CORRECTION: FineMark Holdings, Inc. Reports Second Quarter 2021 Earnings
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CORRECTION: FineMark Holdings, Inc. Reports Second Quarter 2021 Earnings

Tuesday, July 20, 2021 11:12 AM
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This press release replaces the release distributed on Monday, July 19, 2021. The Consolidated Financial Highlights have been updated to reflect Second Quarter 2021 results.

FORT MYERS, FL / ACCESSWIRE / July 20, 2021 / FineMark Holdings, Inc. (the "Holding Company") (OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank") (collectively, "FineMark"), today announced second quarter 2021 net income of $5.4 million (or $0.58 per diluted share). This compares to net income of $4.8 million (or $0.54 per diluted share) reported for the second quarter of 2020.

SECOND QUARTER FINANCIAL HIGHLIGHTS

FineMark's net income for the second quarter increased 11.3% on a year-over-year basis, reflecting continued growth in our loan portfolio and trust business. While the loan portfolio expanded by 13%, net interest income increased only 4%, reflecting the continued ultra-low interest rate environment. Assets under management and administration increased 30% or $1.3 billion over the past 12 months, reflecting inflows from new and existing trust clients and gains in equity markets.

As of June 30, 2021, the Bank's total assets are just under $3.0 billion compared to $2.5 billion a year earlier. Once the $3.0 billion threshold is reached, FineMark's capital ratios will be evaluated on a consolidated basis. In preparation, $82.5 million in new equity capital was raised in the month of June, with 2.5 million shares issued at $33 per share (818,182 of those shares were issued in July). Investor demand was robust due to the strength of the Bank's balance sheet, our mix of interest-and fee-based income, along with other factors. This demand led us to increase the amount raised from the original target of $60 million.

Quarterly pre-tax operating income was $7.1 million, up 11.5% year-over-year, but down slightly from the previous quarter. This quarter-over-quarter decrease was due partly to a one-time fee for prepaying $10 million of subordinated debt; this upfront cost will generate substantial future interest savings.

Major categories affecting second quarter 2021 performance on a year-over-year basis:

  1. Cost of funds decreased 20 basis points to 0.57%.
  2. Trust and investment fees increased 35% to $6.6 million, representing 29% of total revenue.
  3. Assets under management and administration increased 30% to $5.7 billion, including $141 million of additional investments from new and existing clients.
  4. Loans (net of allowances) increased 13% to $1.95 billion, reflecting strong new loan demand net of paydowns.
  5. Deposits increased 23% to $2.4 billion, even after adjusting for $100 million in deposits that were moved off the balance sheet in the first quarter of 2021.
  6. Net interest income increased 4% to $15.6 million, despite a decrease in net interest margin as yields declined.

Return on average assets was 0.74% (down from 0.80%); return on risk-weighted assets was 1.28% (versus 1.34%); and return on average equity was 9.89% (versus 10.16%). Declines were due to a change in balance sheet composition, a higher asset base, higher non-interest expense to support growth, a higher equity capital base, and lower realized gains on securities.

COVID-19 UPDATE

As the U.S. continues to recover from the COVID-19 pandemic, we are pleased to report that our operations are essentially back to normal at all FineMark locations. We are extremely proud that we were able to serve our clients throughout the past year and produce strong financial performance for our shareholders. We were able to grow our high-quality loan portfolio, grow our deposit base, increase trust assets and generate strong earnings during the pandemic.

Loan-loss Reserves and Forbearance: No new COVID-related provisions were made for loan losses in the second quarter and we are continuing to evaluate the appropriateness of the Bank's $2.5 million in COVID-related reserves. As of June 30, 2021, two loans, both from the same borrower, remain in forbearance; however, we expect full repayment and both loans to resume paying according to original terms.

Paycheck Protection Program (PPP): As of June 30, 2021, we have $40.8 million in PPP loans outstanding. Our PPP loan portfolio, which will continue to decline as borrowers seek loan forgiveness, recognized $532,000 in net fees in the second quarter, for a total of $1.1 million year-to-date. We are pleased to have helped many businesses in our communities obtain funds through the PPP to assist them through the pandemic.

NET INTEREST INCOME AND MARGIN

Inflation has been in the news a great deal recently. While we believe the recent surge is likely to be transitory, FineMark's earnings would likely hold up well even if inflation were to persist longer than expected, as rising-rate environments tend to increase loan rates and benefit banks' net interest margins. The Federal Reserve remains committed to maintaining ultra-low short-term interest rates at least until 2023, and we continue to seek ways to reduce funding costs to offset the downward pressure on net interest income. Net interest income for the second quarter rose 4% year-over-year to $15.6 million. The increase is a result of growth in the Bank's balance sheet and its ability to invest cash in either loans or bonds.

Average cost of funds declined to 0.57% in the second quarter of 2021, versus 0.58% in the first quarter and 0.77% in the second quarter of 2020. Yield on earning assets also declined slightly to 2.79% versus 2.81% in the first quarter. As a result, the Bank's net interest margin decreased by 1 basis point in the second quarter, to 2.24% versus 2.25%. Going forward, interest expense will benefit from having prepaid $10 million in subordinated debt, which had an interest rate of 5.875%. The bank incurred a prepayment fee of $400,000, however the debt prepayment will generate $587,500 in annual savings.

NON-INTEREST INCOME

Non-interest income growth continues to benefit from strong performance in our trust and investment business. Fee income from the trust business now represents 29% of revenues and acts as a stabilizer to the Bank's net interest income, which is interest rate sensitive. As of June 30, 2021, FineMark had $5.7 billion in assets under management and administration, up 30% on a year-over-year basis. During the second quarter of 2021, we added nearly $141 million in net assets from new and existing clients, which highlights our ability to expand current relationships, while building new ones, often based on referrals.

The U.S. equity market delivered strong returns in the second quarter, which contributed to the growth in trust assets. Trust fees for the quarter totaled $6.6 million, a year-over-year increase of 35%.

FineMark realized gains of $243,000 from the sale of debt securities in the second quarter of 2021, down from $1.4 million in the second quarter of 2020, when bond prices had benefitted from the precipitous decline in interest rates.

NON-INTEREST EXPENSES

As FineMark's loan portfolio, deposit base, and trust business continue to grow, operating overhead also increases to maintain our high level of client service. Non-interest expenses in the second quarter totaled $15.1 million, a 5% increase compared to the first quarter and a 18% increase year-over-year. The higher expense is mainly due to hiring new associates and continuing to invest in cybersecurity and technology.

CREDIT QUALITY

FineMark's asset quality remains strong. The Bank had $3.1 million in classified loans (loans that may potentially default) as of June 30, 2021, compared to $2.4 million in the first quarter. The Bank's ratio of classified loans to total loans remains exceptionally low at 1.03% of total capital, compared to an industry average of 14.5%. Total non-performing loans rose by $0.4 million in the second quarter to $2.0 million, which represents 0.10% of total loans.

The allowance for loan losses at the end of the second quarter was slightly below $22 million, up 2.6% versus the first quarter and up 10.5% year-over-year, reflecting the growth in our loan portfolio. Loan loss allowances represent 1.10% of total loans outstanding as of June 30, 2021, unchanged from the previous quarter. The total includes $2.5 million added in the first half of 2020 as a special COVID-related provision. Despite an increase in classified loans, management continues to believe reserves are sufficient to support the risk in the Bank's loan portfolio.

Management is pleased with the credit quality of the Bank's loan portfolio; as always, we monitor conditions of both the economy and our individual borrowers to determine whether additional provisions should be made. Our commitment to knowing our clients-and working with them proactively to achieve solutions as needed-continues to serve our shareholders well. As the Bank is on the verge of exceeding $3 billion in assets, we are prepared for the higher level of regulatory scrutiny that larger banks receive from the Federal Reserve. We intend to maintain capital levels that are consistent with peers of our size, as illustrated by the capital raise this quarter, to support continued growth.

CAPITAL AND LIQUIDITY

FineMark's capital ratios continue to exceed regulatory requirements for 'well-capitalized' banks. As of June 30, 2021, FineMark's tier 1 leverage ratio on a consolidated basis was 9.27%, a substantial increase from the first quarter due to the equity capital raised this quarter. The total risk-based capital ratio as of June 30, 2021 was 19.68%.

HEADQUARTERS UPDATE AND EXPANSION PLANS

We are comfortably settled into our new home office in Fort Myers, Florida, and we continue to recognize synergies that arise from having more than 100 associates in the same location. We look forward to opening new locations in Jupiter, Florida (before the end of 2021) and South Naples, Florida (in early 2022) to meet the needs of our growing client base in those areas. That will bring us to 14 locations in Florida, Arizona and South Carolina.

CLOSING REMARKS

As always, we appreciate your loyalty, trust, and faith in FineMark and our associates. We continue to be deeply grateful for the exceptional dedication our team of associates show to the Bank, our clients, and our communities every day. Our ability to achieve the results reported here­ stems from our relationship-based approach and our dedication to providing creative solutions that meet our clients' needs. We believe that our commitment to achieving balanced, diversified growth through our lending and trust businesses will serve our shareholders well. We recognize that many parts of the world are still battling the pandemic and we are grateful to hold an optimistic outlook that strong economic growth will continue for the remainder of the year.

Kind regards,

Joseph R. Catti
Chairman & 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 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
($ in thousands, except share amounts)

       

 
 June 30,  December 31, 
Assets
 2021  2020 
  (Unaudited)  
 
 
Cash and due from banks
 197,119   227,921 
Debt securities available for sale
  654,974   589,233 
Debt securities held to maturity
  65,919   64,908 
Loans, net of allowance for loan losses of $21,636 in 2021
        
and $20,782 in 2020
  1,945,541   1,850,293 
Federal Home Loan Bank stock
  12,082   16,155 
Federal Reserve Bank stock
  5,016   4,397 
Premises and equipment, net
  42,305   41,303 
Operating lease right-of-use assets
  7,289   7,674 
Accrued interest receivable
  7,193   7,604 
Deferred tax asset
  2,212   - 
Bank-owned life insurance
  35,360   34,963 
Other assets
  7,959   6,965 
 
        
Total assets
 2,982,969   2,851,416 
         
Liabilities and Shareholders' Equity
        

 
        
Liabilities:
        
Noninterest-bearing demand deposits
  448,097   352,281 
Savings, NOW and money-market deposits
  1,845,800   1,788,441 
Time deposits
  64,366   84,232 
 
        
Total deposits
  2,358,263   2,224,954 
 
        
Official checks
  7,762   5,883 
Other borrowings
  5,790   5,612 
Federal Home Loan Bank advances
  284,144   334,271 
Operating lease liabilities
  7,444   7,849 
Subordinated debt
  40,876   50,712 
Deferred tax liability
  -   202 
Other liabilities
  7,685   10,876 
 
        
Total liabilities
  2,711,964   2,640,359 
 
        
 
        
 
        
Shareholders' equity:
        
Common stock, $.01 par value; 50,000,000 shares authorized,
        
10,754,549 and 8,955,427 shares issued and outstanding in 2021 and 2020
  108   90 
Additional paid-in capital
  178,155   122,629 
Retained earnings
  91,088   80,120 
Accumulated other comprehensive income
  1,654   8,218 
 
        
Total shareholders' equity
  271,005   211,057 
 
        
Total liabilities and shareholders' equity
 2,982,969   2,851,416 
 
        
Book Value per Share
  25.20   23.57 
         

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

        

 

 
 Three Months Ended  Six Months Ended 
 

 
 June 30,  June 30, 
 

 
 2021  2020  2021  2020 
Interest income:

 
 
 
  
 
  
 
  
 
 
Loans

 
 16,860   15,640  33,335   31,409 
Debt securities

 
  2,398   3,035   4,866   5,896 
Dividends on Federal Home Loan Bank stock
  114   188   279   373 
Other

 
  101   456   218   594 
 
                
Total interest income
  19,473   19,319   38,698   38,272 
 
                
Interest expense:

 
                
Deposits

 
  1,023   1,732   2,064   5,701 
Federal Home Loan Bank advances
  2,078   2,102   4,172   4,008 
Subordinated debt

 
  732   453   1,424   906 
 
                
Total interest expense
  3,833   4,287   7,660   10,615 
 
                
Net interest income
  15,640   15,032   31,038   27,657 
 
                
Provision for loan losses

 
  540   2,563   847   3,746 
 
                
Net interest income after provision for loan losses
  15,100   12,469   30,191   23,911 
 
                
Noninterest income:

 
                
Trust fees

 
  6,628   4,897   12,596   9,952 
Income from bank-owned life insurance
  200   210   397   422 
Income from solar farms

 
  97   92   161   155 
Gain on sale of debt securities available for sale
  243   1,371   902   4,062 
Loss on extinguishment of debt
  (400)  -   (955)  - 
Other fees and service charges
  309   142   541   402 
 
                
Total noninterest income
  7,077   6,712   13,642   14,993 
 
                
Noninterest expenses:

 
                
Salaries and employee benefits
  9,336   7,435   18,240   15,424 
Occupancy

 
  1,506   1,487   3,035   2,918 
Information systems

 
  1,548   1,313   3,086   2,521 
Professional fees

 
  446   369   872   719 
Marketing and business development
  492   266   677   760 
Regulatory assessments

 
  395   314   788   617 
Other

 
  1,355   1,630   2,750   2,881 
 
                
Total noninterest expense
  15,078   12,814   29,448   25,840 
 
                
Earnings before income taxes
  7,099   6,367   14,385   13,064 
 
                
Income taxes

 
  1,703   1,520   3,417   3,130 
 
                
 
                
Net earnings

 
 5,396   4,847  10,968   9,934 
 
                
Weighted average common shares outstanding - basic
  9,162   8,922   9,093   8,912 
Weighted average common shares outstanding - diluted
  9,331   9,067   9,265   9,045 
 
                
Per share information: Basic earnings per common share
 0.59   0.54  1.21   1.11 
Diluted earnings per common share
 0.58   0.54  1.18   1.10 
                 

FineMark Holdings, Inc.
Consolidated Financial Highlights
Second Quarter 2021
Unaudited

                      
$ in thousands except for share data
 2nd Qtr 2021  1st Qtr 2021  4th Qtr 2020  3rd Qtr 2020  2nd Qtr 2020  2021  2020 
$ Earnings
 
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net Interest Income
 15,640   15,398   15,312   15,205   15,032   31,038   27,657 
Provision for loan loss
 540   307   610   630   2,563   847   3,746 
Non-interest Income
 7,234   6,461   6,113   5,858   5,341   13,695   10,931 
Gain on sale of securities available for sale
 243   659   584   1,066   1,371   902   4,062 
Loss on extinguishment of debt
 (400)  (555)  (160)  -   -   (955)  - 
Non-interest Expense
 15,078   14,370   13,164   14,069   12,814   29,448   25,840 
Earnings before income taxes
  7,099   7,286   8,075   7,430   6,367   14,385   13,064 
Taxes
 1,703   1,714   1,789   1,694   1,520   3,417   3,130 
Net Income
 5,396   5,572   6,286   5,736   4,847   10,968   9,934 
Basic earnings per share
 0.59   0.62   0.70   0.65   0.54   1.21   1.11 
Diluted earnings per share
 0.58   0.61   0.69   0.63   0.54   1.18   1.10 
Performance Ratios
                            
Return on average assets*
  0.74%  0.78%  0.93%  0.90%  0.80%  0.76%  0.85%
Return on risk weighted assets*
  1.28%  1.37%  1.60%  1.54%  1.34%  1.30%  1.34%
Return on average equity*
  9.89%  10.48%  12.12%  11.35%  10.16%  10.18%  10.62%
Yield on earning assets*
  2.79%  2.81%  2.95%  3.13%  3.32%  2.80%  3.45%
Cost of funds*
  0.57%  0.58%  0.62%  0.67%  0.77%  0.58%  1.00%
Net Interest Margin*
  2.24%  2.25%  2.36%  2.50%  2.58%  2.25%  2.49%
Efficiency ratio
  66.37%  65.43%  60.24%  63.58%  58.92%  65.91%  60.59%
Capital
                            
Tier 1 leverage capital ratio
  9.27%  7.37%  7.48%  7.71%  7.89%  9.27%  7.89%
Common equity risk-based capital ratio
  15.96%  12.91%  12.94%  13.20%  13.15%  15.96%  13.15%
Tier 1 risk-based capital ratio
  15.96%  12.91%  12.94%  13.20%  13.15%  15.96%  13.15%
Total risk-based capital ratio
  19.68%  17.36%  17.52%  16.57%  16.56%  19.68%  16.56%
Book value per share
 25.20  23.20  23.57  23.01  22.08  25.20  22.08 
Tangible book value per share
 25.20  23.20  23.57  23.01  22.08  25.20  22.08 
Asset Quality
                            
Net charge-offs (recoveries)
 (1)  (6)  3   3   9   -7   3 
Net charge-offs (recoveries) to average total loans
  -0.00%  -0.00%  0.00%  0.00%  0.00%  (0.00)%  0.00%
Allowance for loan losses
 21,636   21,095   20,782   20,209   19,582   21,636   19,582 
Allowance to total loans
  1.10%  1.10%  1.11%  1.12%  1.12%  1.10%  1.12%
Nonperforming loans
 2,001   1,599   1,279   1,098   1,560   2,001   1,560 
Other real estate owned
 -   -   -   -   -   -   - 
Nonperforming loans to total loans
  0.10%  0.08%  0.07%  0.06%  0.09%  0.10%  0.09%
Nonperforming assets to total assets
  0.07%  0.06%  0.04%  0.04%  0.06%  0.07%  0.06%
Loan Composition (% of Total Gross Loans)
                            
1-4 Family
  53.6%  52.4%  53.1%  53.3%  52.8%  53.6%  52.8%
Commercial Loans
  11.1%  13.1%  13.5%  14.9%  15.3%  11.1%  15.3%
Commercial Real Estate
  21.1%  19.5%  18.9%  19.4%  19.9%  21.1%  19.9%
Construction Loans
  6.7%  7.7%  7.6%  6.8%  6.7%  6.7%  6.7%
Other Loans
  7.4%  7.3%  7.0%  5.5%  5.3%  7.4%  5.3%
End of Period Balances
                            
Total Assets
 2,982,969   2,874,148   2,851,416   2,606,789   2,520,831   2,982,969   2,520,831 
Investments
 720,893   668,823   654,141   619,016   618,569   720,893   618,569 
Loans, net of allowance
 1,945,541   1,889,770   1,850,293   1,789,905   1,727,853   1,945,541   1,727,853 
Total Deposits
 2,358,263   2,297,031   2,224,954   1,978,922   1,919,966   2,358,263   1,919,966 
Other borrowings
 5,790   12,144   5,612   14,920   9,121   5,790   9,121 
Subordinated Debt
 40,876   50,737   50,712   29,622   29,610   40,876   29,610 
FHLB Advances
 284,144   284,207   334,271   354,334   314,396   284,144   314,396 
Total Shareholders Equity
 271,005   210,400   211,057   205,627   197,174   271,005   197,174 
Wealth Management
                            
Trust fees
 6,628   5,968   5,591   5,337   4,897   12,596   9,952 
Assets Under Administration
                            
Balance at beginning of period
 5,304,562   5,091,408   4,622,464   4,382,810   3,932,309   5,091,408   4,472,585 
Net investment appreciation (depreciation) & income
 242,924   75,199   349,016   166,182   389,677   318,123   (316,852)
Net client asset flows
 140,623   137,955   119,928   73,472   60,824   278,578   227,077 
Balance at end of period
 5,688,110   5,304,562   5,091,408   4,622,464   4,382,810   5,688,110   4,382,810 
Percentage of AUA that are managed
  89%  89%  89%  90%  89%  89%  89%
Stock Valuation
                            
Closing Market Price (OTCQX)
 33.00   30.00   23.41   19.85   21.60  33.00  21.60 
Multiple of Tangible Book Value
  1.31   1.29   0.99   0.9   1.0  1.31  0.98 
                             

*annualized

CONTACT:

Ryan Roberts, Investor Relations
8695 College Parkway, Suite 100 
Fort Myers, FL 33919
239-461-3850
[email protected]

SOURCE: FineMark Holdings, Inc.

FineMark Holdings, Inc.
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