FineMark Holdings, Inc. Reports First Quarter 2021 Earnings

FORT MYERS, FL / ACCESSWIRE / April 20, 2021 / FineMark Holdings, Inc. (the "Holding Company"; OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank"; collectively, "FineMark"), today announced first quarter 2021 net income of $5.6 million (or $0.61 per diluted share). This compares to net income of $5.1 million (or $0.56 per diluted share) reported for the first quarter of 2020.

FIRST QUARTER FINANCIAL HIGHLIGHTS

FineMark's net income was up 9.5% over the first quarter of last year, reflecting the continued growth of our loan portfolio and trust business. Net interest income increased 22% year-over-year, due to significant growth in earning assets coupled with a low cost of funds. Assets under management and administration have increased 35% over the past 12 months, reflecting gains in equity markets and significant net inflows of client assets.

As of March 31, 2021, total assets stand at $2.9 billion compared to $2.5 billion a year earlier. As the Bank continues to grow steadily, we are investing in our people, technology, cybersecurity, and operations to support the growth.

Quarterly pre-tax operating income was $7.3 million, down from the previous quarter due to an increase in non-interest expenses as we reinvest in our infrastructure. Our operating income also reflects a loss from prepaying Federal Home Loan Bank advances, which will generate future interest savings.

Highlights of first quarter 2021 performance on a year-over-year basis include:

  • Return on average assets (ROAA) was 0.78% (down from 0.92%); return on risk-weighted assets (ROWA) was 1.37% (down from 1.46%); and return on average equity (ROAE) was 10.48% (down from 11.11%). These decreases were due to a higher asset base and lower realized securities gains
  • Cost of funds decreased 68 basis points to 0.58%
  • Trust and investment fees increased 18% to $6.0 million, representing 27% of total revenue
  • Assets under management and administration increased 35% to $5.3 billion
  • Loans (net of allowances) increased 19% to $1.9 billion
  • Deposits increased 26% to $2.3 billion, despite moving $100 million in deposits off the balance sheet in the first quarter of 2021
  • Net interest income increased 22% to $15.4 million

COVID-19: ONGOING IMPACT AND OUR RESPONSE

As vaccination efforts continue to gain momentum and the U.S. economy progresses toward fully reopening, we remain focused on practicing COVID-19 safety protocols while delivering exceptional service to our clients and producing a strong financial performance for our shareholders. Our ability to grow our high-quality loan portfolio, increase trust assets, and generate strong earnings during the pandemic is a direct result of our associates' commitment to our high-touch, relationship- driven approach.

Operations and Safety: Our associates continued to serve our clients through productive meetings held using videoconferencing technology in the first quarter of 2021, as well as through a growing number of in-person meetings at many of our offices. An influx of new trust clients during the quarter reflects the strong relationships we have developed with our existing clients, which lead to a steady flow of referrals.

Loan Forbearance: The credit quality of our loan portfolio remains strong, and no new COVID-related provisions for loan losses were made in the first quarter. As of March 31, 2021, only two loans (totaling $1.2 million) remain in forbearance; we do not expect any losses to occur from these loans. This data highlights our prudent approach to lending: we continue to focus on growing our loan portfolio through relationship-building-not through increased transaction volume.

Paycheck Protection Program (PPP): We are pleased to have assisted approximately 700 small business owners since the PPP program began last year. For many, this was the lifeline they needed to endure the pandemic. In total, we have originated $124 million in PPP loans, with $26 million in 2021, in the third round of the program. As of March 31, 2021, we have $79.8 million in PPP loans outstanding, with $44.2 million forgiven by the Small Business Administration.

NET INTEREST INCOME AND MARGIN

The Federal Reserve remains committed to an ultra-low, short-term interest rate target for the next two to three years and we continue to seek ways to offset the downward pressure on interest income.

Net interest income for the first quarter rose 22% year-over-year to $15.4 million, reflecting a reduction in the cost of funds and growth in our deposit base. Deposits increased 3% from the previous quarter and 26% year-over-year.

Our average cost of funds declined to 0.58% this quarter (versus 0.62% in the previous quarter) and 1.26% in the pre- pandemic first quarter of 2020. The yield on earning assets also decreased, declining to 2.81% versus 2.95% in the previous quarter. As a result, the net interest margin decreased to 2.25% in the first quarter, down from 2.36%. This margin compression was caused by declining yields as well as $21.3 million in subordinated debt, which was added to the balance sheet in November 2020.

NON-INTEREST INCOME

Our overall growth continues to benefit from a sound performance in our trust and investment business, as measured by assets under management and administration. As of March 31, 2021, FineMark had a total of $5.3 billion in assets under management and administration, up 35% on a year-over-year basis. During the first quarter of 2021, we added nearly $138 million in net assets from new and existing clients, demonstrating our ability to expand our current relationships, while also developing new ones.

The U.S. equity market delivered strong (albeit somewhat volatile) returns in the first quarter, which contributed to the growth in trust assets. Trust fees for the quarter totaled $6.0 million, an increase of 18% on a year-over-year basis.

FineMark realized gains of $659,000 from the sale of debt securities in the first quarter, down from $2.7 million in the fourth quarter of 2020. As previously noted, the first quarter 2021 sales were arranged primarily to offset a $555,000 prepay penalty on $50 million in Federal Home Loan Bank advances, a move that will generate interest savings of $709,000 annually.

NON-INTEREST EXPENSES

As FineMark's loan portfolio, deposit base, and trust business continue to grow, certain expenses increased in the first quarter to enable us to maintain the Bank's high level of client service. Non-interest expenses totaled $14.4 million; a 9% increase compared to the fourth quarter of 2020. This higher expense is mostly due to the hiring of 10 new associates (predominantly in Risk Management and Operations), as well as investments in cybersecurity and technology. Our focus remains fixed on maintaining the level of service required to meet our high standards.

CREDIT QUALITY

The quality of FineMark's loan portfolio remains strong with $2.4 million in classified loans (loans that may potentially default) as of March 31, 2021, down slightly from $2.7 million the previous quarter. The Bank's ratio of classified loans to total capital is exceptionally low at 1.05% compared to an industry average of 14.5%. Total non-performing loans rose slightly year-over-year to $1.6 million (or 0.08% of total loans).

The allowance for loan losses at the end of the first quarter was $21 million, up 1.5% from the previous quarter and up 24% year-over-year. This increase reflects the growth in our loan portfolio and includes a special COVID-related provision of $2.5 million, which was added in the first half of 2020 and in line with industry practice. Loan loss allowances represent 1.10% of total loans outstanding as of March 31, 2021, compared to 1.11% in the previous quarter and 1.06% a year earlier.

Management believes these reserves are 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 been exceptionally strong during the pandemic. Only 13% of our loan portfolio consists of commercial loans (including PPP loans, which are extinguished when they are forgiven by the Small Business Administration) and we have no concentration in sectors highly affected by COVID-19 interruptions.

Management is pleased with the credit quality of the Bank's loan portfolio and will continue to monitor economic conditions to determine whether additional provisions are necessary. We believe our commitment to knowing our clients'-and working proactively with them to achieve solutions-continues to serve our shareholders well.

CAPITAL AND LIQUIDITY

All of FineMark's capital ratios continue to be in excess of regulatory requirements for "well-capitalized" banks. As of March 31, 2021, the Bank's tier 1 leverage ratio was 9.23%. FineMark (the consolidated entity)'s tier 1 leverage ratio was 7.34% and the total risk-based capital ratio was 17.37%.

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
8695 College Pkwy Suite 100
Fort Myers, FL 33919
239-461-3850
[email protected]

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands, except share amounts)
March 31, December 31,
Assets
2021 2020
(Unaudited)
Cash and due from banks
$195,726 227,921
Debt securities available for sale
604,246 589,233
Debt securities held to maturity
64,577 64,908
Loans, net of allowance for loan losses of $21,095
and $20,782
1,889,770 1,850,293
Federal Home Loan Bank stock
12,082 16,155
Federal Reserve Bank stock
4,767 4,397
Premises and equipment, net
42,262 41,303
Operating lease right-of-use assets
7,334 7,674
Accrued interest receivable
7,582 7,604
Deferred tax asset
2,238 -
Bank-owned life insurance
35,160 34,963
Other assets
8,404 6,965
Total assets
$2,874,148 2,851,416
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing demand deposits
393,574 352,281
Savings, NOW and money-market deposits
1,819,961 1,788,441
Time deposits
83,496 84,232
Total deposits
2,297,031 2,224,954
Official checks
4,863 5,883
Other borrowings
12,144 5,612
Federal Home Loan Bank advances
284,207 334,271
Operating lease liabilities
7,499 7,849
Subordinated debt
50,737 50,712
Deferred tax liability
- 202
Other liabilities
7,267 10,876
Total liabilities
2,663,748 2,640,359
Shareholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized,
9,068,669 and 8,955,427 shares issued and outstanding in 2021 and 2020
91 90
Additional paid-in capital
123,688 122,629
Retained earnings
85,692 80,120
Accumulated other comprehensive income
929 8,218
Total shareholders' equity
210,400 211,057
Total liabilities and shareholders' equity
$2,874,148 2,851,416

Book Value per Share
23.20 23.57
See Accompanying Notes to Consolidated Financial Statements
18
FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
($ in thousands, except per share amounts)
Unaudited
Three Months Ended
March 31,
2021 2020
Interest income:
Loans
$16,475 15,769
Debt securities
2,468 2,861
Dividends on Federal Home Loan Bank stock
165 185
Other
117 138
Total interest income
19,225 18,953
Interest expense:
Deposits
1,041 3,969
Federal Home Loan Bank advances
2,094 1,906
Subordinated debt
692 453
Total interest expense
3,827 6,328
Net interest income
15,398 12,625
Provision for loan losses
307 1,183
Net interest income after provision for loan losses
15,091 11,442
Noninterest income:
Trust fees
5,968 5,055
Income from bank-owned life insurance
197 212
Income from solar farms
64 63
Gain on sale of debt securities available for sale
659 2,691
(Loss) on extinguishment of debt
(555) -
Other fees and service charges
232 260
Total noninterest income
6,565 8,281
Noninterest expenses:
Salaries and employee benefits
8,904 7,989
Occupancy
1,529 1,431
Information systems
1,538 1,208
Professional fees
426 350
Marketing and business development
185 494
Regulatory assessments
393 303
Other
1,395 1,251
Total noninterest expense
14,370 13,026
Earnings before income taxes
7,286 6,697
Income taxes
1,714 1,610
Net earnings
$5,572 5,087
Weighted average common shares outstanding - basic
9,023 8,900
Weighted average common shares outstanding - diluted
9,191 9,058
Per share information:
Basic earnings per common share
$0.62 0.57
Diluted earnings per common share
$0.61 0.56
FineMark Holdings, Inc.
Consolidated Financial Highlights
First Quarter 2021
Unaudited

$ in thousands except for share data
1st Qtr 2021 4th Qtr 2020 3rd Qtr 2020 2nd Qtr 2020 1st Qtr 2020 2021 2020
$ Earnings
Net Interest Income
$ 15,398 15,312 15,205 15,032 12,625 15,398 12,625
Provision for loan loss
$ 307 610 630 2,563 1,183 307 1,183
Non-interest Income
$ 6,461 6,113 5,858 5,341 5,590 6,461 5,590
Gain on sale of securities available for sale
$ 659 584 1,066 1,371 2,691 659 2,691
Debt extinguishment gains/(losses)
$ (555) (160) - - - (555) -
Non-interest Expense
$ 14,370 13,164 14,069 12,814 13,026 14,370 13,026
Earnings before income taxes
$ 7,286 8,075 7,430 6,368 6,697 7,286 6,697
Taxes
$ 1,714 1,789 1,694 1,520 1,610 1,714 1,610
Net Income
$ 5,572 6,286 5,736 4,847 5,087 5,572 5,087
Basic earnings per share
$ 0.62 0.70 0.65 0.54 0.57 0.62 0.57
Diluted earnings per share
$ 0.61 0.69 0.63 0.54 0.56 0.61 0.56
Performance Ratios
Return on average assets*
0.78% 0.93% 0.90% 0.80% 0.92% 0.78% 0.92 %
Return on risk weighted assets*
1.37% 1.60% 1.54% 1.34% 1.46% 1.37% 1.46 %
Return on average equity*
10.48% 12.12% 11.35% 10.16% 11.11% 10.48% 11.11 %
Yield on earning assets*
2.81% 2.95% 3.13% 3.32% 3.59% 2.81% 3.59 %
Cost of funds*
0.58% 0.62% 0.67% 0.77% 1.26% 0.58% 1.26 %
Net Interest Margin*
2.25% 2.36% 2.50% 2.58% 2.39% 2.25% 2.39 %
Efficiency ratio
65.43% 60.24% 63.58% 58.92% 62.31% 65.43% 62.31%
Capital
Tier 1 leverage capital ratio
7.34% 7.48% 7.71% 7.89% 8.35% 7.34 % 8.35 %
Common equity risk-based capital ratio
12.91% 12.94% 13.20% 13.15% 14.10% 12.91 % 14.10 %
Tier 1 risk-based capital ratio
12.91% 12.94% 13.20% 13.15% 14.10% 12.91 % 14.10 %
Total risk-based capital ratio
17.36% 17.52% 16.57% 16.56% 17.67% 17.36 % 17.67 %
Book value per share
$ 23.20 $ 23.57 $ 23.01 $ 22.08 $ 20.74 $ 23.20 $ 20.74
Tangible book value per share
$ 23.20 $ 23.57 $ 23.01 $ 22.08 $ 20.74 $ 23.20 $ 20.74
Asset Quality
Net charge-offs (recoveries)
$ (6) 3 3 9 (7) -6 (7)
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
$ 21,095 20,782 20,209 19,582 17,028 21,095 17,028
Allowance to total loans
1.10% 1.11% 1.12% 1.12% 1.06% 1.10 % 1.06 %
Nonperforming loans
$ 1,599 1,279 1,098 1,560 1,184 1,599 1,184
Other real estate owned
$ - - - - - - -
Nonperforming loans to total loans
0.08% 0.07% 0.06% 0.09% 0.07% 0.08 % 0.07 %
Nonperforming assets to total assets
0.06% 0.04% 0.04% 0.06% 0.05% 0.06 % 0.05 %
Loan Composition (% of Total Gross Loans)
1-4 Family
52.4% 53.1% 53.3% 52.8% 55.9% 52.4 % 55.9 %
Commercial Loans
13.1% 13.5% 14.9% 15.3% 10.9% 13.1 % 10.9 %
Commercial Real Estate
19.5% 18.9% 19.4% 19.9% 21.0% 19.5 % 21.0 %
Construction Loans
7.7% 7.6% 6.8% 6.7% 6.6% 7.7 % 6.6 %
Other Loans
7.3% 7.0% 5.5% 5.3% 5.6% 7.3 % 5.6 %
End of Period Balances
Assets
$ 2,874,148 2,851,416 2,606,789 2,520,831 2,464,669 2,874,148 2,464,669
Debt Securities
$ 668,823 654,141 619,016 618,569 577,917 668,823 577,917
Loans, net of allowance
$ 1,889,770 1,850,293 1,789,905 1,727,853 1,584,767 1,889,770 1,584,767
Deposits
$ 2,297,031 2,224,954 1,978,922 1,919,966 1,824,174 2,297,031 1,824,174
Other borrowings
$ 12,144 5,612 14,920 9,121 112,527 12,144 112,527
Subordinated Debt
$ 50,737 50,712 29,622 29,610 29,598 50,737 29,598
FHLB Advances
$ 284,207 334,271 354,334 314,396 294,458 284,207 294,458
Shareholders Equity
$ 210,400 211,057 205,627 197,174 185,119 210,400 185,119
Trust and Investment
Fee Income
$ 5,968 5,591 5,337 4,897 5,055 5,968 5,055
Assets Under Administration
Balance at beginning of period
$ 5,091,408 4,622,464 4,382,810 3,932,309 4,472,585 5,091,408 4,472,585
Net investment appreciation (depreciation) & income
$ 75,199 349,016 166,182 389,677 (706,530) 75,199 (706,530)
Net client asset flows
$ 137,955 119,928 73,472 60,824 166,253 137,955 166,253
Balance at end of period
$ 5,304,562 5,091,408 4,622,464 4,382,810 3,932,309 5,304,562 3,932,309
Percentage of AUA that are managed
89% 89% 90% 89% 88% 89 % 88 %
Stock Valuation
Closing Market Price (OTCQX)
$ 30.00 23.41 19.85 21.60 21.00 $ 30.00 $ 21.00
Multiple of Tangible Book Value
1.29 0.99 0.86 1.0 1.0 $ 1.29 $ 1.01
*annualized

SOURCE: FineMark Holdings, Inc.



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