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:
- Net income increased 23% to a record $7.1 million
- Diluted earnings per share decreased 3% to $0.61 (due to additional shares outstanding from capital raise)
- Loans, net of allowance, increased 12% to $2.0 billion
- Total deposits increased 23% to $2.4 billion
- Net interest income increased 8.5% to $16.5 million
- Cost of funds decreased 16 basis points
- Trust fees increased 31% to $7.0 million, representing 29% of total revenue for the period
- 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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