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FineMark Holdings, Inc. Reports Third Quarter 2023 Earnings

FORT MYERS, FL / ACCESSWIRE / October 17, 2023 / FineMark Holdings, Inc. (the "Holding Company") (OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank"; collectively, "FineMark"), today reported revenues of $45.5 million and net revenues of $20.5 million for the third quarter ended September 30, 2023, compared to $32.1 million and $25.9 million, respectively, in the third quarter of 2022. Net income was $729 thousand, or $0.06 per diluted share, compared with net income of $5.4 million, or $0.45 per diluted share, for the same period a year ago.

Joseph R. Catti, Chairman & Chief Executive Officer:

I would like to begin by extending our heartfelt condolences to the families of those killed and taken hostage by terrorists in Israel and Gaza in recent days. Our thoughts and prayers are with the people of the Middle East as this deadly war with terrorist group Hamas intensifies.

Against a backdrop of uncertainty in our global markets, renewed concerns around inflation and worries of a ‘higher for longer' interest rate outlook, our associates continue to meet challenges and prudently manage our resources as we maintain our focus on the individuals and families we serve. Our clients know they can depend on FineMark to deliver exceptional service and innovative solutions. It is gratifying to lead an organization that continually seeks to deliver unparalleled and proactive service and we are grateful for the confidence our clients place in us.

As important as service and innovation are to our business, our focus on financial stability provides our clients with the confidence that we will be here for future generations. Our conservative credit culture combined with our high levels of liquidity and robust capital have positioned FineMark to succeed in a variety of economic environments.

While we are pleased with the growth in client relationships, loans, assets under management and administration, our financial results continue to be impacted by the Federal Reserve's monetary policies. Interest expense has increased sharply over the last 18 months due to higher deposit costs and the use of certain higher-cost sources of funding. We are cautiously optimistic that the pace of increases in interest expense should begin to slow over the coming months which, when combined with increasing yields on our loan and securities portfolio, should result in improving financial performance.

Highlights from the Third Quarter:

  • Interest income increased 50% in the third quarter 2023 to $36.4 million, compared to total interest income of $24.2 million for the same quarter 2022.
  • Net loans increased 15.6% from the third quarter of 2022 and credit quality remains excellent.
  • Assets under management grew 18.6% from the third quarter of 2022, resulting in a 23.7% increase in Trust fees.

Net Interest Income & Margin

For the third quarter of 2023, FineMark's net interest income totaled $11.3 million, representing a 37% decrease compared to Q3 of 2022. This decline is attributable to the impact of the Fed's rapid action to reduce inflation which has resulted in interest expense increasing more quickly than interest income. The Bank's net interest margin decreased to 1.21% in Q3 2023, down from 2.16% for the same period in 2022.

Non-Interest Income

As of September 30, 2023, FineMark's assets under management and administration totaled $6.4 billion, reflecting an 18.6% increase from $5.4 billion on September 30, 2022. This increase in assets under management resulted in investment management and trust fees increasing 25% year-over-year.

Non-Interest Expense

Non-interest expense for the quarter ended September 30, 2023, rose to $19.5 million, marking a 5% increase from $18.7 million in the third quarter of 2022. While salary and employee benefits remained relatively stable, occupancy expense increased due to the opening of our newest locations in Naples and Jupiter, Florida. Additionally, a 2 basis point increase in deposit insurance rates resulted in a $353,000 increase in expenses from Q3 2022.

Balance Sheet Highlights

Despite the rising interest rate environment, loan production remained strong for the quarter at $164 million, compared to $177 million for the same quarter last year. Total loans ended the quarter at $2.5 billion, compared to $2.1 billion at September 30, 2022. Deposits decreased to $2.78 billion as of September 30, 2023, down 5% from $2.92 billion on September 30, 2022 primarily from the transfer of client deposits to purchase higher yielding treasuries.

Credit Quality

FineMark maintains its commitment to high credit standards through a tailored and relationship-centered approach to lending. Our loan decisions are based on a comprehensive understanding of each borrower's needs and unique financial situation, resulting in minimal loan defaults spanning various economic conditions.

As of September 30, 2023, non-performing loans amounted to $2.1 million, representing 0.09% of total loans. This marks an increase from $692 thousand or 0.03% of total loans in the third quarter of 2022. The rise can be attributed to the default of one loan. We do not expect any losses associated with existing non-accrual loans. The current allowance for credit losses stands at $24.3 million, equivalent to 0.98% of gross loans.

Capital

FineMark's capital ratios continue to exceed regulatory requirements for "well-capitalized" banks. On September 30, 2023, FineMark's Tier 1 leverage ratio, on a consolidated basis, stood at 8.71% after adding the unrealized loss to average assets (denominator), while the total risk-based capital ratio was 17.96%. Additionally, the tangible equity to assets ratio was 8.92% after deducting the net unrealized loss from Tier 1 capital to average assets. Rising interest rates in the past year and a half led to a net unrealized loss of $71 million on the Bank's investment portfolio. This is a direct result of the rapid increase in rates rather than a reflection of bond credit quality. Given the short duration of the portfolio of 2.6 years, these losses will continue to decline as bonds mature.

CONTACT:

Ryan Roberts
Investor Relations
239-461-3850
investorrelations@finemarkbank.com
8695 College Pkwy Suite 100
Fort Myers, FL 33919

website: www.finemarkbank.com

Background

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. Through its offices located in Florida, Arizona and South Carolina, FineMark offers a full range of financial services, including personal and business banking, lending services, trust, and investment services. 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 .

Forward-Looking Statements

This press release contains statements that are "forward-looking statements." You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions that predict or indicate future events and trends, and which do not relate to historical matters. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause our actual results, performance or achievements to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value or outflows of assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectability, default and charge-off rates; changes in the size and nature of our competition; changes in legislation or regulation and accounting principles, policies and guidelines; occurrences of cyber-attacks, hacking and identity theft; natural disasters; and changes in the assumptions used in making such forward-looking statements. You should carefully review all of these factors, and you should be aware that there might be other factors that could cause these differences.

These forward-looking statements were based on information, plans and estimates at the date of this report. We assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands, except share amounts)

September 30, December 31,
Assets
2023 2022
(Unaudited)
Cash and due from banks
$ 309,234 18,374
Debt securities available for sale
903,993 1,020,612
Debt securities held to maturity
90,253 93,369
Loans, net of allowance for credit losses of $24,270 in 2023 and $23,168 in 2022
2,456,714 2,228,236
Federal Home Loan Bank stock
17,449 13,859
Federal Reserve Bank stock
6,340 6,277
Premises and equipment, net
40,441 41,009
Operating lease right-of-use assets
11,829 12,825
Accrued interest receivable
12,096 10,220
Deferred tax asset
28,401 29,955
Bank-owned life insurance
73,367 72,138
Other assets
18,658 7,496
Total assets
$ 3,968,775 3,554,370
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing demand deposits
675,402 652,671
Savings, NOW and money-market deposits
1,872,219 2,122,561
Time deposits
231,006 43,259
Total deposits
2,778,627 2,818,491
Official checks
5,979 13,312
Other borrowings
531,973 118,444
Federal Home Loan Bank advances
315,000 286,100
Operating lease liabilities
11,973 12,900
Subordinated debt
27,467 33,545
Other liabilities
22,172 11,271
Total liabilities
3,693,191 3,294,063
Shareholders' equity:
Common stock, $.01 par value 50,000,000 shares authorized,
11,912,634 and 11,773,050 shares issued and outstanding in 2023 and 2022
119 118
Additional paid-in capital
214,474 210,953
Retained earnings
132,050 127,514
Accumulated other comprehensive loss
(71,059 ) (78,278 )
Total shareholders' equity
275,584 260,307
Total liabilities and shareholders' equity
$ 3,968,775 3,554,370
Book Value per Share
$ 23.13 22.11

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,
2023 2022 2023 2022
Interest income:
Loans
$ 29,704 20,186 $ 81,296 55,363
Debt securities
3,849 3,854 12,032 11,126
Dividends on Federal Home Loan Bank stock
265 102 836 319
Other
2,560 105 4,823 251
Total interest income
36,378 24,247 98,987 67,059
Interest expense:
Deposits
15,536 4,188 38,011 6,963
Federal Home Loan Bank advances
2,519 1,473 8,604 4,502
Subordinated debt
364 507 1,347 1,590
Other borrowings
6,654 - 12,222 -
Total interest expense
25,073 6,168 60,184 13,055
Net interest income
11,305 18,079 38,803 54,004
Credit loss expense
238 121 1,272 1,406
Net interest income after credit loss expense
11,067 17,958 37,531 52,598
Noninterest income:
Trust fees
8,015 6,477 21,935 20,227
Income from bank-owned life insurance
663 399 1,736 1,412
Income from solar farms
89 85 240 255
Gain on extinguishment of debt
- 505 534 2,349
Other fees and service charges
397 381 1,226 1,287
Total noninterest income
9,164 7,847 25,671 25,530
Noninterest expenses:
Salaries and employee benefits
12,060 11,984 35,207 33,871
Occupancy
2,476 2,035 7,424 5,934
Information systems
1,559 1,417 4,685 4,513
Professional fees
655 535 1,984 1,687
Marketing and business development
447 392 1,613 1,644
Regulatory assessments
778 446 2,022 1,341
Other
1,543 1,851 4,887 4,370
Total noninterest expense
19,518 18,660 57,822 53,360
Earnings before income tax (benefit) expense
713 7,145 5,380 24,768
Income tax (benefit) expense
(16 ) 1,757 816 5,531
Net earnings
$ 729 5,388 $ 4,564 19,237
Weighted average common shares outstanding - basic
11,904 11,747 11,884 11,720
Weighted average common shares outstanding - diluted
11,942 11,925 11,921 11,901
Per share information:
Basic earnings per common share
$ 0.06 0.46 $ 0.38 1.64

Diluted earnings per common share
$ 0.06 0.45 $ 0.38 1.62

FineMark Holdings, Inc.
Consolidated Financial Highlights
Third Quarter 2023
Unaudited

$ in thousands except for share data
3rd Qtr 2023 2nd Qtr 2023 1st Qtr 2023 4th Qtr 2022 3rd Qtr 2022 2023 2022
$ Earnings
Net Interest Income
$ 11,305 12,799 14,699 15,889 18,079 38,803 54,004
Credit Loss Expense
$ 238 (23 ) 1,057 1,039 121 1,272 1,406
Non-interest Income (excl. gains and losses)
$ 9,164 8,253 7,720 7,224 7,342 25,137 23,181
Gain on sale of debt securities available for sale
$ - - - - - - -
Gain (loss) on debt extinguishment
$ - 534 - - 505 534 2,349
Gain on termination of swap
$ - - - - - - -
Non-interest Expense
$ 19,518 19,388 18,916 18,011 18,660 57,822 53,360
Earnings before income tax (benefit) expense
713 2,221 2,446 4,063 7,145 5,380 24,768
Income tax (benefit) expense
$ (16 ) 391 441 933 1,757 816 5,531
Net Earnings
$ 729 1,830 2,005 3,130 5,388 4,564 19,237
Basic earnings per share
$ 0.06 0.15 0.17 0.27 0.46 0.38 1.64
Diluted earnings per share
$ 0.06 0.15 0.17 0.26 0.45 0.38 1.62
Performance Ratios
Return on average assets*
0.07 % 0.19 % 0.22 % 0.36 % 0.62 % 0.16 % 0.74 %
Return on risk weighted assets*
0.13 % 0.34 % 0.39 % 0.63 % 1.12 % 0.27 % 1.33 %
Return on average equity*
1.06 % 2.63 % 3.01 % 4.92 % 7.97 % 2.22 % 9.15 %
Yield on earning assets*
3.93 % 3.68 % 3.39 % 3.17 % 2.92 % 3.67 % 2.72 %
Cost of funds*
2.78 % 2.36 % 1.74 % 1.27 % 0.76 % 2.31 % 0.62 %
Net Interest Margin*
1.21 % 1.40 % 1.75 % 1.90 % 2.16 % 1.44 % 2.45 %
Efficiency ratio
95.36 % 89.82 % 84.37 % 77.93 % 71.98 % 90.42 % 67.09 %
Capital
Tier 1 leverage capital ratio
8.71 % 8.77 % 9.23 % 9.36 % 9.35 % 8.71 % 9.35 %
Common equity risk-based capital ratio
15.63 % 15.80 % 16.45 % 17.01 % 17.41 % 15.63 % 17.41 %
Tier 1 risk-based capital ratio
15.63 % 15.80 % 16.45 % 17.01 % 17.41 % 15.63 % 17.41 %
Total risk-based capital ratio
17.96 % 18.16 % 19.23 % 19.86 % 20.30 % 17.96 % 20.30 %
Book value per share
$ 23.13 $ 23.16 $ 23.61 $ 22.11 $ 21.81 $ 23.13 $ 21.81
Tangible book value per share
$ 23.13 $ 23.16 $ 23.61 $ 22.11 $ 21.81 $ 23.13 $ 21.81
Asset Quality
Net (recoveries) charge-offs
$ (7 ) (12 ) (10 ) (227 ) (176 ) -29 (213 )
Net (recoveries) charge-offs to average total loans
-0.00 % -0.00 % -0.00 % -0.01 % -0.01 % -0.00 % -0.01 %
Allowance for credit losses
$ 24,270 24,164 24,193 23,168 21,902 24,270 21,902
Allowance to total loans
0.98 % 0.98 % 1.03 % 1.03 % 1.02 % 0.98 % 1.02 %
Nonperforming loans
$ 2,111 2,122 1,215 730 692 2,111 692
Other real estate owned
$ - - - - - - -
Nonperforming loans to total loans
0.09 % 0.09 % 0.05 % 0.03 % 0.03 % 0.09 % 0.03 %
Nonperforming assets to total assets
0.05 % 0.06 % 0.03 % 0.02 % 0.02 % 0.05 % 0.02 %
Loan Composition (% of Total Gross Loans)
1-4 Family
48.7 % 48.5 % 48.8 % 49.0 % 50.2 % 48.7 % 50.2 %
Commercial Loans
10.4 % 10.7 % 9.4 % 9.5 % 9.1 % 10.4 % 9.1 %
Commercial Real Estate
25.7 % 25.3 % 26.3 % 24.4 % 24.1 % 25.7 % 24.1 %
Construction Loans
8.2 % 8.3 % 7.9 % 9.0 % 8.3 % 8.2 % 8.3 %
Other Loans
7.0 % 7.2 % 7.6 % 8.1 % 8.3 % 7.0 % 8.3 %
End of Period Balances
Assets
$ 3,968,775 3,802,330 3,784,609 3,554,370 3,455,462 3,968,775 3,455,462
Debt securities
$ 994,246 1,092,107 1,099,613 1,113,981 1,129,272 994,246 1,129,272
Loans, net of allowance
$ 2,456,714 2,446,065 2,325,912 2,228,236 2,125,751 2,456,714 2,125,751
Deposits
$ 2,778,627 2,637,668 2,868,954 2,818,491 2,919,206 2,778,627 2,919,206
Other borrowings
$ 531,973 608,092 106,253 118,444 25,760 531,973 25,760
Subordinated Debt
$ 27,467 27,458 33,626 33,545 33,483 27,467 33,483
FHLB Advances
$ 315,000 215,000 470,000 286,100 190,000 315,000 190,000
Shareholders' Equity
$ 275,584 275,517 279,547 260,307 256,348 275,584 256,348
Trust and Investment
Fee Income
$ 8,015 7,347 6,573 6,390 6,477 21,935 20,227
Assets Under Administration
Balance at beginning of period
$ 6,697,009 6,435,562 5,944,772 5,392,768 5,464,847 5,944,772 6,200,407
Net investment appreciation (depreciation) & income
$ (363,654 ) 60,789 175,566 314,992 (204,456 ) (127,299 ) (1,267,404 )
Net client asset flows
$ 62,533 200,658 315,224 237,012 132,377 578,415 459,765
Balance at end of period
$ 6,395,888 6,697,009 6,435,562 5,944,772 5,392,768 6,395,888 5,392,768
Percentage of AUA that are managed
87.81 % 87.79 % 87.58 % 88.08 % 87.99 % 87.81 % 87.99 %
Stock Valuation
Closing Market Price (OTCQX)
$ 22.65 23.30 28.15 29.75 29.25 $ 22.65 $ 29.25
Multiple of Tangible Book Value
0.98 1.01 1.19 1.35 1.34 0.98 1.34
*annualized

SOURCE: FineMark Holdings, Inc.



View source version on accesswire.com:
https://www.accesswire.com/793852/finemark-holdings-inc-reports-third-quarter-2023-earnings

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