2020 Q4 Shareholder’s Letter

2020 Q4 Shareholder’s Letter


On behalf of everyone at FineMark Holdings, Inc.—the Board of Directors, the executive management team, and all of our dedicated associates—I am pleased to report on our performance for the fourth quarter and the full year 2020.

FineMark Holdings, Inc. (the “Holding Company”; OTCQX: FNBT), the parent company of FineMark National Bank & Trust (the “Bank”; collectively, “FineMark”), today announced fourth quarter 2020 net income of $6.3 million (or $0.69 per diluted share). This compares to net income of $4.3 million (or $0.49 per diluted share) in the fourth quarter of 2019, a 45% increase. For the full year 2020, FineMark announced net income of $22.0 million (or $2.42 per diluted share). This compares to 2019’s totals of $15.2 million (or $1.69 per diluted share), a 44% increase.

FineMark achieved record net income for both the full year 2020 and the fourth quarter. This accomplishment is especially notable given the headwinds created by record low interest rates and ongoing challenges from COVID-19. We attribute this success to our associates and their commitment to providing excellent service even under the most difficult of circumstances. With every pivot they rose to the occasion and as a result, our trust and investment business continued to expand, and our loan portfolio continued to grow.

Additionally, we accelerated our planned investments in technology and greatly expanded our ability to engage with clients and shareholders virtually in 2020. We used this technology to host a variety of events, including an online annual shareholders’ meeting, virtual investor roundtables, and speaker sessions attended by clients located across the country.

Fourth Quarter Financial Highlights

Highlights of the fourth quarter of 2020 on a year-over-year basis include:

  • Net income increased 45% to a record $6.3 million.
  • Diluted earnings per share increased 41% to $0.69.
  • Loans, net of allowance, increased 22% to $1.9 billion (up 17% excluding Paycheck Protection Program loans).
  • Total deposits increased 33% to $2.2 billion.
  • Net interest income increased 26% to $15.3 million.
  • Trust fees increased 11% to $5.6 million.
  • Assets under management and administration increased 14% to $5.1 billion (including $120 million of net client asset inflows, a 63% increase from the third quarter).

Year-end Financial Highlights

Highlights for the entire year of 2020 include:

  • Net income increased 44% to a record $22.0 million.
  • Diluted earnings per share increased 43% to $2.42.
  • Net interest income increased 26% to $58.2 million.
  • Return on average assets (ROAA) was 0.89% (up from 0.76%); return on risk-weighted assets (ROWA) was 1.49% (up from 1.22%); return on average equity (ROAE) was 11.20% (up from 8.97%).
  • Net interest margin was 2.45% (up from 2.43%).
  • Cost of funds was 0.81% (down from 1.46%).
  • Nonperforming loans dropped to 0.07% of total loans, down from 0.12% in 2019.
  • Trust fees increased 12% to $20.9 million.

 Please refer to the attached abbreviated financial statement.

Net Interest Income and margin

For the fourth quarter of 2020, FineMark’s net interest income totaled $15.3 million, up 26% from the fourth quarter of 2019. This increase was attributable to a 22% year-over-year increase in the loan portfolio coupled with a decline in the Bank’s cost of funds, despite the cost of the recent subordinate debt and the decrease in yields on earning assets. For the entire year, FineMark’s net interest income totaled $58.2 million, up 26% from 2019.

In alignment with our values, we were pleased to help hundreds of small businesses successfully obtain loans through the Paycheck Protection Program (PPP). Our principal motivation for participating in PPP was to assist our clients; however, a byproduct of the program was a positive effect on revenue (in 2020, we recognized $1 million in fees generated by these loans).

Against the backdrop of the Federal Reserve’s policy to keep short-term rates near zero for most of the year due to the COVID-19 pandemic, the Bank’s net interest margin for 2020 was 2.45%, up slightly from 2.43% in 2019. To support our capital position (due to strong balance sheet growth), we issued $21.3 million in 10-year subordinated debt. The rate on this debt is fixed at 4.25% for five years.

Non-interest Income

A significant driver of FineMark’s growth for the past several years, and an important source of revenue diversification, is our expanding trust and investment business. As of December 31, 2020, FineMark’s assets under management and administration totaled $5.1 billion, a 14% increase from year-end 2019. As a result, trust fees totaled $20.9 million for the year, a 12% increase over 2019. While this growth was aided by strength in the equity markets in the second half of the year, it resulted primarily from the addition of new clients and our expanded relationships with existing clients.

Net asset inflows in the fourth quarter of 2020 were $120 million, a 63% increase versus the previous quarter. For the year, net asset inflows totaled $420 million. This reflects the Bank’s ability to attract funds from new clients ($148 million) and expand relationships with existing clients ($272 million). Although less than the exceptional inflows experienced in 2019, the results are notable given the uncertainty created by the pandemic.

Non-interest Expense

As FineMark’s business increases, we incur additional expenses to maintain high service levels. Our non-interest expense increased 11% in 2020 to $53.1 million. This uptick, due largely to our hiring of additional professionals and our investment in technology to support client service, is in line with FineMark’s steady expansion. FineMark’s efficiency ratio, which measures non-interest expense as a percent of revenues, improved in 2020 to 61.27% (from 69.12% in 2019), indicating our ability to manage expenses prudently as we expand.

Credit Quality

As FineMark grows, the Bank remains committed to maintaining high credit standards through our relationship-based approach to lending. Loans are underwritten based on an in-depth understanding of each potential borrower’s needs and financial situation. As a result, the Bank has experienced minimal defaults on loans across all market cycles.

At the end of 2020, nonperforming loans were just $1.3 million, or 0.07% of the Bank’s total loans. This is a further decline from the low rate of 0.12% at year-end 2019. As of December 31, 2020, the Bank’s allowance for loan loss reserve was $20.8 million (or 1.11% of total loans outstanding) and includes $2.5 million held as a precaution due to the pandemic. Management believes that this reserve is sufficient to support the Bank’s loan portfolio risk.

FineMark’s management team is pleased with the credit quality of the Bank’s loan portfolio and will continue to closely monitor economic conditions to determine whether additional provisions should be made. We believe our commitment to maintaining strong relationships, understanding our clients’ individual situations, and working proactively with them to deliver creative solutions continues to serve our shareholders well.


All of the Bank’s capital ratios continue to exceed regulatory requirements for “well-capitalized” banks. As of December 31, 2020, the Bank’s tier 1 leverage ratio was 9.19%. FineMark’s (the consolidated entity) tier 1 leverage ratio was 7.48%, and the total risk-based capital ratio was 17.52%. Funds raised through the $21.3 million subordinated debt offering in the fourth quarter were used to pay down a line of credit at the holding company level and to augment the Bank’s capital.


Shares of FineMark Holdings, Inc. (OTCQX: FNBT), the parent company of FineMark National Bank & Trust, are traded on the OTCQX exchange. Operated by the OTC Markets Group, the OTCQX allows investors to trade privately-held stock through their preferred broker. During 2020, FineMark’s shares traded in a range of $19.55 and $25.15 at an average volume of 1,089 shares per trading day. The shares closed the year trading at $23.41 for a price-to-tangible book value multiple of 0.99x.

Our new Headquarters Office

FineMark’s new headquarters in Fort Myers, Florida, opened in the fourth quarter. The state-of-the-art building features superior amenities and is equipped with the latest technology to facilitate future in-person client meetings. The solar panels installed on its carports generated a $189,000 tax credit and will help reduce carbon emissions. We look forward to hosting a formal welcome event at our new headquarters as soon as it is safe to do so.

Closing remarks

As we look ahead to 2021, the most important drivers of the Bank’s growth will always be our associates’ unparalleled commitment to providing the highest level of personalized service to our clients and the strength of our balance sheet. We believe that these qualities will continue to create shareholder value in all types of environments now and in the years to come.

We remain faithful to the vision that has guided FineMark since its founding in 2007: to make a positive impact on the families, individuals, 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 of—and dedication to—our vision.

Kind regards,
Joseph R. Catti
Chairman & CEO

Earnings Release October-December 2020 (pdf)

View previous letters here.