Presidio Bank (OTCBB: PDOB), a Bay Area business bank, today reported unaudited results for the fourth quarter and full year ended December 31, 2018 with Net Income for the year of $11.8 million, up 116% from 2017. Net Income in 2017 was reduced by a $1.5 million devaluation of Deferred Tax Assets and Low Income Housing Investments in the fourth quarter due to the tax reform legislation. Pretax Income for 2018 was $15.7 million, up 39% from 2017. Pretax Income for the quarter ending December 31, 2018 was $4.8 million, up 10% from the quarter ending September 30, 2018, and up 39% from the quarter ending December 31, 2017. Diluted Earnings per Share were $0.50 for the fourth quarter of 2018. For 2018, Diluted Earnings per Share were $1.82, up from $0.87 in 2017. Diluted Earnings per share were reduced by $0.24 in 2017 due to the Deferred Tax Asset devaluation. Total Assets were $862 million at December 31, 2018, up $28 million or 3% from September 30, 2018 and up $69 million or 9% from December 31, 2017.

“2018 was another year of significant growth in profitability driven by continued asset growth combined with increasing margins and improved efficiency,” said Presidio Bank CEO Steve Heitel.

Financial Highlights

  • Loans, net of fees at December 31, 2018 were up $42 million or 6.3% from September 30, 2018 and up $85 million or 13.5% from December 31, 2017. Growth for the year was centered in Commercial Real Estate, up $57 million, Personal, up $18 million and Land and Construction, up $11 million. Commercial and Industrial Loans declined $21 million during 2018, primarily due to a decline in Line of Credit Utilization from 42% to 33%. Loan Originations for the fourth quarter of 2018 were $78 million, up from $42 million in the third quarter 2018. For the year, Loan Originations were $252 million, down marginally from $259 million in 2017.
  • Total Deposits at December 31, 2018 increased by $24 million or 3% from September 30, 2018. Total Deposits increased $55 million or 8% for the year. Demand Deposits increased $4 million or 1% in the fourth quarter and were up $24 million or 8% for the year. Demand Deposits comprise 42% of total deposits at December 31, 2018. Money Market Deposits increased by $6 million or 2% in the fourth quarter and were up $47 million or 20% for the year.
  • Net Interest Income of $9.5 million in the fourth quarter of 2018 was up 4% from the third quarter of 2018 and up 23% from the fourth quarter of 2017. For the year, Net Interest Income was up 21% over 2017. Net Interest Margin increased during the fourth quarter of 2018 to 4.55% from 4.32% in the third quarter of 2018. Net Interest Margin for the full year 2018 was 4.34%, up from 4.05% in 2017. Loan portfolio yield for the quarter increased to 5.42% from 5.27% in the third quarter of 2018. For the year, the loan portfolio yield increased to 5.25% from 4.91% in 2017. The Cost of Deposits was 0.32% in the fourth quarter 2018, up from 0.28% in the third quarter of 2018. For the year, the Cost of Deposits was 0.26%, up from 0.15% in 2017.
  • Operating Expense in the fourth quarter 2018 was up 2% from the third quarter of 2018 and up 9.2% from the fourth quarter of 2017. For the full year 2018, Operating Expense was up 10.8%, primarily due to a growth-related increase in Salary and Benefit Expense, an increase in Occupancy Expense due to the full year impact of the lease on our Walnut Creek branch that opened in the 2nd half of the 2017, and higher professional fees.
  • Full year 2018 Total Revenue grew 21% while Total Expenses grew 10.8% compared to full year 2017. The Bank’s efficiency ratio improved to 56.2% in 2018 from 61.7% in 2017. In the fourth quarter of 2018, the Bank’s efficiency ratio was 51.2% versus 57.4% in the fourth quarter of 2017.
  • During the fourth quarter of 2018, the Bank placed a $3.7 million Commercial Real Estate Loan on non-accrual status. The loan is past due because of a dispute between the owners of the property, which prevented a timely renewal of the credit. There is currently no impairment on the loan as a recent appraisal indicated a loan-to-value ratio of 50%. This is the Bank’s only non-performing loan. The Classified Asset to Capital Ratio increased to 6.3% at December 31, 2018 from 2.6% at September 30, 2018 solely due to the above referenced loan. Total Criticized and Classified Loans represent only 4% of Loan Commitments and 5% of Loans Outstanding at December 31, 2018, up 1% each from September 30, 2018.
  • Book Value per Share increased to $14.21 per share at December 31, 2018 from $13.59 per share at September 30, 2018 and $12.29 per share at December 31, 2017.

“I am grateful to our clients for continuing to trust us with their banking business and their willingness to refer us to their friends,” said Presidio Bank Chairman and Founder, Jim Woolwine. “This has allowed us to continue our quality growth.”

                     

4th Quarter 2018 Financial Results

(Dollars in thousands, except per share amounts, unaudited)

 

Condensed Balance Sheet

                         
  12/31/2018       9/30/2018     Change       12/31/2017     Change
 
Cash and due from banks 7,804 9,041 -13.7% 7,613 2.5%
Interest bearing due from banks   67,877       78,598 -13.6%   129,952 -47.8%
Total cash and equivalents 75,681 87,639 -13.6% 137,565 -45.0%
Investment securities 57,925 59,282 -2.3% 12,313 370.4%
Loans, net of fees 710,939 668,934 6.3% 626,282 13.5%
Allowance for loan losses   (7,439)       (7,423) 0.2%   (7,166) 3.8%
Net loans 703,500 661,511 6.3% 619,116 13.6%
Premises and equipment, net 2,287 2,371 -3.5% 2,627 -13.0%
Other assets and interest receivable   23,071       23,366 -1.3%   22,237 3.7%
Total assets 862,464 834,169 3.4% 793,858 8.6%
 
Non-interest-bearing demand 319,358 315,493 1.2% 295,070 8.2%
Interest bearing transaction 116,120 101,712 14.2% 120,109 -3.3%
Money market and savings accounts 285,245 278,867 2.3% 238,706 19.5%
Time deposits   37,995       38,400 -1.1%   50,269 -24.4%
Total deposits 758,718 734,472 3.3% 704,154 7.7%
Borrowings 9,865 9,928 -0.6% 10,174 -3.0%
Other liabilities   5,221       5,014 4.1%   4,767 9.5%
Total liabilities 773,804 749,414 3.3% 719,095 7.6%
 
Common stock 67,978 67,783 0.3% 65,960 3.1%
Retained earnings 20,683 17,401 18.9% 8,854 133.6%
Other comprehensive income   (1)       (429) 99.8%   (51) 98.3%
Total shareholder’s equity   88,660       84,755 4.6%   74,763 18.6%
Total liabilities and equity   862,464       834,169 3.4%   793,858 8.6%
 
Book value per share
Book value per share $ 14.21 $ 13.59 $ 12.29
Total shares outstanding EOP 6,241 6,238 6,084
 
Capital Ratios
Tier 1 leverage ratio 10.3% 9.9% 9.7%
Tier 1 risk-based capital ratio 10.0% 10.2% 9.8%
Tangible common risk-based ratio 10.0% 10.2% 9.8%
Total risk-based capital ratio 12.1% 12.3% 12.1%
 
           
Condensed Statement of Income

(Dollars in thousands, except per share amounts, unaudited)

 
For the three months ended For the twelve months ended
  12/31/2018       9/30/2018    

Change
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(Unfav.)

       12/31/2017    

Change
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(Unfav.)

   12/31/2018       12/31/2017    

Change
Fav./
(Unfav.)

                       
Interest income 10,323 9,866 4.6% 8,236 25.3% 37,801 30,799 22.7%
Interest expense   812       752 (7.9%)   483 (68.2%)   2,758       1,819 (51.6%)
Net interest income 9,511 9,114 4.4% 7,753 22.7% 35,043 28,980 20.9%
Provision for loan loss   16       98 83.4%   - NM   273       298 8.3%
Net interest income after provision 9,495 9,016 5.3% 7,753 22.5% 34,770 28,682 21.2%
 
Other income 315 279 13.0% 287 9.6% 1,221 948 28.9%
 
Compensation and benefit expenses 3,335 3,301 (1.1%) 2,814 (18.5%) 13,174 11,525 (14.3%)
Occupancy and equipment expenses 606 625 3.1% 617 1.7% 2,450 2,282 (7.3%)
Data processing 420 388 (8.3%) 388 (8.2%) 1,592 1,366 (16.6%)
Professional and legal 161 145 (11.3%) 155 (4.1%) 731 574 (27.5%)
Other operating expenses   503       473 (6.5%)   627 19.7%   2,321       2,547 8.9%
Total operating expenses   5,025       4,932 (1.9%)   4,601 (9.2%)   20,268       18,294 (10.8%)
Net income before taxes 4,785 4,363 9.7% 3,439 39.1% 15,723 11,336 38.7%
Income taxes   1,503       870 (72.8%)   2,838 47.0%   3,894       5,859 33.5%
Net income   3,282       3,493 (6.0%)   601 445.7%   11,829       5,477 116.0%
 
Earnings Per Share
Basic earnings per share $ 0.53 $ 0.56 (6.4%) $ 0.10 431.9% $ 1.92 $ 0.91 111.8%
Diluted earnings per share $ 0.50 $ 0.53 (6.1%) $ 0.09 434.2% $ 1.82 $ 0.87 110.0%
Average shares outstanding 6,160 6,132 6,009 6,092 5,979
Average diluted shares 6,458 6,454 6,328 6,432 6,259
 
Performance Ratios
Return on average assets 1.52% 1.60% 0.32% 1.41% 0.75%
Return on average common equity 14.95% 16.64% 3.25% 14.44% 7.67%
Net interest margin 4.55% 4.32% 4.11% 4.34% 4.05%
Cost of funds 0.42% 0.39% 0.28% 0.37% 0.28%
Efficiency ratio 51.2% 52.5% 57.4% 56.2% 61.7%
 
Average Balances
Total assets 857,104 864,605 774,015 834,978 736,754
Earning assets 829,811 836,348 747,679 807,700 715,782
Total loans 675,569 665,655 608,584 654,920 594,624
Total deposits 754,400 763,647 684,233 737,628 649,793
Common equity 87,084 83,346 75,531 81,583 72,056
 

NM = Not Meaningful

 
                     
Condensed Balance Sheet (5 Quarter Data)

(Dollars in thousands, except per share amounts, unaudited)

 
                         
  12/31/2018       9/30/2018       6/30/2018       3/31/2018       12/31/2017
 
Cash and due from banks 7,804 9,041 8,842 14,682 7,613
Interest bearing due from banks   67,877       78,598       130,412       154,434       129,952
Total cash and equivalents 75,681 87,639 139,254 169,116 137,565
Investment securities 57,925 59,282 41,326 11,810 12,313
Loans, net of fees 710,939 668,934 653,226 649,994 626,282
Allowance for loan losses   (7,439)       (7,423)       (7,325)       (7,325)       (7,166)
Net loans 703,500 661,511 645,901 642,669 619,116
Premises and equipment, net 2,287 2,371 2,464 2,537 2,627
Other assets and interest receivable   23,071       23,366       24,373       23,796       22,237
Total assets 862,464 834,169 853,318 849,928 793,858
 
Non-interest-bearing demand 319,358 315,493 298,354 337,201 295,070
Interest bearing transaction 116,120 101,712 108,338 108,399 120,109
Money market and savings accounts 285,245 278,867 302,077 262,503 238,706
Time deposits   37,995       38,400       48,698       50,082       50,269
Total deposits 758,718 734,472 757,467 758,185 704,154
Borrowings 9,865 9,928 9,961 10,059 10,174
Other liabilities   5,221       5,014       5,152       4,466       4,767
Total liabilities 773,804 749,414 772,580 772,710 719,095
 
Common stock 67,978 67,783 66,995 66,241 65,960
Retained earnings 20,683 17,401 13,908 11,079 8,854
Other comprehensive income   (1)       (429)       (165)       (102)       (51)
Total shareholder’s equity   88,660       84,755       80,738       77,218       74,763
Total liabilities and equity   862,464       834,169       853,318       849,928       793,858
 
Book value per share
Book value per share $ 14.21 $ 13.59 $ 13.06 $ 12.68 $ 12.29
Total shares outstanding EOP 6,241 6,238 6,184 6,090 6,084
 
Capital Ratios
Tier 1 leverage ratio 10.3% 9.9% 9.8% 9.7% 9.7%
Common equity tier 1 capital ratio 10.0% 10.2% 9.9% 9.5% 9.8%
Tier 1 risk-based capital ratio 10.0% 10.2% 9.9% 9.5% 9.8%
Total risk-based capital ratio 12.1% 12.3% 12.1% 11.7% 12.1%
 
     
Condensed Statement of Income (5 Quarter Data)

(Dollars in thousands, except per share amounts, unaudited)

 
For the three months ended
  12/31/2018       9/30/2018       6/30/2018       3/31/2018       12/31/2017
               
Interest income 10,323 9,866 9,042 8,570 8,236
Interest expense   812       752       707       487       483
Net interest income 9,511 9,114 8,335 8,083 7,753
Provision for loan loss   16       98       -       159       -
Net interest income after provision 9,495 9,016 8,335 7,924 7,753
 
Other income 315 279 309 320 287
 
Compensation and benefit expenses 3,335 3,301 3,254 3,283 2,814
Occupancy and equipment expenses 606 625 602 616 617
Data processing 420 388 400 385 388
Professional and legal 161 145 278 147 155
Other operating expenses   503       473       571       777       627
Total operating expenses   5,025       4,932       5,105       5,208       4,601
Net income before taxes 4,785 4,363 3,539 3,036 3,439
Income taxes   1,503       870       710       811       2,838
Net income   3,282       3,493       2,829       2,225       601
 
Earnings Per Share
Basic earnings per share $ 0.53 $ 0.56 $ 0.46 $ 0.36 $ 0.10
Diluted earnings per share $ 0.50 $ 0.53 $ 0.44 $ 0.34 $ 0.09
Average shares outstanding 6,160 6,132 6,053 6,025 6,009
Average diluted shares 6,458 6,454 6,419 6,398 6,328
 
Performance Ratios
Return on average assets 1.52% 1.60% 1.38% 1.14% 0.32%
Return on average common equity 14.95% 16.64% 14.31% 11.78% 3.25%
Net interest margin 4.55% 4.32% 4.20% 4.27% 4.11%
Cost of funds 0.42% 0.39% 0.38% 0.28% 0.28%
Efficiency ratio 51.2% 52.5% 59.1% 62.1% 57.4%
 
Average Balances
Total assets 857,104 864,605 822,750 794,442 774,015
Earning assets 829,811 836,348 795,498 768,150 747,679
Total loans 675,569 665,655 642,855 635,039 608,584
Total deposits 754,400 763,647 728,532 703,081 684,233
Common equity 87,084 83,346 79,177 76,591 75,531
 
                     

Loans (5 Quarter Data)

(Dollars in Thousands, unaudited)

 
 
12/31/2018     9/30/2018     6/30/2018     3/31/2018     12/31/2017
 
Commercial real estate 328,667 304,123 303,444 283,238 271,346
Land and construction 56,179 55,185 53,771 54,088 44,714
Commercial 176,179 177,747 180,783 201,094 197,748
Personal 34,738 22,505 13,709 17,172 16,295
Residential 38,357 36,552 31,011 33,114 34,174
Multifamily 77,928 73,839 71,505 62,325 63,024
Deferred loan fees (1,109)     (1,017)     (997)     (1,037)     (1,019)
Loans, net of fees 710,939 668,934 653,226 649,994 626,282
Allowance for loan losses (7,439)     (7,423)     (7,325)     (7,325)     (7,166)
Net loans 703,500 661,511 645,901 642,669 619,116
 
 
 

Non-Performing Assets (5 Quarter Data)

(Dollars in Thousands, unaudited)

 
                         
12/31/2018     9/30/2018     6/30/2018     3/31/2018     12/31/2017
Non-Accrual Loans 3,746 - - - -
Non-Performing Loans (NPL) 3,746 - - - -
Other Real Estate Owned - - - - -
Non-Performing Assets (NPA) 3,746 - - - -
90+ Days Delinquent - - - - -
NPAs & 90 Day Delinquent 3,746 - - - -
Quarterly Net Charge-offs - - - - -
 
NPAs / Assets % 0.43% 0.00% 0.00% 0.00% 0.00%
NPAs & 90 Day / Assets % 0.43% 0.00% 0.00% 0.00% 0.00%
NPAs / Actual Loans and OREO % 0.43% 0.00% 0.00% 0.00% 0.00%
Loan Loss Reserves / Loans (%) 1.05% 1.11% 1.12% 1.13% 1.14%
 
     

Net Interest Income (Quarterly Data)

(Dollars in Thousands, unaudited)

 
For the Three Months Ended
 
12/31/2018     9/30/2018
    Interest         Interest    
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
Assets:
Interest-bearing deposits $ 95,949 $ 543 2.24 % $ 116,875 $ 577 1.96 %
Federal Reserve and Federal Home Loan Bank stock 4,887 128 10.36 4,867 79 6.47
Investment Securities 53,406 421 3.13 48,951 363 2.94
Loans: (2)
Commercial 171,054 2,560 5.94 182,772 2,591 5.62
Land and Construction 56,796 927 6.48 53,000 856 6.40
Commercial Real Estate 307,474 3,934 5.08 305,632 3,854 5.00
Residential 36,007 547 6.02 32,565 471 5.74
Multifamily 74,159 892 4.77 74,251 872 4.66
Personal 30,079 371 4.90 17,435 203 4.63
Total Loans 675,569 9,231 5.42 665,655 8,847 5.27
Total Earning Assets 829,811 10,323 4.94 836,348 9,866 4.68
Allowance for loan losses (7,428) (7,390)
Cash and cash equivalents 10,101 10,156
Other assets 24,620 25,491
Total Assets $ 857,104 $ 864,605
 
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits $ 102,590 $ 78 0.30 % $ 107,491 $ 64 0.24 %
Money market deposits 277,247 424 0.61 291,017 364 0.50
Savings deposits 3,925 3 0.30 3,892 3 0.25
Certificates and other time deposits 38,251 96 1.00 43,674 110 1.00
Total Interest-bearing Deposits 422,013 601 0.56 446,074 541 0.48
Borrowings 9,856 211 8.49 9,952 211 8.41
Total Interest-bearing Liabilities 431,869 812 0.75 456,026 752 0.65
Noninterest-bearing deposits 332,387 317,573
Other liabilities 5,764 7,660
Total Liabilities 770,020 781,259
Stockholders' Equity 87,084 83,346
Total Liabilities and Stockholders' Equity $ 857,104 $ 864,605
Net Interest Income $ 9,511 $ 9,114
Net Interest Margin 4.55 % 4.32 %
Cost of Funds 0.42 % 0.39 %
Cost of Deposits 0.32 % 0.28 %
 
   

Net Interest Income (Annual Data)

(Dollars in Thousands, unaudited)

 
For the Twelve Months Ended
 
12/31/2018   12/31/2017
  Interest     Interest  
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
Assets:
Interest-bearing deposits $ 117,354 $ 2,191 1.87 % $ 108,324 $ 1,183 1.09 %
Federal Reserve and Federal Home Loan Bank stock 4,805 360 7.49 4,505 302 6.70
Investment Securities 30,621 893 2.92 8,329 128 1.54
Loans: (2)
Commercial 185,747 10,339 5.57 180,630 9,358 5.18
Land and Construction 52,136 3,371 6.47 26,482 1,647 6.22
Commercial Real Estate 295,082 14,650 4.96 269,499 12,838 4.76
Residential 33,123 1,856 5.60 31,615 1,500 4.74
Multifamily 69,637 3,248 4.66 61,246 2,795 4.56
Personal 19,195 893 4.65 25,152 1,048 4.17
Total Loans 654,920 34,357 5.25 594,624 29,186 4.91
Total Earning Assets 807,700 37,801 4.68 715,782 30,799 4.30
Allowance for loan losses (7,340) (7,020)
Cash and cash equivalents 9,776 8,839
Other assets 24,842 19,153
Total Assets $ 834,978 $ 736,754
 
Liabilities:
Interest-bearing deposits:
Interest-bearing NOW deposits $ 107,443 $ 249 0.23 % $ 104,157 $ 183 0.18 %
Money market deposits 266,057 1,232 0.46 239,776 515 0.21
Savings deposits 3,869 9 0.24 4,550 4 0.10
Certificates and other time deposits 45,434 424 0.93 47,569 273 0.57
Total Interest-bearing Deposits 422,803 1,914 0.45 396,052 975 0.25
Borrowings 9,988 844 8.45 10,066 844 8.39
Total Interest-bearing Liabilities 432,791 2,758 0.64 406,118 1,819 0.45
Noninterest-bearing deposits 314,825 253,741
Other liabilities 5,779 4,839
Total Liabilities 753,395 664,698
Stockholders' Equity 81,583 72,056
Total Liabilities and Stockholders' Equity $ 834,978 $ 736,754
Net Interest Income $ 35,043 $ 28,980
Net Interest Margin 4.34 % 4.05 %
Cost of Funds 0.37 % 0.28 %
Cost of Deposits 0.26 % 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.