KBRA Comments on FineMark Holdings, Inc.'s Preferred Stock Issuance

2 Apr 2024   |   New York


On March 29, 2024, Fort Myers, Florida based FineMark Holdings, Inc. (OTCQX: FNBT or “the company”) announced that it had completed the issuance of $30 million noncumulative perpetual convertible preferred stock, which bears an annual dividend rate of 7.25% and is convertible to common stock at $27.50 per share after 63 months. The majority of the proceeds ($28 million) was downstreamed to its subsidiary, FineMark National Bank & Trust (“the bank”) to increase common equity capital. The remaining proceeds of $2 million were retained at the parent company and are equivalent to about the annual level of preferred dividends.

The convertible preferred stock qualifies as additional Tier 1 capital at the consolidated level, and, as a result, has increased the pro forma Tier 1 leverage ratio to 9.2%, compared to 8.5% as of YE23. In addition, the $28 million of downstreamed capital will increase the bank’s pro forma CET1 ratio to 17.7%, relative to 16.4% at YE23.

At the parent company, the convertible preferred issue has no impact on double leverage, although it will increase the common equity double leverage ratio to 117%, compared to 107% at YE23. In addition, KBRA estimates that the pro forma fixed charge coverage ratio at the parent company will diminish somewhat based upon varying revenue scenarios tied to income from bank level dividends (to the parent company).

On July 7, 2023, KBRA affirmed the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Fort Myers, Florida based FineMark Holdings, Inc. In addition, KBRA affirmed the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for its subsidiary, FineMark National Bank & Trust. The Outlook for all long-term ratings was revised to Negative from Stable.

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KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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