FineMark Holdings, Inc. Reports Third Quarter 2021 Earnings

·16 min read

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
investorrelations@finemarkbank.com

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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https://www.accesswire.com/669294/FineMark-Holdings-Inc-Reports-Third-Quarter-2021-Earnings

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