FineMark Holdings, Inc. Reports Third Quarter 2021 Earnings

Rhea-AI Summary

FineMark Holdings, Inc. (OTCQX: FNBT) announced a record net income of $7.1 million ($0.61 per diluted share) for Q3 2021, up 23% from $5.7 million in Q3 2020. Key highlights include a 12% year-over-year loan portfolio growth, 8.5% increase in net interest income, and a 24% rise in assets under management, totaling $5.7 billion. The bank's total assets reached $3.1 billion, bolstered by an $82.5 million capital raise. However, diluted earnings per share decreased by 3% due to additional shares from the capital raise.

Positive

• Net income increased 23% to $7.1 million, a record high
• Loan portfolio expanded 12% year-over-year to $2.0 billion
• Net interest income rose 8.5% to $16.5 million
• Assets under management increased 24% to $5.7 billion
• Trust fees surged 31% to $7.0 million, making up 29% of total revenue
• Completed a capital raise totaling $82.5 million

Negative

• Diluted earnings per share decreased 3% to $0.61 due to more shares outstanding

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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FAQ

What were FineMark Holdings' Q3 2021 earnings results?

FineMark reported a net income of $7.1 million for Q3 2021, which is a 23% increase compared to the previous year.

How did FineMark's loan portfolio perform in Q3 2021?

The loan portfolio grew by 12% year-over-year to reach $2.0 billion.

What is the Ticker Symbol for FineMark Holdings?

FineMark Holdings trades under the ticker symbol FNBT on the OTCQX.

What is the outlook for FineMark Holdings after the Q3 2021 results?

The outlook appears positive with record net income and significant growth in loans and assets under management.

How much did FineMark raise in its capital raise?

FineMark completed a capital raise totaling $82.5 million, which included $27 million raised in Q3.