Q4 Shareholder's Letter
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 year ending December 31, 2011.
FineMark’s total assets were $449.7 million as of December 31, 2011. Net income before taxes was $1.93 million for the year, 158 percent higher than the $748 thousand for the year ending December 31, 2010. The increase in net income year-over-year was primarily the result of growth in total net revenue. Total net revenue was $14.5 million for the year, compared with $10.6 million in 2010. This growth in total net revenue was driven by increases in net interest income, fee-based revenue and gains from security sales.
Net Interest Income
Net interest income was $9.2 million for 2011, 44 percent higher than the $6.4 million for 2010. The increase resulted from earning assets growth and lower cost core deposit funding growth. Net interest margin was 2.34 percent for the year ending December 31, 2011, compared with 2.28 percent for the year ending December 31, 2010.
FineMark’s securities portfolio balance was $199 million as of year-end 2011, compared with $179 million as of year-end 2010. The increase resulted from deposit growth exceeding growth in the loan portfolio.
Loans grew to $217 million as of year-end 2011, compared to $164 million as of year-end 2010. The increase was driven by loan growth in residential mortgages ($34 million), commercial real estate ($11 million), commercial ($6 million), construction (-$1 million) and personal ($3 million).
Deposits ended the year at $344 million, compared to $282 million at this time last year. We believe the overall flight to safety and our focus on building deep relationships contributed to the bank's significant deposit growth.
Non-interest income generated from investment and trust management fees totaled $2.9 million in 2011, 38 percent higher than the $2.1 million for 2010. Investment and trust assets grew from $425 million to $729 million during the 12 months ending December 31, 2011.
The bank realized $2 million in gains from security sales in 2011, compared to $1.7 million during 2010. The sales occurred from moderate repositioning of the bank’s securities portfolio.
Non-interest expense for the year ending December 31, 2011 was $12.2 million, 31 percent higher than the $9.3 million for 2010. This year-over-year increase in non-interest expense was principally due to the bank adding 16 new employees and opening two new offices.
FineMark charged-off $354 thousand during 2011 and experienced $171 thousand in recoveries. Non-accrual loans were $633 thousand as of December 31, 2011. FineMark had no delinquent loans at year end. We believe this evidences a high quality loan portfolio.
FineMark’s allowance for loan losses balance was $3.2 million or 1.47 percent of the total loans outstanding as of December 31, 2011. Management believes the provision for loan losses is appropriate given current economic conditions and the bank’s high asset quality.
FineMark Holdings, Inc. raised additional capital in the amount of $11.8 million, inclusive of $5.6 million from the United States Treasury’s Small Business Lending Fund. $5.1 million was injected into the bank resulting in a Tier I capital ratio of 8.91 percent as of December 31, 2011, compared with 8.08 percent as of December 31, 2010. We maintain $6.6 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.
2011 Business Highlights
2011 was a year of growth for FineMark National Bank & Trust. Two offices opened in Naples at Moorings Park and Vi at Bentley Village. FineMark also opened a Trust and Investment office in Palm Beach. Renovations to the office on Royal Palm Way were completed in late January and the team currently manages about $200 million in assets. Our Palm Beach office marks the first expansion outside of Southwest Florida.
Along with the new offices at the Continuing Life Care Communities in Naples, FineMark entered into a lease agreement for temporary space in south Naples on 5th Avenue South. Keith Embree will move into that space by early March.
FineMark National Bank & Trust hit a financial milestone in 2011. The bank surpassed $200 million in loans. Today, that number is up to $226 million.
In 2011 we initiated two community based programs. The first involves foster children on the verge of ‘aging out’ of the foster care system. After a number of interviews we selected a young man who is now working as a paid intern in our Fort Myers office. Not only is he gaining professional experience, but we are committed to helping him enroll in college and to act as mentors. We are encouraging other local businesses to hire young adults in similar circumstances.
We also are working with The United Way and the Lee County School District to create a program that ensures homeless families get the help they need to secure stable housing. This program was initiated after we learned of the growing problem of homelessness among school children in Southwest Florida.
The bank continued to perform at an exemplary level in 2011 and the reasons are attributable to the people we have working at FineMark, our board of directors, our shareholders and our clients. While the banking industry continues to face challenges, FineMark National Bank & Trust continues to grow, generating pre-tax profits of $1.9 million in 2011. We continue to focus on the communities we serve and developing deep relationships with our clients, with a goal of providing the highest level of service.
We thank you for your ongoing support and commitment to FineMark. Your contributions are vital to the bank’s success. Please contact me anytime as your questions, comments and thoughts are greatly appreciated.
Joseph R. Catti
President & CEO