FORT MYERS, FL / ACCESSWIRE / January 18, 2023 / FineMark Holdings, Inc. (the "Holding Company"; OTCQX:FNBT) company of FineMark National Bank & Trust (the "Bank"; collectively, "FineMark"), today reported net revenues of $102.6 million for the year ended December 31, 2022, compared to $94.6 million in 2021. Net income for 2022 was $22.4 million, or $1.89 per diluted share, compared to $25 million, or $2.39 per diluted share, reported for 2021. For the fourth quarter of 2022 net revenues were $23.1 million, compared to $25.8 million in the fourth quarter of 2021. Net income was $3.1 million, or $.26 per diluted shares, compared with net income of $7 million, or $.59 per diluted share, for the same period a year ago.
Joseph R. Catti, Chairman & Chief Executive Officer:
"The most significant drivers of FineMark's success are the extraordinary talents of our associates, the strength of our balance sheet, and an unwavering commitment to our culture of service. In 2022, our associates exceeded expectations, overcoming difficult market conditions and a massive hurricane, on the heels of the COVID pandemic.
Hurricane Ian caused unimaginable damage and inflicted hardships, particularly on the communities and people in Southwest Florida, where FineMark has a significant presence. I have been deeply inspired by the work of our associates in helping each other and the broader community in the aftermath of the storm.
On the financial front, the twin shocks of inflation and rising interest rates have rocked the equity and bond markets, resulting in the worst annual performance of bonds since inception of the Bloomberg Bond index in 1976 and U.S. stock markets since 2008.
After a period of difficulties such as this, we assess our performance based on how well we have risen to the challenges, and I am proud of what was accomplished in 2022."
Financial highlights for full-year and fourth quarter 2022 on a year-over-year basis include:
- Net interest income increased to $69.9 in 2022 from $64.7 million for 2021. For the fourth quarter of 2022, net interest income totaled $15.9 million compared to $17.2 for the fourth quarter of 2021, due in part to the significant rise in interest rates.
- Despite rising interest rates, loan production totaled $754 million for the year and $236 million for the fourth quarter, compared to $934 million in 2021 and $205 million in the fourth quarter of 2021.
- Net loans grew 12% year-over-year, increasing from just under $2 billion in 2021 to $2.23 billion in 2022.
- Deposits increased 3% to $2.8 billion, despite moving approximately $370 million from deposit accounts into Treasuries.
- Trust fees remained flat year-over-year at $26.6 million despite double digit declines in the S&P, Nasdaq and bond market. For the fourth quarter 2022, trust fees were $6.4 million compared to $7 million in the fourth quarter of 2021.
- Net asset inflows from new and existing trust clients reached $705 million during 2022, a 21% increase compared to $583 million in 2021. The fourth quarter of 2022 represented a 31% increase with net asset inflows of $237 million compared to $181 million in the fourth quarter of 2021.
- Asset quality remains pristine, with non-performing loans to total loans at .03%, down from an already low .04%. Additionally, the Bank's criticized assets decreased to $2.8 million at the end of 2022, from $15.4 million in 2021, which is a testament to the relationships we build with clients and the Bank's conservative credit culture.
- The Bank added 1,247 new client households in 2022 (including 263 new investment relationships), compared to 1,186 new client households in 2021.
- FineMark's Sports Management division welcomed 20 new professional athletes in 2022, bringing the total to 228.
The dramatic rate increases in 2022, as the Fed continued attempts to stem inflation, created unanticipated challenges for the year. The federal funds rate increased much more rapidly than in past cycles of monetary tightening and took a toll on earnings, as the cost of funding rose dramatically.
This rapid rise in interest rates adversely impacted FineMark through the Bank's sweep accounts. Each night, investment clients' cash is automatically transferred into a higher yielding bank money market account. The interest rate for sweep accounts rose from 0.10% in January to 4.14% in December. In addition to the higher costs on these accounts, approximately $370 million was moved from deposits held at the Bank to Treasuries in the Bank's investment area, providing a higher yield to clients. The deposits were replaced, in part, by overnight borrowings from the Federal Reserve at the Fed Funds rate, which rose from 0.07% at the start of 2022 to 4.3% in December. These two sources contributed to reduced earnings in 2022.
The overall decline in value of both stocks and bonds, has also reduced asset-based fee income. Having these two asset classes fall so much over the same period is highly unusual. Looking at calendar year returns for the S&P 500 and 10-year Treasury bonds over the last 95 years, 2022 is an outlier in terms of such negative returns for both stocks and bonds.
Net Interest Income & Margin
For the year ended December 31, 2022, net interest income totaled $69.9 million, 8% higher than 2021. For the fourth quarter of 2022, FineMark's net interest income totaled $15.9 million, down 7% from fourth quarter 2021. Between March and October 2022, rates increased five times totaling 300 basis points. As a result, the fourth quarter bore the weight of those increases, plus two additional rate hikes to end the year.
The rising rates in the fourth quarter increased interest expense and, to a lesser degree, higher loan yields offset the rising cost of deposits and overnight borrowings. The Bank's net interest margin decreased to 2.11% in 2022, down from 2.24% in 2021. The net interest margin also decreased for the fourth quarter of 2022, coming in at 1.90% compared to 2.24% in the fourth quarter of 2021. Approximately 25% of total loans float with changes in interest rates. Most of the remaining loans reset on 5 and 7-year intervals and would not keep pace with the speed of the Federal Reserve rate hikes.
Non-Interest Income
As of December 31, 2022, assets under management and administration totaled $5.9 billion, down slightly from $6.2 billion at year-end 2021. On average, the Bank's assets under administration consist of 60% equities, 23% bonds, 12% Cash and 5% other. The Bank's trust and estate settlement fees were flat for the year, in spite of the decline in the U.S. equity ( S&P down 19.4%, Nasdaq down 33% for the year) and bond markets (Bloomberg U.S. Aggregate Bond index down 13% for the year+).
The Bank continued to add assets from new and existing clients totaling $705 million for the year and $237 million in the fourth quarter, representing a 21% increase compared to full year 2021 and a 31% increase over fourth quarter 2021, respectively. This is a testament to the exceptional level of expertise and service provided by our associates.
Non-Interest Expense
Non-interest expense increased to $71.4 million for the year ended December 31, 2022, up 15% from $62.2 million in 2021. For the fourth quarter of 2022, non-interest expense totaled $18 million, a 5% increase over the fourth quarter of 2021. Several factors contributed to the increase including two new locations opened in 2022, 28 new associates were hired bank wide, and FineMark proactively increased the salaries of a number of existing associates to remain competitive in a tight labor market. In order to preserve our high service levels as we grow, the hiring of additional associates and investments in technology (information systems) is expected.
Credit Quality
Asset quality remained pristine in 2022 and the same is expected for 2023. The Bank's criticized assets were reduced to 1% of total capital reserves or $2.8 million in 2022, compared to 5% or $15.4 million at the end of 2021. FineMark remains committed to maintaining high credit standards through a relationship-centered approach to lending. Loan decisions are based on an in-depth understanding of each borrower's needs and unique financial situation.
As of December 31, 2022, non-performing loans totaled $730 thousand, or 0.03% of total loans, nearly flat compared to $729 thousand or 0.04% in the fourth quarter of 2021. The current allowance for loan losses is $23.2 million (or 1.03% of gross loans). Management believes the Bank's reserves continue to be sufficient to support risks in the loan portfolio.
Capital
All capital ratios continue to exceed regulatory requirements for "well-capitalized" banks. On December 31, 2022, FineMark's Tier 1 leverage ratio on a consolidated basis was 9.36%, and the total risk-based capital ratio was 19.86%.
Rising interest rates throughout the past few quarters resulted in a $78 million net unrealized loss on the Bank's investment portfolio. This unrealized loss does not reflect bond credit quality; rather, it shows how rapidly interest rates have increased.
On a yearly basis, return on average equity (ROAE) decreased to 8.17% in 2022, compared to 9.66% in 2021. ROAE was 4.92% for the fourth quarter of 2022, compared to 9.22% for the fourth quarter of 2021.
Closing Remarks from Chairman & Chief Executive Officer, Joseph R. Catti
"As we look to 2023, elevated interest rates will likely remain a significant headwind, however I am confident our associates will continue to excel and provide the highest levels of service and stewardship, just as they have while navigating the past year and since FineMark's inception. In addition, the Bank has made a multimillion-dollar commitment to technology enhancements to include a new application that offers clients a holistic view of their banking and investment accounts, as well as tools to enhance our investment management processes.
The people who come to work here each day have a commitment to the long-term success of this company and I firmly believe we will continue to create shareholder value in all types of environments in the coming year and beyond."
FineMark will host a conference call to discuss the results at 9am Eastern Time, January 19, 2023. Individuals interested in joining the call should register at https://ir.finemarkbank.com/. Please join the call approximately 15 minutes prior to the start to allow time for login.
FineMark Holdings, Inc., the parent company of FineMark National Bank & Trust is a nationally chartered bank, with $3.6 billion in total assets and $6 billion in assets under management and Administration. 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.
For more information contact:
Ryan Roberts, Investor Relations
239.461.3850
[email protected]
Website address: www.finemarkbank.com
FineMark Holdings, Inc.
Consolidated Financial Highlights
Fourth Quarter 2022
Unaudited
| YTD | ||||||||||||||||||||||||||||
$ in thousands except for share data | 4th Qtr 2022 | 3rd Qtr 2022 | 2nd Qtr 2022 | 1st Qtr 2022 | 4th Qtr 2021 | 2022 | 2021 | |||||||||||||||||||||
$ Earnings | ||||||||||||||||||||||||||||
Net Interest Income | $ | 15,889 | $ | 18,079 | 18,386 | 17,539 | 17,155 | $ | 69,893 | $ | 64,689 | |||||||||||||||||
Provision (credit) for loan loss | $ | 1,039 | $ | 121 | 836 | 449 | 18 | $ | 2,445 | $ | 31 | |||||||||||||||||
Non-interest Income (excl. gains and losses) | $ | 7,224 | $ | 7,342 | 7,648 | 8,191 | 7,712 | $ | 30,405 | $ | 29,024 | |||||||||||||||||
Gain on sale of debt securities available for sale | $ | - | $ | - | - | - | - | $ | - | $ | 902 | |||||||||||||||||
Gains and losses on debt extinguishment | $ | - | $ | 505 | 1,226 | 618 | (244 | ) | $ | 2,349 | $ | (1,199 | ) | |||||||||||||||
Gain on termination of swap | $ | - | $ | - | - | - | 1,212 | $ | - | $ | 1,212 | |||||||||||||||||
Non-interest Expense | $ | 18,011 | $ | 18,660 | 17,700 | 17,000 | 17,161 | $ | 71,371 | $ | 62,208 | |||||||||||||||||
Earnings before income taxes | $ | 4,063 | $ | 7,145 | 8,724 | 8,899 | 8,656 | $ | 28,831 | $ | 32,389 | |||||||||||||||||
Income Taxes | $ | 933 | $ | 1,757 | 1,747 | 2,027 | 1,653 | $ | 6,464 | $ | 7,362 | |||||||||||||||||
Net Earnings | $ | 3,130 | $ | 5,388 | 6,977 | 6,872 | 7,003 | $ | 22,367 | $ | 25,027 | |||||||||||||||||
Basic earnings per share | $ | 0.27 | $ | 0.46 | 0.60 | 0.59 | 0.60 | $ | 1.91 | $ | 2.43 | |||||||||||||||||
Diluted earnings per share | $ | 0.26 | $ | 0.45 | 0.59 | 0.58 | 0.59 | $ | 1.89 | $ | 2.39 | |||||||||||||||||
Performance Ratios | ||||||||||||||||||||||||||||
Return on average assets* | 0.36 | % | 0.62 | % | 0.80 | % | 0.80 | % | 0.88 | % | 0.64 | % | 0.83 | % | ||||||||||||||
Return on risk weighted assets* | 0.63 | % | 1.12 | % | 1.43 | % | 1.46 | % | 1.55 | % | 1.12 | % | 1.39 | % | ||||||||||||||
Return on average equity* | 4.92 | % | 7.97 | % | 10.28 | % | 9.17 | % | 9.22 | % | 8.17 | % | 9.66 | % | ||||||||||||||
Yield on earning assets* | 3.17 | % | 2.92 | % | 2.66 | % | 2.52 | % | 2.67 | % | 2.82 | % | 2.74 | % | ||||||||||||||
Cost of funds* | 1.27 | % | 0.76 | % | 0.46 | % | 0.41 | % | 0.46 | % | 0.73 | % | 0.53 | % | ||||||||||||||
Net Interest Margin* | 1.90 | % | 2.16 | % | 2.22 | % | 2.14 | % | 2.24 | % | 2.11 | % | 2.24 | % | ||||||||||||||
Efficiency ratio | 77.93 | % | 71.98 | % | 64.93 | % | 64.52 | % | 69.70 | % | 71.16 | % | 66.59 | % | ||||||||||||||
Capital | ||||||||||||||||||||||||||||
Tier 1 leverage capital ratio | 9.36 | % | 9.35 | % | 9.16 | % | 9.22 | % | 9.73 | % | 9.36 | % | 9.73 | % | ||||||||||||||
Common equity risk-based capital ratio | 17.01 | % | 17.41 | % | 16.81 | % | 16.96 | % | 17.24 | % | 17.01 | % | 17.24 | % | ||||||||||||||
Tier 1 risk-based capital ratio | 17.01 | % | 17.41 | % | 16.81 | % | 16.96 | % | 17.24 | % | 17.01 | % | 17.24 | % | ||||||||||||||
Total risk-based capital ratio | 19.86 | % | 20.30 | % | 20.03 | % | 20.25 | % | 20.64 | % | 19.86 | % | 20.64 | % | ||||||||||||||
Book value per share | $ | 22.11 | $ | 21.81 | $ | 22.73 | $ | 23.82 | $ | 26.29 | $ | 22.11 | $ | 26.29 | ||||||||||||||
Tangible book value per share | $ | 22.11 | $ | 21.81 | $ | 22.73 | $ | 23.82 | $ | 26.29 | $ | 22.11 | $ | 26.29 | ||||||||||||||
Asset Quality | ||||||||||||||||||||||||||||
Net charge-offs (recoveries) | $ | (227 | ) | $ | (176 | ) | (24 | ) | (13 | ) | 541 | $ | (440 | ) | $ | 530 | ||||||||||||
Net charge-offs (recoveries) to average total loans | -0.01 | % | -0.01 | % | -0.00 | % | -0.00 | % | 0.03 | % | -0.02 | % | 0.03 | % | ||||||||||||||
Allowance for loan losses | $ | 23,168 | $ | 21,902 | 21,605 | 20,745 | 20,283 | $ | 23,168 | $ | 20,283 | |||||||||||||||||
Allowance to total loans | 1.03 | % | 1.02 | % | 1.01 | % | 1.01 | % | 1.01 | % | 1.03 | % | 1.01 | % | ||||||||||||||
Nonperforming loans | $ | 730 | $ | 692 | 706 | 714 | 729 | $ | 730 | $ | 729 | |||||||||||||||||
Other real estate owned | $ | - | $ | - | - | - | - | $ | - | $ | - | |||||||||||||||||
Nonperforming loans to total loans | 0.03 | % | 0.03 | % | 0.03 | % | 0.04 | % | 0.04 | % | 0.03 | % | 0.04 | % | ||||||||||||||
Nonperforming assets to total assets | 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % | 0.02 | % | ||||||||||||||
Loan Composition (% of Total Gross Loans) | ||||||||||||||||||||||||||||
1-4 Family | 49.0 | % | 50.2 | % | 49.5 | % | 50.7 | % | 51.8 | % | 49.0 | % | 51.8 | % | ||||||||||||||
Commercial Loans | 9.5 | % | 9.1 | % | 9.5 | % | 10.4 | % | 10.2 | % | 9.5 | % | 10.2 | % | ||||||||||||||
Commercial Real Estate | 24.4 | % | 24.1 | % | 24.3 | % | 23.2 | % | 21.7 | % | 24.4 | % | 21.7 | % | ||||||||||||||
Construction Loans | 9.0 | % | 8.3 | % | 8.5 | % | 7.8 | % | 8.3 | % | 9.0 | % | 8.3 | % | ||||||||||||||
Other Loans | 8.1 | % | 8.3 | % | 8.2 | % | 7.9 | % | 8.0 | % | 8.1 | % | 8.0 | % | ||||||||||||||
End of Period Balances | ||||||||||||||||||||||||||||
Assets | $ | 3,554,370 | $ | 3,455,462 | 3,527,841 | 3,489,146 | 3,377,198 | $ | 3,554,370 | $ | 3,377,198 | |||||||||||||||||
Debt securities | $ | 1,113,981 | $ | 1,129,272 | 1,164,449 | 1,209,357 | 978,228 | $ | 1,113,981 | $ | 978,228 | |||||||||||||||||
Loans, net of allowance | $ | 2,228,236 | $ | 2,125,751 | 2,115,137 | 2,032,426 | 1,996,362 | $ | 2,228,236 | $ | 1,996,362 | |||||||||||||||||
Deposits | $ | 2,818,491 | $ | 2,919,206 | 2,951,656 | 2,954,042 | 2,734,120 | $ | 2,818,491 | $ | 2,734,120 | |||||||||||||||||
Other borrowings | $ | 118,444 | $ | 40,760 | 2,543 | 1,507 | 1,873 | $ | 118,444 | $ | 1,873 | |||||||||||||||||
Subordinated Debt | $ | 33,545 | $ | 33,483 | 40,961 | 40,940 | 40,919 | $ | 33,545 | $ | 40,919 | |||||||||||||||||
FHLB Advances | $ | 286,100 | $ | 175,000 | 240,000 | 192,951 | 264,016 | $ | 286,100 | $ | 264,016 | |||||||||||||||||
Shareholders' Equity | $ | 260,307 | $ | 256,348 | 266,800 | 277,814 | 305,062 | $ | 260,307 | $ | 305,062 | |||||||||||||||||
Trust and Investment | ||||||||||||||||||||||||||||
Fee Income | $ | 6,390 | $ | 6,477 | 6,752 | 6,998 | 7,030 | $ | 26,617 | $ | 26,638 | |||||||||||||||||
Assets Under Administration | ||||||||||||||||||||||||||||
Balance at beginning of period | $ | 5,392,768 | $ | 5,464,847 | 6,009,657 | 6,200,407 | 5,739,551 | $ | 6,200,407 | $ | 5,091,408 | |||||||||||||||||
Net investment appreciation (depreciation) & income | $ | 314,992 | $ | (204,456 | ) | (675,883 | ) | (395,125 | ) | 279,391 | $ | (960,472 | ) | $ | 526,048 | |||||||||||||
Net client asset flows | $ | 237,012 | $ | 132,377 | 131,073 | 204,375 | 181,465 | $ | 704,837 | $ | 582,951 | |||||||||||||||||
Balance at end of period | $ | 5,944,772 | $ | 5,392,768 | 5,464,847 | 6,009,657 | 6,200,407 | $ | 5,944,772 | $ | 6,200,407 | |||||||||||||||||
Percentage of AUA that are managed | 88 | % | 88 | % | 88 | % | 88 | % | 88 | % | 88 | % | 88 | % | ||||||||||||||
Stock Valuation | ||||||||||||||||||||||||||||
Closing Market Price (OTCQX) | $ | 29.75 | $ | 29.25 | 29.05 | 33.25 | 33.60 | $ | 29.75 | $ | 33.60 | |||||||||||||||||
Multiple of Tangible Book Value | 1.35 | 1.34 | 1.28 | 1.40 | 1.28 | 1.35 | 1.28 | |||||||||||||||||||||
*annualized | ||||||||||||||||||||||||||||
SOURCE: FineMark Holdings, Inc.