NEW YORK, NY--(Marketwired - May 19, 2015) - First American International Corp. (
Net Income and Results of Operations
The Company today reported net income for the quarter ended March 31, 2015 of $117,000, or $0.05 per share, basic and diluted, after deduction of $192,000 in Troubled Asset Relief Program ("TARP") preferred stock dividends and discount accretion. This compares to net income of $518,000, or $0.24 per share, basic and diluted, for the quarter ended March 31, 2014, also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.08% for the quarter ended March 31, 2015, compared to 0.37% for the same period in 2014 and a return on average equity of 0.93% for quarter ended March 31, 2015, compared to 4.28% for the same period in 2014.
The decrease is due principally to a year-over-year increase in non-interest expense of $925 thousand, or 16.9%, which was offset partially by a decrease of $157 thousand in provision for loan loss, an increase of $117 thousand in net interest income, and an increase of $61 thousand in non-interest income.
The $925 thousand increase in non-interest expense, as described in greater detail below, is due principally to an increase of $576 thousand in general and administrative expenses, including increases in FDIC insurance due to timing, legal fees and salaries and benefits expense due to additional staffing and increased health insurance costs.
Net interest margin decreased to 3.79% for the three months ended March 31, 2015, compared to 3.88% for the same period in 2014. Net interest income increased by $117 thousand even though the net interest margin declined due to an increase in average interest earning assets of $25.3 million from $518.9 million in 2014 to $544.2 million in 2015, partially offset by an increase of $7.3 million in interest bearing liabilities from $398.0 million in 2014 to $405.3 million.
"Although the financial performance has declined year-over-year, the Company has increased its loan origination capabilities, which we believe will benefit shareholders and customers in the long term. We also continue to maintain a strong capital base, which supports our ability to grow and address the challenges we face in this competitive environment. At March 31, 2015 our capital ratio stood at 11.73%, which is substantially above the amount needed to be considered a 'well capitalized' bank," said Mark Ricca, President and Chief Executive Officer.
Net Interest Income
Net interest income for three months ended March 31, 2015, before provision for loan losses, was $5.2 million, an increase of $117,000 or 2.33% from the prior year.
Interest income increased by $160 thousand to $6.146 million in the first quarter of 2015 from $5.986 million in the same quarter in 2014. This includes FAS 91 downward adjustments in interest income of $189 thousand in 2015 and $514 thousand in 2014. The first quarter of 2015 also included $122 thousand in interest from a payoff of a non-performing loan, which the Company recorded as interest income. Without these adjustments, interest income would have decreased by $287 thousand. The decrease is mostly due to a decrease in the yield on loans.
The yield earned on loans declined 40 basis points to 5.43% for the first quarter of 2015 from 5.83% in 2014. The decrease was principally because of a shift in the mix of loans towards residential 1-4 family loans and away from commercial mortgage loans, which tend to have higher yields. Residential loans outstanding increased $38.1 million for the year compared to commercial real estate loans decreasing $339 thousand. The Bank also experienced a yield reduction of 43 basis points to 6.35% on existing and new commercial real estate loans due to competitive market conditions.
The average cost of deposits increased 4 basis point to 0.74% in the first quarter of 2015 compared to the same quarter of 2014. The average balance of certificates of deposit increased by $4.2 million, from $189.4 million in 2014 to $193.6 million in 2015. The average rate paid on certificates of deposit increased by 6 basis points from 1.01% in 2014 to 1.07% in 2015. The average balance of money market deposit accounts and savings increased by $2.9 million, from $138.1 million in 2014 to $141.0 million in 2015 with the average rate paid remaining the same at 0.29%.
The average volume of securities increased from $99.4 million in 2014 to $102.5 million in 2015; as excess cash was redeployed into securities investments to increase yields. However, the average yield on securities declined by 19 basis points due to the Bank investing in shorter term investments and a slight decline in overall interest rates. The net effect of the increase in volume and the decrease in yield was a $32,000 decrease in interest earned on securities.
Overall, for the quarter ended March 31, 2015, the interest rate spread of 3.54% was down 12 basis points from 3.66% for the quarter ended March 31, 2014; the net interest margin of 3.79% was down 9 basis points from 3.88% from the quarter ended March 31, 2014. The reduction in the interest rate spread was due to the interest rate earned on loans declining faster than the interest rate paid on deposits and other borrowings.
The total loan portfolio of $417.6 million at March 31, 2015 was $38.1 million, or 10.0%, higher than at March 31, 2014. Non-loan interest earning assets decreased by $16.3 million, or 11.7%, from $139.6 million at March 31, 2014 to $123.3 million at March 31, 2015. This decrease in non-loan interest-earning assets was due primarily to redeploying excess cash into new loans.
Total deposits increased by $20.7 million from $411.3 million at March 31, 2014 to $432.0 million at March 31, 2015, and were utilized to fund loan portfolio growth. Borrowings from the Federal Home Loan Bank increased $1.0 million to $62 million and mainly consist of five year and seven year term borrowings at a higher rate than deposits to help manage our interest rate risk.
Provision for Loan Losses
The Company made no provision for loan losses in the first quarter of 2015 and made a provision of $157,000 in the first quarter of 2014. Management believes the existing $8.3 million allowance, aggregating 1.99% of total loans, is appropriate.
Non-interest Income
Non-interest income was $1.8 million for the quarter ended March 31, 2015, an increase of $61 thousand, or 3.6%, compared to the quarter ended March 31, 2014. The increase is mainly due to an increase of $137,000 in the gain on sale of mortgage loans to $505 thousand, offset by a $76,000 decrease in service and transaction fees.
Non-interest Expenses
Non-interest expenses were $6.4 million for the quarter ended March 31, 2015 compared to $5.5 million in 2014, an increase of $925,000, or 16.9%. The increase is mainly due to an increase in general administrative expenses of $576,000 and an increase in salaries and benefits of $281,000.
The increase in general and administrative expenses is mainly due to an increase in FDIC insurance of $184,000 due to booking two quarter's expenses in one quarter and legal fees of $158,000. The Bank also experienced increases in a number of other expense categories due principally to accounting accrual entries. Salaries and benefits increased due to higher staffing levels, mainly in the loan department, salary increases for existing employees and rising health insurance costs. Excluding one-time adjustments totaling $385 thousand for the first quarter of 2015, and FAS 91 adjustments aggregating $189 thousand for the first quarter of 2015 and $513 thousand for the first quarter of 2014, FAIC's operating expense for the first quarter would have been $6.2 million, which is $216 thousand or 3.6% higher than the prior year.
Balance Sheet Highlights
Assets
Total assets at March 31, 2015 were $577.2 million, an increase of $22.1 million, or 4.0%, versus March 31, 2014. Total loans receivable were $417.6 million, an increase of $38.1 million compared to last year. The increase is due principally to a $38.1 million increase in adjustable rate 1-4 family mortgage loans, partially offset by a $339 thousand decrease in commercial mortgage loans, including commercial real estate, multifamily and construction loans, a $225 thousand increase in commercial and industrial loans, and an increase of $143 thousand in consumer loans. Investment securities increased by $1.2 million while overnight investments decreased by $17.4 million. Total cash at March 31, 2015 was $25.4 million, a decrease of $19.5 million from March 31, 2014 which is principally the result of redeploying cash into higher yielding loan assets.
Fixed assets held for sale at March 31, 2015 increased to $12.9 million, compared to $0 at March 31, 2014 and Bank premises and equipment decreased during the same period by $10.7 million. This change is due to the Bank's decision to sell the recently constructed premises at 135 Bowery, New York, NY.
Asset Quality
Asset quality continued to improve as non-performing loans declined by 47.6% at March 31, 2015 to $5.7 million, compared to $10.9 million one year earlier. Total delinquent loans declined by 52.8% to $7.1 million at March 31, 2015, compared to $15.0 million at March 31, 2014. The Company monitors delinquent loans closely and continues to work on improving asset quality on an overall basis. The allowance for loan losses was $8.3 million, or 1.99% of total loans at March 31, 2015, compared to $7.7 million, or 2.03%, at March 31, 2014. The increase in the allowance was due to net recoveries and no new provision.
Deposits
Deposits increased to $432.0 million at March 31, 2015, an increase of $20.1 million, or 5.0%, versus March 31, 2014. Demand deposits increased $21.9 million, or 26.4%, compared to March 31, 2014. NOW accounts increased $910 thousand, or 41.3%. Savings and money market accounts decreased $1.2 million, or 0.9%. Certificates of deposit were $187.4 million, a decrease of $891 thousand, or 0.5%.
Borrowings
Federal Home Loan Bank Borrowings increased by $1.0 million to $62.0 million during the quarter. The remaining borrowings of $7.2 million consist of the Company's trust preferred securities transaction originated in 2004.
Stockholders' Equity
Stockholders' equity was $67.7 million, or 11.73% of total assets, at March 31, 2015, a $1.5 million, or 2.3% increase from March 31, 2014. The increase was mainly due to net income and proceeds from stock options exercised.
About First American International Corp
First American International Corp. is the holding company for First American International Bank, a community development financial institution ("CDFI") and a minority depository institution ("MDI") with nine branches and two mortgage offices serving principally the Chinese-American communities in Manhattan, Queens and Brooklyn in New York City.
See accompanying unaudited financial data tables for additional information.
The information contained herein is intended to provide the reader with historical information about the financial results of First American International Corp. It is not intended to provide forward looking statements or projections of future results. A variety of factors could cause actual results and experiences to differ materially from historical results and anticipated results based on historical results.
For further information, please contact Neil Hecht, Chief Financial Officer, at (718) 567-8788 Ext 1388.
| First American International Corp. | ||||||
| Financial Highlights (unaudited) | ||||||
| Balance Sheet Items | $ thousands | |||||
| 03/31/15 | 03/31/14 | |||||
| Cash and due from banks - noninterest bearing | 5,623 | 6,274 | ||||
| Due from banks - interest bearing | 19,815 | 38,647 | ||||
| Federal funds sold | 623 | 357 | ||||
| Time deposits with banks | 3,456 | 2,337 | ||||
| Securities available for sale | 80,289 | 98,209 | ||||
| Securities held to maturity | 19,110 | - | ||||
| Loans held for sale | 1,176 | 1,100 | ||||
| Real estate - commercial | 129,326 | 129,665 | ||||
| Real estate - residential | 285,178 | 247,123 | ||||
| Commercial and industrial | 2,401 | 2,176 | ||||
| Consumer and installment | 654 | 511 | ||||
| Loans receivable, gross | 417,559 | 379,475 | ||||
| Unearned loan fees | (844 | ) | (815 | ) | ||
| Allowance for possible loan losses | (8,290 | ) | (7,682 | ) | ||
| Bank premises and equipment | 7,743 | 18,438 | ||||
| Fixed assets held for sale | 12,928 | - | ||||
| Federal Home Loan Bank stock | 3,367 | 3,463 | ||||
| Accrued interest receivable | 2,231 | 2,030 | ||||
| Mortgage servicing rights | 7,256 | 7,556 | ||||
| Other assets | 5,151 | 5,735 | ||||
| Total Assets | 577,193 | 555,124 | ||||
| Demand deposits | 105,146 | 83,204 | ||||
| NOW accounts | 3,115 | 2,205 | ||||
| Money market and savings | 136,303 | 137,524 | ||||
| Certificate of deposit | 187,441 | 188,332 | ||||
| Total deposits | 432,005 | 411,265 | ||||
| Borrowings | 69,217 | 68,217 | ||||
| Accrued interest payable | 1,038 | 1,014 | ||||
| Accounts payable and other liabilities | 7,255 | 8,496 | ||||
| Total Liabilities | 509,515 | 488,992 | ||||
| Stockholders' equity | 67,678 | 66,132 | ||||
| Total Liabilities and stockholders' equity | 577,193 | 555,124 | ||||
| First American International Corp. | |||||
| Financial Highlights (unaudited) | |||||
| Summary Income Statement | For the quarter ended | ||||
| 03/31/15 | 03/31/14 | ||||
| Interest income | 6,146 | 5,986 | |||
| Interest expense | 991 | 948 | |||
| Net interest income | 5,155 | 5,038 | |||
| Provision for loan losses | - | 157 | |||
| Net interest income after provision for loan losses | 5,155 | 4,881 | |||
| Non-interest income | 1,758 | 1,697 | |||
| BEA grant | - | - | |||
| Non-interest expenses | 6,400 | 5,475 | |||
| Income before income taxes | 513 | 1,103 | |||
| Income taxes | 204 | 398 | |||
| Net income | 309 | 705 | |||
| Less Preferred Stock Dividends and Discount Accretion | 192 | 187 | |||
| Net Income Available to Shareholders | 117 | 518 | |||
| First American International Corp. | ||||||||
| Performance ratios (Unaudited) | ||||||||
| Quarter ended | ||||||||
| 03/31/15 | 03/31/14 | |||||||
| Return on average assets | 0.08 | % | 0.37 | % | ||||
| Return on average net worth | 0.93 | % | 4.28 | % | ||||
| Average interest earning assets/bearing liabilities | 134 | % | 130 | % | ||||
| Net interest rate spread | 3.54 | % | 3.66 | % | ||||
| Net interest margin | 3.79 | % | 3.88 | % | ||||
| Net interest income after provision/total expense | 81 | % | 89 | % | ||||
| Non-interest income to total revenue | 22.24 | % | 22.09 | % | ||||
| Non-interest expense to total revenue | 80.97 | % | 71.26 | % | ||||
| Non-interest expense to average assets | 4.43 | % | 3.95 | % | ||||
| Net Worth and Asset Quality Ratios | ||||||||
| Average net worth to average total assets | 8.69 | % | 8.38 | % | ||||
| Total net worth to assets end of period | 11.73 | % | 11.91 | % | ||||
| Non-performing assets to total assets | 0.99 | % | 1.97 | % | ||||
| Non-performing loans to total loans | 1.38 | % | 2.89 | % | ||||
| Allowance for loan losses to total loans | 1.99 | % | 2.03 | % | ||||
| Allowance for loan losses to NPLs | 144.51 | % | 70.20 | % | ||||
| Risk based total capital ratio (bank) | 20.89 | % | 22.10 | % | ||||
| Capital, Book Value and Earnings Per Share | ||||||||
| Tier 1 risk based capital (bank) | 19.63 | % | 20.84 | % | ||||
| Leverage ratio (bank) | 12.60 | % | 12.91 | % | ||||
| Book value per share basic | $ | 23.05 | $ | 22.65 | ||||
| Diluted EPS available to Common Shareholders | $ | 0.05 | $ | 0.24 | ||||
Contact Information:
Contact:
Neil Hecht
Chief Financial Officer
(718) 567-8788 Ext 1388