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2019 Q4 Shareholder’s Letter

Read FineMark's Fourth Quarter Shareholder's Letter from the President, Joseph R. Catti.

FineMark Holdings, Inc. Logo


On behalf of everyone at FineMark National Bank & Trust—the Board of Directors, the executive management team and all of our dedicated associates—I am pleased to report on the bank’s performance for the fourth quarter and the full year 2019.

FineMark Holdings, Inc. (OTCQX: FNBT), the parent company of FineMark National Bank & Trust, today announced fourth quarter 2019 net income of $4.3 million, or $0.49 per diluted share, compared to net income of $4.1 million, or $0.46 per diluted share, for the fourth quarter of 2018. For the full year 2019, FineMark announced net income of $15.2 million, or $1.69 per diluted share, compared to 2018’s totals of $15.1 million and $1.70 per diluted share.

Earnings before tax in 2019 increased 12% over 2018, while net income increased just 1%. The primary reason for the flat net income year over year, is attributable to $1.6 million in tax credits the bank received in 2018 from investments in solar farms. The credits were a one-time event. While the increase in net income was modest, we are very pleased with the bank’s continued growth and profitability in what continued to be a challenging interest-rate environment in 2019. The flattening and eventual inversion of the yield curve was a headwind for all banks.

As we look ahead to 2020, interest rates and equity market performance will continue to influence the bank’s earnings; however, we believe our success ultimately depends on our commitment to our clients, our ability to provide high levels of personalized service and our desire to do what is right. We are confident these characteristics will create shareholder value irrespective of the prevailing market conditions.


Financial highlights for the fourth quarter of 2019 include:

  • Net income increased 5% and diluted earnings per share increased 7% from the fourth quarter of 2018
  • Production of new loans totaled $140 million, up 15% from the fourth quarter of 2018
  • Net interest margin increased to 2.41%, up seven basis points from the previous quarter
  • Trust fees increased 18% from the fourth quarter of 2018, exceeding $5 million


Financial highlights for the entire year of 2019 include:

  • Net income totaled $15.2 million, up 1% from 2018
  • Diluted earnings per share were $1.69, down 1% from 2018
  • Pre-tax operating income totaled $19.9 million, up 12% from 2018
  • Gains from selling securities totaled $1.6 million, mostly resulting from the sale of $6.5 million of tax-exempt municipal bonds in August 2019
  • Net interest margin was 2.43%, down from 2.70% in 2018
  • Cost of funds was 1.46%, up from 0.99% in 2018
  • Total bank assets surpassed $2 billion, increasing 17% from 2018
  • New loan production increased 14% from 2018
  • Non-performing loans were 0.12% of total loans, down from 0.20% in 2018
  • Total assets under management and administration surpassed $4 billion, increasing 32% from 2018
  • Trust fees totaled $18.6 million, up 12% from 2018
    Please refer to attached abbreviated financial statements.


In the fourth quarter, FineMark’s net interest income totaled $12.1 million, up 7% from the previous quarter. This growth was driven by an increase in the net interest margin, as well as an increase in loan production. The bank generated $140 million in new loans in the fourth quarter, up 9% from the previous quarter.

For the entire year, FineMark’s net interest income totaled $46.0 million, up 1% from 2018. Loan production was strong, increasing 14%; however, paydowns resulted in net loan growth of 11 percent for the year. The bank’s net interest margin for 2019 was 2.43%, down from 2.70% in 2018. Notably, the bank’s cost of funds increased to 1.46% in 2019 from 0.99% in 2018. This increase was largely the result of the bank adding $30 million of subordinated debt in June 2018, at an interest rate of 5.875%; the interest expense from this debt affected the bank’s net interest income for just six months in 2018 but for all 12 months in 2019.


A major driver of FineMark’s growth has been the impressive expansion of our trust and investment area. As of December 31, 2019, FineMark’s total assets under management and administration totaled $4.5 billion. This represents a 32% increase from year-end 2018. Trust fees totaled $18.6 million for the year, a 12% increase from 2018.

This growth was fueled by our commitment to provide advice and services, tailored to our clients’ unique needs. We continue to attract new clients and expand existing relationships in all of our markets. FineMark’s net client asset flows totaled $546 million, a 2% increase from 2018. Net asset flows in the fourth quarter of 2019 were $116 million, significantly higher than the fourth quarter of last year. In addition to our high level of service, equity markets enjoyed one of their strongest years in the past decade; as a result, several major indexes closed the year near record highs.


The growth of FineMark’s business requires additional expenses to support the high level of service the bank provides its clients. Noninterest expense increased 5% in 2019 to $47.9 million. This increase, which includes adding more professionals and investing in technology to improve client service, is in line with the steady expansion FineMark has experienced over the past several years.


FineMark remains committed to maintaining high credit standards through a relationship-based approach to lending. We conduct underwriting based on an in-depth understanding of each potential borrower’s needs and financial situation. As a result, the bank has experienced very low defaults on loans across market cycles.

At the end of 2019, FineMark’s nonperforming loans equaled $1.8 million, or just 0.12% of the bank’s total loans. This percentage represents a decrease of eight basis points from 2018’s year-end figure of 0.20%. In addition, 1.5% of total capital is classified compared to industry peers at 15.2%. As of December 31, 2019, FineMark’s allowance for loan loss reserve was $15.8 million, or 1.04% of total loans outstanding. Management believes this level of reserve is sufficient to support the bank’s loan portfolio risk. FineMark’s management team is very pleased with the credit quality of the bank’s loan portfolio and believes our commitment to knowing each of our clients personally, will serve shareholders well in the event of an eventual economic downturn.


All of FineMark’s capital ratios continue to be in excess of regulatory requirements for “well-capitalized” banks. FineMark’s tier 1 capital ratio was 8.51% as of December 31, 2019, down from 8.95% at the end of 2018. The bank’s Tier 1 leverage capital ratio was 9.52%. Additionally, FineMark Holdings has $5.4 million of capital to support the bank’s future growth.


As noted in previous quarterly letters, FineMark is in the process of building a new office in Fort Myers, Florida, to support the bank’s growth and to serve as a home for our expanding team. The walls are now up on the 60,000 square foot building, which is a half mile from our existing Fort Myers office. Construction began in November 2019, with a projected completion date of yearend 2020.
As we progress into 2020, we remain committed to the vision that has guided FineMark since its founding in 2007: To make a positive impact on the individuals, families and communities we serve while being good stewards of FineMark’s resources. On behalf of the entire FineMark team, I want to thank you for your support and commitment to our vision.

Kind regards,

Joseph R. Catti
President & CEO

Click to download a PDF version of the Fourth Quarter Shareholder’s Letter.

View previous letters here.