Q1 Shareholder's Letter

05/16/2012

Dear Shareholder:

On behalf of the Board of Directors and the management team of FineMark National Bank & Trust, I am pleased to report on the Bank’s performance for the quarter ending March 31, 2012.

First Quarter Financial Highlights

FineMark’s total assets were $463 million as of March 31, 2012. Pre-tax income totaled $451 thousand for the quarter, compared to $91 thousand for the first quarter last year.

Total net revenue was $4.3 million for the quarter, compared with $2.8 million for the same period in 2011. This growth in total net revenue was driven by increases in net interest income, fee-based revenue and gains from security sales.

Please refer to abbreviated financial statement below:

Net Interest Income

Net interest income was $2.8 million for the quarter, 36 percent higher than the $2 million for the first quarter 2011. The increase resulted from higher loan growth and lower cost of core deposits. As a result, net interest margin increased to 2.63 percent, compared with 2.28 percent for the same period last year.

FineMark’s securities portfolio balance was $187 million, compared with $204 million as of March 31, 2011. The reduction in the securities portfolio was a result of funding loan growth.

Loans grew to $233 million, compared to $177 million in the first quarter 2011. Loan growth was centered in residential lending, growing by approximately $42 million. Loans to businesses grew by approximately $5 million. As a result of the Bank’s focus on community assistance, an additional $1 million acquisition of Habitat for Humanity Loans was made. These loans were made to individuals in order to assist in home ownership.

Total deposits grew to $352 million, compared to $328 million as of March 31, 2011. The average cost of deposits has declined to 0.59% compared to 1.19% for the quarter ended March 31, 2011. This is a direct result of the continued low interest rate environment.

Noninterest Income

Noninterest income generated from asset management and trust fees totaled $889 thousand in the first quarter of 2012, 38 percent higher than the $644 thousand for first quarter 2011.
Investment and trust assets grew from $ 461 million to $767 million during the quarter ending March 31, 2012. Asset management revenues continue to increase from developing new relationships across the organization.

FineMark generated security gains of $470 thousand during the quarter versus $64 thousand for the same period last year. These gains were the result of repositioning the portfolio to reduce interest rate volatility and to provide liquidity for loan growth.

Noninterest Expense

Noninterest expense was $3.7 million, 41 percent higher than the $2.6 million last year. Year-over-year operating expenses were higher due to the bank expanding geographically and adding staff to enhance its enterprise risk management capabilities.

Credit Quality

FineMark’s overall credit quality remains high with low levels of classified loans relative to capital and total assets of the bank. Classified loans total $5.5 million, which represents 13 percent of total capital and reserves.

FineMark’s allowance for loan losses had a balance of $3.3 million or 1.42 percent of the total loans outstanding as of March 31, 2012. Management believes this level of reserve is adequate to support the risk associated with the loan portfolio.
Capital

The Bank’s Tier One Capital ratio was 8.53 percent as of March 31st, 2012, compared with 7.91 percent at the end of first quarter 2011. There continues to be $6.4 million of capital in the Holding Company to support future growth. All bank capital ratios continue to be in excess of “well-capitalized” regulatory requirements.

First Quarter 2012 Business Highlight

FineMark’s marketing team finalized the redesign of the Bank’s website www.finemarkbank.com. The revamped site is more interactive with video profiles, an updated news feed and improved compatibility for iPads, iPhones and other mobile devices.

We thank you for your ongoing support and commitment to FineMark. Your contribution to this organization is greatly appreciated and I encourage you to contact me anytime.



Joseph R. Catti
President & Chief Executive Officer




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