Presidio Bank Reports Results for Third Quarter 2015

Total Assets Exceed $600 Million for the first time

SAN FRANCISCO--(BUSINESS WIRE)-- Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the third quarter ended September 30, 2015 with net income for the quarter of $687 thousand, essentially flat from the $696 thousand earned in the quarter ended June 30, 2015. In addition, Total Assets ended the quarter at $614 million, eclipsing the $600 Million total for the first time while Total Loans and Total Deposits also achieved record high levels.

“We are pleased to report another quarter of strong organic growth,” said Presidio Bank President and CEO Steve Heitel. “While a loan growth related increase in the loan loss reserve resulted in flat earnings, the increase in earning assets achieved during the quarter positions the Bank well for earnings growth in the fourth quarter of 2015 and beyond.”

Financial Highlights

• Total Loans outstanding were up $29 million, 7% from the quarter ended June 30, 2015, and increased $74 million or 18% over the third quarter of 2014. Loans outstanding now total a record high of $475 million. The outlook for continued loan growth in the fourth quarter remains positive.
• Total Deposits increased by $18 million or 4% from the quarter ended June 30, 2015 and increased by $84 million, 19% over the third quarter of 2014. Client deposits increased by $24 million during the quarter while the Bank chose not to renew $6 million in long-term wholesale deposits which matured in September. Non-Interest Bearing Demand Deposits were up 8% for the quarter and up 22% from the same quarter in 2014 and now account for 38% of Total Deposits.
• Net Interest Income of $5.1 million in the third quarter was up 8.3% over the second quarter of 2015 and 7.8% over the quarter ended September 30, 2014. The third quarter of 2015 included $210 thousand in interest expense on subordinated debt that was not incurred in the third quarter of 2014.
• Because of the substantial loan growth during the quarter, the Bank incurred $422 thousand in Provision For Loan Loss Expense versus zero in both the quarter ended June 30, 2015 and the quarter ended September 30, 2014. It is expected that future loan growth will require similar Provision For Loan Loss Expense.
• Operating Expenses were flat from the quarter ended June 30, 2015 and were up 10% from the quarter ended September 30, 2014 primarily due to increased personnel and rent expense associated with the Bank’s San Mateo Office which opened in November 2014.
• Net Income applicable to Common Shareholders was $532 thousand for the quarter, a decrease of $9 thousand, 1.7% over the second quarter 2015 due exclusively to the Provision For Loan Loss Expense incurred in the third quarter of 2015.
• Net Interest Margin increased 5 basis points from the quarter ended June 30, 2015 due to a higher proportion of loans in earning assets. Deposits cost and loan yields were essentially flat. Net Interest Margin is down 50 basis points from the quarter ended September 30, 2014, due to interest expense on the Bank’s $10 million Subordinated Notes not incurred in 2014 and higher levels of lower yielding liquid assets maintained in 2015.
• On September 29, 2015, the Bank redeemed the remaining $6.8 million outstanding of Perpetual Preferred Shares at par. This will result in an annual savings on dividends of $620 thousand.
• Credit quality remains strong with a classified Loan to Capital Ratio less than 5%. Non-Performing Loans totaled $1.2 million at September 30, 2015 or 0.3% of total loans. The Allowance for Loan Losses of $5.6 million covers Non-Performing Loans by more than four times.
• Diluted Earnings per Common Share were $0.09 for the quarter compared to $0.12 in the second quarter of 2015 and $0.18 in the third quarter of 2014. As previously reported, the Bank raised $12 million in a 1 million share rights offering which closed at the end of the second quarter of 2015.
• Book Value per Share increased to $10.37 per share as of September 30, 2015 from $10.27 per share at June 30, 2015 and $9.53 per share at September 30, 2014.

“On the heels of our very successful stock offering, I am particularly pleased to see the Bank put the new capital to work by growing loans,” said Presidio Bank Chairman and Founder, Jim Woolwine.

The Bank also announced that it has engaged BDO as its independent auditor for 2015, replacing Crowe Horwath LLP (“Crowe”). Crowe and a related predecessor firm had served the Bank since inception but informed the Board of Directors earlier in the year that it would not be independent relative to Presidio Bank in 2015. Because the Bank exceeded $500 million in assets at the end of 2014, additional independence rules became applicable in 2015 related to the service of a retired Crowe partner on the Bank’s Board of Directors for a portion of 2015. Crowe continues to provide tax services to the Bank.

3rd Quarter 2015 Financial Results(Dollars in thousands, except per share amounts, unaudited)
Condensed Balance Sheet
			9/30/2015			6/30/2015			Change			9/30/2014			Change			12/31/2014			Change
Cash and due from banks			8,984			501			1693.2	%		7,972			12.7	%		5,621			59.8	%
Interest bearing due from banks			108,898			126,275			-13.8	%		84,612			28.7	%		104,642			4.1	%
Total cash and equivalents			117,882			126,776			-7.0	%		92,584			27.3	%		110,263			6.9	%
Investment securities			14,203			14,191			0.1	%		14,419			-1.5	%		14,392			-1.3	%
Loans, net of fees			475,466			446,068			6.6	%		401,421			18.4	%		415,741			14.4	%
Allowance for loan losses			(5,594	)		(5,172	)		8.2	%		(4,952	)		13.0	%		(5,172	)		8.2	%
Net loans			469,872			440,896			6.6	%		396,469			18.5	%		410,569			14.4	%
Premises and equipment, net			1,313			1,381			-4.9	%		1,090			20.5	%		1,477			-11.1	%
Other assets and interest receivable			11,222			11,064			1.4	%		5,773			94.4	%		6,052			85.4	%
Total assets			614,492			594,308			3.4	%		510,335			20.4	%		542,753			13.2	%
Non-interest-bearing demand			204,348			190,129			7.5	%		167,411			22.1	%		164,353			24.3	%
Interest bearing transaction			69,142			67,403			2.6	%		63,260			9.3	%		69,646			-0.7	%
Money market and savings accounts			216,602			207,446			4.4	%		166,866			29.8	%		196,050			10.5	%
Time deposits			44,388			51,046			-13.0	%		52,967			-16.2	%		51,643			-14.0	%
Total deposits			534,480			516,024			3.6	%		450,504			18.6	%		481,692			11.0	%
Borrowings			10,160			10,284			-1.2	%		10,048			NM			10,360			NM
Other liabilities			15,020			7,079			112.2	%		2,913			415.6	%		2,884			420.8	%
Total liabilities			559,660			533,387			4.9	%		463,465			20.8	%		494,936			13.1	%
Preferred stock			-			6,869			-100.0	%		6,860			-100.0	%		6,869			-100.0	%
Common stock			56,789			56,375			0.7	%		43,949			29.2	%		44,207			28.5	%
Retained earnings			(1,824	)		(2,264	)		19.4	%		(3,797	)		52.0	%		(3,167	)		42.4	%
Other comprehensive income			(133	)		(59	)		-125.4	%		(142	)		6.3	%		(92	)		-44.6	%
Total shareholder’s equity			54,832			60,921			-10.0	%		46,870			17.0	%		47,817			14.7	%
Total liabilities and equity			614,492			594,308			3.4	%		510,335			20.4	%		542,753			13.2	%
Book value per share
Book value per share			$ 10.37			$ 10.27						$ 9.53						$ 9.74
Total shares outstanding EOP			5,288			5,261						4,199						4,203
Capital Ratios
Tier 1 leverage ratio			9.1	%		10.6	%					9.7	%					8.8	%
Tier 1 risk-based capital ratio			9.7	%		11.6	%					10.1	%					10.0	%
Total risk-based capital ratio			12.5	%		14.6	%					13.5	%					13.3	%
Common equity tier 1 capital ratio			9.7	%		10.3	%					8.6	%					8.5	%

Condensed Statement of Income
			For the three months ended															For the nine months ended
			9/30/2015			6/30/2015			ChangeFav./(Unfav.)			9/30/2014			ChangeFav./(Unfav.)			9/30/2015			9/30/2014			ChangeFav./(Unfav.)
Interest income			5,557			5,171			7.5	%		4,963			12.0	%		15,723			14,377			9.4	%
Interest expense			421			428			1.6	%		197			(113.7	%)		1,253			586			(113.8	%)
Net interest income			5,136			4,743			8.3	%		4,766			7.8	%		14,470			13,791			4.9	%
Provision for loan loss			422			-			NM			-			NM			422			81			421.0	%
Net interest income after provision			4,714			4,743			(0.6	%)		4,766			(1.1	%)		14,048			13,710			2.5	%
Other income			191			183			4.4	%		182			4.9	%		543			534			1.7	%
Compensation and benefit expenses			2,331			2,301			(1.3	%)		2,165			(7.7	%)		7,227			6,416			(12.6	%)
Occupancy and equipment expenses			445			432			(3.0	%)		393			(13.2	%)		1,324			1,139			(16.2	%)
Data processing			289			277			(4.3	%)		261			(10.7	%)		853			778			(9.6	%)
Professional and legal			116			191			39.3	%		88			(31.8	%)		417			302			(38.1	%)
Other operating expenses			557			542			(2.8	%)		498			(11.8	%)		1,610			1,486			(8.3	%)
Total operating expenses			3,738			3,743			0.1	%		3,405			(9.8	%)		11,431			10,121			(12.9	%)
Net income before taxes			1,167			1,183			(1.4	%)		1,543			(24.4	%)		3,160			4,123			(23.4	%)
Income taxes			480			487			1.4	%		648			25.9	%		1,294			1,706			24.2	%
Net income			687			696			(1.3	%)		895			(23.2	%)		1,866			2,417			(22.8	%)
Preferred dividends			155			155			0.0	%		89			(74.2	%)		431			267			(61.4	%)
Net income to common			532			541			(1.7	%)		806			(34.0	%)		1,435			2,150			(33.3	%)
Earnings Per Share
Basic earnings per share			$ 0.10			$ 0.13						$ 0.19						$ 0.30			$ 0.50
Diluted earnings per share			$ 0.09			$ 0.12						$ 0.18						$ 0.29			$ 0.48
Average shares outstanding			5,263			4,296						4,187						4,588			4,167
Average diluted shares			5,515			4,526						4,404						4,827			4,347
Performance Ratios
Return on average assets			0.45	%		0.48	%					0.73	%					0.44	%		0.68	%
Return on average common equity			3.84	%		5.00	%					8.02	%					4.11	%		7.37	%
Net interest margin			3.45	%		3.40	%					3.96	%					3.49	%		3.97	%
Cost of funds			0.30	%		0.32	%					0.18	%					0.32	%		0.19	%
Efficiency ratio			70.2	%		76.1	%					68.8	%					76.1	%		70.7	%
Average Balances
Total assets			606,634			576,058						484,699						567,737			471,881
Earning assets			592,748			561,247						476,849						554,891			464,504
Total loans			453,483			424,455						403,372						430,768			395,218
Total deposits			527,295			508,336						426,552						498,136			414,256
Common equity			54,963			43,205						39,892						46,638			38,991
NM = Not Meaningful

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151022006665/en/

Presidio Bank
Steve Heitel, 415-229-8428
President & CEO
Ed Murphy, 415-229-8403
EVP/CFO
or
MEDIA:
Annette Gelinas, 415-229-8415 (o) / 925-787-2956 (c)
SVP/Marketing Director
[email protected]

Source: Presidio Bank

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