnings per share	$	0.56	$	0.46	$	0.36	$	0.10	$	0.33
Diluted earnings per share	$	0.53	$	0.44	$	0.34	$	0.09	$	0.32
Average shares outstanding		6,132		6,053		6,025		6,009		6,001
Average diluted shares		6,454		6,419		6,398		6,328		6,277
Performance Ratios
Return on average assets		1.60%		1.38%		1.14%		0.32%		1.10%
Return on average common equity		16.64%		14.31%		11.78%		3.25%		11.31%
Net interest margin		4.32%		4.20%		4.27%		4.11%		4.34%
Cost of funds		0.39%		0.38%		0.28%		0.28%		0.28%
Efficiency ratio		52.5%		59.1%		62.1%		57.4%		57.0%
Average Balances
Total assets		864,605		822,750		794,442		774,015		748,229
Earning assets		836,348		795,498		768,150		747,679		721,374
Total loans		665,655		642,855		635,039		608,584		612,493
Total deposits		763,647		728,532		703,081		684,233		660,790
Common equity		83,346		79,177		76,591		75,531		73,108

Loans (5 Quarter Data)
(Dollars in Thousands, unaudited)
	9/30/2018	6/30/2018	3/31/2018	12/31/2017	9/30/2017
Commercial real estate	304,123	303,444	283,238	271,346	268,357
Land and construction	55,185	53,771	54,088	44,714	39,599
Commercial	177,747	180,783	201,094	197,748	194,884
Personal	22,505	13,709	17,172	16,295	21,292
Residential	36,552	31,011	33,114	34,174	34,389
Multifamily	73,839	71,505	62,325	63,024	59,764
Deferred loan fees	(1,017)	(997)	(1,037)	(1,019)	(1,016)
Loans	668,934	653,226	649,994	626,282	617,269
Allowance for loan losses	(7,423)	(7,325)	(7,325)	(7,166)	(7,166)
Net loans	661,511	645,901	642,669	619,116	610,103

Non-Performing Assets (5 Quarter Data)
(Dollars in Thousands, unaudited)
	9/30/2018	6/30/2018	3/31/2018	12/31/2017	9/30/2017
Non-Accrual Loans	-	-	-	-	-
Non-Performing Loans (NPL)	-	-	-	-	-
Other Real Estate Owned	-	-	-	-	-
Non-Performing Assets (NPA)	-	-	-	-	-
90+ Days Delinquent	-	-	-	-	-
NPAs & 90 Day Delinquent	-	-	-	-	-
Quarterly Net Charge-off's	-	-	-	-	(51)
NPAs / Assets %	0.00%	0.00%	0.00%	0.00%	0.00%
NPAs & 90 Day / Assets %	0.00%	0.00%	0.00%	0.00%	0.00%
NPAs / Actual Loans and OREO %	0.00%	0.00%	0.00%	0.00%	0.00%
Loan Loss Reserves / Loans (%)	1.11%	1.12%	1.13%	1.14%	1.16%

Net Interest Income (Quarterly Data)
(Dollars in Thousands, unaudited)
		For the Three Months Ended
		9/30/2018					6/30/2018
				Interest						Interest
		Average		Income /	Average			Average		Income/	Average
		Balance		Expense	Rate			Balance		Expense	Rate
Assets:
Interest-bearing deposits	$	116,875	$	577	1.96	%	$	135,803	$	569	1.68	%
Federal Reserve and Federal Home Loan Bank stock		4,867		79	6.47			4,806		76	6.35
Investment Securities		48,951		363	2.94			12,034		78	2.59
Loans: (2)
Commercial		182,772		2,591	5.62			190,167		2,610	5.51
Land and Construction		53,000		856	6.40			52,828		816	6.20
Commercial Real Estate		305,632		3,854	5.00			288,246		3,546	4.93
Residential		32,565		471	5.74			31,297		426	5.46
Multifamily		74,251		872	4.66			67,247		776	4.63
Personal		17,435		203	4.63			13,070		145	4.47
Total Loans		665,655		8,847	5.27			642,855		8,319	5.19
Total Earning Assets		836,348		9,866	4.68			795,498		9,042	4.56
Allowance for loan losses		(7,390)						(7,325)
Cash and cash equivalents		10,156						9,295
Other assets		25,491						25,282
Total Assets	$	864,605					$	822,750
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	107,491	$	64	0.24	%	$	112,088	$	67	0.24	%
Money market deposits		291,017		364	0.50			258,372		306	0.47
Savings deposits		3,892		3	0.25			3,846		2	0.25
Certificates and other time deposits		43,674		110	1.00			49,729		121	0.97
Total Interest-bearing Deposits		446,074		541	0.48			424,035		496	0.47
Borrowings		9,952		211	8.41			10,059		211	8.41
Total Interest-bearing Liabilities		456,026		752	0.65			434,094		707	0.65
Noninterest-bearing deposits		317,573						304,497
Other liabilities		7,660						4,982
Total Liabilities		781,259						743,573
Stockholders' Equity		83,346						79,177
Total Liabilities and Stockholders' Equity	$	864,605					$	822,750
Net Interest Income			$	9,114					$	8,335
Net Interest Margin					4.32	%					4.20	%
Cost of Funds					0.39	%					0.38	%
Cost of Deposits					0.28	%					0.27	%

Net Interest Income (Annual Data)
(Dollars in Thousands, unaudited)
		For the Nine Months Ended
		9/30/2018					9/30/2017
				Interest						Interest
		Average		Income /	Average			Average		Income/	Average
		Balance		Expense	Rate			Balance		Expense	Rate
Assets:
Interest-bearing deposits	$	124,568	$	1,648	1.77	%	$	102,188	$	807	1.06	%
Federal Reserve and Federal Home Loan Bank stock		4,777		232	6.50			4,459		225	6.75
Investment Securities		22,942		472	2.75			8,467		96	1.52
Loans: (2)
Commercial		190,699		7,779	5.45			178,945		6,910	5.16
Land and Construction		50,566		2,444	6.46			21,234		992	6.25
Commercial Real Estate		290,905		10,716	4.93			270,284		9,505	4.70
Residential		32,151		1,309	5.45			30,980		1,086	4.69
Multifamily		68,113		2,356	4.62			60,991		2,083	4.57
Personal		15,527		522	4.49			27,484		859	4.18
Total Loans		647,961		25,126	5.18			589,918		21,435	4.86
Total Earning Assets		800,248		27,478	4.59			705,032		22,563	4.28
Allowance for loan losses		(7,311)						(6,972)
Cash and cash equivalents		9,667						8,974
Other assets		24,918						17,163
Total Assets	$	827,522					$	724,197
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits	$	109,078	$	172	0.21	%	$	102,941	$	142	0.18	%
Money market deposits		262,286		808	0.41			239,093		372	0.21
Savings deposits		3,850		6	0.22			4,620		3	0.09
Certificates and other time deposits		47,854		327	0.91			46,965		186	0.53
Total Interest-bearing Deposits		423,068		1,313	0.41			393,619		703	0.24
Borrowings		10,033		633	8.44			10,033		633	8.44
Total Interest-bearing Liabilities		433,101		1,946	0.60			403,652		1,336	0.44
Noninterest-bearing deposits		308,907						244,771
Other liabilities		5,784						4,888
Total Liabilities		747,792						653,311
Stockholders' Equity		79,730						70,886
Total Liabilities and Stockholders' Equity	$	827,522					$	724,197
Net Interest Income			$	25,532					$	21,227
Net Interest Margin					4.27	%					4.03	%
Cost of Funds					0.35	%					0.28	%
Cost of Deposits					0.24	%					0.15	%

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.