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

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.

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