DEAR VALUED SHAREHOLDERS:
On behalf of everyone at FineMark Holdings, Inc.—the Board of Directors, the executive management team, and our dedicated associates—I am pleased to report on our performance for the fourth quarter as well as for the full year 2021.
FineMark Holdings, Inc. (the “Holding Company”; OTCQX: FNBT), the parent company of FineMark National Bank & Trust (the “Bank”; collectively, “FineMark”), today announced fourth quarter 2021 net income of $7.0 million. This compares to $6.3 million for the fourth quarter of 2020. Per-share earnings were $0.59 per diluted share, a $0.10 decrease compared to the fourth quarter of 2020, which reflects the issuance of 2.5 million new shares in 2021. For the full year 2021, FineMark announced net income of $25.0 million (or $2.39 per diluted share), a 14% increase over the $22.0 million (or $2.42 per diluted share) in 2020.
We attribute FineMark’s growth to the quality and dedication of our associates and their commitment to provide outstanding service. Net income for 2021 was a record high, and fourth quarter net income was just shy of hitting another record. For both the quarter and the year, growth in the loan portfolio and trust assets under management were key drivers of these results.
As with many businesses around the Country, we continue to be challenged by the pandemic and are mindful of our associates’ and clients’ safety. While our preference is to meet with our clients in person, our investment in technology allows us to engage virtually with our clients. Our hope remains that pandemic-related issues will wane as we progress into the new year.
Fourth Quarter Financial Highlights
Highlights of the fourth quarter of 2021 on a year-over-year basis include:
- Net income increased 11% to $7.0 million.
- Loans, net of allowance, increased 8% to $2 billion.
- Total deposits increased 23% to $2.7 billion.
- Net interest income increased 12% to $17.2 million.
- Cost of funds decreased 15% to $3.3 million.
- Trust fees increased 26% to $7.0 million.
- Assets under management and administration increased 22% to $6.2 billion (including $181 million from new and expanded relationships, a 51% increase year-over-year).
Year-end Financial Highlights
Highlights for the entire year of 2021 include:
- Net income increased 14% to a record $25.0 million.
- Net interest income increased 11% to $64.7 million.
- Diluted earnings per share was $2.39 versus $2.42 in 2020, a minimal decline given the greater number of shares outstanding (11,603,7781 as of 12-31-21 versus 8,955,427 as of 12-31-20).
- Net interest margin was 2.24%, down from 2.45% as yields available on earning assets declined from 3.20% to 2.74%.
- Cost of funds was 0.53% (down from 0.78% in 2020).
- Trust fees increased by 28% to $26.6 million.
Please refer to the abbreviated financial statement for more details here.
Net Interest Income and Margin
For the fourth quarter of 2021, FineMark’s net interest income totaled $17.2 million, up 12% from the fourth quarter of 2020. The increase in interest income was largely attributable to the investment portfolio which increased by 50% year-over-year, and interest income generated from the 8% net growth in the loan portfolio. In addition,
two interest rate swaps were terminated, reducing our interest expense by $45,000 per month. Also, in the fourth quarter, two Federal Home Loan Bank advances, totaling $20 million, were prepaid. Despite the upfront cost, interest expense was reduced by $27,000 per month. For the entire year, FineMark’s net interest income totaled $64.7 million, up 11% from 2020.
With short-term rates near zero throughout 2021, the Bank achieved a net interest margin of 2.24% in the fourth quarter, compared to 2.36% in the fourth quarter of 2020. A decline in yield generated from earning assets was partly offset by a decrease in the cost of funds for the quarter from .62% to .46%, in 2021. For the year, net interest margin of 2.24% was down from 2.45% in 2020. Yields are expected to increase as the Federal Reserve has signaled it will likely raise short-term interest rates in 2022. We continue to seek ways to manage the impact that rising interest rates could place on net interest income. In addition, in the fourth quarter, we strategically invested over $91 million in securities to improve net interest income. This investment will generate more income than holding those funds in cash. Finally, we have engaged a third-party consultant to provide tactical and strategic initiatives with respect to our balance sheet structure and overall asset-liability management.
FineMark’s trust and investment business continues to grow at significant rates, resulting in desired revenue diversification. As of December 31, 2021, assets under management and administration totaled $6.2 billion, an 8% increase from the previous quarter and a 22% increase from year-end 2020. Trust fees increased to $26.6 million for the year, a 28% increase over 2020.
More than 50% of this growth was the result of satisfied clients expanding their relationships with FineMark, as well as our associates developing new client relationships. In addition, growth was aided by strong equity market returns in 2021.
Net asset inflows in the fourth quarter of 2021 totaled $181 million, a 48% increase versus the previous quarter. For the year, net asset inflows were $583 million, a 39% increase compared to 2020. This growth is a testament to the exceptional level of expertise, service and comprehensive advice provided by our team.
As FineMark grows, additional expenses are incurred to maintain our high service levels. Non-interest expense increased 30% in the fourth quarter year-over-year, and 17% for the full year, to $62.2 million. The increases were primarily due to higher personnel costs. In 2021, we hired 29 associates (net), and several programs were initiated in a very tight labor market to proactively reward and help retain the associates who are crucial to our continued success. To offset these initiatives, we purchased an additional $15 million of bank-owned life insurance, which generates an attractive tax-free yield. FineMark’s efficiency ratio, which measures non-interest expense as a percent of revenues, increased to 66.6% in 2021, compared to 61.27% in 2020; however, this level remains in line with our targets.
FineMark’s loan portfolio (net of allowances) grew by $146 million in 2021. This 8% net increase masks extremely strong gross-loan production of over $912 million as many clients took advantage of favorable conditions to reduce debt during the year, and $70 million in Paycheck Protection Program loans were repaid in 2021.
As always, the Bank remains committed to maintaining its high credit standards through our relationship-based approach to lending. Loan decisions are always based on an in-depth understanding of each borrower’s needs, the relationship and financial situation. As a result, the Bank has experienced minimal defaults on loans through a variety of market cycles. At the end of 2021, nonperforming loans were just $729,000 or 0.04% of total loans, a decrease from the already low rate of 0.07% at year-end 2020. As of December 31, 2021, the bank’s allowance for loan loss reserve was $20.2 million (1.01% of total loans outstanding) and includes $750 thousand held as a precaution due to the pandemic. Management believes 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 circumstances, and working proactively to deliver comprehensive solutions, continues to serve our shareholders well.
All capital ratios continue to exceed regulatory requirements for “well-capitalized” banks. As of December 31, 2021, FineMark’s tier 1 leverage ratio on a consolidated basis was 9.73%, and the total risk-based capital ratio was 20.64%. ROAE declined relative to 2020 due to the issuance of 2.5 million shares in 2021: increasing shareholders’ equity by $80 million or 37%.
FINEMARK HOLDINGS, INC. ON THE OTCQX EXCHANGE
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 2021, FineMark’s shares traded in a range of $23.65 to $36.00 at an average volume of 1,759 shares per trading day. The shares closed the year trading at $33.60, a 44% increase compared to the end of 2020, for a price-to-tangible book value multiple of 1.28.
Our newest full-service location in Jupiter, Florida, is slated to open in March, followed shortly thereafter by our second Naples location in the heart of the historic downtown area. In addition, the buildout continues of our flagship location in Fort Myers, Florida. Tenants will occupy approximately half of the built-out second floor, generating rental income, and the Bank will use the remaining space to support our continued growth.
As we look ahead to 2022, the most important drivers of the Bank’s growth will always be our associates’ unparalleled commitment to providing the highest level of personalized and comprehensive 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 economic environments and across market cycles.
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.
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 www.finemarkbank.com.
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 2021 Q4 (.pdf)
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