FineMark Holdings, Inc. Reports Third Quarter 2023 Earnings

FORT MYERS, FL / ACCESSWIRE / October 17, 2023 / FineMark Holdings, Inc. (the "Holding Company") (OTCQX:FNBT), the parent company of FineMark National Bank & Trust (the "Bank"; collectively, "FineMark"), today reported revenues of $45.5 million and net revenues of $20.5 million for the third quarter ended September 30, 2023, compared to $32.1 million and $25.9 million, respectively, in the third quarter of 2022. Net income was $729 thousand, or $0.06 per diluted share, compared with net income of $5.4 million, or $0.45 per diluted share, for the same period a year ago.

Joseph R. Catti, Chairman & Chief Executive Officer:

I would like to begin by extending our heartfelt condolences to the families of those killed and taken hostage by terrorists in Israel and Gaza in recent days. Our thoughts and prayers are with the people of the Middle East as this deadly war with terrorist group Hamas intensifies.

Against a backdrop of uncertainty in our global markets, renewed concerns around inflation and worries of a ‘higher for longer' interest rate outlook, our associates continue to meet challenges and prudently manage our resources as we maintain our focus on the individuals and families we serve. Our clients know they can depend on FineMark to deliver exceptional service and innovative solutions. It is gratifying to lead an organization that continually seeks to deliver unparalleled and proactive service and we are grateful for the confidence our clients place in us.

As important as service and innovation are to our business, our focus on financial stability provides our clients with the confidence that we will be here for future generations. Our conservative credit culture combined with our high levels of liquidity and robust capital have positioned FineMark to succeed in a variety of economic environments.

While we are pleased with the growth in client relationships, loans, assets under management and administration, our financial results continue to be impacted by the Federal Reserve's monetary policies. Interest expense has increased sharply over the last 18 months due to higher deposit costs and the use of certain higher-cost sources of funding. We are cautiously optimistic that the pace of increases in interest expense should begin to slow over the coming months which, when combined with increasing yields on our loan and securities portfolio, should result in improving financial performance.

Highlights from the Third Quarter:

• Interest income increased 50% in the third quarter 2023 to $36.4 million, compared to total interest income of $24.2 million for the same quarter 2022.

• Net loans increased 15.6% from the third quarter of 2022 and credit quality remains excellent.

• Assets under management grew 18.6% from the third quarter of 2022, resulting in a 23.7% increase in Trust fees.

Net Interest Income & Margin

For the third quarter of 2023, FineMark's net interest income totaled $11.3 million, representing a 37% decrease compared to Q3 of 2022. This decline is attributable to the impact of the Fed's rapid action to reduce inflation which has resulted in interest expense increasing more quickly than interest income. The Bank's net interest margin decreased to 1.21% in Q3 2023, down from 2.16% for the same period in 2022.

Non-Interest Income

As of September 30, 2023, FineMark's assets under management and administration totaled $6.4 billion, reflecting an 18.6% increase from $5.4 billion on September 30, 2022. This increase in assets under management resulted in investment management and trust fees increasing 25% year-over-year.

Non-Interest Expense

Non-interest expense for the quarter ended September 30, 2023, rose to $19.5 million, marking a 5% increase from $18.7 million in the third quarter of 2022. While salary and employee benefits remained relatively stable, occupancy expense increased due to the opening of our newest locations in Naples and Jupiter, Florida. Additionally, a 2 basis point increase in deposit insurance rates resulted in a $353,000 increase in expenses from Q3 2022.

Balance Sheet Highlights

Despite the rising interest rate environment, loan production remained strong for the quarter at $164 million, compared to $177 million for the same quarter last year. Total loans ended the quarter at $2.5 billion, compared to $2.1 billion at September 30, 2022. Deposits decreased to $2.78 billion as of September 30, 2023, down 5% from $2.92 billion on September 30, 2022 primarily from the transfer of client deposits to purchase higher yielding treasuries.

Credit Quality

FineMark maintains its commitment to high credit standards through a tailored and relationship-centered approach to lending. Our loan decisions are based on a comprehensive understanding of each borrower's needs and unique financial situation, resulting in minimal loan defaults spanning various economic conditions.

As of September 30, 2023, non-performing loans amounted to $2.1 million, representing 0.09% of total loans. This marks an increase from $692 thousand or 0.03% of total loans in the third quarter of 2022. The rise can be attributed to the default of one loan. We do not expect any losses associated with existing non-accrual loans. The current allowance for credit losses stands at $24.3 million, equivalent to 0.98% of gross loans.

Capital

FineMark's capital ratios continue to exceed regulatory requirements for "well-capitalized" banks. On September 30, 2023, FineMark's Tier 1 leverage ratio, on a consolidated basis, stood at 8.71% after adding the unrealized loss to average assets (denominator), while the total risk-based capital ratio was 17.96%. Additionally, the tangible equity to assets ratio was 8.92% after deducting the net unrealized loss from Tier 1 capital to average assets. Rising interest rates in the past year and a half led to a net unrealized loss of $71 million on the Bank's investment portfolio. This is a direct result of the rapid increase in rates rather than a reflection of bond credit quality. Given the short duration of the portfolio of 2.6 years, these losses will continue to decline as bonds mature.

CONTACT:

Ryan Roberts
Investor Relations
239-461-3850
investorrelations@finemarkbank.com
8695 College Pkwy Suite 100
Fort Myers, FL 33919

website: www.finemarkbank.com

Background

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 .

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.

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands, except share amounts)

			September 30,				December 31,
Assets			2023				2022
			(Unaudited)
Cash and due from banks			$	309,234				18,374
Debt securities available for sale				903,993				1,020,612
Debt securities held to maturity				90,253				93,369
Loans, net of allowance for credit losses of $24,270 in 2023 and $23,168 in 2022				2,456,714				2,228,236
Federal Home Loan Bank stock				17,449				13,859
Federal Reserve Bank stock				6,340				6,277
Premises and equipment, net				40,441				41,009
Operating lease right-of-use assets				11,829				12,825
Accrued interest receivable				12,096				10,220
Deferred tax asset				28,401				29,955
Bank-owned life insurance				73,367				72,138
Other assets				18,658				7,496
Total assets			$	3,968,775				3,554,370
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing demand deposits				675,402				652,671
Savings, NOW and money-market deposits				1,872,219				2,122,561
Time deposits				231,006				43,259
Total deposits				2,778,627				2,818,491
Official checks				5,979				13,312
Other borrowings				531,973				118,444
Federal Home Loan Bank advances				315,000				286,100
Operating lease liabilities				11,973				12,900
Subordinated debt				27,467				33,545
Other liabilities				22,172				11,271
Total liabilities				3,693,191				3,294,063
Shareholders' equity:
Common stock, $.01 par value 50,000,000 shares authorized,
11,912,634 and 11,773,050 shares issued and outstanding in 2023 and 2022				119				118
Additional paid-in capital				214,474				210,953
Retained earnings				132,050				127,514
Accumulated other comprehensive loss				(71,059	)			(78,278	)
Total shareholders' equity				275,584				260,307
Total liabilities and shareholders' equity			$	3,968,775				3,554,370
Book Value per Share			$	23.13				22.11

FINEMARK HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
($ in thousands, except per share amounts)

			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2023				2022				2023				2022
Interest income:
Loans			$	29,704				20,186			$	81,296				55,363
Debt securities				3,849				3,854				12,032				11,126
Dividends on Federal Home Loan Bank stock				265				102				836				319
Other				2,560				105				4,823				251
Total interest income				36,378				24,247				98,987				67,059
Interest expense:
Deposits				15,536				4,188				38,011				6,963
Federal Home Loan Bank advances				2,519				1,473				8,604				4,502
Subordinated debt				364				507				1,347				1,590
Other borrowings				6,654				-				12,222				-
Total interest expense				25,073				6,168				60,184				13,055
Net interest income				11,305				18,079				38,803				54,004
Credit loss expense				238				121				1,272				1,406
Net interest income after credit loss expense				11,067				17,958				37,531				52,598
Noninterest income:
Trust fees				8,015				6,477				21,935				20,227
Income from bank-owned life insurance				663				399				1,736				1,412
Income from solar farms				89				85				240				255
Gain on extinguishment of debt				-				505				534				2,349
Other fees and service charges				397				381				1,226				1,287
Total noninterest income				9,164				7,847				25,671				25,530
Noninterest expenses:
Salaries and employee benefits				12,060				11,984				35,207				33,871
Occupancy				2,476				2,035				7,424				5,934
Information systems				1,559				1,417				4,685				4,513
Professional fees				655				535				1,984				1,687
Marketing and business development				447				392				1,613				1,644
Regulatory assessments				778				446				2,022				1,341
Other				1,543				1,851				4,887				4,370
Total noninterest expense				19,518				18,660				57,822				53,360
Earnings before income tax (benefit) expense				713				7,145				5,380				24,768
Income tax (benefit) expense				(16	)			1,757				816				5,531
Net earnings			$	729				5,388			$	4,564				19,237
Weighted average common shares outstanding - basic				11,904				11,747				11,884				11,720
Weighted average common shares outstanding - diluted				11,942				11,925				11,921				11,901
Per share information:	Basic earnings per common share		$	0.06				0.46			$	0.38				1.64
	Diluted earnings per common share		$	0.06				0.45			$	0.38				1.62

FineMark Holdings, Inc.
Consolidated Financial Highlights
Third Quarter 2023
Unaudited

$ in thousands except for share data		3rd Qtr 2023				2nd Qtr 2023				1st Qtr 2023				4th Qtr 2022				3rd Qtr 2022				2023				2022
$ Earnings
Net Interest Income		$	11,305				12,799				14,699				15,889				18,079				38,803				54,004
Credit Loss Expense		$	238				(23	)			1,057				1,039				121				1,272				1,406
Non-interest Income (excl. gains and losses)		$	9,164				8,253				7,720				7,224				7,342				25,137				23,181
Gain on sale of debt securities available for sale		$	-				-				-				-				-				-				-
Gain (loss) on debt extinguishment		$	-				534				-				-				505				534				2,349
Gain on termination of swap		$	-				-				-				-				-				-				-
Non-interest Expense		$	19,518				19,388				18,916				18,011				18,660				57,822				53,360
Earnings before income tax (benefit) expense			713				2,221				2,446				4,063				7,145				5,380				24,768
Income tax (benefit) expense		$	(16	)			391				441				933				1,757				816				5,531
Net Earnings		$	729				1,830				2,005				3,130				5,388				4,564				19,237
Basic earnings per share		$	0.06				0.15				0.17				0.27				0.46				0.38				1.64
Diluted earnings per share		$	0.06				0.15				0.17				0.26				0.45				0.38				1.62
Performance Ratios
Return on average assets*			0.07	%			0.19	%			0.22	%			0.36	%			0.62	%			0.16	%			0.74	%
Return on risk weighted assets*			0.13	%			0.34	%			0.39	%			0.63	%			1.12	%			0.27	%			1.33	%
Return on average equity*			1.06	%			2.63	%			3.01	%			4.92	%			7.97	%			2.22	%			9.15	%
Yield on earning assets*			3.93	%			3.68	%			3.39	%			3.17	%			2.92	%			3.67	%			2.72	%
Cost of funds*			2.78	%			2.36	%			1.74	%			1.27	%			0.76	%			2.31	%			0.62	%
Net Interest Margin*			1.21	%			1.40	%			1.75	%			1.90	%			2.16	%			1.44	%			2.45	%
Efficiency ratio			95.36	%			89.82	%			84.37	%			77.93	%			71.98	%			90.42	%			67.09	%
Capital
Tier 1 leverage capital ratio			8.71	%			8.77	%			9.23	%			9.36	%			9.35	%			8.71	%			9.35	%
Common equity risk-based capital ratio			15.63	%			15.80	%			16.45	%			17.01	%			17.41	%			15.63	%			17.41	%
Tier 1 risk-based capital ratio			15.63	%			15.80	%			16.45	%			17.01	%			17.41	%			15.63	%			17.41	%
Total risk-based capital ratio			17.96	%			18.16	%			19.23	%			19.86	%			20.30	%			17.96	%			20.30	%
Book value per share		$	23.13			$	23.16			$	23.61			$	22.11			$	21.81			$	23.13			$	21.81
Tangible book value per share		$	23.13			$	23.16			$	23.61			$	22.11			$	21.81			$	23.13			$	21.81
Asset Quality
Net (recoveries) charge-offs		$	(7	)			(12	)			(10	)			(227	)			(176	)			-29				(213	)
Net (recoveries) charge-offs to average total loans			-0.00	%			-0.00	%			-0.00	%			-0.01	%			-0.01	%			-0.00	%			-0.01	%
Allowance for credit losses		$	24,270				24,164				24,193				23,168				21,902				24,270				21,902
Allowance to total loans			0.98	%			0.98	%			1.03	%			1.03	%			1.02	%			0.98	%			1.02	%
Nonperforming loans		$	2,111				2,122				1,215				730				692				2,111				692
Other real estate owned		$	-				-				-				-				-				-				-
Nonperforming loans to total loans			0.09	%			0.09	%			0.05	%			0.03	%			0.03	%			0.09	%			0.03	%
Nonperforming assets to total assets			0.05	%			0.06	%			0.03	%			0.02	%			0.02	%			0.05	%			0.02	%
Loan Composition (% of Total Gross Loans)
1-4 Family			48.7	%			48.5	%			48.8	%			49.0	%			50.2	%			48.7	%			50.2	%
Commercial Loans			10.4	%			10.7	%			9.4	%			9.5	%			9.1	%			10.4	%			9.1	%
Commercial Real Estate			25.7	%			25.3	%			26.3	%			24.4	%			24.1	%			25.7	%			24.1	%
Construction Loans			8.2	%			8.3	%			7.9	%			9.0	%			8.3	%			8.2	%			8.3	%
Other Loans			7.0	%			7.2	%			7.6	%			8.1	%			8.3	%			7.0	%			8.3	%
End of Period Balances
Assets		$	3,968,775				3,802,330				3,784,609				3,554,370				3,455,462				3,968,775				3,455,462
Debt securities		$	994,246				1,092,107				1,099,613				1,113,981				1,129,272				994,246				1,129,272
Loans, net of allowance		$	2,456,714				2,446,065				2,325,912				2,228,236				2,125,751				2,456,714				2,125,751
Deposits		$	2,778,627				2,637,668				2,868,954				2,818,491				2,919,206				2,778,627				2,919,206
Other borrowings		$	531,973				608,092				106,253				118,444				25,760				531,973				25,760
Subordinated Debt		$	27,467				27,458				33,626				33,545				33,483				27,467				33,483
FHLB Advances		$	315,000				215,000				470,000				286,100				190,000				315,000				190,000
Shareholders' Equity		$	275,584				275,517				279,547				260,307				256,348				275,584				256,348
Trust and Investment
Fee Income		$	8,015				7,347				6,573				6,390				6,477				21,935				20,227
Assets Under Administration
Balance at beginning of period		$	6,697,009				6,435,562				5,944,772				5,392,768				5,464,847				5,944,772				6,200,407
Net investment appreciation (depreciation) & income		$	(363,654	)			60,789				175,566				314,992				(204,456	)			(127,299	)			(1,267,404	)
Net client asset flows		$	62,533				200,658				315,224				237,012				132,377				578,415				459,765
Balance at end of period		$	6,395,888				6,697,009				6,435,562				5,944,772				5,392,768				6,395,888				5,392,768
Percentage of AUA that are managed			87.81	%			87.79	%			87.58	%			88.08	%			87.99	%			87.81	%			87.99	%
Stock Valuation
Closing Market Price (OTCQX)		$	22.65				23.30				28.15				29.75				29.25			$	22.65			$	29.25
Multiple of Tangible Book Value			0.98				1.01				1.19				1.35				1.34				0.98				1.34
*annualized

SOURCE: FineMark Holdings, Inc.

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