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Professional Holding Corp. Reports Third Quarter 2022 Results

Another Strong Quarter Results in Earnings per Share of $0.63

Professional Holding Corp. (the “Company”) (NASDAQ:PFHD), the parent company of Professional Bank (the “Bank”), today reported net income of $8.5 million, or $0.63 per share, for the third quarter of 2022 compared to net income of $7.0 million, or $0.52 per share, for the second quarter of 2022, and net income of $6.3 million, or $0.48 per share, for the third quarter of 2021.

“Our team continues to deliver high quality results establishing a solid foundation as we prepare for our next phase,” said Abel Iglesias, Chief Executive Officer.

Results of Operations for the Three Months Ended September 30, 2022

  • Net income increased by $1.5 million, or 21.1%, to $8.5 million compared to $7.0 million in the second quarter, due to an increase in net interest income of $2.9 million and a decrease in provision expense of $0.9 million, partially offset by a decrease in noninterest income of $0.6 million, an increase in noninterest expense of $1.2 million, and an increase in income tax provision of $0.5 million.
  • Net interest income increased $2.9 million, or 13.2%, to $24.8 million compared to $21.9 million in the second quarter, due to the Federal Reserve’s target Federal Funds Rate increases during the third quarter and new loan production in a higher rate environment on the Company’s asset sensitive balance sheet. The Company’s yield on average interest earning assets increased 91 basis points while cost of funds increased 14 basis points compared to the prior quarter.
  • Provision for loan losses expense decreased $0.9 million, or 40.0%, to $1.3 million compared to $2.2 million in the second quarter, primarily due to slower net loan growth during the third quarter. There were no net charge-offs during the three months ended September 30, 2022, compared to $0.7 million of charge-offs in the second quarter.
  • Noninterest income decreased $0.6 million, or 31.3% to $1.2 million compared to $1.8 million in the prior quarter. The decrease was primarily due to $0.5 million of insurance proceeds recorded in the second quarter on a previously recognized contingency.
  • Noninterest expense increased by $1.2 million, or 9.9%, to $13.9 million compared to $12.6 million in the prior quarter, primarily due to expenses of $1.0 million in connection with the pending merger with Seacoast, higher salaries and employee benefits of $0.5 million, of which $0.2 million was attributable to lower capitalized costs related to the development of internal-use software, and higher marketing expenses of $0.4 million due to a charitable contribution to the AAA scholarship foundation. These increases were partially offset by $0.2 million in lower Federal Deposit Insurance Corporation (“FDIC”) expense and a decrease in other noninterest expense. Other noninterest expense decreased by $0.3 million, or 14.9%, compared to the second quarter due to a $0.4 million decrease related to the loss contingency reclassification recorded in the prior quarter, partially offset by an increase in the provision for unfunded commitments of $0.1 million.

Results of Operations for the Nine Months Ended September 30, 2022

  • Net income increased by $0.5 million, or 2.8%, to $17.9 million compared to $17.4 million in the prior year period, due to an increase in net interest income of $11.6 million, partially offset by an increase in provision expense of $1.6 million, a decrease in noninterest income of $0.6 million, an increase in noninterest expense of $8.6 million, and an increase in income tax provision of $0.3 million.
  • Net interest income increased by $11.6 million, or 21.3%, to $65.8 million compared to $54.2 million in the prior year period, primarily due to the impact of the Federal Reserve’s target Federal Funds Rate increases in 2022 on the Company’s asset sensitive balance sheet, in addition to an increase in average loans from $1.7 billion in 2021 to $1.9 billion in 2022. Interest income also benefited from increased average balances and higher yields in the investment portfolio.
  • Provision for loan losses increased by $1.6 million, or 55.0%, to $4.4 million compared to $2.9 million in the prior year period primarily due to loan growth. The ratio of annualized charge-offs to average loans was 0.05% during the nine months ended September 30, 2022, compared to 0.61% in the prior year period.
  • Noninterest income decreased by $0.6 million, or 12.7% to $4.3 million compared to the prior year period. The decrease primarily reflected lower service charges of $0.6 million on deposit accounts compared to prior year due to service charges of approximately $0.7 million, associated with acting as a correspondent bank for a Payroll Protection Program lender, and lower swap fee income of $0.7 million. These decreases were partially offset by an increase of $0.8 million in other noninterest income, comprised of $0.5 million of expected insurance proceeds on a previously recognized contingency and a $0.2 million loss on fixed asset disposals recorded in 2021.
  • Noninterest expense increased by $8.6 million, or 25.0%, to $43.0 million compared to $34.4 million in the prior year period primarily due to higher salaries and employee benefits of $5.5 million and higher other noninterest expense of $2.0 million. The increase in salaries and benefits was driven by the $2.9 million expense related to the departure of the Company’s former Chief Executive Officer, and higher employee compensation costs from higher headcount and bonus and sales incentives. The increase in other noninterest expense was primarily comprised of a $0.7 million loss related to a previously recognized contingency from the first quarter, a $0.3 million increase related to our Community Reinvestment Act (“CRA”) mutual fund investment valuation, and a $0.5 million increase in the provision for unfunded commitments.

Financial Condition

At September 30, 2022:

  • Total assets decreased by $0.2 billion, or 27.8%, annualized to $2.5 billion, compared to June 30, 2022, primarily as a result of decreases in cash and cash equivalents, partially offset by an increase in loans.
  • Total loans increased by $17.7 million, or 3.5%, annualized, compared to June 30, 2022. We experienced loan originations of approximately $193.5 million, of which $67.2 million funded, partially offset by paydowns and prepayments. The Professional Bank PPP loan balance decreased $5.6 million, or 68.0%, to $2.6 million from June 30, 2022.
  • Total deposits decreased by $0.2 billion, or 32.2% annualized, compared to June 30, 2022, primarily due to a decreases in all of our deposit categories. Cost of deposits increased 15 basis points to 0.39% for the three months ended September 30, 2022, from 0.24% for the three months ended June 30, 2022.
  • As of September 30, 2022, nonperforming assets increased $0.3 million to $1.8 million compared to $1.5 million at June 30, 2022, due to the addition of a nonaccrual loan in our commercial real estate portfolio during the three months ended September 30, 2022.

Capital and Liquidity

The Company continues to remain well capitalized per regulatory requirements. As of September 30, 2022, the Company had a total risk-based capital ratio of 13.2% and a leverage capital ratio of 9.2%. The Company maintains a strong liquidity position. At September 30, 2022, in addition to its balance sheet liquidity, the Company had the ability to generate approximately $459.3 million in liquidity through available resources. Additionally, the Company retained $9.2 million in cash at the holding company.

Net Interest Income and Net Interest Margin Analysis

Net interest income was $24.8 million for the three months ended September 30, 2022. 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 September 30, 2022, the Company’s cost of funds was 0.42%.

(Dollars in thousands)

For the Three Months Ended

September 30, 2022

 

June 30, 2022

 

September 30, 2021

Average

Outstanding

Balance

Interest

Income/

Expense(4)

Average

Yield/Rate

 

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-earning deposits

$

137,355

$

747

2.16

%

 

$

474,835

$

963

0.81

%

 

$

561,082

$

212

0.15

%

Federal funds sold

 

21,895

 

124

2.25

%

 

 

31,584

 

66

0.84

%

 

 

36,264

 

10

0.11

%

Federal Reserve Bank stock, FHLB stock and other corporate stock

 

7,384

 

108

5.80

%

 

 

7,318

 

105

5.76

%

 

 

7,521

 

96

5.06

%

Investment securities - taxable

 

168,662

 

736

1.73

%

 

 

177,082

 

704

1.59

%

 

 

105,498

 

186

0.70

%

Investment securities - tax exempt

 

27,572

 

228

3.28

%

 

 

28,422

 

232

3.27

%

 

 

19,402

 

177

3.62

%

Loans(1)

 

1,979,132

 

25,222

5.06

%

 

 

1,853,077

 

21,600

4.68

%

 

 

1,702,137

 

20,209

4.71

%

Total interest earning assets

 

2,342,000

 

27,165

4.60

%

 

 

2,572,318

 

23,670

3.69

%

 

 

2,431,904

 

20,890

3.41

%

Loans held for sale

 

31

 

 

 

 

639

 

 

 

 

1,478

 

 

Noninterest earning assets

 

156,584

 

 

 

 

152,134

 

 

 

 

125,751

 

 

Total assets

$

2,498,615

 

 

 

$

2,725,091

 

 

 

$

2,559,133

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

1,453,653

 

2,170

0.59

%

 

 

1,663,120

 

1,491

0.36

%

 

 

1,463,138

 

1,476

0.40

%

Borrowed funds

 

24,447

 

198

3.21

%

 

 

25,735

 

270

4.21

%

 

 

45,046

 

310

2.73

%

Total interest-bearing liabilities

 

1,478,100

 

2,368

0.64

%

 

 

1,688,855

 

1,761

0.42

%

 

 

1,508,184

 

1,786

0.47

%

Noninterest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

758,135

 

 

 

 

784,252

 

 

 

 

810,042

 

 

Other noninterest-bearing liabilities

 

24,492

 

 

 

 

21,098

 

 

 

 

16,746

 

 

Stockholders’ equity

 

237,888

 

 

 

 

230,886

 

 

 

 

224,161

 

 

Total liabilities and stockholders’ equity

$

2,498,615

 

 

 

$

2,725,091

 

 

 

$

2,559,133

 

 

Net interest income

 

$

24,797

 

 

 

$

21,909

 

 

 

$

19,104

 

Net interest spread(2)

 

 

3.96

%

 

 

 

3.27

%

 

 

 

2.94

%

Net interest margin(3)

 

 

4.20

%

 

 

 

3.42

%

 

 

 

3.12

%

_________________________________________

(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 $0.9 million, $1.4 million and $2.3 million for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Net interest income was $65.8 million and the Company’s cost of funds was 0.34% for the nine months ended September 30, 2022.

 

 

For the Nine Months Ended

 

 

September 30, 2022

 

September 30, 2021

(Dollars in thousands)

 

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 earning deposits

 

$

394,614

 

$

1,985

 

0.67

%

 

$

441,679

 

$

436

 

0.13

%

Federal funds sold

 

 

27,215

 

 

209

 

1.03

%

 

 

49,982

 

 

50

 

0.13

%

Federal Reserve Bank stock, FHLB stock and other corporate stock

 

 

7,433

 

 

310

 

5.58

%

 

 

7,624

 

 

290

 

5.09

%

Investment securities - taxable

 

 

177,604

 

 

2,078

 

1.56

%

 

 

81,941

 

 

526

 

0.86

%

Investment securities - tax-exempt

 

 

27,305

 

 

673

 

3.30

%

 

 

20,396

 

 

569

 

3.73

%

Loans (1)

 

 

1,869,450

 

 

66,602

 

4.76

%

 

 

1,688,499

 

 

57,753

 

4.57

%

Total interest earning assets

 

 

2,503,621

 

 

71,857

 

3.84

%

 

 

2,290,121

 

 

59,624

 

3.48

%

Loans held for sale

 

 

452

 

 

 

 

 

 

1,824

 

 

 

 

Noninterest earning assets

 

 

148,404

 

 

 

 

 

 

122,306

 

 

 

 

Total assets

 

$

2,652,477

 

 

 

 

 

$

2,414,251

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

1,595,585

 

 

5,247

 

0.44

%

 

 

1,350,795

 

 

4,223

 

0.42

%

Borrowed funds

 

 

33,463

 

 

857

 

3.42

%

 

 

82,229

 

 

1,216

 

1.98

%

Total interest-bearing liabilities

 

 

1,629,048

 

 

6,104

 

0.50

%

 

 

1,433,024

 

 

5,439

 

0.51

%

Noninterest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

769,026

 

 

 

 

 

 

742,530

 

 

 

 

Other noninterest-bearing liabilities

 

 

20,781

 

 

 

 

 

 

17,769

 

 

 

 

Shareholders’ equity

 

 

233,622

 

 

 

 

 

 

220,928

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,652,477

 

 

 

 

 

$

2,414,251

 

 

 

 

Net interest income

 

 

 

$

65,753

 

 

 

 

 

$

54,185

 

 

Net interest spread (2)

 

 

 

 

 

3.34

%

 

 

 

 

 

2.97

%

Net interest margin (3)

 

 

 

 

 

3.51

%

 

 

 

 

 

3.16

%

__________________________________

(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 $3.9 million and $6.7 million for the nine months ended September 30, 2022, and 2021, respectively.

Provision for Loan Losses

Provision for loan losses decreased by $0.9 million, or 40.0%, in the third quarter to $1.3 million compared to $2.2 million in the prior quarter, primarily due to slower net loan growth during the quarter. There were no net charge-offs during the three months ended September 30, 2022, compared to $0.7 million of charge-offs in the second quarter. Also, there was an addition of two impaired loans that required a specific reserve this quarter.

Investment Securities

The Company’s investment portfolio decreased $14.6 million, or 7.4%, to $183.8 million compared to the prior quarter. The decrease was primarily due to $7.2 million in investment calls, redemptions and paydowns coupled with an increase in unrealized losses of $7.2 million during the third 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 $0.9 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. Pro Opp Fund LLC has an additional $0.8 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 September 30, 2022, June 30, 2022, and December 31, 2021:

(Dollars in thousands)

 

September 30, 2022

 

June 30, 2022

 

December 31, 2021

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

Loans held for investment:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

$

997,478

 

 

49.8

%

 

$

1,034,487

 

 

52.1

%

 

$

902,654

 

 

50.8

%

Residential real estate

 

 

452,521

 

 

22.6

%

 

 

422,239

 

 

21.2

%

 

 

377,511

 

 

21.2

%

Commercial (non-PPP) (1)

 

 

397,725

 

 

19.8

%

 

 

387,317

 

 

19.5

%

 

 

325,415

 

 

18.3

%

Commercial (PPP)

 

 

2,618

 

 

0.1

%

 

 

8,176

 

 

0.4

%

 

 

58,615

 

 

3.3

%

Construction and land development

 

 

128,570

 

 

6.4

%

 

 

114,938

 

 

5.8

%

 

 

91,520

 

 

5.1

%

Consumer and other

 

 

25,983

 

 

1.3

%

 

 

20,076

 

 

1.0

%

 

 

21,449

 

 

1.2

%

Total loans held for investment, gross

 

 

2,004,895

 

 

100.0

%

 

 

1,987,233

 

 

100.0

%

 

 

1,777,164

 

 

100.0

%

Allowance for loan losses

 

 

(16,485

)

 

 

 

 

(15,142

)

 

 

 

 

(12,704

)

 

 

Loans held for investment, net

 

$

1,988,410

 

 

 

 

$

1,972,091

 

 

 

 

$

1,764,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

 

 

%

 

$

 

 

%

 

$

165

 

 

100.0

%

Total loans held for sale

 

$

 

 

 

 

$

 

 

 

 

$

165

 

 

 

_________________________________________

(1)

Includes search fund lending of $99.2 million, $102.1 million, and $84.0 million for September 30, 2022, June 30, 2022, and December 31, 2021, respectively.

Nonperforming Assets

As of September 30, 2022, the Company had nonperforming assets of $1.8 million, or 0.07% of total assets, compared to nonperforming assets of $1.5 million, or 0.06% of total assets, at June 30, 2022. The increase was due to the addition of a nonaccrual loan in our commercial real estate portfolio during the three months ended September 30, 2022.

Allowance for Loan and Lease Loss (“ALLL”)

The Company’s allowance for loan losses increased $1.3 million, or 8.9%, to $16.5 million at September 30, 2022, compared to June 30, 2022, due to loan production and the increase of specific reserves allocated to two impaired loans. The Company’s allowance for loan losses as a percentage of total loans held for investment was 0.82% at September 30, 2022, compared to 0.76% at June 30, 2022. There were minimal changes to qualitative loss factors and historical loss factors for the current period with the principal driver for the increased allowance being loan growth.

 PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands, except share data)

 

 

 

September 30,

2022

 

June 30,

2022

 

December 31,

2021

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

43,863

 

 

 

41,202

 

 

$

38,469

 

Interest earning deposits

 

 

113,641

 

 

 

299,834

 

 

 

545,521

 

Federal funds sold

 

 

15,762

 

 

 

27,043

 

 

 

13,477

 

Cash and cash equivalents

 

 

173,266

 

 

 

368,079

 

 

 

597,467

 

Securities available for sale, at fair value - taxable

 

 

150,517

 

 

 

164,354

 

 

 

175,536

 

Securities available for sale, at fair value - tax exempt

 

 

26,863

 

 

 

27,453

 

 

 

18,765

 

Securities held to maturity (fair value September 30, 2022 – $178, June 30, 2022 – $197, December 31, 2021 – $242)

 

 

194

 

 

 

204

 

 

 

236

 

Equity securities

 

 

6,182

 

 

 

6,359

 

 

 

6,638

 

Loans, net of allowance of $16,485, $15,142, and $12,704 as of September 30, 2022, June 30, 2022, and December 31, 2021, respectively

 

 

1,988,410

 

 

 

1,972,091

 

 

 

1,764,460

 

Loans held for sale

 

 

 

 

 

 

 

 

165

 

Premises and equipment, net

 

 

7,867

 

 

 

8,570

 

 

 

9,020

 

Bank owned life insurance

 

 

54,534

 

 

 

54,134

 

 

 

38,485

 

Goodwill and intangibles

 

 

25,579

 

 

 

25,639

 

 

 

25,766

 

Other assets

 

 

41,465

 

 

 

34,631

 

 

 

27,573

Total assets

 

$

2,474,877

 

$

2,661,514

 

$

2,664,111

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Demand – noninterest bearing

 

$

758,042

 

 

$

777,501

 

 

$

674,003

 

Demand – interest bearing

 

 

308,167

 

 

$

339,942

 

 

 

310,362

 

Money market and savings

 

 

976,766

 

 

$

1,055,813

 

 

 

1,121,330

 

Time deposits

 

 

145,316

 

 

$

208,479

 

 

 

265,693

 

Total deposits

 

 

2,188,291

 

 

 

2,381,735

 

 

 

2,371,388

 

Federal Home Loan Bank advances

 

 

 

 

 

 

 

 

35,000

 

Official Checks

 

 

5,350

 

 

 

5,815

 

 

 

4,125

 

Other borrowings

 

 

 

 

 

 

 

 

10,000

 

Subordinated debt

 

 

24,467

 

 

 

24,436

 

 

 

 

Accrued interest and other liabilities

 

 

18,905

 

 

 

15,930

 

 

 

12,074

 

Total liabilities

 

 

2,237,013

 

 

 

2,427,916

 

 

 

2,432,587

 

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 14,769,354 and outstanding 13,811,084 shares as of September 30, 2022, issued 14,699,975 and outstanding 13,742,381 shares at June 30, 2022, issued 14,393,750 and outstanding 13,446,400 shares at December 31, 2021

 

 

148

 

 

 

147

 

 

 

144

 

Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding on September 30, 2022, June 30, 2022, and December 31, 2021

 

 

 

 

 

 

 

 

 

Treasury stock, at cost

 

 

(16,214

)

 

 

(16,201

)

 

 

(16,003

)

Additional paid in capital

 

 

216,703

 

 

 

215,541

 

 

 

212,012

 

Retained earnings

 

 

54,006

 

 

 

45,533

 

 

 

36,120

 

Accumulated other comprehensive loss

 

 

(16,779

)

 

 

(11,422

)

 

 

(749

)

Total stockholders’ equity

 

 

237,864

 

 

 

233,598

 

 

 

231,524

 

Total liabilities and stockholders' equity

 

$

2,474,877

 

 

$

2,661,514

 

 

$

2,664,111

 

 

PROFESSIONAL HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Dollar amounts in thousands, except share data)

 
 

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

September 30,

2022

June 30,

2022

September 30,

2021

 

 

 

September 30,

2022

September 30,

2021

Interest income

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

25,222

 

$

21,600

 

$

20,209

 

 

 

 

$

66,602

 

$

57,753

 

Investment securities - taxable

 

 

736

 

 

704

 

 

186

 

 

 

 

 

2,078

 

 

526

 

Investment securities - tax-exempt

 

 

228

 

 

232

 

 

177

 

 

 

 

 

673

 

 

569

 

Dividend income on restricted stock

 

 

108

 

 

105

 

 

96

 

 

 

 

 

310

 

 

290

 

Other

 

 

871

 

 

1,029

 

 

222

 

 

 

 

 

2,194

 

 

486

 

Total interest income

 

 

27,165

 

 

23,670

 

 

20,890

 

 

 

 

 

71,857

 

 

59,624

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,170

 

 

1,491

 

 

1,476

 

 

 

 

 

5,247

 

 

4,223

 

Federal Home Loan Bank advances

 

 

 

 

3

 

 

182

 

 

 

 

 

137

 

 

568

 

Subordinated debt

 

 

198

 

 

266

 

 

128

 

 

 

 

 

696

 

 

335

 

Other borrowings

 

 

 

 

1

 

 

 

 

 

 

 

24

 

 

313

 

Total interest expense

 

 

2,368

 

 

1,761

 

 

1,786

 

 

 

 

 

6,104

 

 

5,439

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

24,797

 

 

21,909

 

 

19,104

 

 

 

 

 

65,753

 

 

54,185

 

Provision for loan losses

 

 

1,343

 

 

2,240

 

 

1,060

 

 

 

 

 

4,434

 

 

2,860

 

Net interest income after provision for loan losses

 

 

23,454

 

 

19,669

 

 

18,044

 

 

 

 

 

61,319

 

 

51,325

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

542

 

 

577

 

 

643

 

 

 

 

 

1,636

 

 

2,237

 

Income from bank owned life insurance

 

 

400

 

 

376

 

 

281

 

 

 

 

 

1,049

 

 

844

 

SBA origination fees

 

 

90

 

 

48

 

 

21

 

 

 

 

 

138

 

 

166

 

Swap fee income

 

 

 

 

 

 

208

 

 

 

 

 

112

 

 

781

 

Loans held for sale income

 

 

6

 

 

45

 

 

161

 

 

 

 

 

122

 

 

462

 

Gain on sale and call of securities

 

 

 

 

13

 

 

1

 

 

 

 

 

13

 

 

23

 

Other

 

 

185

 

 

722

 

 

161

 

 

 

 

 

1,207

 

 

384

 

Total noninterest income

 

 

1,223

 

 

1,781

 

 

1,476

 

 

 

 

 

4,277

 

 

4,897

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,003

 

 

7,473

 

 

7,350

 

 

 

 

 

26,696

 

 

21,233

 

Occupancy and equipment

 

 

1,001

 

 

1,010

 

 

935

 

 

 

 

 

3,013

 

 

2,942

 

Data processing

 

 

257

 

 

304

 

 

303

 

 

 

 

 

875

 

 

869

 

Marketing

 

 

565

 

 

125

 

 

420

 

 

 

 

 

886

 

 

738

 

Professional fees

 

 

830

 

 

886

 

 

689

 

 

 

 

 

2,635

 

 

2,087

 

Acquisition expenses

 

 

957

 

 

 

 

 

 

 

 

 

957

 

 

684

 

Regulatory assessments

 

 

254

 

 

473

 

 

481

 

 

 

 

 

1,276

 

 

1,248

 

Other

 

 

1,986

 

 

2,333

 

 

1,446

 

 

 

 

 

6,614

 

 

4,565

 

Total noninterest expense

 

 

13,853

 

 

12,604

 

 

11,624

 

 

 

 

 

42,952

 

 

34,366

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

10,824

 

 

8,846

 

 

7,896

 

 

 

 

 

22,644

 

 

21,856

 

Income tax provision

 

 

2,351

 

 

1,852

 

 

1,608

 

 

 

 

 

4,758

 

 

4,452

 

Net income

 

$

8,473

 

$

6,994

 

$

6,288

 

 

 

 

$

17,886

 

$

17,404

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.63

 

$

0.52

 

$

0.48

 

 

 

 

$

1.33

 

$

1.30

 

Diluted

 

$

0.60

 

$

0.50

 

$

0.45

 

 

 

 

$

1.27

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Unrealized holding loss on securities available for sale

 

$

(7,176

)

$

(5,841

)

$

(288

)

 

 

 

$

(21,484

)

$

(1,081

)

Tax effect

 

 

1,819

 

 

1,481

 

 

71

 

 

 

 

 

5,454

 

 

265

 

Other comprehensive loss, net of tax

 

 

(5,357

)

 

(4,360

)

 

(217

)

 

 

 

 

(16,030

)

 

(816

)

Comprehensive income

 

$

3,116

 

$

2,634

 

$

6,071

 

 

 

 

$

1,856

 

$

16,588

 

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 awards during the year.

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

 

 

September 30,

2022

 

September 30,

2021

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,473

 

$

6,994

 

$

6,288

 

 

 

$

17,886

 

$

17,404

Total weighted average common stock outstanding

 

 

13,498,007

 

 

13,446,335

 

 

13,196,025

 

 

 

 

13,430,536

 

 

13,344,470

Net income per share

 

$

0.63

 

$

0.52

 

$

0.48

 

 

 

$

1.33

 

$

1.30

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,473

 

$

6,994

 

$

6,288

 

 

 

$

17,886

 

$

17,404

Total weighted average common stock outstanding

 

 

13,498,007

 

 

13,446,335

 

 

13,196,025

 

 

 

 

13,430,536

 

 

13,344,470

Add: dilutive effect of employee restricted stock and options

 

 

742,008

 

 

628,550

 

 

659,402

 

 

 

 

661,214

 

 

568,613

Total weighted average diluted stock outstanding

 

 

14,240,015

 

 

14,074,885

 

 

13,855,427

 

 

 

 

14,091,750

 

 

13,913,083

Net income per share

 

$

0.60

 

$

0.50

 

$

0.45

 

 

 

$

1.27

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive restricted stock and options

 

 

16,874

 

 

29,250

 

 

7,357

 

 

 

 

49,167

 

 

278,007

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 as “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, except per share data)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

June 30,

2022

September 30,

2021

 

September 30,

2022

September 30,

2021

Net interest income (GAAP)

 

$

24,797

 

$

21,909

 

$

19,104

 

 

$

65,753

 

$

54,185

 

Total noninterest income

 

 

1,223

 

 

1,781

 

 

1,476

 

 

 

4,277

 

 

4,897

 

Total noninterest expense

 

 

13,853

 

 

12,604

 

 

11,624

 

 

 

42,952

 

 

34,366

 

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

 

$

12,167

 

$

11,086

 

$

8,956

 

 

$

27,078

 

$

24,716

 

Total adjustments to noninterest expense (1)

 

 

(957

)

 

 

 

 

 

 

(3,872

)

 

(684

)

Adjusted pre-tax pre-provision earnings

(non-GAAP)

 

$

13,124

 

$

11,086

 

$

8,956

 

 

$

30,950

 

$

25,400

 

 

 

 

 

 

 

 

 

Return on average assets (GAAP)

 

 

1.35

%

 

1.03

%

 

0.97

%

 

 

0.90

%

 

0.96

%

Annualized pre-tax pre-provision ROAA

(non-GAAP)

 

 

1.93

%

 

1.63

%

 

1.39

%

 

 

1.36

%

 

1.37

%

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

 

 

2.08

%

 

1.63

%

 

1.39

%

 

 

1.56

%

 

1.41

%

(1)

Adjustments to noninterest expense for the three months ended September 30, 2022, were related to acquisition expenses. Adjustments for the nine months ended September 30, 2022, were related to acquisition expenses and severance and accelerated vesting expense related to the departure of the former Chief Executive Officer. Adjustments to noninterest expense for the nine months ended September 30, 2021, were related to change in control payments to two former Marquis employees.

(Dollar amounts in thousands, except per share data)

 

September 30, 2022

 

June 30, 2022

 

December 31, 2021

Total loans held for investment, net (GAAP)

 

$

1,988,410

 

 

$

1,972,091

 

 

$

1,764,460

 

Add allowance for loan loss ("ALLL")

 

 

16,485

 

 

 

15,142

 

 

 

12,704

 

Total gross loans held for investment ("LHFI")

 

 

2,004,895

 

 

 

1,987,233

 

 

 

1,777,164

 

Less Professional Bank net PPP loans ("PPP")

 

 

2,618

 

 

 

8,176

 

 

 

58,615

 

Total gross LHFI excluding net PPP loans (non-GAAP)

 

 

2,002,277

 

 

 

1,979,057

 

 

 

1,718,549

 

Add purchase accounting loan marks ("PA")

 

 

8,480

 

 

 

9,937

 

 

 

13,003

 

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

 

$

2,010,757

 

 

$

1,988,994

 

 

$

1,731,552

 

 

 

 

 

 

 

 

ALLL as a % of LHFI (GAAP)

 

 

0.82

%

 

 

0.76

%

 

 

0.71

%

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

 

 

0.82

%

 

 

0.77

%

 

 

0.74

%

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

 

 

1.24

%

 

 

1.26

%

 

 

1.48

%

(Dollar amounts in thousands)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net interest income (GAAP)

 

$

24,797

 

 

$

21,909

 

 

$

19,104

 

 

$

65,753

 

 

$

54,185

 

Less: PPP net interest income recognized

 

 

(200

)

 

 

(818

)

 

 

(2,151

)

 

 

(2,077

)

 

 

(7,048

)

Net interest income excluding PPP (non-GAAP)

 

 

24,597

 

 

 

21,091

 

 

 

16,953

 

 

 

63,676

 

 

 

47,137

 

Less: PA premium/discounts

 

 

(1,504

)

 

 

(1,648

)

 

 

(1,969

)

 

 

(4,813

)

 

 

(1,969

)

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

 

$

23,093

 

 

$

19,443

 

 

$

14,984

 

 

$

58,863

 

 

$

45,168

 

Average interest earning assets (GAAP)

 

 

2,342,000

 

 

 

2,572,318

 

 

 

2,431,904

 

 

 

2,503,621

 

 

 

2,290,121

 

Less: average PPP loans

 

 

(4,796

)

 

 

(19,727

)

 

 

(117,256

)

 

 

(22,890

)

 

 

(164,691

)

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

 

 

2,337,204

 

 

 

2,552,591

 

 

 

2,314,648

 

 

 

2,480,731

 

 

 

2,125,430

 

Add: average PA marks

 

 

9,178

 

 

 

10,436

 

 

 

14,317

 

 

 

10,631

 

 

 

16,823

 

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

 

$

2,346,382

 

 

$

2,563,027

 

 

$

2,328,965

 

 

$

2,491,362

 

 

$

2,142,253

 

Net interest margin (GAAP)

 

 

4.20

%

 

 

3.42

%

 

 

3.12

%

 

 

3.51

%

 

 

3.16

%

Net interest margin excluding PPP (non-GAAP)

 

 

4.18

%

 

 

3.31

%

 

 

2.91

%

 

 

3.43

%

 

 

2.97

%

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

 

 

3.90

%

 

 

3.04

%

 

 

2.55

%

 

 

3.16

%

 

 

2.82

%

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 periods presented below.

 

 

Three Months

Ended


September 30, 2022

 

Three Months

Ended


June 30, 2022

 

Three Months

Ended


September 30, 2021

 

 

Nine Months Ended

September 30, 2022

 

Nine Months Ended

September 30, 2021

Return on average assets

 

1.35

%

 

1.03

%

 

0.97

%

 

 

0.90

%

 

0.96

%

Return on average equity

 

14.13

%

 

12.15

%

 

11.13

%

 

 

10.24

%

 

10.53

%

Average equity to average assets

 

9.52

%

 

8.47

%

 

8.76

%

 

 

8.81

%

 

9.15

%

Additional Materials

A slide presentation with supplemental financial information relating to this release can be accessed at https://proholdco.com.

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 communication 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; involve assumptions, risks and uncertainties; and are not guarantees. Several important factors could cause actual results to differ materially from those in forward-looking statements. Those factors include, without limitation:

  • general business and economic conditions, either globally, nationally, in the State of Florida, or in the specific markets in which we operate, including the negative impacts and disruptions resulting from rising interest rates, supply chain challenges and inflation, which have had and may likely continue to have an adverse impact on our business operations and performance, and could continue to have a negative impact on our credit portfolio, stock price, borrowers and the economy as a whole both globally and domestically;
  • the impact of Hurricane Ian on Florida generally, as well as certain of the communities we serve, and which could continue to have a negative impact on our business, credit portfolio, borrowers and our stock price;
  • the effects of our lack of a diversified loan portfolio and concentration in the South Florida market;
  • the risk that our proposed merger Seacoast Banking Corporation of Florida (“Seacoast”) may not be completed in a timely manner or at all, which may adversely affect our business and the price of our common stock;
  • the diversion of management time on issues related to the merger with Seacoast;
  • the effect of the announcement or pendency of the merger on Seacoast’s customer, employee and business relationships, operating results, and business generally;
  • changes in laws or regulations;
  • changes in interest rates, deposit flows, loan demand and real estate values;
  • the ongoing impacts and disruptions resulting from COVID-19 or other variants on the economies and communities we serve, which has had and may likely continue to have an adverse impact on our business operations and performance, and could continue to have a negative impact on our credit portfolio, stock price, borrowers and the economy as a whole both globally and domestically; and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2021, and other filings with the Securities and Exchange Commission.

Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge investors to carefully consider the risks described in our filings with the Securities and Exchange Commission, referred to above, which are available on www.proholdco.com and the SEC’s website at www.sec.gov. The Company expressly 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-sized businesses, the owners and operators of these businesses, professionals and entrepreneurs. Professional Bank currently operates its Florida network through nine branch locations and two LPOs 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 LPO in Bedford, New Hampshire that specializes in search fund lending. For more information, visit www.myprobank.com. Member FDIC. Equal Housing Lender.

On August 8, 2022, Seacoast, the holding company for Seacoast National Bank (“Seacoast Bank”), and Professional Holding Corp. (“Professional”) announced that they have signed a definitive agreement under which Seacoast will acquire Professional. The transaction is subject to approval of Professional’s shareholders, regulatory approvals and other conditions and is expected to be completed in the first quarter of 2023.

Contacts

Investor Relations:

Mike Sontag

General Counsel

(561)-868-9040

ir@proholdco.com

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