Professional Holding Corp. Reports Fourth-Quarter and Annual 2021 Results
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Professional Holding Corp. Reports Fourth-Quarter and Annual 2021 Results

Thursday, January 27, 2022 6:27 PM
Professional Holding Corp.
Topic:
Earnings

Quarterly Net Income of $4.0 million Leads to Net Income of $21.4 million for the Year Ended December 31, 2021.

CORAL GABLES, FL / ACCESSWIRE / January 27, 2022 / Professional Holding Corp. (the "Company") (NASDAQ:PFHD), the parent company of Professional Bank (the "Bank"), today reported net income of $4.0 million, or $0.30 per share, for the fourth quarter of 2021 compared to net income of $6.3 million, or $0.48 per share, for the third quarter of 2021, and net income of $5.5 million, or $0.41, for the fourth quarter of 2020. For the year ended December 31, 2021, net income totaled $21.4 million, or $1.61 per share, compared to net income of $8.3 million, or $0.69 per share for the year ended December 31, 2020.

Daniel R. Sheehan, Chairman and CEO of Professional Holding Corp., said: "Our loan portfolio continues to expand nicely, largely due to our increasing gross loan production. I am particularly proud of our bankers who delivered outsized origination volume in 2021, and look forward to continuing that momentum into 2022 across our new and existing markets."

Results of Operations for the Three Months Ended December 31, 2021

  • Net income decreased $2.3 million, or 37.0%, to $4.0 million compared to the prior quarter. The decrease was comprised of lower net interest income of $1.0 million, a decrease in noninterest income of $0.2 million, an increase in noninterest expense of $1.3 million, and a higher provision expense of $0.8 million.
  • Net interest income decreased $1.0 million, or 5.1%, to $18.1 million compared to the prior quarter primarily due to a decrease in loan yield in our commercial real estate loan portfolio. The loan yield decrease was due to prior quarter's acceleration of the Bank's Payroll Protection Program ("Professional Bank PPP") loan fees and acceleration of purchase accounting loan marks from the Marquis Bancorp, Inc. ("MBI") acquisition. The Company remains asset sensitive and net interest income is expected to increase in a rising interest rate environment. Net interest income, excluding Professional Bank PPP income and purchase accounting marks from the MBI acquisition, increased $0.4 million, or 2.9%, to $15.4 million, compared to the prior quarter, see Reconciliation of non-GAAP Financial Measures.
  • Provision expense increased $0.8 million, or 77.4%, to $1.9 million compared to the prior quarter primarily due to loan growth during the quarter, and, to a lesser extent, a specific reserve on a non-performing impaired loan.
  • Noninterest income decreased $0.2 million, or 12.6%, to $1.3 million compared to the prior quarter primarily due to a decrease in service charges associated with deposit correspondent fees from service charges on deposit accounts associated with acting as a correspondent bank for a Payroll Protection Program lender (the "Correspondent Banking Relationship") Correspondent Banking Relationship, lower SWAP fee income due to a lower volume of SWAP transactions, and a decrease in fees generated from loans held for sale, partially offset by higher Small Business Administration ("SBA") loan origination fees.
  • Noninterest expense increased $1.3 million, or 11.0%, to $12.9 million compared to the prior quarter primarily due to increases in salary and benefits of $0.7 million to support scalable growth, $0.5 million loss attributable to a wire erroneously sent by the Bank in reliance on instructions that appear to have originated from a client's compromised computer system, and an increase of $0.2 million in the provision for unfunded off-balance sheet items, partially offset by a $0.3 million charitable contribution expense in prior quarter.

Results of Operations for the Year Ended December 31, 2021

  • The variance in the Results of Operations for 2021 compared to 2020 occurred in part due to the March 26, 2020, closing date of the MBI acquisition as there were 281 days of MBI integration in 2020 compared to a full year in 2021 (the "MBI Variance").
  • Net income increased $13.1 million, or 157.2%, to $21.4 million compared to the prior year. The increase was primarily due to an increase in net interest income resulting from the MBI Variance, the acceleration of Professional Bank PPP loan fees, deposit fees associated with the Correspondent Banking Relationship, as well as lower provision for loan losses primarily due to the macro environment stabilization following the increased reserves at the early stages of COVID-19 pandemic in 2020 and having addressed the impairment of a previously disclosed loan in the third quarter of 2020.
  • Net interest income increased $12.3 million, or 20.4%, to $72.3 million compared to the prior year primarily due to loan growth and an increase in forgiveness of Professional Bank PPP loans resulting in a higher amount of loan fees recognized in addition to a reduction in interest expense on deposit accounts. Net interest income, excluding Professional Bank PPP income and purchase accounting marks from the MBI acquisition increased $9.0 million, or 18.4%, to $58.0 million, compared to the prior year, see Reconciliation of non-GAAP Financial Measures.
  • Noninterest income increased $1.9 million, or 43.7%, to $6.2 million, compared to the prior year primarily due to an increase of $0.9 million in service charges associated with the Correspondent Banking Relationship, $0.6 million in service charges on other deposit accounts, a $0.6 million increase in Bank Owned Life Insurance income, and a $0.1 million increase in SBA loan origination fees, partially offset by a $0.3 million decrease in fees generated from loans held for sale, and a $0.1 million decrease in SWAP fee income.
  • Noninterest expense increased $3.6 million, or 8.4%, to $47.3 million compared to the prior year. The year-over-year increase was due to increased salaries and employee benefits resulting from our opening of LPOs in Tampa Bay and Jacksonville, investments in digital infrastructure, and higher regulatory and professional fees related to accounting and regulatory compliance, partially offset by prior year MBI acquisition expenses. The Bank's number of employees increased from 182 as of December 31, 2020, to 208 as of December 31, 2021.

Financial Condition:

On December 31, 2021:

  • Total assets remained relatively unchanged at $2.7 billion compared to the prior quarter. Total assets increased 29.5%, or $0.6 billion, compared to December 31, 2020, primarily as a result of increases in cash and cash equivalents, net loans, and taxable securities available-for-sale.
  • Total loans increased $89.9 million, or 5.3%, to $1.8 billion compared to the prior quarter. The increase was driven by loan originations of approximately $304.3 million, of which $226.6 million funded, partially offset by loan paydowns and prepayments. The Professional Bank PPP loan balance decreased $26.5 million, or 31.1%, to $58.6 million from the prior quarter.
  • Total deposits remained relatively unchanged at $2.4 billion compared to the prior quarter. An increase in money market deposit accounts were mostly offset by a decrease in noninterest bearing demand deposit accounts due to SBA loan forgiveness payments related to the Correspondent Banking Relationship.
  • Nonperforming assets decreased $0.7 million to $2.1 million compared to the prior quarter due to a charge-off of a previously disclosed impaired loan. As of December 31, 2020, the Company had nonperforming assets of $10.4 million. There were no charge-offs during the three months ended December 31, 2020.

Capital

The Company continues to remain well capitalized per regulatory requirements. As of December 31, 2021, the Company had a total risk-based capital ratio of 12.7% and a leverage capital ratio of 7.7%.

On March 2, 2020, the Company's Board of Directors authorized the repurchase from time to time of the Company's Class A Common Stock. Under this program, shares may be repurchased in open market transactions, including plans complying with Rule 10b5-1 under the Exchange Act. Effective May 6, 2021, the Company's Board of Directors authorized an increase in the amount available under its existing stock repurchase program such that $10.0 million of additional funds were made available to repurchase outstanding shares of the Company's Class A Common Stock. For the three months ended December 31, 2021, the Company repurchased 40,052 shares of Class A Common Stock, at an average price of $18.90 per share. As of December 31, 2021, year to date, the Company repurchased 381,419 shares of Class A Common Stock, at an average price of 17.81 per share. Under the stock repurchase program $4.1 million remained available as of December 31, 2021.

Liquidity

The Company maintains a strong liquidity position. On December 31, 2021, in addition to its balance sheet liquidity, the Company had the ability to generate approximately $449.9 million in liquidity through available resources. Additionally, the Company retained $5.8 million in cash at the holding company. During the fourth quarter of 2021, the Company redeemed in full, the amount of its subordinated notes payable of $10.0 million, in accordance with its contractual terms. On December 31, 2021, the Company had $10.0 million of outstanding borrowings at Valley National Bank, N.A. ("Valley"). As previously disclosed, during the first quarter of 2022, the Company completed both a private placement transaction, pursuant to which the Company issued and sold a subordinated note due 2032 in the principal amount of $25.0 million, and increased the availability under its revolving line of credit at Valley from $10.0 million to $25.0 million.

Net Interest Income and Net Interest Margin Analysis

Net interest income was $18.1 million for the three months ended December 31, 2021. The following table shows the average outstanding balance of each principal category of the Company's assets, liabilities, and shareholders' equity, together with the average yields on assets and the average costs of liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the respective periods. For the three months ended December 31, 2021, the Company's cost of funds was 0.30%.

(Dollars in thousands)

For the Three Months Ended December 31,

2021

2020

Average

Outstanding

Balance

Interest

Income/

Expense (4)

Average

Yield/Rate

Average

Outstanding

Balance

Interest

Income/

Expense (4)

Average

Yield/Rate

Assets

Interest earning assets

Interest-bearing deposits

$ 700,741

$ 263

0.15 %

$ 177,707

$ 46

0.10 %

Federal funds sold

21,969

13

0.23 %

60,070

29

0.19 %

Federal Reserve Bank stock, FHLB stock and other corporate stock

7,760

106

5.42 %

8,079

101

4.96 %

Investment securities - taxable

129,602

290

0.89 %

75,094

172

0.91 %

Investment securities - tax exempt

18,694

166

3.52 %

22,468

212

3.74 %

Loans (1)

1,705,563

19,159

4.46 %

1,600,163

19,896

4.93 %

Total interest earning assets

2,584,329

19,997

3.07 %

1,943,581

20,456

4.18 %

Loans held for sale

802

-

Noninterest earning assets

136,892

109,178

Total assets

$ 2,722,023

$ 2,052,759

Liabilities and shareholders' equity

Interest-bearing liabilities

Interest-bearing deposits

1,619,355

1,634

0.40 %

1,147,211

1,369

0.47 %

Borrowed funds

39,796

240

2.39 %

201,202

846

1.67 %

Total interest-bearing liabilities

1,659,151

1,874

0.45 %

1,348,413

2,215

0.65 %

Noninterest-bearing liabilities

Noninterest-bearing deposits

814,767

480,372

Other noninterest-bearing liabilities

18,514

18,962

Shareholders' equity

229,591

207,677

Total liabilities and shareholders' equity

$ 2,722,023

$ 2,055,424

Net interest spread (2)

2.62 %

3.52 %

Net interest income

$ 18,123

$ 18,241

Net interest margin (3)

2.78 %

3.73 %

_________________________________________

  1. Includes nonaccrual loans.
  2. Net interest spread is the difference between interest earned on interest earning assets and interest paid on interest-bearing liabilities.
  3. Net interest margin is a ratio of net interest income to average interest earning assets for the same period.
  4. Interest income on loans includes loan fees of $1.7 million and $2.0 million for the three months ended December 31, 2021, and 2020, respectively.

Provision for Loan Losses

The Company's provision for loan losses amounted to $1.9 million for the quarter ended December 31, 2021, an increase of $0.8 million compared to the prior quarter. The increase in the provision expense was due to loan growth during the quarter, and to a lesser extent, a specific reserve on a non-performing impaired loan.

Investment Securities

The Company's investment portfolio increased $80.5 million, or 66.8%, to $201.2 million compared to the prior quarter. The increase was due to purchases of approximately $91.0 million in high quality MBS/CMO, SBA, and CDD bonds in our available for sale portfolio, partially offset by $6.2 million in MBS and SBA principal paydowns, in addition to $2.6 million in investment calls during the quarter. To supplement interest income earned on the Company's loan portfolio, the Company invests in high quality mortgage-backed securities, government agency bonds, corporate bonds, community development district bonds, and equity securities (including mutual funds). Equity securities include $0.8 million of investments, made through our subsidiary Pro Opp Fund LLC, in businesses directly and indirectly related to the Company's core business as permitted under the U.S. Bank Holding Company Act. Additionally, Pro Opp Fund LLC has an additional $0.9 million of unfunded investments outstanding.

Loan Portfolio

The Company's primary source of income is derived from interest earned on loans. The Company's loan portfolio consists of loans secured by real estate as well as commercial business loans, construction and development loans, and other consumer loans. The Company's loan clients primarily consist of small to medium sized businesses, the owners and operators of those businesses, and other professionals, entrepreneurs and high net worth individuals. The Company's owner-occupied and investment commercial real estate loans, residential construction loans, and commercial business loans provide higher risk-adjusted returns, shorter maturities, and more sensitivity to interest rate fluctuations and are complemented by the relatively lower risk residential real estate loans to individuals. The Company's lending activities are principally directed to the Miami-Dade MSA. The following table summarizes and provides additional information about certain segments of the Company's loan portfolio as of December 31, 2021:

(Dollars in thousands)

December 31, 2021

December 31, 2020 (1)

Amount

Percent

Amount

Percent

Loans held for investment:

Commercial real estate

$ 902,654

50.8 %

$ 777,025

46.9 %

Residential real estate

377,511

21.3 %

379,534

22.9 %

Commercial (Non-PPP)

325,415

18.3 %

206,095

12.4 %

Commercial (PPP)

58,615

3.3 %

185,748

11.2 %

Construction and land development

91,520

5.1 %

99,590

6.0 %

Consumer and other

21,449

1.2 %

9,689

0.6 %

Total loans held for investment, gross

1,777,164

100.0 %

1,657,681

100.0 %

Allowance for loan losses

(12,704)

(16,259)

Loans held for investment, net

$ 1,764,460

$ 1,641,422

Loans held for sale:

Loans held for sale

$ 165

100.0 %

$ 1,270

100.0 %

Total loans held for sale

$ 165

$ 1,270

___________________________________________

  1. Certain prior period amounts have been reclassified to conform to the current period presentation.

As of December 31, 2021, the Company participated in all three rounds of the PPP and funded 2,287 small business loans representing approximately $340.5 million in relief proceeds, of which 1,931 loans totaling $280.6 million were forgiven by the SBA. Most of the Professional Bank PPP loans were initially pledged to the Federal Reserve as part of the Payroll Protection Program Liquidity Facility ("PPPLF"). The PPPLF pledged loans are non-recourse to the Company. However, the Company paid off all of the PPPLF advances during the first and second quarter of 2021 and the balance of PPPLF advances made by the Company was $0 on December 31, 2021.

As a result of the COVID-19 pandemic the Company has reviewed and processed numerous debt service relief requests in accordance with Section 4013 of the CARES Act and interagency guidelines published by federal banking regulators on March 13, 2020. As currently interpreted by the agencies, the guidelines assert that short-term modifications made on good faith for reasons related to the COVID-19 pandemic to borrowers who were current prior to such relief are not considered Troubled Debt Restructurings ("TDRs"). These modifications include deferrals of principal and interest, modification to interest only, and deferrals to escrow requirements. The modifications had varying terms up to six months. As of December 31, 2021, all of these loans had returned to normal payment schedules.

Non-Performing Assets

As of December 31, 2021, the Company had nonperforming assets of $2.1 million, or 0.08% of total assets, compared to nonperforming assets of $2.8 million, or 0.10% of total assets, on September 30, 2021. As of December 31, 2020, the Company had nonperforming assets of $10.4 million, or 0.51% of total assets.

Allowance for Loan and Lease Loss ("ALLL")

The Company's allowance for loan losses increased $1.2 million, or 10.7%, to $12.7 million compared to the prior quarter due to growth in our loan portfolio, partially offset by a partial charge-off of a previously impaired loan. The Company's allowance for loan losses as a percentage of total loans held for investment (excluding Professional Bank PPP loans) was 0.74% on December 31, 2021, compared to 1.10% on December 31, 2020. The December 31, 2020, ALLL included the reserve for a previously disclosed impaired loan, see Reconciliation of non-GAAP Financial Measures.

PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands, except share data)

December 31,
2021

December 31,
2020

ASSETS

Cash and due from banks

$ 38,469

$ 62,305

Interest-bearing deposits

545,521

129,291

Federal funds sold

13,477

25,376

Cash and cash equivalents

597,467

216,972

Securities available for sale, at fair value - taxable

175,536

65,110

Securities available for sale, at fair value - tax exempt

18,765

22,398

Securities held to maturity (fair value December 31, 2021 - $242, December 31, 2020 - $1,561)

236

1,547

Equity securities

6,638

6,005

Loans, net of allowance of $12,704 and $16,259 as of December 31, 2021, and December 31, 2020, respectively

1,764,460

1,641,422

Loans held for sale

165

1,270

Federal Home Loan Bank stock, at cost

2,341

3,229

Federal Reserve Bank stock, at cost

5,426

4,762

Accrued interest receivable

5,272

6,666

Premises and equipment, net

3,871

4,370

Bank owned life insurance

38,485

37,360

Deferred tax asset

9,510

10,525

Goodwill

24,621

24,621

Core deposit intangibles

1,145

1,422

Other assets

10,173

9,591

Total assets

$ 2,664,111

$ 2,057,270

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits

Demand - non-interest bearing

$ 674,003

$ 475,598

Demand - interest bearing

310,362

232,367

Money market and savings

1,121,330

715,003

Time deposits

265,693

236,575

Total deposits

2,371,388

1,659,543

Federal Home Loan Bank advances

35,000

40,000

Official Checks

4,125

4,447

Other borrowings

10,000

114,573

Subordinated debt

-

10,153

Accrued interest and other liabilities

12,074

12,989

Total liabilities

2,432,587

1,841,705

Stockholders' equity

Preferred stock, 10,000,000 shares authorized, none issued

-

-

Class A Voting Common stock, $0.01 par value; authorized 50,000,000 shares, issued 14,393,750 and outstanding 13,446,400 shares as of December 31, 2021, and authorized 50,000,000 shares, issued 14,100,760 and outstanding 13,534,829 shares on December 31, 2020

144

141

Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding on December 31, 2021, and December 31, 2020

-

-

Treasury stock, at cost

(16,003)

(9,209)

Additional paid-in capital

212,012

208,995

Retained earnings

36,120

14,756

Accumulated other comprehensive income (loss)

(749)

882

Total stockholders' equity

231,524

215,565

Total liabilities and stockholders' equity

$ 2,664,111

$ 2,057,270

PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Dollar amounts in thousands, except share data)

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

Interest income

Loans, including fees

$ 19,159

$ 19,896

$ 76,912

$ 66,296

Investment securities - taxable

290

172

816

835

Investment securities - tax exempt

166

212

735

642

Dividend income on restricted stock

107

101

397

414

Other

275

75

761

912

Total interest income

19,997

20,456

79,621

69,099

Interest expense

Deposits

1,634

1,369

5,857

6,777

Federal Home Loan Bank advances

183

202

751

964

Subordinated debt

43

-

378

-

Other borrowings

14

644

327

1,305

Total interest expense

1,874

2,215

7,313

9,046

Net interest income

18,123

18,241

72,308

60,053

Provision for loan losses

1,880

1,252

4,740

10,017

Net interest income after provision for loan losses

16,243

16,989

67,568

50,036

Non-interest income

Service charges on deposit accounts

504

348

2,741

1,196

Income from Bank owned life insurance

281

124

1,125

502

SBA origination fees

94

-

260

114

SWAP fee income

128

404

909

1,026

Loans held for sale income

89

289

551

808

Gain on sale and call of securities

16

21

39

37

Other

178

333

562

623

Total non-interest income

1,290

1,519

6,187

4,306

Non-interest expense

Salaries and employee benefits

8,044

6,971

29,277

25,579

Occupancy and equipment

987

1,241

3,929

4,292

Data processing

313

305

1,182

1,276

Marketing

(103)

(178)

635

545

Professional fees

743

650

2,830

2,373

Acquisition expenses

-

27

684

3,328

Regulatory assessments

433

348

1,681

1,112

Other

2,483

1,722

7,048

5,115

Total non-interest expense

12,900

11,086

47,266

43,620

Income before income taxes

4,633

7,422

26,489

10,722

Income tax provision

673

1,881

5,125

2,417

Net income

3,960

5,541

21,364

8,305

Earnings per share:

Basic

$ 0.30

$ 0.41

$ 1.61

$ 0.69

Diluted

$ 0.29

$ 0.40

$ 1.54

$ 0.67

Other comprehensive income:

Unrealized holding gain (loss) on securities available for sale

(1,080)

40

(2,161)

1,265

Tax effect

265

(10)

530

(310)

Other comprehensive gain (loss), net of tax

(815)

30

(1631)

955

Comprehensive income

$ 3,145

$ 5,571

$ 19,733

$ 9,260

PROFESSIONAL HOLDING CORP.

EARNINGS PER COMMON SHARE (Unaudited)

(Dollar amounts in thousands, except share data)

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding plus the effect of employee stock options during the year.

Three Months Ended December 31,

Year Ended

Year Ended December 31,

2021

2020

2021

2020

Basic earnings per share:

Net income

$ 3,960

$ 5,541

$ 21,364

$ 8,305

Total weighted average common stock outstanding

13,202,477

13,373,516

13,308,682

12,042,477

Net income per share

$ 0.30

$ 0.41

$ 1.61

$ 0.69

Diluted earnings per share:

Net income

$ 3,960

$ 5,541

$ 21,364

$ 8,305

Total weighted average common stock outstanding

13,202,477

13,373,516

13,308,682

12,042,477

Add: dilutive effect of employee restricted stock and options

666,908

330,801

592,168

390,040

Total weighted average diluted stock outstanding

13,869,385

13,704,317

13,900,850

12,432,517

Net income per share

$ 0.29

$ 0.40

$ 1.54

$ 0.67

Anti-dilutive stock options and restricted stock

4,380

604,393

285,487

442,838

Explanation of Certain Unaudited Non-GAAP Financial Measures

This press release contains financial information determined by methods other than U.S. Generally Accepted Accounting Principles ("GAAP"), which we refer to "non-GAAP financial measures." The table below provides a reconciliation between these non-GAAP measures and net income and net income per share, which are the most comparable GAAP measures.

Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these measures are useful supplemental information that can enhance investors' understanding of the Company's business and performance without considering taxes or provisions for loan losses and can be useful when comparing performance with other financial institutions. However, these non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures.

Reconciliation of non-GAAP Financial Measures

(Dollar amounts in thousands)

Three Months Ended

December 31, 2021

September 30, 2021

December 31, 2020

Adjusted earnings return on average assets

Net interest income (GAAP)

$ 18,123

$ 19,104

$ 18,241

Total non-interest income

1,290

1,476

1,519

Total non-interest expense

12,900

11,624

11,086

Pre-tax pre-provision earnings (non-GAAP)

$ 6,513

$ 8,956

$ 8,674

Total adjustments to non-interest expense

-

-

(27)

Adjusted pre-tax pre-provision earnings (non-GAAP)

$ 6,513

$ 8,956

$ 8,701

Return on average assets (GAAP)

0.58 %

0.97 %

1.07 %

Annualized pre-tax pre-provision ROAA (non-GAAP)

0.95 %

1.39 %

1.68 %

Adjusted annualized pre-tax pre-provision ROAA (non-GAAP)

0.95 %

1.39 %

1.69 %

(Dollar amounts in thousands)

Year Ended
December 31,

2021

2020

Adjusted earnings return on average assets

Net interest income (GAAP)

$ 72,308

$ 60,053

Total non-interest income

6,187

4,306

Total non-interest expense

47,266

43,620

Pre-tax pre-provision earnings (non-GAAP)

$ 31,229

$ 20,739

Total adjustments to non-interest expense

-

(3,328)

Adjusted pre-tax pre-provision earnings (non-GAAP)

$ 31,229

$ 24,067

Return on average assets (GAAP)

0.86 %

0.46 %

Annualized pre-tax pre-provision ROAA (non-GAAP)

1.25 %

1.14 %

Adjusted annualized pre-tax pre-provision ROAA (non-GAAP)

1.25 %

1.33 %

(Dollar amounts in thousands)

December 31, 2021

December 31, 2020

PPP and PA marks adjustment

Total loans held for investment (GAAP)

$ 1,764,460

$ 1,641,422

Add allowance for loan loss ("ALLL")

12,704

16,259

Total gross loans held for investment ("LHFI")

1,777,164

1,657,681

Less Professional Bank PPP loans ("PPP")

58,615

185,748

Total LHFI excluding PPP loans (non-GAAP)

1,718,549

1,471,933

Add purchase accounting loan marks ("PA")

13,003

18,835

Total LHFI excluding PPP loans (non-GAAP) + PA marks

$ 1,731,552

$ 1,490,768

ALLL as a % of LHFI (GAAP)

0.72 %

0.99 %

ALLL as a % of total LHFI excluding PPP loans (non-GAAP)

0.74 %

1.10 %

PA marks + ALLL / LHFI excluding PPP loans (non-GAAP)

1.48 %

2.35 %

(Dollar amounts in thousands)

Three Months Ended

December 31, 2021

September 30, 2021

December 31, 2020

Net interest margin adjustment

Net interest income (GAAP)

$ 18,123

$ 19,104

$ 18,241

Less: PPP net interest income recognized

1,269

2,151

2,040

Net interest income excluding PPP (non-GAAP)

16,854

16,953

16,201

Less: PA premium/discounts

1,442

1,969

2,669

Net interest income excluding PPP and PA (non-GAAP)

$ 15,412

$ 14,984

$ 13,532

Average interest earning assets (GAAP)

2,584,329

2,431,904

1,943,581

Less: average PPP loans

72,728

117,256

206,272

Average interest earning assets, excluding PPP (non-GAAP)

2,511,601

2,314,648

1,737,309

Less: average PA marks

(14,051)

(14,317)

(17,047)

Average interest earning assets, excluding PPP and PA (non-GAAP)

$ 2,525,652

$ 2,328,965

$ 1,754,356

Net interest margin (GAAP)

2.78 %

3.12 %

3.73 %

Net interest margin excluding PPP (non-GAAP)

2.66 %

2.91 %

3.71 %

Net interest margin excluding PPP and PA (non-GAAP)

2.42 %

2.55 %

3.07 %

(Dollar amounts in thousands)

Year Ended

December 31, 2021

December 31, 2020

Net interest margin adjustment

Net interest income (GAAP)

$ 72,308

$ 60,053

Less: PPP net interest income recognized

8,246

3,605

Net interest income excluding PPP (non-GAAP)

64,062

56,448

Less: PA premium/discounts

6,024

7,418

Net interest income excluding PPP and PA (non-GAAP)

$ 58,038

$ 49,030

Average interest earning assets (GAAP)

2,364,294

1,713,043

Less: average PPP loans

141,511

142,020

Average interest earning assets, excluding PPP (non-GAAP)

2,222,783

1,571,023

Less: average PA marks

(16,124)

(13,160)

Average interest earning assets, excluding PPP and PA (non-GAAP)

$ 2,238,907

$ 1,584,183

Net interest margin (GAAP)

3.06 %

3.51 %

Net interest margin excluding PPP (non-GAAP)

2.88 %

3.59 %

Net interest margin excluding PPP and PA (non-GAAP)

2.59 %

3.09 %

Certain Performance Metrics

The following table shows the return on average assets (computed as annualized net income divided by average total assets), return on average equity (computed as annualized net income divided by average equity) and average equity to average assets ratios for the three and twelve months ended December 31, 2021.

Three Months Ended

Year Ended

December 31, 2021

December 31, 2020

December 31, 2021

December 31, 2020

Return on Average Assets

0.58 %

1.07 %

0.86 %

0.46 %

Return on Average Equity

6.84 %

10.61 %

9.58 %

4.30 %

Average Equity to Average Assets

8.43 %

10.12 %

8.95 %

10.64 %

Additional Materials

There is also a slide presentation with supplemental financial information relating to this release that can be accessed at https://myprobank.com/ir/.

Forward Looking Statements

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained in this presentation that are not statements of historical fact may be deemed to be forward-looking statements, including, without limitation, statements preceded by, followed by or including words such as "anticipate," "intend," "believe," "estimate," "plan," "seek," "project" or "expect," "may," "will," "would," "could" or "should" and similar expressions. Forward-looking statements represent the Company's current expectations, plans or forecasts and involve significant risks and uncertainties. Several important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include, without limitation, current and future economic and market conditions, including those that could impact credit quality and the ability to generate loans and gather deposits; the duration, extent and impact of the COVID-19 pandemic, including the governments' responses to the pandemic and the potential worsening of the pandemic resulting from variants of COVID-19, on our and our customers' operations, personnel, and business activity (including developments and volatility), as well as COVID-19's impact on the credit quality of our loan portfolio and financial markets and general economic conditions; the effects of our lack of a diversified loan portfolio and concentration in the South Florida market; the impact of current and future interest rates and expectations concerning the actual timing and amount of interest rate movements; damage resulting from pending future litigation; competition; our ability to execute business plans; geopolitical developments; legislative and regulatory developments; inflation or deflation; market fluctuations; risks related to the discontinuation of the London Interbank Offered Rate; natural disasters (including pandemics such as COVID-19); critical accounting estimates; a failure or disruption in or breach of our operational or securities systems or infrastructure, or those of third parties, including as a result of cyber fraud; the composition of our workforce and our ability to attract and retain key personnel; and other factors described in our Form 10-K for the year ended December 31, 2020, Form 10-Qs for the quarters ended March 31, 2021, June 30, 2021, September 30, 2021, and other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any of the forward-looking statements included herein to reflect future events or developments or changes in expectations, except as may be required by law.

About Professional Bank and Professional Holding Corp.:

Professional Holding Corp. (NASDAQ:PFHD) is the financial holding company for Professional Bank, a Florida state-chartered bank established in 2008 and based in Coral Gables, Florida. Professional Bank focuses on providing creative, relationship-driven commercial banking products and services designed to meet the needs of small-to-medium-size businesses, the owners and operators of these businesses, professionals, and entrepreneurs. Professional Bank currently operates its Florida network through nine branch locations and two Loan Production Offices in the regional areas of Miami, Broward, Palm Beach, Duval (Jacksonville), Hillsborough and Pinellas (Tampa Bay) counties. It also has a Digital Innovation Center located in Cleveland, Ohio and a Loan Production Office in New England. For more information, visit www.myprobank.com. Member FDIC. Equal Housing Lender.

Media Contact:
Todd Templin
[email protected]
954-370-8999

SOURCE: Professional Holding Corp.

Topic:
Earnings
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