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Professional Holding Corp. Reports First-Quarter Results

Quarterly Net Income of $4.8 Million as Assets Top $2.2 Billion

CORAL GABLES, FL / ACCESSWIRE / May 5, 2021 / Professional Holding Corp. (the "Company") (NASDAQ:PFHD), the parent company of Professional Bank (the "Bank"), today reported net income of $4.8 million, or $0.34 per diluted share, for the first quarter of 2021 compared to net income of $5.5 million, or $0.38 per diluted share, for the fourth quarter of 2020, and a net loss of $1.3 million, or ($0.14) per diluted share, for the first quarter of 2020, respectively.

"We are pleased to report another quarter of balance sheet expansion," said Daniel R. Sheehan, Chairman and Chief Executive Officer. "Total loans increased 4.3% to $1.7 billion. The balance sheet performance combined with our share repurchase activity resulted in a tangible book value increase to $14.21 per share. We continue to benefit from a healthy pipeline of loan and deposit activities and look forward to more liquidity deployment opportunities." Chief Financial Officer Mary Usategui added, "we continue to focus on sensible expense management while we scale the balance sheet."

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

  • Net income decreased $0.7 million, or 13.6%, to $4.8 million from the prior quarter. The decrease was primarily due to core deposit intangible accretion surrounding adjustments to the day one accounting for the Marquis Bancorp Inc. ("MBI") acquisition of $1.4 million in the fourth quarter of 2020 (the "Purchase Accounting Adjustment").
  • Pre-tax pre-provision earnings (non-GAAP, see Explanation of Certain Unaudited Non-GAAP Financial Measures) decreased $1.5 million, or 16.9%, to $7.2 million from the prior quarter, primarily due to the Purchase Accounting Adjustment, and increased $7.8 million the same period in 2020.
  • Net interest income decreased $0.3 million, or 2.0%, to $17.9 million from the prior quarter, primarily due to the Purchase Accounting Adjustment, and increased $9.8 million, or 121.8%, compared to the same period in 2020.
  • Noninterest income decreased $0.4 million, or 26.3% to $1.1 million, from the prior quarter primarily due to less interest rate swap fee income, fewer third-party residential loan sales, and the accelerated depreciation of premises and equipment from the MBI headquarters lease termination of $0.1 million, offset by increased BOLI income.
  • Noninterest expense increased $0.7 million, or 6.3%, to $11.8 million from the prior quarter and increased $2.3 million, or 24.3%, compared to the same period in 2020. The quarter over quarter increase was due to compensation expense in relation to change in control payments to two former MBI employees and the year over year increase was due in part to additional employees from the MBI acquisition.

Financial Condition:

At March 31, 2021:

  • Total assets increased 8.6%, or $0.2 billion, to $2.2 billion from the prior quarter.
  • Total loans increased 4.3%, or $72.1 million, to $1.7 billion from the prior quarter. We experienced growth across all loan types due to new originations. New loan originations were $227.7 million ($131.3 million of conventional and $96.4 million of Payroll Protection Program ("PPP")). The Company's PPP loan balance increased $20.9 million, or 11.0%, from the prior quarter.
  • Nonperforming assets decreased $7.6 million, or 73.4%, to $2.8 million from the prior quarter, primarily driven by the partial charge off of the Coex loan which was previously reserved. As of March 31, 2020, the Company had nonperforming assets of $4.0 million.


The Company's capital position remained strong as of March 31, 2021, with a total risk-based capital ratio of 14.1% and a leverage capital ratio of 9.6%. Each of the Company's capital ratios remain well in excess of regulatory requirements.

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. For the three months ended March 31, 2021, the Company repurchased 54,479 shares of Class A Common Stock, at an average price of $16.11 per share. On May 5, 2021, the Company issued a press release announcing that the Board of Directors of the Company authorized an increase in the amount available under its existing stock repurchase program such that, effective May 6, 2021, $10.0 million is available to repurchase outstanding shares of the Company's Class A Common Stock.


The Company maintains a strong liquidity position. At March 31, 2021, in addition to its balance sheet liquidity, the Company had the ability to generate approximately $316.5 million in additional liquidity through available resources.

Net Interest Income and Net Interest Margin Analysis

Net interest income was $17.9 million for the three months ended March 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 March 31, 2021, the Company's cost of funds was 0.40% which was partially offset by a portion of participation loans which were reclassified to other borrowings.

  For the Three Months Ended March 31,  
  2021     2020  
  Average     Interest           Average     Interest        
  Outstanding     Income/     Average     Outstanding     Income/     Average  
(Dollars in thousands)
  Balance     Expense(4)     Yield/Rate     Balance     Expense(4)     Yield/Rate  
Interest earning assets
Interest-bearing deposits
  $ 179,127     $ 46       0.10 %   $ 184,497     $ 585       1.28 %
Federal funds sold
    44,264       16       0.15 %     34,943       119       1.37 %
Federal Reserve Bank stock, FHLB stock and other corporate stock
    7,965       95       4.84 %     5,296       79       6.00 %
Investment securities
    91,436       382       1.69 %     46,107       222       1.94 %
    1,664,886       19,233       4.69 %     813,746       10,015       4.95 %
Total interest earning assets
    1,987,678       19,772       4.03 %     1,084,589       11,020       4.09 %
Noninterest earning assets
    129,560                       59,525                  
Total assets
    2,117,238                       1,144,114                  
Liabilities and shareholders' equity
Interest-bearing liabilities
Interest-bearing deposits
    1,208,741       1,317       0.44 %     762,967       2,626       1.38 %
Borrowed funds
    146,408       576       1.60 %     60,000       333       2.23 %
Total interest-bearing liabilities
    1,355,149       1,893       0.57 %     822,967       2,959       1.45 %
Noninterest-bearing liabilities
Noninterest-bearing deposits
    524,114                       194,222                  
Other noninterest-bearing liabilities
    18,893                       12,142                  
Shareholders' equity
    219,082                       114,783                  
Total liabilities and shareholders' equity
  $ 2,117,238                     $ 1,144,114                  
Net interest spread(2)
                    3.47 %                     2.64 %
Net interest income
          $ 17,879                     $ 8,061          
Net interest margin(3)
                    3.65 %                     2.99 %

  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 $2.7 million and $0.1 million for the three months ended March 31, 2021, and 2020, respectively.

Provision for Loan Losses

The Company's provision for loan losses amounted to $1.0 million for the first quarter of 2021 compared to $1.3 million from the prior quarter. The provision was made primarily to support continued loan growth, exclusive of PPP loans.

Investment Securities

The Company's investment portfolio decreased $8.3 million, or 8.7%, to $86.8 million from the prior quarter. The decrease was primarily due to investment redemptions, paydowns, and maturities. 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).

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 March 31, 2021:

  March 31, 2021     December 31, 2020  
(Dollars in thousands)
  Amount     Percent     Amount     Percent  
Commercial real estate
  $ 820,465       47.2 %   $ 777,776       46.7 %
Owner Occupied
    305,932       -       286,992       -  
Non-Owner Occupied
    514,533       -       490,784       -  
Residential real estate
    369,234       21.2 %     380,491       22.8 %
Commercial (Non-PPP)
    232,170       13.4 %     206,665       12.4 %
Commercial (PPP)
    210,862       12.1 %     189,977       11.4 %
Construction and development
    93,302       5.4 %     99,883       6.0 %
Consumer and other loans
    12,563       0.7 %     11,688       0.7 %
Total loans
  $ 1,738,596       100.0 %   $ 1,666,480       100.0 %
Unearned loan origination (fees) costs, net
    (7,197 )             (5,578 )        
Allowance for loan losses
    (9,656 )             (16,259 )        
Loans, net(1)
  $ 1,721,743             $ 1,644,643          

  1. Does not include loan control, loan participation control or loans in process.

The Company participated in the PPP and funded 2,113 small business loans representing $322.5 million in relief proceeds under all 3 Rounds of the PPP. During the first quarter of 2021, the Company funded 608 loans representing $96.4 million under Round 3 of the PPP. Through the Company's online PPP application and loan closing documentation process, there have been 1,062 loans submitted for forgiveness for a total of $160.4 million, or 70.9% of total PPP loan volume from Rounds 1 and 2 as of March 31, 2021. From the total loans submitted for forgiveness, 913 loans representing $110.8 million, were forgiven and derecognized from the balance sheet. Most of the 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. In addition, we paid off approximately $74.6 million in PPPLF advances during the three months ended March 31, 2021, and had none remaining as of April 30, 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 have varying terms up to six months. As of March 31, 2021, the Company has approved $199.8 million in payment relief modifications that were granted under the CARES Act guidance associated with the treatment of TDRs. Since the inception of the CARES Act, one loan was downgraded to non-performing in the amount of $1.3 million, and one loan remains on payment relief with an outstanding balance of $0.4 million. These loans remain under the exemption from TDR classification as provided for in the CARES Act. All other loans that were provided payment relief have either been reinstated to their original payment terms or paid off. To manage credit risk, the Company increased oversight and analysis of loans to borrowers in vulnerable industries, such as hotels and hospitality. As of March 31, 2021, these hotels and hospitality loans have a balance of $59.2 million. As of March 31, 2021, $32.2 million of these hotels and hospitality loans were provided payment relief consistent with Section 4013 of the CARES Act and the interagency guidelines published on March 13, 2020. As of March 31, 2021, all loans in this segment have been reinstated and returned to normal payment schedules.

Non-Performing Assets

As of March 31, 2021, the Company had nonperforming assets of $2.8 million, or 0.12% of total assets, compared to nonperforming assets of $10.4 million, or 0.51% of total assets, at December 31, 2020. In March 2021, the Company partially charged off the Coex loan that was previously reserved during the third quarter of 2020, in the amount of $7.6 million.

Allowance for Loan and Lease Loss ("ALLL")

The Company's allowance for loan losses decreased $6.6 million, or 40.6%, from the prior quarter to $9.7 million. The quarter over quarter decrease was primarily driven by the partial charge off of the Coex loan which was previously reserved. The Company's allowance for loan losses as a percentage of total loans (net of overdrafts and excluding PPP loans) was 0.63% at March 31, 2021, compared to 1.10% from the prior quarter.

COVID-19 Operational Response and Bank Preparedness:

The Company continues to work within the COVID-19 pandemic response plans which were originally established in the Spring of 2020. The Company continues to update these plans to ensure that they comply with the latest governmental guidelines and health conditions. We hope that the downward trend in infections continues and we are encouraging our employees to be vaccinated. Furthermore, we believe that if conditions continue to improve, as more of the general population is vaccinated, we may be able to return to a normalized office schedule in the Summer of 2021.



(Dollar amounts in thousands, except share data)

  March 31,     December 31,  
  2021     2020  
Cash and due from banks
  $ 29,140     $ 62,305  
Interest-bearing deposits
    250,670       129,291  
Federal funds sold
    43,919       25,376  
Cash and cash equivalents
    323,729       216,972  
Securities available for sale, at fair value
    79,408       87,508  
Securities held to maturity (fair value March 31, 2021 - $1,528, December 31, 2020 - $1,561)
    1,515       1,547  
Equity securities
    5,914       6,005  
Loans, net of allowance of $9,656 and $16,259 as of March 31, 2021, and December 31, 2020, respectively
    1,721,279       1,644,643  
Federal Home Loan Bank stock, at cost
    2,529       3,229  
Federal Reserve Bank stock, at cost
    4,944       4,762  
Accrued interest receivable
    6,511       6,666  
Premises and equipment, net
    4,033       4,370  
Bank owned life insurance
    37,641       37,360  
Deferred tax asset
    8,923       10,525  
    24,621       24,621  
Core deposit intangibles
    1,347       1,422  
Other assets
    11,164       7,640  
Total assets
  $ 2,233,558     $ 2,057,270  
Demand - non-interest bearing
  $ 589,415     $ 475,598  
Demand - interest bearing
    1,067,530       947,370  
Time deposits
    248,759       236,575  
Total deposits
    1,905,704       1,659,543  
Official checks
    4,238       4,447  
Federal Home Loan Bank advances
    40,000       40,000  
Other borrowings
    40,678       114,573  
Subordinated debt
    10,108       10,153  
Accrued interest and other liabilities
    12,799       12,989  
Total liabilities
    2,013,527       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 14,281,977 and outstanding 13,661,567 shares as of March 31, 2021, and authorized 50,000,000 shares, issued 14,100,760 and outstanding 13,534,829 shares at December 31, 2020
    143       141  
Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding at March 31, 2021, and none issued and outstanding at December 31, 2020
    -       -  
Treasury stock, at cost
    (10,087 )     (9,209 )
Additional paid-in capital
    209,770       208,995  
Retained earnings
    19,541       14,756  
Accumulated other comprehensive income (loss)
    664       882  
Total stockholders' equity
    220,031       215,565  
Total liabilities and stockholders' equity
  $ 2,233,558     $ 2,057,270  



(Dollar amounts in thousands, except share data)

  Three Months Ended March 31,  
  2021     2020  
Interest income
Loans, including fees
  $ 19,233     $ 10,015  
Taxable securities
    382       222  
Dividend income on restricted stock
    95       79  
    62       704  
Total interest income
    19,772       11,020  
Interest expense
    1,317       2,626  
Federal Home Loan Bank advances
    196       278  
Subordinated debt
    130       -  
Other borrowings
    250       55  
Total interest expense
    1,893       2,959  
Net interest income
    17,879       8,061  
Provision for loan losses
    1,038       845  
Net interest income after provision for loan losses
    16,841       7,216  
Non-interest income
Service charges on deposit accounts
    395       222  
Income from Bank owned life insurance
    282       129  
SBA origination fees
    145       30  
SWAP fees
    209       263  
Third party loan sales
    75       110  
Gain on sale and call of securities
    1       4  
    12       98  
Total non-interest income
    1,119       856  
Non-interest expense
Salaries and employee benefits
    6,784       5,263  
Occupancy and equipment
    1,102       774  
Data processing
    290       176  
    153       137  
Professional fees
    628       355  
Acquisition expenses
    684       1,663  
Regulatory assessments
    349       214  
    1,798       904  
Total non-interest expense
    11,788       9,486  
Income (loss) before income taxes
    6,172       (1,414 )
Income tax provision (benefit)
    1,387       (97 )
Net income (loss)
    4,785       (1,317 )
Earnings per share:
  $ 0.36     $ (0.14 )
  $ 0.34     $ (0.14 )
Other comprehensive income:
Unrealized holding gain (loss) on securities available for sale
    (289 )     324  
Tax effect
    71       (82 )
Other comprehensive gain (loss), net of tax
    (218 )     242  
Comprehensive income (loss)
  $ 4,567     $ (1,075 )

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"), including adjusted net income and adjusted net income per share, 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

  Three Months Ended  
  March 31,  
(Dollar amounts in thousands, except per share data)
  2021     2020  
Net interest income (GAAP)
  $ 17,879     $ 8,061  
Total non-interest income
    1,119       856  
Total non-interest expense
    11,788       9,486  
Pre-tax pre-provision earnings (non-GAAP)
  $ 7,210     $ (569 )
Total adjustments to non-interest expense
    (684 )     (1,663 )
Adjusted pre-tax pre-provision earnings (non-GAAP)
  $ 7,894     $ 1,094  
Return on average assets (GAAP)
    0.90 %     (0.46 )%
Adjusted return on average assets (non-GAAP)
Annualized pre-tax pre-provision ROAA (non-GAAP)
    1.36 %     (0.20 )%
Adjusted annualized pre-tax pre-provision ROAA (non-GAAP)
    1.49 %     0.38 %
  March 31, 2021     December 31, 2020  
Allowance for Loan Loss
  9,656     16,259  
Total Loans (GAAP)
  1,738,596     1,666,480  
Less PPP loans
  210,862     189,977  
Total loans held for investment (non-GAAP)
  1,527,734     1,476,503  
Purchase accounting loan marks
  17,034     18,835  
Total loans excluding PPP loans and loan marks
  1,544,768     1,457,668  
Professional Bank loans
  1,059,773     1,002,603  
Allowance for Loan Loss as a % of Total Loans (GAAP)
    0.56 %     0.98 %
Allowance for Loan Loss as a % of total loans held for investment (non-GAAP)
    0.63 %     1.10 %
Allowance for Loan Loss as a % of Professional Bank loans (non-GAAP)
    0.91 %     1.62 %
Loan marks + Allowance for Loan Loss / Total loans excluding PPP loans and loan marks (non-GAAP)
    1.73 %     2.41 %

Additional Materials

There is also a slide presentation with supplemental financial information relating to this release that can be accessed at

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, 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; competition; our ability to execute business plans; geopolitical developments; legislative and regulatory developments; inflation or deflation; market fluctuations; natural disasters (including pandemics such as COVID-19); potential business uncertainties related to the integration of MBI, including into our operations critical accounting estimates; and other factors described in our Form 10-K for the year ended December 31, 2020, 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 Holding Corp. and Professional Bank:

Professional Holding Corp. (NASDAQ:PFHD), is the financial holding company for Professional Bank, a Florida state-chartered bank established in 2008. 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 through a network of nine locations in the regional areas of Miami-Dade, Broward, and Palm Beach counties. It also has a Digital Innovation Center located in Cleveland, Ohio and a loan production office in New England. For more information, visit Member FDIC. Equal Housing Lender.

Media Contacts:
Todd Templin or Eric Kalis, BoardroomPR

SOURCE: Professional Holding Corp.

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