SOURCE: First American International Corp.

May 10, 2017 12:45 ET

First American International Corp. Announces First Quarter Results for 2017

NEW YORK, NY--(Marketwired - May 10, 2017) - First American International Corp. (OTCQB: FAIT) (www.faib.com) (the "Company"), the holding company for First American International Bank (the "Bank"), today reported net income available to shareholders for the quarter ended March 31, 2017 of $1.4 million. Earnings per share available to common shareholders were $0.63 per share, both basic and diluted.

Net Income and Results of Operations

The Company today reported net income for the quarter ended March 31, 2017 of $1.4 million, or $0.63 per share, basic and diluted, after deduction of $203,000 in Troubled Asset Relief Program ("TARP") costs, comprised of preferred stock dividends of $85,000 and discount accretion of $118,000. This compares to net income of $530,000, or $0.24 per share, basic and diluted, for the quarter ended March 31, 2016, also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.66% for the quarter ended March 31, 2017, compared to 0.30% for the same period in 2016 and a return on average equity of 9.63% for the quarter ended March 31, 2017, compared to 3.99% for the same period in 2016.

The increase in earnings is due principally to a year-over-year increase in net interest income of $1.1 million, or 18.6%, an increase in non-interest income of $329,000, or 22.7%, and a decrease in provision for loan losses of $288,000, partially offset by a year-over-year increase in noninterest expenses of $334,000, or 5.9%.

"I continue to be pleased with our steady progress in growing core earnings, with net interest income being the highest quarterly amount in six years. Our financial performance reflects our team's ongoing efforts to successfully execute our business strategy of originating high quality loans, funded largely by retail deposits, and selling residential loans on the secondary market to manage balance sheet growth and generate fee income. I am cautiously optimistic that we can continue to grow quality earning assets, while controlling expense growth. This cautious optimism is tempered by the ongoing increase in competition, the uncertain impact interest rate changes will have on customer preferences, and the regulatory landscape," said Mark Ricca, President and Chief Executive Officer.

Net Interest Income
Net interest income for the three months ended March 31, 2017, before provision for loan losses, was $6.7 million, an increase of $1.1 million, or 18.6%, from the prior year.

The increase in net interest income is attributable principally to an increase in average interest earning assets of $168.1 million, or 25.6%, from $655.7 million in 2016 to $823.8 million in 2017, driven largely by loan growth, partially offset by an increase in interest expense from an increase in average interest bearing liabilities of $149.5 million, or 31.5%, from $474.9 million in 2016 to $624.4 million. Net interest income was also negatively impacted by competitive pressures on loan pricing, combined with a rising deposit rate environment during the quarter which resulted in a 20 basis point decrease in net interest margin, from 3.46% for the three months ended March 31, 2016 to 3.26% for the same period in 2017.

Interest income increased by $1.6 million, or 23.0%, to $8.6 million in the first quarter of 2017 from $7.0 million in the same quarter in 2016. The yield earned on loans declined 25 basis points to 4.58% for the first quarter of 2017 from 4.83% in 2016. The decrease was principally due to the continued low interest rate environment and greater competition in the Bank's primary markets, resulting in the Bank originating new loans at lower rates than the existing portfolio. Average residential loans outstanding increased $107.8 million, or 35.8%, and average commercial real estate loans outstanding increased $58.0 million, or 26.8% when compared to the prior year quarter.

The average volume of securities decreased from $78.8 million in the first quarter of 2016 to $63.5 million in the first quarter of 2017. In the third quarter of 2016, the Bank sold securities with a book value of $11.3 million, resulting in a $292,000 pre-tax gain. Proceeds from this sale, as well as security repayments, were redeployed into higher yielding loans. The average yield on securities increased by 32 basis points to 2.65%, principally because management allowed lower yielding securities to mature while retaining more intermediate term securities with higher yields. The net effect of the decrease in volume and the increase in yield was a $37,000 decrease in interest and dividends earned on securities to $421,000 during the first quarter of 2017 compared to $458,000 in the prior year quarter.

Interest expense increased by $549,000, or 42.6%, during the first quarter of 2017 compared to the first quarter of 2016. The average cost of deposits increased 14 basis points to 0.95% in the first quarter of 2017 compared to the same quarter of 2016. This was largely due to an increase in both the volume and cost of certificates of deposit, resulting from a Chinese New Year campaign and greater competition during the recent quarter. The average balance of certificates of deposit, our highest cost deposit category, increased by $63.2 million, from $230.8 million in the first quarter of 2016 to $294.0 million in 2017. The average rate paid on certificates of deposit increased by 14 basis points from 1.09% in 2016 to 1.23% in 2017. The average balance of money market deposit accounts and savings increased by $42.4 million, from $120.6 million in 2016 to $163.0 million in 2017 with the average rate paid increasing from 0.29% to 0.49%.

Provision for Loan Losses
In the quarter ended March 31, 2017, the Company recorded a $79,000 provision for loan losses, which was attributable to the increase in the loan portfolio, compared to a provision for loan losses of $367,000 in the first quarter of 2016. Management believes the existing $9.3 million allowance at March 31, 2017 is appropriate. The allowance as a percentage of loans was 1.30% at March 31, 2017 compared to 1.69% at March 31, 2016. The reduction in the allowance as a percentage of total loans was due to a reduction in the level of non-performing loans, continued improvement in our historical loan loss experience, which is based upon the last twelve quarters of loan losses, a reduction in certain qualitative factors associated with a stronger risk management program and the improved economy, and a slight shift of the portfolio to lower risk residential loans. We remain focused on improving the quality of our assets.

Non-interest Income
Non-interest income was $1.8 million for the quarter ended March 31, 2017, an increase of $329,000, or 22.7%, compared to the quarter ended March 31, 2016. The quarter-over-quarter increase is largely due to a volume-driven $166,000 increase in gains on sales of loans to third parties, from $23,000 in the quarter ended March 31, 2016 to $189,000 in the quarter ended March 31, 2017, and a volume-driven increase in the value of the Bank's mortgage servicing rights of $148,000, due primarily to the retention of servicing rights when the Bank sold $10.1 million of portfolio residential loans to a third party during the recent quarter, partially offset by a $79,000 decrease in investment and insurance product sales fees, from $201,000 to $122,000.

Non-interest Expenses
Non-interest expenses were $6.0 million for the quarter ended March 31, 2017 compared to $5.7 million in 2016, an increase of $334,000, or 5.9%. The increase is primarily due to volume-driven incentive compensation costs associated with the increase in residential loan originations combined with increased benefits costs and a greater emphasis on staff training, $364,000, and higher volume-driven data processing costs, $49,000, partially offset by decreases in occupancy, $31,000, office expenses, $45,000 and other professional fees, $22,000.

Balance Sheet Highlights

Assets
Total assets at March 31, 2017 were $850.3 million, an increase of $155.3 million, or 22.4%, versus March 31, 2016. Total loans receivable were $715.4 million, an increase of $170.3 million, or 31.2%, compared to last year. The increase is due primarily to a $118.5 million, or 36.6%, increase in 5/1 and 7/1 adjustable rate 1-4 family mortgage loans, at an average yield of 4.43%, combined with a $53.3 million, or 24.1%, increase in commercial mortgage loans at an average yield of 4.07%. Commercial mortgage loans generally have the interest rate fixed for 5 years.

Overnight investments increased by $3.8 million, or 8.4%, to $48.6 million, while investment securities decreased by $20.7 million, or 27.5%, to $54.7 million. In the third quarter of 2016, the Bank sold securities with a book value of $11.3 million and used the proceeds to fund loan growth. The increase in overnight investments is principally the result of a successful Chinese New Year certificate of deposit campaign during the first quarter of 2017. The Bank anticipates redeploying a portion of its overnight investments into new loan originations during the second quarter of 2017.

Asset Quality
Non-performing loans declined by $47,000, or 1.5% at March 31, 2017 to $3.12 million, compared to $3.17 million one year earlier. However, total delinquent loans increased to $2.4 million at March 31, 2017, or 0.33% of the loan portfolio, compared to $1.6 million, or 0.30% of the portfolio at March 31, 2016. The Company monitors delinquent loans closely and continues to work on improving asset quality on an overall basis. The allowance for loan losses was $9.3 million, or 1.30% of total loans at March 31, 2017, compared to $9.2 million, or 1.69%, at March 31, 2016.

Deposits
Deposits increased by $104.2 million, or 20.8%, from $501.6 million at March 31, 2016 to $605.8 million at March 31, 2017 and were utilized to fund loan portfolio growth. Certificates of deposit were $306.9 million, an increase of $53.3 million, or 21.0%, over the same period. Savings and money market accounts increased $41.1 million, or 34.9%, while demand deposits increased $8.5 million, or 6.7%, when comparing March 31, 2017 to March 31, 2016. NOW accounts increased $1.3 million, or 45.8%.

Borrowings
Federal Home Loan Bank of New York ("FHLBNY") Borrowings increased by $43.0 million, or 38.4% to $155.0 million, $42.0 million of which occurred during the third quarter of 2016, partially offset by two borrowings which matured and were paid off during the fourth quarter of 2016 and first quarter of 2017 in the amounts of $2.0 million and $1.0 million, respectively. The $42.0 million of borrowings were for original three to five year terms at an effective average cost of 1.49% and were used to supplement retail deposits to support loan growth. Total FHLBNY Borrowings at March 31, 2017 mainly consist of borrowings with remaining average terms of two to four years. Recent borrowings have been at slightly higher rates than deposits to help provide a cost-effective source of funding and to help the Bank manage interest rate risk. The remaining borrowings of $7.2 million consist of the Company's trust preferred securities transaction originated in 2004.

Stockholders' Equity
Stockholders' equity was $74.3 million, or 8.73% of total assets, at March 31, 2017, a $5.6 million, or 8.2%, increase from March 31, 2016. The increase was due mainly to the retention of net income.

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 eight full service branches, including offering consumer and business banking and loan products and services, and non-deposit insured investment products and services, 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.

   
First American International Corp.  
Financial Highlights (unaudited)  
               
      ($ in thousands)  
Balance Sheet Items   3/31/2017     3/31/2016  
Cash and cash equivalents                
  Cash and due from banks - noninterest bearing   $ 4,917     $ 5,324  
  Due from banks - interest bearing     48,579       44,828  
  Federal funds sold     66       948  
    Total cash and cash equivalents     53,562       51,100  
Time deposits with banks     3,797       3,947  
Securities                
  Securities available for sale     26,387       47,874  
  Securities held to maturity     28,352       27,611  
    Total securities     54,739       75,485  
Loans                 
  Loans held for sale     1,939       982  
  Real estate - residential     442,461       323,995  
  Real estate - commercial     274,686       221,375  
  Commercial and industrial     1,062       227  
  Consumer and installment     369       383  
  Unearned loan fees     (3,141 )     (850 )
    Loans receivable, gross     715,437       545,130  
    Allowance for loan losses     (9,329 )     (9,223 )
      Loans, net     706,108       535,907  
Bank premises and equipment     6,933       7,070  
Federal Home Loan Bank stock     7,776       5,839  
Accrued interest receivable     2,766       2,387  
Mortgage servicing rights     7,129       7,351  
Other assets     5,523       4,889  
  Total Assets   $ 850,272     $ 694,957  
                   
Demand deposits   $ 135,592     $ 127,086  
NOW accounts     4,233       2,903  
Money market and savings     159,118       117,980  
Certificates of deposit     306,895       253,591  
  Total deposits     605,838       501,560  
Borrowings     155,000       112,000  
Junior subordinated debentures     7,217       7,217  
Accrued interest payable     1,649       1,173  
Accounts payable and other liabilities     6,299       4,365  
  Total Liabilities     776,003       626,315  
Stockholders' equity     74,269       68,642  
  Total Liabilities and Stockholders' Equity   $ 850,272     $ 694,957  
                   
First American International Corp.  
Financial Highlights (unaudited)  
             
    ($ in thousands except per share data)  
Summary Income Statement   For the Quarter Ended  
    3/31/2017     3/31/2016  
Interest income                
  Real estate - residential   $ 4,695     $ 3,530  
  Real estate - commercial     3,085       2,745  
  Other     777       680  
    Total Interest income     8,557       6,955  
Interest expense                
  Interest-bearing core deposits     201       87  
  Interest-bearing certificates of deposit     902       627  
  Interest on borrowings     737       576  
    Total Interest expense     1,839       1,290  
Net interest income     6,718       5,665  
Provision for loan losses     79       367  
  Net interest income after                
  provision for loan losses     6,639       5,298  
Non-interest income     1,778       1,449  
Non-interest expenses     5,999       5,665  
    Income before income taxes     2,418       1,081  
Provision for income taxes     827       354  
    Net income   $ 1,591     $ 728  
Less: Preferred stock dividends and discount accretion     (203 )     (198 )
    Net income available to shareholders   $ 1,388     $ 530  
                 
    For the Quarter Ended  
    3/31/2017     3/31/2016  
Performance Ratios                
                 
Return on average assets     0.66 %     0.30 %
Return on average common equity     9.63 %     3.99 %
Average interest earning assets/bearing liabilities     133.5 %     140.1 %
Net interest rate spread     2.98 %     3.16 %
Net interest margin     3.26 %     3.46 %
Yield on loans     4.58 %     4.83 %
Average cost of deposits     0.95 %     0.81 %
Net interest income after provision/total expense     110.66 %     93.51 %
Non-interest income to total revenue     17.21 %     17.24 %
Non-interest expense to total revenue     58.05 %     67.42 %
Non-interest expense to average assets     2.85 %     3.25 %
                 
Net Worth and Asset Quality Ratios                
                 
Average total equity to average total assets     8.78 %     9.90 %
Total equity to assets end of period     8.73 %     9.88 %
Non-performing assets to total assets     0.37 %     0.81 %
Non-performing loans to total loans     0.44 %     0.58 %
Allowance for loan losses to total loans     1.30 %     1.69 %
Allowance for loan losses to NPLs     299.10 %     291.32 %
                 
Capital, Book Value and Earnings Per Share                
                 
Total risk based capital ratio (Bank)     15.76 %     17.22 %
Tier 1 risk based capital (Bank)     14.51 %     15.95 %
Leverage ratio (Bank)     9.55 %     10.90 %
                 
Book value per share basic   $ 26.26     $ 23.97  
Diluted EPS available to common shareholders   $ 0.63     $ 0.24  
                 

Contact Information

  • For further information, please contact
    Michael Lowengrub
    Chief Financial Officer
    (718) 567-8788 Ext 1388