Professional Holding Corp. Reports Second-Quarter Results
07/29/2021 - 06:15 PM
Quarterly Net Income of $6.3 Million as Assets Approach $2.6 Billion
CORAL GABLES, FL / ACCESSWIRE / July 29, 2021 / Professional Holding Corp. (the "Company") (NASDAQ:PFHD), the parent company of Professional Bank (the "Bank"), today reported net income of $6.3 million , or $0.47 per share, for the second quarter of 2021 compared to net income of $4.8 million , or $0.36 per share, for the first quarter of 2021, and net income of $3.1 million , or $0.22 , for the second quarter of 2020.
"The Company had a strong quarter of asset and net income growth." said Daniel R. Sheehan, Chairman and Chief Executive Officer. "These results were a product of continued scale and noninterest income improvement."
Results of Operations for the Three Months Ended June 30, 2021
Net income increased $1.5 million , or 32.3% , to $6.3 million compared to the prior quarter. The increase was primarily due to balance sheet expansion and increases in service charges on deposit accounts associated with acting as a correspondent bank for a Payroll Protection Program lender (the "Correspondent Banking Relationship"). During the quarter we recognized $1.4 million from the reduction of fees associated with the Bank's Payroll Protection Program ("Professional Bank PPP") and $0.7 million in deposit correspondent fees from the Correspondent Banking Relationship. Net interest income decreased $0.7 million , or 3.8% , to $17.2 million compared to the prior quarter primarily due to a decrease in Professional Bank PPP loan fees coupled with payoffs of higher yielding loans. Noninterest income increased $1.1 million , or 105.7% , to $2.3 million , compared to the prior quarter primarily due to increases in service charges from the Correspondent Banking Relationship, secondarily to an increase in SWAP fees, and to a one-time credit to an unwinding fee of a Federal Home Loan Bank advance. Noninterest expense decreased $0.8 million , or 7.1% , to $11.0 million compared to the prior quarter primarily due to the payment of change-in-control obligations paid in the prior quarter. Results of Operations for the Six Months Ended June 30, 2021
The variance in the six-month Results of Operations for 2021 compared to 2020 occurred in part due to the March 26, 2020, closing date of the Marquis Bancorp, Inc. ("MBI") acquisition as there were 95 days of MBI integration in the first six months of 2020 compared to 181 days in the first six month of 2021 (the "MBI Variance"). Net income increased $9.3 million , or 512.8% , to $11.1 million compared to the prior year. The increase was primarily due to the MBI Variance, Professional Bank PPP loan fees recognized, and deposit fees associated with the Correspondent Banking Relationship. Net interest income increased $10.7 million , or 44.1% , to $35.1 million from the prior year primarily due to loan growth. Noninterest income increased $1.6 million , or 87.6% , to $3.4 million , compared to the prior year primarily due to increases in service charges on deposit accounts associated with the Correspondent Banking Relationship, $0.5 million increase in SWAP referral fees, $0.3 million increase in Bank Owned Life Insurance ("BOLI"), and $0.2 million increase in fees generated from loans held for sale, offset by a $0.3 million decrease in SBA loan origination fees. Noninterest expense increased $1.7 million , or 8.1% , to $22.7 million compared to the prior year. The year over year increase was due to increased salaries and investment in digital infrastructure. The Bank's number of employees increased from 137 as of December 31, 2019, to 179 as of June 30, 2020, which increase was due to the MBI merger, and further increased to 194 as of June 30, 2021. Financial Condition:
At June 30, 2021:
Total assets increased 14.7% , or $0.4 billion , to $2.6 billion compared to the prior quarter primarily due to increases in customer deposit accounts associated with the Correspondent Banking Relationship and investments in taxable securities available-for-sale. Additionally, total assets increased 26.0% , or $0.5 billion , compared to June 30, 2020. Total loans were flat at $1.7 billion compared to the prior quarter. New loan originations were $186.8 million ($169.2 million of conventional loans, of which $118.0 million funded, coupled with $17.6 million of Professional Bank PPP loans). The Professional Bank PPP loan balance decreased $66.7 million , or 31.7% , from the prior quarter. Total Deposits increased 19.7% , or $0.4 billion , to $2.3 billion compared to the prior quarter primarily due to increases in noninterest bearing demand deposit accounts. Additionally, average assets for the quarter increased due to large balances associated with the Correspondent Banking Relationship. Nonperforming assets remained unchanged at $2.8 million compared to the prior quarter. As of June 30, 2020, the Company had nonperforming assets of $6.2 million . Capital
The Company continues to remain well capitalized per regulatory requirements. As of June 30, 2021, the Company had a total risk-based capital ratio of 14.1% and a leverage capital ratio of 7.8% . During the quarter, the Company infused $15.0 million of capital into the Bank in order support asset growth and maintain well capitalized ratios at the Bank.
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. 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 of additional funds were made available to repurchase outstanding shares of the Company's Class A Common Stock. For the three months ended June 30, 2021, the Company repurchased 193,289 shares of Class A Common Stock, at an average price of $17.88 per share. As of June 30, 2021, year to date, the Company repurchased 247,768 shares of Class A Common Stock, at an average price of $17.50 per share.
Liquidity
The Company maintains a strong liquidity position. At June 30, 2021, in addition to its balance sheet liquidity, the Company had the ability to generate approximately $370.9 million in liquidity through available resources. Additionally, the Company retained $20.2 million in cash held at the holding company.
Net Interest Income and Net Interest Margin Analysis
Net interest income was $17.2 million for the three months ended June 30, 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 June 30, 2021, the Company's cost of funds was 0.30% .
For the Three Months Ended June 30,
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 Assets
Interest earning assets
Interest-bearing deposits
$ 580,632 $ 178 0.12 % $ 170,658 $ 44 0.10 % Federal funds sold
69,506 24 0.14 % 32,965 12 0.15 % Federal Reserve Bank stock, FHLB stock and other corporate stock
7,391 99 5.37 % 7,598 131 6.93 % Investment securities - taxable
70,137 161 0.92 % 88,365 241 1.10 % Investment securities - tax exempt
20,172 189 3.76 % 20,973 197 3.78 % Loans(1)
1,699,403 18,311 4.32 % 1,501,590 17,897 4.79 % Total interest earning assets
2,447,241 18,962 3.11 % 1,822,149 18,522 4.09 % Loans held for sale
2,638 - Noninterest earning assets
115,358 102,663 Total assets
$ 2,565,237 $ 1,924,812 Liabilities and stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
1,377,712 1,430 0.42 % 994,972 1,617 0.65 % Borrowed funds
56,347 330 2.35 % 230,516 614 1.07 % Total interest-bearing liabilities
1,434,059 1,760 0.49 % 1,225,488 2,231 0.73 % Noninterest-bearing liabilities
Noninterest-bearing deposits
890,292 475,613 Other noninterest-bearing liabilities
17,690 19,540 Stockholders' equity
223,196 204,171 Total liabilities and stockholders' equity
$ 2,565,237 $ 1,924,812 Net interest spread(2)
2.62 % 3.36 % Net interest income
$ 17,202 $ 16,291 Net interest margin(3)
2.82 % 3.60 %
Includes nonaccrual loans. Net interest spread is the difference between interest earned on interest earning assets and interest paid on interest-bearing liabilities. Net interest margin is a ratio of net interest income to average interest earning assets for the same period. Interest income on loans includes loan fees of $1.8 million and $0.9 million for the three months ended June 30, 2021, and 2020, respectively. Provision for Loan Losses
The Company's provision for loan losses amounted to $0.8 million for the quarter ended June 30, 2021, a decrease of $0.2 million compared to the prior quarter. The decrease in the provision expense was due primarily to loan payoffs in higher risk categories offset by an increase in loan originations.
Investment Securities
The Company's investment portfolio increased $40.9 million , or 47.1% , to $127.7 million compared to the prior quarter. The increase was primarily due to $41.1 million in purchase of securities available for sale, offset by 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 June 30, 2021:
June 30, 2021 December 31, 2020 (Dollars in thousands)
Amount Percent Amount Percent Commercial real estate
$ 875,453 51.4 % $ 777,776 46.7 % Owner Occupied
305,854 - 286,992 - Non-Owner Occupied
569,599 - 490,784 - Residential real estate
361,946 21.3 % 380,491 22.8 % Commercial (Non-PPP)
229,215 13.5 % 206,665 12.4 % Commercial (PPP)
144,118 8.5 % 189,977 11.4 % Construction and development
74,175 4.4 % 99,883 6.0 % Consumer and other loans
14,575 0.9 % 11,688 0.7 % Total loans
$ 1,699,482 100.0 % $ 1,666,480 100.0 % Unearned loan origination (fees) costs, net
(1,984 ) (1,323 ) Unearned PPP loan origination (fees) costs, net
(4,855 ) (4,255 ) Allowance for loan loss
(10,418 ) (16,259 ) Loans held for sale
(2,039 ) (1,270 ) Loans, net(1)
$ 1,680,186 $ 1,643,373
Does not include loan control, loan participation control or loans in process. During the quarter ended June 30, 2021, the Company funded 172 loans representing $17.6 million under Round 3 of the Small Business Association's ("SBA") Payroll Protection Program ("PPP"). As of June 30, 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 1,362 loans totaling $196.9 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 as of June 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 had varying terms up to six months. As of June 30, 2021, all these loans had returned to normal payment schedules.
Non-Performing Assets
As of June 30, 2021, the Company had nonperforming assets of $2.8 million , or 0.11% of total assets, compared to nonperforming assets of $2.8 million , or 0.13% of total assets, at March 31, 2021. As of June 30, 2020, the Company had nonperforming assets of $6.2 million , or 0.30% of total assets.
Allowance for Loan and Lease Loss ("ALLL")
The Company's allowance for loan losses increased $0.7 million , or 7.2% , to $10.4 million compared to the prior quarter. An appropriate level of reserve was maintained as a precaution against potential economic weakening related to COVID-19 variants. The Company's allowance for loan losses as a percentage of total gross loans plus loans held for sale (net of overdrafts and excluding Professional Bank PPP loans) was 0.67% at June 30, 2021, compared to 1.10% at December 31, 2020. The December 31, 2020, ALLL included the reserve for Coex Coffee International, Inc., see Reconciliation of non-GAAP Financial Measures.
PROFESSIONAL HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands, except share data)
June 30, December 31,
2021 2020 ASSETS
Cash and due from banks
$ 29,803 $ 62,305 Interest-bearing deposits
586,377 129,291 Federal funds sold
36,156 25,376 Cash and cash equivalents
652,336 216,972 Securities available for sale, at fair value - taxable
100,735 65,110 Securities available for sale, at fair value - tax exempt
19,761 22,398 Securities held to maturity (fair value June 30, 2021 - $1,296 , December 31, 2020 - $1,561)
1,285 1,547 Equity securities
5,942 6,005 Loans, net of allowance of $10,418 and $16,259 as of June 30, 2021, and December 31, 2020, respectively
1,680,168 1,643,373 Loans held for sale
2,039 1,270 Federal Home Loan Bank stock, at cost
2,341 3,229 Federal Reserve Bank stock, at cost
4,954 4,762 Accrued interest receivable
5,449 6,666 Premises and equipment, net
4,000 4,370 Bank owned life insurance
37,923 37,360 Deferred tax asset
9,446 10,525 Goodwill
24,621 24,621 Core deposit intangibles
1,280 1,422 Other assets
8,738 7,640 Total assets
$ 2,561,018 $ 2,057,270 LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - non-interest bearing
$ 854,673 $ 475,598 Demand - interest bearing
286,173 232,367 Money market and savings
874,637 715,003 Time deposits
261,680 236,575 Total deposits
2,277,163 1,659,543 Official checks
3,289 4,447 Federal Home Loan Bank advances
35,000 40,000 Other borrowings
- 114,573 Subordinated debt
10,062 10,153 Accrued interest and other liabilities
12,476 12,989 Total liabilities
2,337,990 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 14,289,480 and outstanding 13,475,781 shares as of June 30, 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 June 30, 2021, and December 31, 2020
- - Treasury stock, at cost
(13,544 ) (9,209 ) Additional paid-in capital
210,274 208,995 Retained earnings
25,872 14,756 Accumulated other comprehensive income (loss)
283 882 Total stockholders' equity
223,028 215,565 Total liabilities and stockholders' equity
$ 2,561,018 $ 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 June 30, Six Months Ended June 30,
2021 2020 2021 2020 Interest income
Loans, including fees
$ 18,311 $ 17,897 $ 37,544 $ 27,912 Investment securities - taxable
161 232 340 434 Investment securities - tax exempt
189 206 392 226 Dividend income on restricted stock
99 131 194 210 Other
202 56 264 760 Total interest income
18,962 18,522 38,734 29,542
Interest expense
Deposits
1,430 1,617 2,747 4,243 Federal Home Loan Bank advances
190 287 386 565 Subordinated debt
77 59 207 189 Other borrowings
63 268 313 193 Total interest expense
1,760 2,231 3,653 5,190
Net interest income
17,202 16,291 35,081 24,352 Provision for loan losses
762 1,750 1,800 2,595 Net interest income after provision for loan losses
16,440 14,541 33,281 21,757
Non-interest income
Service charges on deposit accounts
1,199 307 1,594 529 Income from Bank owned life insurance
281 126 563 255 SBA origination fees
- 84 145 114 SWAP fees
364 210 573 473 Third party loan sales
226 157 301 267 Gain on sale and call of securities
21 11 22 15 Other
211 73 223 171 Total non-interest income
2,302 968 3,421 1,824
Non-interest expense
Salaries and employee benefits
7,099 6,912 13,883 12,175 Occupancy and equipment
905 1,081 2,007 1,855 Data processing
276 421 566 597 Marketing
165 151 318 288 Professional fees
770 806 1,398 1,161 Acquisition expenses
- 560 684 2,223 Regulatory assessments
418 300 767 514 Other
1,321 1,317 3,119 2,221 Total non-interest expense
10,954 11,548 22,742 21,034
Income before income taxes
7,788 3,961 13,960 2,547 Income tax provision
1,457 830 2,844 733 Net income
6,331 3,131 11,116 1,814
Earnings per share:
Basic
$ 0.47 $ 0.23 $ 0.83 $ 0.16 Diluted
$ 0.45 $ 0.22 $ 0.80 $ 0.15
Other comprehensive income:
Unrealized holding gain (loss) on securities available for sale
(505 ) 743 (794 ) 1,068 Tax effect
124 (188 ) 195 (271 ) Other comprehensive gain (loss), net of tax
(381 ) 555 (599 ) 797 Comprehensive income
$ 5,950 $ 3,686 $ 10,517 $ 2,611
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
June 30, 2021 December 31, 2020 Total loans (GAAP)
$ 1,680,186 $ 1,643,373 Add allowance for loan loss
10,418 16,259 Add unearned loan origination fees (costs), net
6,839 5,578 Add loans held for sale
2,039 1,270 Total gross loans
$ 1,699,482 $ 1,666,480 Less PPP loans
144,118 189,977 Total gross loans excluding Professional Bank PPP loans (non-GAAP)
$ 1,555,364 $ 1,476,503 Add purchase accounting loan marks
16,133 18,835 Total gross loans excluding PPP loans and loan marks (non-GAAP)
$ 1,571,497 $ 1,495,338
Allowance for loan loss as a % of total loans + loans held for sale (GAAP)
0.62 % 0.99 % Allowance for loan loss as a % of total gross loans excluding Professional Bank PPP loans (non-GAAP)
0.67 % 1.10 % Loan marks + allowance for loan loss / total gross loans excluding PPP loans and loan marks (non-GAAP)
1.69 % 2.35 %
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 months ended June 30, 2021 and 2020, the six months ended June 30, 2021, and for the year ended December 31, 2020.
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Return on Average Assets
0.99 % 0.65 % 0.95 % 0.24 % Return on Average Equity
11.35 % 6.13 % 10.05 % 2.31 % Average Equity to Average Assets
8.70 % 10.61 % 9.44 % 10.24 %
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; 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); critical accounting estimates; and other factors described in our Form 10-K for the year ended December 31, 2020, Form 10-Q for the quarter ended March 31, 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-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 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:
Eric Kalis or Todd Templin, BoardroomPR
ekalis@boardroompr.com / ttemplin@boardroompr.com
954-370-8999
SOURCE: Professional Holding Corp.
https://www.accesswire.com/657712/Professional-Holding-Corp-Reports-Second-Quarter-Results
