FineMark Holdings, Inc. Reports Third Quarter 2020 Earnings
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FineMark Holdings, Inc. Reports Third Quarter 2020 Earnings

Thursday, October 15, 2020 11:00 AM
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FORT MYERS, FL / ACCESSWIRE / October 15, 2020 / FineMark Holdings, Inc. (the "Holding Company") (OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank") (collectively, "FineMark"), today announced third quarter 2020 net income of $5.7 million (or $0.63 per diluted share). This compares to net income of $4.5 million (or $0.50 per diluted share) reported for the third quarter of 2019.

THIRD QUARTER FINANCIAL HIGHLIGHTS

FineMark achieved record quarterly net income for the third quarter, up 27% versus the third quarter of 2019 and up 44% year-to-date versus 2019. This increase has been driven largely by loan growth of 23% and assets under management and administration growth of 11% over the past 12 months.

As of September 30, 2020, total assets stand at $2.6 billion compared to $2.1 billion a year earlier. Quarterly pre-tax operating income increased to $7.4 million (a 23% increase over the third quarter of 2019). These achievements are particularly noteworthy given the low interest rate environment and uncertain economic climate.

Highlights of third quarter 2020 performance on a year-over-year basis include:

  • Record earnings resulting in Return on Average Assets (ROAA) of 0.90% (up from 0.89%); Return on Risk-Weighted Assets (RORWA) of 1.54% (up from 1.45%); and Return on Average Equity (ROAE) of 11.35% (up from 10.47%).
  • A cost of funds decline of 88 basis points (to 0.67%).
  • Trust and investment fees increased 7% to $5.3 million, representing 24% of total revenue.
  • Assets under management and administration increased 11% to $4.6 billion (This includes both new clients and existing clients expanding their relationships).
  • Loans net of allowance increased by over $330 million (or 23%) to $1.8 billion.
  • Deposits increased 24% to $2.0 billion.
  • Net interest income increased 34% to $15.2 million.

Please refer to below abbreviated financial statements.

COVID-19: ONGOING IMPACT AND OUR RESPONSE

Despite the many challenges the current pandemic has created, FineMark has maintained its focus on safety while delivering exceptional service to our clients, resulting in strong financial performance for our shareholders. Our ability to grow while also generating record earnings during this difficult period is clearly due to the quality and dedication of our people and their commitment to our client service-driven approach.

Operations and Safety: Most of our associates have returned to the office and continue to provide service at the highest level by holding productive meetings through the use of videoconferencing technology and by offering drive-through service and in-person meetings by appointment. We also have begun to open some of our lobbies for teller transactions.

Loan Forbearance: The credit quality of our loan portfolio remains strong despite the challenges and hardships faced by many of our clients and the broader economy. As of June 30, 2020, we granted 90-day forbearance on 184 loans totaling $131 million. As of September 30, 2020, only six of those loans (totaling $6.1 million) remain in forbearance; we do not expect any losses from those relationships. These results are a testament to our prudent, relationship-driven approach to lending.

Paycheck Protection Program (PPP): As of September 30, 2020, we've processed more than 500 PPP loans. In the third quarter, based on the current rules issued from Congress and frequent updates provided by the SBA, we began the process of helping borrowers apply for loan forgiveness. In alignment with our values, we're pleased to be able to help many businesses in our communities successfully obtain loans through this program.

NET INTEREST INCOME AND MARGIN

The Federal Reserve is expected to maintain its ultra-low target for short-term interest rates for the next two to three years and we continue to seek funding cost reduction opportunities to offset that downward pressure on interest income. Net interest income for the third quarter increased 34% year-over-year to $15.2 million; on a year-to-date basis, net interest income rose 26% versus 2019. This growth reflects our success in reducing our cost of funds while growing our deposit base.

Our average cost of funds declined to 0.67% this quarter versus 0.77% in the previous quarter; this decline of 10 basis points is largely due to the low interest rate environment. Yield on earning assets, however, decreased on an absolute basis, falling from 3.32% to 3.13% during the third quarter. As a result, net interest margin decreased from 2.58% to 2.50% during the quarter. Non-interest-bearing deposits increased 51% in the third quarter compared to the previous year, including funding for PPP loans deposited in non-interest-bearing accounts; this represented a large change from a fairly small base.

NON-INTEREST INCOME

Our overall growth continues to be bolstered by our expanding trust and investment business, as measured by assets under management and administration. As of September 30, 2020, FineMark had a total of $4.6 billion in assets under management and administration, up 11% on a year-over-year basis. During the third quarter of 2020, we added over $73 million of client assets; these inflows came from both new and existing clients, representing our ability to build new relationships and expand current ones.

A continued recovery in the U.S. equity market in the third quarter also contributed to our growth in trust assets. Net appreciation and income from investments increased clients' assets by $166 million in the third quarter. Trust fees for the third quarter totaled $5.3 million, an increase of 7% on a year-over-year basis and up 12% year-to-date versus 2019.

FineMark realized net gains of $1.1 million from the sale of debt securities in the third quarter. Security sales were conducted primarily to maintain FineMark's balance sheet in line with policy levels.

NON-INTEREST EXPENSES

As FineMark's loan portfolio, deposit base and trust business continue to grow, certain expenses may increase as needed to maintain the bank's high levels of client service. Non-interest expenses in the third quarter totaled $14.1 million, a 19% increase compared to the third quarter of 2019. The higher expense is mainly due to our hiring of new associates at a rate that is in line with FineMark's steady expansion. As always, our focus is on maintaining the level of client service that meets our high standards.

CREDIT QUALITY

The overall credit quality of the bank's loan portfolio remained strong during the third quarter, improving over the second quarter and year-over-year with low levels of classified loans relative to capital and total assets. As of September 30, 2020, classified loans-loans that may potentially default-totaled $2.35 million (or just 0.93% of total capital and reserves). This level compares very favorably to the industry average of 14.44%; management believes the probability of any losses associated with these loans to be very low. Total non-performing loans declined 7% year-over-year to $1.1 million and now represent just 0.06% of total loans.

The allowance for loan losses at the end of the third quarter was $20.2 million, up 3% versus the second quarter and up 31% year-over-year. This increase reflects loan portfolio growth and includes $2.5 million added in the first half of 2020 as a special COVID-related provision, which is in line with industry practice. Approximately $630,000 of loan loss allowances were added in the third quarter, an amount that is in line with FineMark's typical levels. The loan loss allowance represents 1.12% of total loans outstanding as of September 30, 2020, is unchanged from the second quarter and up from 1.05% a year earlier.

Management believes that this level of reserve is sufficient to support the risks in the bank's loan portfolio. The residential real estate market, which represents the majority of our loan portfolio, has not yet shown a negative impact due to the pandemic. In addition, only 15% of the portfolio is represented by commercial loans, with no concentration in sectors particularly affected by the pandemic. (It is worth noting that our percentage of commercial loans was just 10% a year ago; the increase to the current 15% has been driven primarily by PPP loans.)

FineMark's management team is pleased with the credit quality of the bank's loan portfolio and will continue to monitor economic conditions closely to determine whether additional provisions should be made. We believe our commitment to knowing our clients' individual situations-and working proactively with them to deliver creative solutions-continues to serve our shareholders well.

CAPITAL AND LIQUIDITY

All of the Bank's capital ratios continue to be in excess of regulatory requirements for "well-capitalized" banks. As of September 30, 2020, the bank's tier 1 leverage ratio was 9.19%. FineMark's tier 1 leverage ratio was 7.71% and the total risk-based capital ratio was 16.57%.

HEADQUARTERS CONSTRUCTION UPDATE

Construction of our new office building in Fort Myers, Florida, is on schedule. The building will support the bank's growth and serve as the home base for our expanding team. We continue to work closely with the building contractor to ensure that workers' safety is prioritized and have been assured that all appropriate job-site safety measures have been implemented. We expect our relocation to begin in mid-November and plan to open with just under 100 associates onsite before the end of the year.

CLOSING REMARKS

As we continue to work together during a year filled with unprecedented challenges, we appreciate your loyalty, trust and faith in us. We're also deeply grateful for the dedication exhibited by our associates each day. Their constancy, positive attitudes, and desire to serve inspire us all. Our people have been nothing short of extraordinary in their commitment to the bank, to our clients, and to our communities.

Our ability to achieve the financial success reported here­ is no secret-it's the result of our relationship-based approach, which is dedicated to providing creative, convenient solutions that meet our clients' needs. We believe that our commitment to driving diversified growth through both our lending and asset management businesses will serve our shareholders well across all phases of the market cycle, particularly in these times of heightened uncertainty.

We thank our shareholders, our associates, and our clients for their continued support.

Kind regards,

Joseph R. Catti

President & CEO

Background

FineMark Holdings, Inc. is the parent company of FineMark National Bank & Trust. Founded in 2007, FineMark National Bank & Trust is a nationally chartered bank, headquartered in Florida. Through its offices located in Florida, Arizona and South Carolina, FineMark offers a full range of financial services, including personal and business banking, lending services, trust and investment services. The Corporation's common stock trades on the OTCQX under the symbol FNBT. Investor information is available on the Corporation's website at www.finemarkbank.com.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements." You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value or outflows of assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectability, default and charge-off rates; changes in the size and nature of our competition; changes in legislation or regulation and accounting principles, policies and guidelines; occurrences of cyber-attacks, hacking and identity theft; natural disasters; and changes in the assumptions used in making such forward-looking statements. You should carefully review all of these factors and you should be aware that there might be other factors that could cause these differences.

These forward-looking statements were based on information, plans and estimates at the date of this report. We assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
Unaudited

 
  At September 30,  
Assets
  2020     2019  
 
           
Cash and due from banks
  $ 81,070       137,879  
Debt securities available for sale
    553,035       385,721  
Debt securities held to maturity
    65,981       28,071  
Loans, net of allowance for loan losses of $20,209 in 2020
               
and $15,404 in 2019
    1,789,905       1,458,700  
Federal Home Loan Bank stock
    17,008       13,764  
Federal Reserve Bank stock
    4,397       3,884  
Premises and equipment, net
    37,607       24,031  
Operating lease right-of-use assets
    8,012       7,133  
Accrued interest receivable
    7,690       6,151  
Deferred tax asset
    33       2,006  
Bank-owned life insurance
    34,753       33,900  
Other assets
    7,298       6,559  
 
               
Total assets
  $ 2,606,789       2,107,799  
 
               
Liabilities and Shareholders' Equity
               
 
               
Liabilities:
               
Noninterest-bearing demand deposits
    307,432       203,313  
Savings, NOW and money-market deposits
    1,591,812       1,302,620  
Time deposits
    79,678       91,086  
 
               
Total deposits
    1,978,922       1,597,019  
 
               
Official checks
    4,452       3,508  
Other borrowings
    14,920       2,499  
 
            -  
Federal Home Loan Bank advances
    354,334       284,581  
Operating lease liabilities
    8,198       7,378  
Subordinated debt
    29,622       29,574  
Other liabilities
    10,714       7,817  
 
               
Total liabilities
    2,401,162       1,932,376  
 
               
 
               
 
               
Shareholders' equity:
               
Common stock, $.01 par value; 50,000,000 shares authorized,
               
8,936,616 and 8,854,557 shares issued and outstanding in 2020 and 2019
    89       89  
Additional paid-in capital
    122,266       120,732  
Retained earnings
    73,834       53,842  
Accumulated other comprehensive income
    9,438       760  
 
               
Total shareholders' equity
    205,627       175,423  
 
               
Total liabilities and shareholders' equity
  $ 2,606,789       2,107,799  
 
               
Book Value per Share
    23.01       19.81  
                 

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Dollars and shares in thousands, except per share amounts)
Unaudited

 
  Three Months     Nine Months  
Periods ended September 30,
  2020     2019     2020     2019  
Interest income:
                       
Loans
  $ 16,004       15,647     $ 47,413       45,752  
Debt securities
    2,817       2,215       8,713       6,673  
Dividends on Federal Home Loan Bank stock
    159       171       532       433  
Other
    110       459       704       628  
 
                               
Total interest income
    19,090       18,492       57,362       53,486  
 
                               
Interest expense:
                               
Deposits
    1,226       4,721       6,927       13,572  
Federal Home Loan Bank advances
    2,207       1,961       6,215       4,638  
Subordinated debt
    452       452       1,358       1,358  
 
                               
Total interest expense
    3,885       7,134       14,500       19,568  
 
                               
Net interest income
    15,205       11,358       42,862       33,918  
 
                               
Provision for loan losses
    630       233       4,376       1,059  
 
                               
Net interest income after provision for loan losses
    14,575       11,125       38,486       32,859  
 
                               
Noninterest income:
                               
Trust fees
    5,337       4,968       15,289       13,591  
Income from bank-owned life insurance
    213       224       635       667  
Income from solar farms
    86       97       241       262  
Gain on sale of debt securities available for sale
    1,066       833       5,128       1,327  
Gain on extinguishment of debt
    -       271       -       271  
Other fees and service charges
    222       319       624       850  
 
                               
Total noninterest income
    6,924       6,712       21,917       16,968  
 
                               
Noninterest expenses:
                               
Salaries and employee benefits
    8,313       7,284       23,737       21,504  
Occupancy
    1,597       1,410       4,515       4,292  
Information systems
    1,310       1,062       3,831       3,263  
Professional fees
    329       333       1,048       1,011  
Marketing and business development
    454       509       1,214       1,442  
Regulatory assessments
    385       82       1,002       680  
Other
    1,681       1,127       4,562       3,209  
 
                               
Total noninterest expense
    14,069       11,807       39,909       35,401  
 
                               
Earnings before income taxes
    7,430       6,030       20,494       14,426  
 
                               
Income taxes
    1,694       1,505       4,824       3,540  
 
                               
 
                               
 
                               
Net earnings
  $ 5,736       4,525     $ 15,670       10,886  
 
                               
Weighted average common shares outstanding - basic
    8,824       8,872       8,920       8,855  
Weighted average common shares outstanding - diluted
    9,104       9,049       9,052       9,036  
 
                               
Per share information:
                               
Basic earnings per common share
  $ 0.65       0.51     $ 1.76       1.23  
Diluted earnings per common share
  $ 0.63       0.50     $ 1.73       1.20  
                                 

FineMark Holdings, Inc.
Consolidated Financial Highlights
Third Quarter 2020
Unaudited

 
                                Year to Date  
$ in thousands except for share data
  3rd Qtr 2020     2nd Qtr 2020     1st Qtr 2020     4th Qtr 2019     3rd Qtr 2019     2020     2019  
$ Earnings
                                         
Net Interest Income
  15,205     15,032     12,625     12,125     11,358     42,862     33,918  
Provision for loan loss
  630     2,563     1,183     429     233     4,376     1,059  
Non-interest Income
  5,858     5,341     5,590     5,629     5,608     16,789     15,370  
Gain on sale of debt securities available for sale
  1,066     1,371     2,691     233     833     5,128     1,327  
Debt extinguishment gains
  -     -     -     413     271     -     271  
Non-interest Expense
  14,069     12,814     13,026     12,489     11,807     39,909     35,401  
Earnings before income taxes
  7,430     6,368     6,696     5,483     6,030     20,494     14,426  
Taxes
  1,694     1,520     1,610     1,163     1,505     4,824     3,540  
Net Income
  5,736     4,847     5,087     4,321     4,525     15,670     10,886  
Basic earnings per share
  0.65     0.54     0.57     0.49     0.51     1.76     1.23  
Diluted earnings per share
  0.63     0.54     0.56     0.49     0.50     1.73     1.20  
Performance Ratios
                                                       
Return on average assets*
    0.90 %     0.80 %     0.92 %     0.82 %     0.89 %     0.87 %     0.74 %
Return on Risk Weighted assets*
    1.54 %     1.34 %     1.46 %     1.32 %     1.45 %     1.45 %     1.18 %
Return on average equity*
    11.35 %     10.16 %     11.11 %     9.72 %     10.47 %     10.88 %     8.71 %
Yield on earning assets*
    3.13 %     3.32 %     3.59 %     3.74 %     3.81 %     3.33 %     3.84 %
Cost of funds*
    0.67 %     0.77 %     1.26 %     1.40 %     1.55 %     0.88 %     1.48 %
Net Interest Margin*
    2.50 %     2.58 %     2.39 %     2.41 %     2.34 %     2.49 %     2.44 %
Efficiency ratio
    63.58 %     58.92 %     62.31 %     67.87 %     65.35 %     61.61 %     69.57 %
Capital
                                                       
Tier 1 leverage capital ratio
    7.71 %     7.89 %     8.35 %     8.51 %     8.59 %     7.71 %     8.59 %
Common equity risk-based capital ratio
    13.20 %     13.15 %     14.10 %     13.70 %     14.00 %     13.20 %     14.00 %
Tier 1 risk-based capital ratio
    13.20 %     13.15 %     14.10 %     13.70 %     14.00 %     13.20 %     14.00 %
Total risk-based capital ratio
    16.57 %     16.56 %     17.67 %     17.18 %     17.61 %     16.57 %     17.61 %
Book value per share
  23.01     22.08     20.74     20.15     19.81     23.01     19.81  
Tangible book value per share
  23.01     22.08     20.74     20.15     19.81     23.01     19.81  
Asset Quality
                                                       
Net charge-offs (recoveries)
  3     9     (7 )   (10 )   (5 )   5     121  
Net charge-offs (recoveries) to average total loans
    0.00 %     0.00 %     0.00 %     0.00 %     0.00 %     0.00 %     0.01 %
Allowance for loan losses
  20,209     19,582     17,028     15,838     15,404     20,209     15,404  
Allowance to total loans
    1.12 %     1.12 %     1.06 %     1.04 %     1.05 %     1.12 %     1.05 %
Nonperforming loans
  1,098     1,560     1,184     1,798     1,183     1,098     1,183  
Other real estate owned
  -     -     -     -     -     -     -  
Nonperforming loans to total loans
    0.06 %     0.09 %     0.07 %     0.12 %     0.08 %     0.06 %     0.08 %
Nonperforming assets to total assets
    0.04 %     0.06 %     0.05 %     0.08 %     0.06 %     0.04 %     0.06 %
Loan Composition (% of Total Gross Loans)
                                                       
1-4 Family
    53.3 %     52.8 %     55.9 %     57.3 %     56.0 %     53.3 %     56.0 %
Commercial Loans
    14.9 %     15.3 %     10.9 %     10.0 %     9.7 %     14.9 %     9.7 %
Commercial Real Estate
    19.4 %     19.9 %     21.0 %     20.9 %     20.9 %     19.4 %     20.9 %
Construction Loans
    6.8 %     6.7 %     6.6 %     6.1 %     7.6 %     6.8 %     7.6 %
Other Loans
    5.5 %     5.3 %     5.6 %     5.7 %     5.9 %     5.5 %     5.9 %
End of Period Balances
                                                       
Assets
  2,606,789     2,520,831     2,464,677     2,168,983     2,107,799     2,606,789     2,107,799  
Debt securities
  619,016     618,569     577,917     505,170     413,792     619,016     413,792  
Loans, net of allowance
  1,789,905     1,727,853     1,584,767     1,512,466     1,458,700     1,789,905     1,458,700  
Deposits
  1,978,922     1,919,966     1,824,174     1,670,419     1,597,019     1,978,922     1,597,019  
Other borrowings
  14,920     9,121     112,527     2,390     2,499     14,920     2,499  
Subordinated Debt
  29,622     29,610     29,598     29,586     29,574     29,622     29,574  
FHLB Advances
  354,334     314,396     294,458     264,520     284,581     354,334     284,581  
Shareholders Equity
  205,627     197,174     185,119     178,453     175,423     205,627     175,423  
Trust and Investment
                                                       
Fee Income
  5,337     4,897     5,055     5,023     4,968     15,289     13,591  
Assets Under Administration
                                                       
Balance at beginning of period
  4,382,810     3,932,309     4,472,585     4,175,715     3,930,319     4,472,585     3,391,455  
Net investment appreciation (depreciation) & income
  166,182     389,677     (706,530 )   180,466     71,545     (150,671 )   354,772  
Net client asset flows
  73,472     60,824     166,253     116,404     173,852     300,549     429,488  
Balance at end of period
  4,622,464     4,382,810     3,932,309     4,472,585     4,175,715     4,622,464     4,175,715  
Percentage of AUA that are managed
    90 %     89 %     88 %     88 %     89 %     90 %     89 %
Stock Valuation
                                                       
Closing Market Price (OTCQX)
  19.85     21.60     21.00     25.10     25.10     19.85     25.10  
Multiple of Tangible Book Value
    0.86       0.98       1.01       1.20       1.30       0.86       1.27  
*annualized
                                                       
                                                         

For more information on FineMark Holdings, Inc., please visit FineMark's Investor Relations page at https://www.finemarkbank.com/about/investor-relations/

CONTACT:

Meagan Beyer, Investor Relations
12681 Creekside Lane
Fort Myers, FL 33919
239-461-3850
[email protected]

SOURCE: FineMark Holdings, Inc.

FineMark Holdings, Inc.
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FNBT
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