Finemark Holdings Inc

During today's call, we may make forward-looking statements. We would like to remind everyone to carefully review the safe harbor language that was published with the earnings release and presentation. You should keep in mind that any forward-looking statements made by the company speak only as of the date on which they were made. As everyone understands, the current economic environment is rapidly evolving. The company's ability to accurately project results or predict the effects of future plans or strategies, or predict market or economic developments is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but are not guarantees of performance or results, and our actual results and performance could differ from those set forth in our forward-looking statements. And you are cautioned not to place undue reliance on such forward-looking statements. Good morning, everyone, and thank you for joining us for the fourth quarter and full year 2022 earnings call. I will send things over in just a moment to our chairman and CEO, Joe Caddy, but first I'd like to share the format for the morning. You as an attendee are muted and your video is off for this call. However, we will take questions after the presentations. Here's how that will work. At the bottom of your screen, you should see it could be to the right of your screen. You should see a hand raised. So if you have a question after the presentation, click on that. Once I see that you have a question, I will send you a request to unmute. Once you click on that, you'll be unmuted and you will be able to go forth with your question. We will also provide a copy of this presentation on our investor relations page of our website at findmarkbank.com. With that, I will now send it over to our CEO and Chairman Joe Caddy. Joe.

Thank you, Jessica. Good morning. And thank you for joining the call today. And also thank you for your continued commitment to the success of Finemark. I'm Joe Caddy, as Jessica mentioned. I'm joined by Brian Eagleson, our chief financial officer, and Bob Paramore, the president of the company. We haven't ever had an earnings call before, so it's unusual for us. But we thought given the current interest rate environment and how that's affected our bank, coupled with this is only the second time in the history of the company that we would have reported year over year decline in earnings. So we thought we would walk our investors through what's taken place and what we're expecting for 2023. Having said that, we continue to have pristine asset quality, and we have experienced significant growth in all areas of the company in 2022, and we continue to see that and expect that going forward into 2023. With that, I'm going to turn it over to Brian Eagleston to walk through some of the numbers. Thanks, Joe.

On the screen is just our just our consolidated financial highlights and on here i'm just going to go through a few things some of the big things obviously that changed one big things obviously our cash. Cash position dropped by over 240 million for the year and we'll go through some of the details as for why and as Joe mentioned our net income. Our net income for the year to date was 22.3 million compared to 25 million in 2021. And then on a quarter to date, it was 3.1 million compared to 7 million last year. And the big, obviously the big reason is you can see our net interest margin. That's the biggest driver. It is on a year to date basis is 2.11. On a quarter to date basis, it's 1.90%. And if you look at last year, We were pretty much flat last year at 2.24 on both the quarter and year-to-date numbers. So what happened? What is the reason? Obviously, the Federal Reserve, they raised rates over 300 basis points between March and the end of the third quarter. And then another 125 basis points in the fourth quarter. So, you know, the Fed started off a little bit late. They just did 25 basis points, the first one in March. So they kind of lulled us a little bit. And then all of a sudden they changed rates considerably. So one of the things that there's some things we'll talk about shortly, but one of the things is there's a lag in terms of our repricing of our loan portfolio. 25% of our loans are what we call floating. So they change as primary or federal reserve, whatever the fed funds rate, it's basically prime. Whenever that changes, they change pretty much in lock and step. There's some that are on a slight delay, but mostly they change. And then 43% of our loans are either 3-1, 5-1, or 7-1 arms. And those obviously reset on those particular intervals. So after three years or whatnot. The other big things that happened during the year, as rates started to rise in the short end of the curve, we saw $370 million of our deposits moving into our trust side and getting invested into treasuries. The bulk of that actually happened in the fourth quarter. So we saw 200 million dollars in deposits go in the fourth quarter of 2022. And so what we did, obviously, the other downside is we had to borrow from the Federal Reserve and we borrowed at then Fed funds rates, which obviously went up during this the fourth quarter. Now, just to touch base on some of the things, you know, the key are tier one leverage ratio remains strong. We're at 9.36% and all the other capital ratios are well above or exceed the minimums by the regulators. So we're capitalized, we're as strong as ever. Our loan composition has remained relatively consistent. So, you know, we've got a very conservative balance sheet. We're predominantly residential lender, obviously. We did see a little uptick in our commercial real estate, but that's owner-occupied. We went down and drilled into it, and that's all just owner-occupied properties that we financed. So it's obviously in the lesser risk area of commercial real estate. The other part we saw, obviously our loans continue to grow. We saw a 12% increase or $234 million growth in our loans year over year. And that compares considerably better than what we did in 2021, where we only saw 146 million in growth. So we're still going strong and hopefully that'll continue obviously. Some of the other key things are non-interest expense. One thing that comes in alignment, a non-interest expense increased. Obviously, it went up by 15% and it went up by 17% in 2021. But one of the key things that we saw was the actual relative dollar amount was exactly the same in terms of increase year over year on both those years. We're right in line with what we're doing, obviously, and the predominant reason for those increases was 2. Well, 2 of the big ones are salaries and benefits and then occupancy expense in 2022. we added 28 new associates. going from 232 to 260 people here at the end of the year. And then one, this is a very tight labor market. So we proactively looked at everybody's salary to do an alignment to what the market is paying. And to a lot of the people we identified that we needed to increase their salaries. So that's also part of what increased them. And then in 2022, we opened two new offices and expanded three of our existing locations. So that was what really brought up our occupancy expense, as I mentioned before. So those are kind of the highlights of what happened in 2022 in terms of some of the key things. There's some more slides that we have here that will go through some things more in depth. Um, but, uh, that's what I have for now. Um, can you go to the next slide?