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2021 Q1 Shareholder’s Letter

Earnings Release March 31, 2021

2021 Q1 Shareholder’s Letter


On behalf of FineMark Holdings, Inc.—the Board of Directors, the executive management team, and all of our dedicated associates—I am pleased to report on the company’s performance for the first quarter of 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.


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 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 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 Please refer to the attached abbreviated financial statements. COVID-19: ONGOING IMPACT AND OUR RESPONSE

As vaccination efforts continue to gain momentum and the U.S. economy progresses toward fully reopening, we remain

focused on practicing COVID-19 safety protocols while delivering exceptional service to our clients and producing a strong financial performance for our shareholders. Our ability to grow our high-quality loan portfolio, increase trust assets, and generate strong earnings during the pandemic is a direct result of our associates’ commitment to our high-touch, relationship- driven approach.

Operations and Safety: Our associates continued to serve our clients through productive meetings held using videoconferencing technology in the first quarter of 2021, as well as through a growing number of in-person meetings at many of our offices. An influx of new trust clients during the quarter reflects the strong relationships we have developed with our existing clients, which lead to a steady flow of referrals.

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 more than 500 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.


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.


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.


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.


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.


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%.


We are settling into our new home office in Fort Myers, Florida, and are beginning to achieve synergies by having so many of our people working together in the same building. Looking ahead toward further expansion, the Office of the Comptroller of the Currency (OCC) approved our application to open an office in Jupiter, Florida, later this year, and a second office in South Naples, Florida, in early 2022. The addition of these two offices will bring our number of locations to 14.


As always, I appreciate your loyalty, trust, and faith in us, and am deeply grateful for the dedication that our associates show every day. Their commitment to the Bank, our clients, and our communities is truly exceptional.

Our ability to achieve the results reported in this letter stems from our relationship-based approach and our commitment to provide creative solutions that meet and exceed our clients’ needs.

In the coming months, we will continue to prioritize the safety of our associates and clients as situations shift around the pandemic. We are optimistic that vaccinations will point the way toward strong growth for the remainder of the year.

Thank you for your continued support.

Kind regards,

Joseph R. Catti

Chairman & CEO


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. Through its offices located in Florida, Arizona and South Carolina, FineMark offers a full range of financial services, including personal and business banking, lending services, trust and investment services. The Corporation’s common stock trades on the OTCQX under the symbol FNBT. Investor information is available on the Corporation’s website at

Forward-Looking Statements

This press release contains statements that are “forward-looking statements.” You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value or outflows of assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectability, default and charge-off rates; changes in the size and nature of our competition; changes in legislation or regulation and accounting principles, policies and guidelines; occurrences of cyber-attacks, hacking and identity theft; natural disasters; and changes in the assumptions used in making such forward-looking statements. You should carefully review all of these factors and you should be aware that there might be other factors that could cause these differences.

These forward-looking statements were based on information, plans and estimates at the date of this report. We assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.


Earnings Release 03-31-21 (pdf)

View previous letters here.