Document

EX-99.1 2 phfd-20221231xex991.htm EX-99.1 Document

Exhibit 99.1

Professional Holding Corp. Reports Fourth Quarter and Full Year 2022 Results

Fourth Quarter 2022 Net Income of $4.3 million and Earnings per Share of $0.31 Reflecting Acquisition Related Expenses

Coral Gables, Fla., January 27, 2023 – Professional Holding Corp. (the “Company”) (NASDAQ:PFHD), the parent company of Professional Bank (the “Bank”), today reported net income of $4.3 million, or $0.31 per share, for the fourth quarter of 2022, compared to net income of $8.5 million, or $0.63 per share, for the third quarter of 2022, and net income of $4.0 million, or $0.30 per share, for the fourth quarter of 2021. Chief Financial Officer Mary Usategui noted that the Company continued to perform at a high level while incurring additional expenses related to its previously announced merger with Seacoast Banking Corporation of Florida (“Seacoast”), expected to close on January 31, 2023.

Results of Operations for the Three Months Ended December 31, 2022

•Net income decreased by $4.2 million, or 49.7%, to $4.3 million compared to $8.5 million in the third quarter, due to a decrease in net interest income of $2.2 million and an increase in noninterest expense of $2.7 million, partially offset by a decrease in provision expense of $0.5 million and an increase in noninterest income of $0.1 million. The increase in noninterest expense was due to expenses associated with one-time equity award accelerations in anticipation of the Seacoast merger and other related acquisition expenses.

•Net interest income decreased by $2.2 million, or 9.0%, to $22.6 million compared to $24.8 million in the third quarter, primarily due to an increase in the cost of funding, partially offset by an increase in the rate received on interest bearing assets. The Company’s yield on average interest earning assets increased by 42 basis points while cost of funds increased by 84 basis points compared to the prior quarter.

•Provision for loan losses expense decreased by $0.5 million, or 36.6%, to $0.9 million compared to $1.3 million in the third quarter, due to a decrease in specific reserves on two impaired loans.

•Noninterest income of $1.3 million remained relatively unchanged compared to the prior quarter.

•Noninterest expense increased by $2.7 million, or 19.8%, to $16.6 million compared to $13.9 million in the prior quarter. The increase was primarily due to expenses of $3.6 million in one-time equity award accelerations, partially offset by lower acquisition expenses of $0.5 million compared to the prior quarter in connection with the pending merger with Seacoast and the prior quarter charitable contribution to the AAA scholarship foundation.

Results of Operations for the Year Ended December 31, 2022

•Net income increased by $0.8 million, or 3.7%, to $22.1 million compared to $21.4 million for the prior year, due to an increase in net interest income of $16.0 million, partially offset by an increase in provision expense of $0.5 million, a decrease in noninterest income of $0.6 million, an increase in noninterest expense of $12.3 million, and an increase in income tax provision of $1.8 million.

•Net interest income increased by $16.0 million, or 22.1%, to $88.3 million compared to $72.3 million in the prior year, 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 our investment portfolio.

•Provision for loan losses increased by $0.5 million, or 11.5%, to $5.3 million compared to $4.7 million in the prior year primarily due to loan growth. The ratio of charge-offs to average loans was 0.03% during the year ended December 31, 2022, compared to 0.49% in the prior year.

•Noninterest income decreased by $0.6 million, or 9.1% to $5.6 million compared to the prior year. The decrease primarily reflected lower loan held for sale income of $0.4 million, lower service charges of $0.5 million on deposit accounts, and lower swap fee income of $0.6 million. These decreases were partially offset by an increase of $0.3 million in bank owned life insurance income and $0.7 million in other noninterest income. The increase in other noninterest income was comprised of $0.5 million of insurance proceeds on a previously recognized contingency and a $0.2 million loss on fixed asset disposals recorded in 2021.

•Noninterest expense increased by $12.3 million, or 26.0%, to $59.5 million compared to $47.3 million in the prior year primarily due to higher salaries and employee benefits of $5.7 million, higher other noninterest expense of $4.7 million, higher acquisition expenses of $0.8 million, and higher professional fees of $0.8 million. The increase in salaries and benefits were comprised of severance and benefit payments related to the departure of the Company’s former Chief Executive Officer, higher employee compensation costs from one-time restricted share award accelerations, increased headcount, and higher sales incentives. The increase in other noninterest expense was primarily comprised of $3.6 million in one-time SAR award accelerations, and a $0.7 million loss related to a previously recognized contingency from the first quarter.

Financial Condition

At December 31, 2022:

•Total assets increased by $114.4 million, or 4.6% to $2.6 billion, compared to September 30, 2022, primarily as a result of an increase in loans, partially offset by a decrease in cash and cash equivalents and a decrease in our securities portfolio.

•Total loans increased by $128.5 million, or 25.4%, annualized, compared to September 30, 2022. We experienced loan originations of approximately $228.8 million, of which $156.5 million funded, partially offset by paydowns and prepayments.

•Total deposits decreased by $15.1 million, or 2.7% annualized, compared to September 30, 2022, primarily due to decreases in noninterest bearing deposits and time deposits, partially offset by increases in money market and interest bearing deposit categories. Cost of deposits increased 79 basis points to 1.18% for the three months ended December 31, 2022, from 0.39% for the three months ended September 30, 2022.

•Federal Home Loan Bank advances increased $120.0 million, compared to September 30, 2022, for the use of funding loan growth and maintaining liquidity.

•As of December 31, 2022, nonperforming assets decreased $0.3 million to $1.5 million compared to $1.8 million at September 30, 2022, as a result of an impaired loan that was brought to good standing during the three months ended December 31, 2022.

Capital and Liquidity

The Company continues to remain well capitalized per regulatory requirements. As of December 31, 2022, the Company had a total risk-based capital ratio of 13.1% and a leverage capital ratio of 9.5%. The Company maintains a strong liquidity position. At December 31, 2022, in addition to its balance sheet liquidity, the Company had the ability to generate approximately $329.5 million in liquidity through available resources. Additionally, the Company retained $9.6 million in cash at the holding company.

Net Interest Income and Net Interest Margin Analysis

Net interest income was $22.6 million for the three months ended December 31, 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 December 31, 2022, the Company’s cost of funds was 1.26%.


(Dollars in thousands)	For the Three Months Ended
	December 31, 2022						September 30, 2022						December 31, 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	$	93,576	$	906	3.84	%	$	137,355	$	747	2.16	%	$	700,741	$	263	0.15	%
Federal funds sold	15,550		145		3.70	%	21,895		124		2.25	%	21,969		13		0.23	%
Federal Reserve Bank stock, FHLB stock and other corporate stock	9,316		139		5.92	%	7,384		108		5.80	%	7,760		106		5.42	%
Investment securities - taxable	153,657		879		2.27	%	168,662		736		1.73	%	129,602		290		0.89	%
Investment securities - tax exempt	24,795		207		3.31	%	27,572		228		3.28	%	18,694		166		3.52	%
Loans(1)	2,048,170		27,423		5.31	%	1,979,132		25,222		5.06	%	1,705,563		19,159		4.46	%
Total interest earning assets	2,345,064		29,699		5.02	%	2,342,000		27,165		4.60	%	2,584,329		19,997		3.07	%
Loans held for sale	—						31						802
Noninterest earning assets	152,349						156,584						136,892
Total assets	$	2,497,413					$	2,498,615					$	2,722,023
Liabilities and stockholders’ equity
Interest-bearing liabilities
Interest-bearing deposits	1,461,797		6,414		1.74	%	1,453,653		2,170		0.59	%	1,619,355		1,634		0.40	%
Borrowed funds	71,988		732		4.03	%	24,447		198		3.21	%	39,796		240		2.39	%
Total interest-bearing liabilities	1,533,785		7,146		1.85	%	1,478,100		2,368		0.64	%	1,659,151		1,874		0.45	%
Noninterest-bearing liabilities
Noninterest-bearing deposits	698,274						758,135						814,767
Other noninterest-bearing liabilities	24,727						24,492						18,514
Stockholders’ equity	240,627						237,888						229,591
Total liabilities and stockholders’ equity	$	2,497,413					$	2,498,615					$	2,722,023
Net interest income			$	22,553					$	24,797					$	18,123
Net interest spread(2)					3.17	%					3.96	%					2.62	%
Net interest margin(3)					3.82	%					4.20	%					2.78	%

_________________________________________

(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 $0.8 million, $0.9 million and $1.7 million for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

Net interest income was $88.3 million and the Company’s cost of funds was 0.56% for the year ended December 31, 2022.


	For the Years Ended
	December 31, 2022						December 31, 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	$	318,736	$	2,892	0.91	%	$	506,993	$	698	0.14	%
Federal funds sold	24,274		354		1.46	%	42,921		63		0.15	%
Federal Reserve Bank stock, FHLB stock and other corporate stock	7,907		448		5.67	%	7,658		397		5.18	%
Investment securities - taxable	171,568		2,957		1.72	%	93,955		816		0.87	%
Investment securities - tax-exempt	26,672		880		3.30	%	19,967		735		3.68	%
Loans (1)	1,914,499		94,025		4.91	%	1,692,800		76,912		4.54	%
Total interest earning assets	2,463,656		101,556		4.12	%	2,364,294		79,621		3.37	%
Loans held for sale	338						1,566
Noninterest earning assets	149,398						125,967
Total assets	$	2,613,392					$	2,491,827
Liabilities and shareholders’ equity
Interest-bearing liabilities
Interest-bearing deposits	1,561,864		11,661		0.75	%	1,418,487		5,857		0.41	%
Borrowed funds	43,173		1,589		3.68	%	71,534		1,456		2.04	%
Total interest-bearing liabilities	1,605,037		13,250		0.83	%	1,490,021		7,313		0.49	%
Noninterest-bearing liabilities
Noninterest-bearing deposits	751,192						760,738
Other noninterest-bearing liabilities	21,776						17,956
Shareholders’ equity	235,387						223,112
Total liabilities and shareholders’ equity	$	2,613,392					$	2,491,827
Net interest income			$	88,306					$	72,308
Net interest spread (2)					3.29	%					2.88	%
Net interest margin (3)					3.58	%					3.06	%

__________________________________

(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 $4.6 million and $8.6 million for the year ended December 31, 2022, and 2021, respectively.

Provision for Loan Losses

Provision for loan losses decreased by $0.5 million, or 36.6%, in the three months ended December 31, 2022, to $0.9 million compared to $1.3 million in the three months ended September 30, 2022, as a result of updated collateral valuations on two impaired loans, reducing the specific reserve requirement. There were no net charge-offs during the three months ended December 31, 2022, and September 30, 2022.

Investment Securities

In the three months ended December 31, 2022, the Company’s investment portfolio decreased $10.8 million, or 5.9%, to $172.9 million compared to the prior quarter. The decrease was primarily due to $10.7 million in investment calls, redemptions and paydowns coupled with an increase in unrealized losses of $0.2 million during the fourth 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).

Loan Portfolio

The Company’s primary source of income is derived from interest earned on loans. The Company’s loan portfolio consists of loans secured by real estate, as well as commercial business loans, construction and development loans, and other consumer loans. The Company’s loan clients primarily consist of small-to medium-sized businesses, the owners and operators of those businesses, and other professionals, entrepreneurs and high net worth individuals. The Company’s owner-occupied and investment commercial real estate loans, residential construction loans, and commercial business loans provide higher risk-adjusted returns, shorter maturities, and more sensitivity to interest rate fluctuations and are complemented by the relatively lower risk residential real estate loans to individuals. The Company’s lending activities are principally directed to the Miami-Dade MSA. The following table summarizes and provides additional information about certain segments of the Company’s loan portfolio as of December 31, 2022, September 30, 2022, and December 31, 2021:


(Dollars in thousands)	December 31, 2022			September 30, 2022			December 31, 2021
	Amount		Percent	Amount		Percent	Amount		Percent
Loans held for investment:
Commercial real estate	$	1,059,754	49.7%	$	997,478	49.8%	$	902,654	50.8%
Residential real estate	500,269		23.5%	452,521		22.6%	377,511		21.2%
Commercial (non-PPP) (1)	405,824		19.0%	397,725		19.8%	325,415		18.3%
Commercial (PPP)	1,902		0.1%	2,618		0.1%	58,615		3.3%
Construction and land development	133,093		6.2%	128,570		6.4%	91,520		5.1%
Consumer and other	32,517		1.5%	25,983		1.3%	21,449		1.2%
Total loans held for investment, gross	2,133,359		100.0%	2,004,895		100.0%	1,777,164		100.0%
Allowance for loan losses	(17,336)			(16,485)			(12,704)
Loans held for investment, net	$	2,116,023		$	1,988,410		$	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 $100.1 million, $99.2 million, and $84.0 million for December 31, 2022, September 30, 2022, and December 31, 2021, respectively.

Nonperforming Assets

As of December 31, 2022, the Company had nonperforming assets of $1.5 million, or 0.06% of total assets, compared to nonperforming assets of $1.8 million, or 0.07% of total assets, at September 30, 2022.

Allowance for Loan and Lease Loss (“ALLL”)

The Company’s allowance for loan losses increased $0.9 million, or 5.2%, to $17.3 million at December 31, 2022, compared to September 30, 2022, primarily due to loan production. The Company’s allowance for loan losses as a percentage of total loans held for investment was 0.81% at December 31, 2022, compared to 0.82% at September 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)


	December 31, 2022		September 30, 2022		December 31, 2021
ASSETS
Cash and due from banks	$	12,495	43,863		$	38,469
Interest earning deposits	142,614		113,641		545,521
Federal funds sold	9,996		15,762		13,477
Cash and cash equivalents	165,105		173,266		597,467
Securities available for sale, at fair value - taxable	144,422		150,517		175,536
Securities available for sale, at fair value - tax exempt	22,197		26,863		18,765
Securities held to maturity (fair value December 31, 2022 – $170, September 30, 2022 – $178, December 31, 2021 – $242)	183		194		236
Equity securities	6,119		6,182		6,638
Loans, net of allowance of $17,336, $16,485, and $12,704 as of December 31, 2022, September 30, 2022, and December 31, 2021, respectively	2,116,023		1,988,410		1,764,460
Loans held for sale	—		—		165
Premises and equipment, net	7,399		7,867		9,020
Bank owned life insurance	54,935		54,534		38,485
Goodwill and intangibles	25,519		25,579		25,766
Other assets	47,411		41,465		27,573
Total assets	$	2,589,313	$	2,474,877	$	2,664,111
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand – noninterest bearing	$	684,822	$	758,042	$	674,003
Demand – interest bearing	306,817		$	308,167	310,362
Money market and savings	1,051,947		$	976,766	1,121,330
Time deposits	129,594		$	145,316	265,693
Total deposits	2,173,180		2,188,291		2,371,388
Federal Home Loan Bank advances	120,000		—		35,000
Official Checks	7,241		5,350		4,125
Other borrowings	—		—		10,000
Subordinated debt	24,498		24,467		—
Accrued interest and other liabilities	19,017		18,905		12,074
Total liabilities	2,343,936		2,237,013		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 15,147,950 and outstanding 14,101,414 shares as of December 31, 2022, issued 14,769,354 and outstanding 13,811,084 shares at September 30, 2022, issued 14,393,750 and outstanding 13,446,400 shares at December 31, 2021	151		148		144
Class B Non-Voting Common stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding on December 31, 2022, September 30, 2022, and December 31, 2021	—		—		—
Treasury stock, at cost	(18,642)		(16,214)		(16,003)
Additional paid in capital	222,451		216,703		212,012
Retained earnings	58,268		54,006		36,120
Accumulated other comprehensive loss	(16,851)		(16,779)		(749)
Total stockholders’ equity	245,377		237,864		231,524
Total liabilities and stockholders' equity	$	2,589,313	$	2,474,877	$	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						Years Ended
	December 31, 2022		September 30, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Interest income
Loans, including fees	$	27,423	$	25,222	$	19,159	$	94,025	$	76,912
Investment securities - taxable	879		736		290		2,957		816
Investment securities - tax-exempt	207		228		166		880		735
Dividend income on restricted stock	138		108		107		448		397
Other	1,052		871		275		3,246		761
Total interest income	29,699		27,165		19,997		101,556		79,621

Interest expense
Deposits	6,414		2,170		1,634		11,661		5,857
Federal Home Loan Bank advances	489		—		183		626		751
Subordinated debt	243		198		43		939		378
Other borrowings	—		—		14		24		327
Total interest expense	7,146		2,368		1,874		13,250		7,313

Net interest income	22,553		24,797		18,123		88,306		72,308
Provision for loan losses	851		1,343		1,880		5,285		4,740
Net interest income after provision for loan losses	21,702		23,454		16,243		83,021		67,568

Noninterest income
Service charges on deposit accounts	558		542		504		2,194		2,741
Income from bank owned life insurance	401		400		281		1,450		1,125
SBA origination fees	25		90		94		163		260
Swap fee income	215		—		128		327		909
Loans held for sale income	—		6		89		122		551
Gain on sale and call of securities	91		—		16		104		39
Other	54		185		178		1,261		562
Total noninterest income	1,344		1,223		1,290		5,621		6,187

Noninterest expense
Salaries and employee benefits	8,300		8,003		8,044		34,996		29,277
Occupancy and equipment	1,005		1,001		987		4,018		3,929
Data processing	476		257		313		1,351		1,182
Marketing	(78)		565		(103)		808		635
Professional fees	1,043		830		743		3,678		2,830
Acquisition expenses	504		957		—		1,461		684
Regulatory assessments	255		254		433		1,531		1,681
Other	5,091		1,986		2,483		11,705		7,048
Total noninterest expense	16,596		13,853		12,900		59,548		47,266

Income before income taxes	6,449		10,824		4,633		29,093		26,489
Income tax provision	2,187		2,351		673		6,945		5,125
Net income	$	4,262	$	8,473	$	3,960	$	22,148	$	21,364

Earnings per share:
Basic	$	0.31	$	0.63	$	0.30	$	1.64	$	1.61
Diluted	$	0.29	$	0.60	$	0.29	$	1.56	$	1.54

Other comprehensive income:
Unrealized holding loss on securities available for sale	$	(96)	$	(7,176)	$	(1,080)	$	(21,581)	$	(2,161)
Tax effect	24		1,819		265		5,479		530
Other comprehensive loss, net of tax	(72)		(5,357)		(815)		(16,102)		(1,631)
Comprehensive income	$	4,190	$	3,116	$	3,145	$	6,046	$	19,733

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						Years Ended
	December 31, 2022		September 30, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Basic earnings per share:
Net income	$	4,262	$	8,473	$	3,960	$	22,148	$	21,364
Total weighted average common stock outstanding	13,567,280		13,498,007		13,202,477		13,465,286		13,308,682
Basic earnings per common share	$	0.31	$	0.63	$	0.30	$	1.64	$	1.61
Diluted earnings per share:
Net income	$	4,262	$	8,473	$	3,960	$	22,148	$	21,364
Total weighted average common stock outstanding	13,567,280		13,498,007		13,202,477		13,465,286		13,308,682
Add: dilutive effect of employee restricted stock and options	784,800		742,008		666,908		708,693		592,168
Total weighted average diluted stock outstanding	14,352,080		14,240,015		13,869,385		14,173,979		13,900,850
Dilutive earnings per common share	$	0.30	$	0.60	$	0.29	$	1.56	$	1.54

Anti-dilutive restricted stock and options	167,784		16,874		4,380		196,160		285,487

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									Years Ended
	December 31, 2022			September 30, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Net interest income (GAAP)	$	22,553		$	24,797		$	18,123		$	88,306		$	72,308
Total noninterest income	1,344			1,223			1,290			5,621			6,187
Total noninterest expense	16,596			13,853			12,900			59,548			47,266
Pre-tax pre-provision earnings (non-GAAP)	$	7,301		$	12,167		$	6,513		$	34,379		$	31,229
Total adjustments to noninterest expense (1)	(5,042)			(957)			—			(8,914)			(684)
Adjusted pre-tax pre-provision earnings (non-GAAP)	$	12,343		$	13,124		$	6,513		$	43,293		$	31,913









Return on average assets (GAAP)	0.68		%	1.35		%	0.58		%	0.85		%	0.86		%

Annualized pre-tax pre-provision ROAA (non-GAAP)	1.16		%	1.93		%	0.95		%	1.32		%	1.25		%
Adjusted annualized pre-tax pre-provision ROAA (non-GAAP)	1.96		%	2.08		%	0.95		%	1.66		%	1.28		%

(1)Adjustments to noninterest expense for the three months ended December 31, 2022, were comprised of $4.5 million in one-time equity award accelerations, and $0.5 million in acquisition expenses. Adjustments for the year ended December 31, 2022, were comprised of $4.5 million in one-time equity award accelerations, $1.5 million in acquisition expenses and $2.9 million in severance and accelerated vesting expense related to the departure of the former Chief Executive Officer. Adjustments to noninterest expense for the three months ended September 30, 2022, were related to acquisition expenses. Adjustments to noninterest expense for the year ended December 31, 2021, were related to change in control payments to two former Marquis employees.


(Dollar amounts in thousands, except per share data)	December 31, 2022			September 30, 2022			December 31, 2021
Total loans held for investment, net (GAAP)	$	2,116,023		$	1,988,410		$	1,764,460
Add allowance for loan loss	17,336			16,485			12,704
Total gross loans held for investment	2,133,359			2,004,895			1,777,164
Less Professional Bank net PPP loans	1,902			2,618			58,615
Total gross LHFI excluding net PPP loans (non-GAAP)	2,131,457			2,002,277			1,718,549
Add purchase accounting loan marks	8,047			8,480			13,003
Total gross LHFI excluding net PPP loans (non-GAAP) + PA marks	$	2,139,504		$	2,010,757		$	1,731,552

ALLL as a % of LHFI (GAAP)	0.81		%	0.82		%	0.71		%
ALLL as a % of total LHFI excluding net PPP loans (non-GAAP)	0.81		%	0.82		%	0.74		%
PA marks + ALLL / LHFI excluding net PPP loans (non-GAAP)	1.19		%	1.24		%	1.48		%


(Dollar amounts in thousands)	Three Months Ended						Years Ended
	December 31, 2022		September 30, 2022		December 31, 2021		December 31, 2022		December 31, 2021

Net interest income (GAAP)	$22,553		$24,797		$18,123		$88,306		$72,308
Less: PPP net interest income recognized	(32)		(200)		(1,269)		(2,110)		(8,246)
Net interest income excluding PPP (non-GAAP)	22,521		24,597		16,854		86,196		64,062
Less: PA premium/discounts	(442)		(1,504)		(1,442)		(5,255)		(6,024)
Net interest income excluding PPP and PA (non-GAAP)	$22,079		$23,093		$15,412		$80,941		$58,038
Average interest earning assets (GAAP)	2,345,064		2,342,000		2,584,329		2,463,656		2,364,294
Less: average PPP loans	(2,147)		(4,796)		(72,728)		(17,662)		(141,511)
Average interest earning assets, excluding PPP (non-GAAP)	2,342,917		2,337,204		2,511,601		2,445,994		2,222,783
Add: average PA marks	8,286		9,178		14,051		10,040		16,124
Average interest earning assets, excluding PPP and PA (non-GAAP)	$2,351,203		$2,346,382		$2,525,652		$2,456,034		$2,238,907
Net interest margin (GAAP)	3.82	%	4.20	%	2.78	%	3.58	%	3.06	%
Net interest margin excluding PPP (non-GAAP)	3.81	%	4.18	%	2.66	%	3.52	%	2.88	%
Net interest margin excluding PPP and PA (non-GAAP)	3.73	%	3.90	%	2.42	%	3.30	%	2.59	%

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 December 31, 2022		Three Months Ended September 30, 2022		Three Months Ended December 31, 2021		Years Ended December 31, 2022		Years Ended December 31, 2021
Return on average assets	0.68	%	1.35	%	0.58	%	0.85	%	0.86	%
Return on average equity	7.03	%	14.13	%	6.84	%	9.41	%	9.58	%
Average equity to average assets	9.64	%	9.52	%	8.43	%	9.01	%	8.95	%

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. On August 8, 2022, the Company and Seacoast announced that they have signed a definitive agreement under which Seacoast will acquire the Company. The transaction has been approved by the shareholders and regulatory authorities. The transaction is expected to be completed on January 31, 2023. For more information, visit www.myprobank.com. Member FDIC. Equal Housing Lender.