FineMark Holdings, Inc. Reports Third Quarter 2021 Earnings
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FineMark Holdings, Inc. Reports Third Quarter 2021 Earnings

Friday, October 22, 2021 2:15 PM
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FineMark Holdings, Inc.

FORT MYERS, FL / ACCESSWIRE / October 22, 2021 / FineMark Holdings, Inc. (the "Holding Company") (OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank") (collectively, "FineMark"), today announced third quarter 2021 net income of $7.1 million ($0.61 per diluted share).This compares to net income of $5.7 million ($0.63 per diluted share) reported for the third quarter of 2020.

THIRD QUARTER FINANCIAL HIGHLIGHTS

FineMark's net income rose 23% in the third quarter to $7.1 million, a new quarterly record. This performance reflects growth in the Bank's loan portfolio and trust business, as well as the reversal of $1.25 million in loan loss provision to cover potential pandemic-related write-downs that never materialized. Excluding this one-time event, net income would have totaled $6.1 million, just shy of the previous record of $6.3 million, set in the fourth quarter of 2020.

In the third quarter, the Bank's loan portfolio expanded by 12% year-over-year, net interest income increased by 8.5%, and cost of funds declined. Assets under management and administration increased 24% year-over-year, reflecting strong inflows from new and existing trust clients, as well as gains in the value of investments.

As of September 30, 2021, total bank assets stood at $3.1 billion compared to $2.6 billion a year earlier. Having crossed the $3 billion threshold, FineMark's leverage ratios are now calculated on a consolidated basis. To augment the targeted consolidated Tier 1 capital leverage ratio, a capital raise was completed in the beginning of the third quarter with $27 million of new equity. This was in addition to $55.5 million raised in June, resulting in a total capital raise of $82.5 million.

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

  1. Net income increased 23% to a record $7.1 million
  2. Diluted earnings per share decreased 3% to $0.61 (due to additional shares outstanding from capital raise)
  3. Loans, net of allowance, increased 12% to $2.0 billion
  4. Total deposits increased 23% to $2.4 billion
  5. Net interest income increased 8.5% to $16.5 million
  6. Cost of funds decreased 16 basis points
  7. Trust fees increased 31% to $7.0 million, representing 29% of total revenue for the period
  8. Assets under management and administration increased 24% to $5.7 billion (including $123 million of new assets, a 67% increase from third quarter 2020)

Return on average equity was 9.39% (down from 11.35%) due to a 48% increase in shareholders' equity which includes the capital raised to meet increased regulatory oversight.

Please refer to the attached abbreviated financial statements for details.

NET INTEREST INCOME AND MARGIN

Net interest income for the third quarter rose 8.5% year-over-year to $16.5 million, as the Bank's outstanding loans continued to grow while reducing the cost of funds. Year-to-date, net interest income is $47.5 million, up almost 11% compared to the third quarter 2020. Deposits increased 23% year-over-year while the Bank's loan portfolio grew 12% year-over-year to $2.0 billion. This growth is particularly strong considering that Paycheck Protection Program (PPP) loan balances continue to decline, and clients are paying down loans with gains realized from the strong equity and real estate markets.

The Bank's average cost of funds declined to 0.51% in the third quarter, compared to 0.57% in the second quarter and 0.67% in the third quarter of 2020. Bond holdings increased to 28% of assets, improving the yield beyond what is available on cash deposited with the Federal Reserve. However, yield on earning assets fell to 2.71% versus 2.79% in the second quarter resulting in a net interest margin of 2.24% for the third quarter, unchanged from the previous quarter. These changes are primarily the result of lower yields on newly purchased bonds and originated loans.

NON-INTEREST INCOME

Trust and investment earnings remained strong in the third quarter. As of September 30, 2021, assets under management and administration totaled $5.7 billion, up 24% year-over-year. During the third quarter, nearly$123 million was added from both existing relationships and new clients to the Bank.

The U.S. equity markets saw muted returns in the third quarter, with the S&P 500 returning 0.60%, while bond prices were adversely impacted by rising interest rates. Despite the foregoing, fee income from trust business increased 31% to $7.0 million in the third quarter, representing 29% of total revenue.

The Bank did not recognize gains from the sale of debt securities in the third quarter 2021, compared to net gains of $1.1 million realized in the third quarter 2020.

NON-INTEREST EXPENSES

As FineMark's loan portfolio, deposit base, and trust business continue to grow, operating overhead has also increased to maintain our high level of client service. Non-interest expenses totaled $15.6 million in the third quarter, an 11% increase over third quarter 2020. This uptick, due largely to the hiring of new professionals and investing in technology, is in line with the Bank's steady expansion. FineMark's efficiency ratio, which measures non-interest expense as a percent of revenues, improved in the third quarter to 64.69% from 66.37% in the second quarter.

CREDIT QUALITY

FineMark's asset quality remains strong. As of September 30, 2021, the allowance for loan losses was $20.8 million, representing 1.0% of total loans, compared to $21.6 million or 1.1% of total loans in the second quarter. No new provisions were made for potential, but not expected, COVID-related loan losses and half of the $2.5 million held in COVID-related reserves was released. This release was partly offset by an addition of $416,000 in new provisions associated with recent growth in the loan portfolio.

Management believes the Bank's reserves continue to be sufficient to support risks in the loan portfolio, as the residential real estate market, which represents over half of the Bank's portfolio, continues to be exceptionally strong. Commercial loans, which include declining PPP loan balances, comprise only 11% of total loans. The Bank's ratio of classified loans to total loans is particularly low at 0.9% compared to an industry average of 14.6%. Total non-performing loans declined to 0.05% of total loans in the third quarter compared to 0.1% in the previous quarter. No COVID-related loans are in forbearance.

As expected, the Bank's PPP loan portfolio continues to run off as borrowers obtain loan forgiveness under the program. As of September 30, 2021, the Bank had $23.3 million in PPP loans, compared to $40.8 million at the end of the second quarter.

Management is satisfied with the credit quality of the Bank's loan portfolio and continually monitors conditions to determine whether additional provisions are necessary. Above all, we remain committed to maintaining credit quality through a relationship-based approach to lending that relies on an in-depth understanding of each potential borrower's needs and financial situation.

CAPITAL AND LIQUIDITY

All capital ratios exceed regulatory requirements for "well-capitalized" banks. As of September 30, 2021, FineMark's Tier 1 leverage ratio on a consolidated basis was 9.88% up from the previous quarter due to the $27 million in additional equity capital raised in the third quarter. The Bank's total risk-based capital ratio as of September 30, 2021 was 20.22%.

Bank assets now exceed $3 billion. As previously mentioned, having crossed the $3 billion threshold in assets, we are prepared for the increased regulatory scrutiny reserved for larger banks and we intend to maintain capital levels consistent with peers of our size.

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. FineMark offers a full range of financial services, including personal and business banking, lending services, trust and investment services through its offices located in Florida, Arizona and South Carolina. 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.

CONTACT:

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

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
($ in thousands, except share amounts)



September 30, December 31,
Assets
2021 2020
(Unaudited)

Cash and due from banks
$57,406 227,921
Debt securities available for sale
811,470 589,233
Debt securities held to maturity
75,774 64,908
Federal Funds Sold
1,351 -
Loans, net of allowance for loan losses of $20,806 in 2021 and $20,782 in 2020
2,002,778 1,850,293
Federal Home Loan Bank stock
12,082 16,155
Federal Reserve Bank stock
5,241 4,397
Premises and equipment, net
41,479 41,303
Operating lease right-of-use assets
7,993 7,674
Accrued interest receivable
7,423 7,604
Deferred tax asset
2,014 -
Bank-owned life insurance
50,581 34,963
Other assets
7,977 6,965
Total assets
$3,083,569 2,851,416
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing demand deposits
456,773 352,281
Savings, NOW and money-market deposits
1,908,058 1,788,441
Time deposits
65,089 84,232
Total deposits
2,429,920 2,224,954
Official checks
3,125 5,883
Other borrowings
3,456 5,612
Federal Home Loan Bank advances
284,080 334,271
Operating lease liabilities
8,110 7,849
Subordinated debt
40,898 50,712
Deferred tax liability
- 202
Other liabilities
9,198 10,876
Total liabilities
2,778,787 2,640,359
Shareholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized, 11,581,050 and 8,955,427 shares issued and outstanding in 2021 and 2020
116 90
Additional paid-in capital
204,867 122,629
Retained earnings
98,144 80,120
Accumulated other comprehensive income
1,655 8,218
Total shareholders' equity
304,782 211,057
Total liabilities and shareholders' equity
$3,083,569 2,851,416
Book Value per Share
26.32 23.57

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings (Unaudited)
($ in thousands, except per share amounts)



Three Months Ended Nine Months Ended


September 30, September 30,


2021 2020 2021 2020
Interest income:








Loans
$17,244 16,004 $50,579 47,413
Debt securities
2,538 2,817 7,404 8,713
Dividends on Federal Home Loan Bank stock
81 159 360 532
Other
121 110 339 704
Total interest income
19,984 19,090 58,682 57,362
Interest expense:
Deposits
932 1,226 2,996 6,927
Federal Home Loan Bank advances
2,015 2,207 6,187 6,215
Subordinated debt
541 452 1,965 1,358
Total interest expense
3,488 3,885 11,148 14,500
Net interest income
16,496 15,205 47,534 42,862
Provision for loan losses
(834) 630 13 4,376
Net interest income after provision for loan losses
17,330 14,575 47,521 38,486
Noninterest income:
Trust fees
7,012 5,337 19,608 15,289
Income from bank-owned life insurance
221 213 618 635
Income from solar farms
89 86 250 241
Gain on sale of debt securities available for sale
- 1,066 902 5,128
Loss on extinguishment of debt
- - (955) -
Other fees and service charges
295 222 836 624
Total noninterest income
7,617 6,924 21,259 21,917
Noninterest expenses:
Salaries and employee benefits
9,464 8,313 27,704 23,737
Occupancy
1,667 1,597 4,702 4,515
Information systems
1,585 1,310 4,671 3,831
Professional fees
487 329 1,359 1,048
Marketing and business development
565 454 1,242 1,214
Regulatory assessments
383 385 1,171 1,002
Other
1,448 1,681 4,198 4,562
Total noninterest expense
15,599 14,069 45,047 39,909
Earnings before income taxes
9,348 7,430 23,733 20,494
Income taxes
2,292 1,694 5,709 4,824
Net earnings
$7,056 5,736 $18,024 15,670
Weighted average common shares outstanding - basic
11,467 8,934 9,890 8,920
Weighted average common shares outstanding - diluted
11,637 9,066 10,058 9,052
Per share information:Basic earnings per common share
$0.62 0.64 $1.82 1.76
Diluted earnings per common share
$0.61 0.63 $1.79 1.73

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

$ in thousands except for share data
3rd Qtr 2021 2nd Qtr 2021 1st Qtr 2021 4th Qtr 2020 3rd Qtr 2020 2021 2020
$ Earnings
Net Interest Income
$16,496 15,640 15,398 15,312 15,205 47,534 42,862
Provision for loan loss
$(834) 540 307 610 630 13 4,376
Non-interest Income
$7,617 7,234 6,461 6,113 5,858 21,312 16,789
Gain on sale of securities available for sale
$- 243 659 584 1,066 902 5,128
Loss on extinguishment of debt
$- (400) (555) (160) - (955) -
Non-interest Expense
$15,599 15,078 14,370 13,164 14,069 45,047 39,909
Earnings before income taxes
9,348 7,099 7,286 8,075 7,430 23,733 20,494
Taxes
$2,292 1,703 1,714 1,789 1,694 5,709 4,824
Net Income
$7,056 5,396 5,572 6,286 5,736 18,024 15,670
Basic earnings per share
$0.62 0.59 0.62 0.70 0.64 1.82 1.76
Diluted earnings per share
$0.61 0.58 0.61 0.69 0.63 1.79 1.73
Performance Ratios
Return on average assets*
0.92% 0.74% 0.78% 0.93% 0.90% 0.82% 0.87%
Return on risk weighted assets*
1.56% 1.28% 1.37% 1.60% 1.54% 2.00% 1.45%
Return on average equity*
9.39% 9.89% 10.48% 12.12% 11.35% 9.84% 10.88%
Yield on earning assets*
2.71% 2.79% 2.81% 2.95% 3.13% 2.77% 3.33%
Cost of funds*
0.51% 0.57% 0.58% 0.62% 0.67% 0.55% 0.88%
Net Interest Margin*
2.24% 2.24% 2.25% 2.36% 2.50% 2.24% 2.49%
Efficiency ratio
64.69% 66.37% 65.43% 60.24% 63.58% 65.48% 61.61%
Capital
Tier 1 leverage capital ratio
9.88% 9.27% 7.37% 7.48% 7.71% 9.88% 7.71%
Common equity risk-based capital ratio
16.80% 15.96% 12.91% 12.94% 13.20% 16.80% 13.20%
Tier 1 risk-based capital ratio
16.80% 15.96% 12.91% 12.94% 13.20% 16.80% 13.20%
Total risk-based capital ratio
20.22% 19.68% 17.36% 17.52% 16.57% 20.22% 16.57%
Book value per share
$26.32 $25.20 $23.20 $23.57 $23.01 $26.32 $23.01
Tangible book value per share
$26.32 $25.20 $23.20 $23.57 $23.01 $26.32 $23.01
Asset Quality
Net charge-offs (recoveries)
$(4) (1) (6) 3 3 -11 5
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
$20,806 21,636 21,095 20,782 20,209 20,806 20,209
Allowance to total loans
1.03% 1.10% 1.10% 1.11% 1.12% 1.03% 1.12%
Nonperforming loans
$928 2,001 1,599 1,279 1,098 928 1,098
Other real estate owned
$- - - - - - -
Nonperforming loans to total loans
0.05% 0.10% 0.08% 0.07% 0.06% 0.05% 0.06%
Nonperforming assets to total assets
0.03% 0.07% 0.06% 0.04% 0.04% 0.03% 0.04%
Loan Composition (% of Total Gross Loans)
1-4 Family
52.0% 53.6% 52.4% 53.1% 53.3% 52.0% 53.3%
Commercial Loans
11.0% 11.1% 13.1% 13.5% 14.9% 11.0% 14.9%
Commercial Real Estate
21.0% 21.1% 19.5% 18.9% 19.4% 21.0% 19.4%
Construction Loans
8.2% 6.7% 7.7% 7.6% 6.8% 8.2% 6.8%
Other Loans
7.8% 7.4% 7.3% 7.0% 5.5% 7.8% 5.5%
End of Period Balances
Total Assets
$3,083,569 2,982,969 2,874,148 2,851,416 2,606,789 3,083,569 2,606,789
Investments
$887,244 720,893 668,823 654,141 619,016 887,244 619,016
Loans, net of allowance
$2,002,778 1,945,541 1,889,770 1,850,293 1,789,905 2,002,778 1,789,905
Total Deposits
$2,429,920 2,358,263 2,297,031 2,224,954 1,978,922 2,429,920 1,978,922
Other borrowings
$3,456 5,790 12,144 5,612 14,920 3,456 14,920
Subordinated Debt
$40,898 40,876 50,737 50,712 29,622 40,898 29,622
FHLB Advances
$284,080 284,144 284,207 334,271 354,334 284,080 354,334
Total Shareholders Equity
$304,782 271,005 210,400 211,057 205,627 304,782 205,627
Wealth Management
Trust fees
$7,012 6,628 5,968 5,591 5,337 19,608 15,289
Assets Under Administration
Balance at beginning of period
$5,688,110 5,304,562 5,091,408 4,622,464 4,382,810 5,091,408 4,472,585
Net investment appreciation (depreciation) & income
$(71,467) 242,924 75,199 349,016 166,182 246,657 (150,670)
Net client asset flows
$122,908 140,623 137,955 119,928 73,472 401,486 300,549
Balance at end of period
$5,739,551 5,688,110 5,304,562 5,091,408 4,622,464 5,739,551 4,622,464
Percentage of AUA that are managed
88% 89% 89% 89% 90% 88% 90%
Stock Valuation
Closing Market Price (OTCQX)
$34.00 33.00 30.00 23.41 19.85 $34.00 $19.85
Multiple of Tangible Book Value
1.29 1.31 1.29 1.0 0.86 $1.29 $0.86

*annualized

SOURCE: FineMark Holdings, Inc.

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