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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
investorrelations@finemarkbank.com

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.



View source version on accesswire.com:
https://www.accesswire.com/640847/FineMark-Holdings-Inc-Reports-First-Quarter-2021-Earnings

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