SOURCE: First American International Corp.

August 24, 2016 16:32 ET

First American International Corp. Announces Second Quarter Results and First Half Results for 2016

NEW YORK, NY--(Marketwired - Aug 24, 2016) -  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 June 30, 2016 of $386,000 and $894,000 for the first half of 2016. Earnings per share available to common shareholders were $0.18 per share for the second quarter and $0.41 for the first half of 2016, both basic and diluted.

Net Income and Results of Operations

The Company today reported net income for the quarter ended June 30, 2016 of $386,000, $0.18 per share, and $894,000, $0.41 per share, for first half of 2016. The income available to common shareholders is after deduction of $199,000 in Troubled Asset Relief Program ("TARP") costs, consisting of preferred stock dividends ($85,000) and discount accretion ($114,000) for the quarter and $397,000 in TARP costs, consisting of preferred stock dividends ($170,000) and discount accretion ($227,000) for the first half of 2016. This compares to a net loss of $5,000, or $0.00 per share, basic and diluted, for the quarter ended June 30, 2015, and net income of $113,000 for the first half of 2015 also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.21% for the quarter ended June 30, 2016, compared to 0.00% for the same period in 2015 and a return on average equity of 2.80% for the quarter ended June 30, 2016, compared to -0.04% for the same period in 2015.

Due principally to a reduction in mortgage interest rates during 2016, the Company recorded a $1,281,000 pre-tax loss on the value of Mortgage Serving Rights ("MSR") in June 2016, compared to the Company recognizing a $266,000 pre-tax gain in June of 2015. The value of MSR is the market value of the right to earn fees for servicing loans. Because loan prepayment speeds tend to change with changes in interest rates, an increase or decrease in interest rates generally results in an increase or decrease in MSR value.

The Company recognized a $751,000 gain in June 2016 attributable to the release of escrow related to the Company's satisfaction of a post-sale performance requirement for the sale in September 2015 of the property located at 135 Bowery, New York, NY.

The Company also recorded a one-time severance expense of $235,000 in the second quarter of 2016 in connection with a reduction in staff that resulted from increased productivity and moving branches to a six-day a week schedule; but with alternating weekend days opened at nearby branches, thus ensuring seven-day a week availability in the Bank's key markets of Sunset Park, Brooklyn, Flushing, Queens and Chinatown, Manhattan.

The net impact of the one-time MSR and severance charges, which were partially offset by the one-time gain for the sale of property, decreased pre-tax income in the second quarter of 2016 by $765,000 ($505,000 after taxes).

The increase in quarterly earnings over the same period in 2015 is due principally to a year-over-year increase in interest income of $945,000, or 15%, and a decrease in non-interest expense of $415,000, or 6.4%, which was offset partially by a year-over-year decrease in non-interest income of $865,000, or 42.8% and an increase in interest expense of $405,000 or 41.1%.

"I continue to be pleased with our progress in growing core earnings and reducing operating expenses. Although the reduction in the value of mortgage servicing rights is significant, I believe the value of the Bank's mortgage servicing portfolio continues to be strong and a reliable source of income. Although, my optimism continues to be tempered by the impact that the prolonged low interest rate environment, competition and regulatory burdens are having on net interest margin and profitability. As such, our team will continue to focus on generating high quality loans, growing customer relationships and deposits and controlling expenses. The Bank also continues to utilize borrowings and wholesale funding to support growth," said Mark Ricca, President and Chief Executive Officer.

Net Interest Income
Net interest income for the three months ended June 30, 2016, before provision for loan losses, was $5.9 million, an increase of $540,000, or 10.1%, from the prior year.

The increase in net interest income is attributable principally to an increase in average interest earning assets of $151.3 million, or 27.7%, from $546.5 million in the second quarter of 2015 to $697.8 million in the same period in 2016, partially offset by an increase in interest expense from an increase in average interest bearing liabilities of $103.3 million, or 26.1%, from $395.3 million in the 2015 quarter to $498.7 million in 2016. Earnings were also negatively impacted by a 54 basis point decrease in net interest margin from 3.90% for the three months ended June 30, 2015 to 3.37% for the same period in 2016.

Interest income increased by $945,000, or 15.0%, to $7.3 million in the second quarter of 2016 from $6.3 million in the same quarter in 2015. The yield earned on loans declined 80 basis points to 4.67% for the second quarter of 2016 from 5.47% in 2015. The decrease was principally due to the continued low interest rate environment and competition, resulting in the Bank originating new loans at lower rates than the existing portfolio. Average commercial real estate loans outstanding increased $107.8 million, including a $49.0 million loan participation purchase at a net yield of 3.32%, and average residential loans outstanding increased $47.1 million for the second quarter compared to the prior year quarter.

The average volume of securities decreased from $100.2 million in the second quarter of 2015 to $81.7 million in the second quarter of 2016, as repayments were redeployed into loans. The average yield on securities increased by 38 basis points due to the Bank investing in more intermediate term investments, while also allowing lower yielding municipal bonds to roll off. The net effect of the decrease in volume and the increase in yield was a $15,000 decrease in interest and dividends earned on securities during the second quarter of 2016 compared to the second quarter of 2015.

Interest expense increased during the second quarter of 2016 compared to 2015 by $405,000, or 41.1%. The average cost of interest bearing deposits increased 12 basis points to 0.86% in the second quarter of 2016 compared to the same quarter of 2015. This was mostly due to a change in the deposit mix. The average balance of certificates of deposit, our highest cost deposit category, increased by $63.2 million, from $190.0 million in 2015 to $253.2 million in 2016. The average rate paid on certificates of deposit increased by 7 basis points from 1.05% in 2015 to 1.12% in 2016. The average balance of money market deposit accounts and savings decreased by $12.1 million, from $133.1 million in 2015 to $121.0 million in 2016 with the average rate paid increasing slightly from 0.31% to 0.32%.

Provision for Loan Losses
The Company made no provision for loan losses in Q2 of 2016 or Q2 of 2015. Management believes the existing $9.2 million allowance, aggregating 1.53% of total loans, is appropriate.

Non-interest Income
Non-interest income was $1.2 million for the quarter ended June 30, 2016, a decrease of $865,000, or 42.8%, compared to the quarter ended June 30, 2015. The decrease is mainly due to the reduction in the value of the mortgage servicing rights of $1.28 million which is recorded as a reduction in the gain on sale of mortgages and a decrease of $390,000 in non-deposit investment income, which is principally caused by a regulatory change reducing the earnings the Bank can receive on the sale of certain investments which was partially offset by the additional gain on sale of 135 Bowery of $751,000.

Non-interest Expenses
Non-interest expenses were $6.1 million for the quarter ended June 30, 2016 compared to $6.5 million in 2015, a decrease of $415,000, or 6.4%. The decrease is mainly due to a decrease in occupancy expenses of $191,000, other professional fees of $180,000, and loan related expenses of $109,000.

Balance Sheet Highlights

Assets
Total assets at June 30, 2016 were $729.4 million, an increase of $137.8 million, or 23.3%, versus June 30, 2015. Total loans receivable were $607.6 million at June 30, 2016, an increase of $170.7 million, or 39.1%, compared to one year earlier. The increase is due principally to a $115.8 million increase in commercial mortgage loans, which includes $49.0 million of loan participations at a net yield of 3.32% purchased in December 2015, and an increase of $56.3 million of adjustable rate 1-4 family mortgage loans.

Overnight investments decreased by $2.3 million, or 9.8%, to $21.6 million, while investment securities decreased by $18.0 million, or 19.7%, to $73.5 million. These funds were used to fund our loan portfolio.

Fixed assets held for sale at June 30, 2015 were $13.1 million. This represented the value of the building at 135 Bowery, New York, NY which was sold during the third quarter of 2015. The Company recognized a $751,000 additional gain in connection with the sale of the property during Q2 of 2016.

Asset Quality
At June 30, 2016, nonperforming loans totaled $3.5 million, or 0.58% of total loans, compared to $4.5 million, or 1.04% of total loans one year earlier. Total delinquent loans declined by 76% to $1.0 million or 0.17% of total loans at June 30, 2016, compared to $4.1 million or 0.93% at June 30, 2015. The allowance for loan losses was $9.2 million, or 1.53% of total loans at June 30, 2016, compared to $8.3 million, or 1.91%, at June 30, 2015.

Deposits
Deposits increased by $69.3 million, or 15.6%, from $444.7 million at June 30, 2015 to $514.0 million and were utilized to fund loan portfolio growth. Certificates of deposit were $255.9 million, an increase of $64.8 million, or 33.9%. Demand deposits increased $8.6 million, or 7.2%, compared to June 30, 2015. NOW accounts increased $654,000, or 20.0%. Savings and money market accounts decreased $4.8 million, or 3.6%.

Borrowings
Federal Home Loan Bank of New York ("FHLBNY") borrowings increased by $66.0 million, or 98.5% to $133.0 million, $45.0 million of the increase is for a three-year term at 1.59% and was incurred in connection the Bank's purchase of $49.0 million in loan participations in December 2015. Total FHLBNY borrowings at June 30, 2016 mainly consist of three year, five year and seven year term borrowings at a higher rate than deposits to help provide a cost-effective source of funding and to help the Bank manage interest rate risk.

Junior subordinated debentures
The subordinated debentures of $7.2 million consist of the Company's trust preferred securities transaction originated in 2004.

Stockholders' Equity
Stockholders' equity was $69.4 million, or 9.51% of total assets, at June 30, 2016, a $1.8 million, or 2.7%, increase from June 30, 2015. The increase was due mainly to retained 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. Please note that prior period financial information may have been revised to conform to current period classifications, the impact of such changes was not material.

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   6/30/2016     3/31/2016     6/30/2015  
Cash and cash equivalents                        
  Cash and due from banks - noninterest bearing   $ 5,719     $ 5,324     $ 5,819  
  Due from banks - interest bearing     21,207       44,828       23,123  
  Federal funds sold     374       948       795  
      Total cash and cash equivalents     27,300       51,100       29,736  
Time deposits with banks     3,697       3,947       3,209  
Securities                        
  Securities available for sale     44,574       47,874       72,665  
  Securities held to maturity     28,888       27,776       18,816  
      Total securities     73,462       75,650       91,481  
Loans                        
  Loans held for sale     2,770       982       1,683  
  Real estate - commercial     260,063       221,375       144,268  
  Real estate - residential     345,286       323,995       289,006  
  Commercial and industrial     426       227       2,077  
  Consumer and installment     386       383       720  
  Unearned loan fees     (1,377 )     (850 )     (912 )
    Loans receivable, gross     607,555       546,113       436,842  
    Allowance for loan losses     (9,234 )     (9,223 )     (8,294 )
      Loans, net     598,321       536,889       428,547  
Bank premises and equipment     6,864       7,070       7,678  
Fixed assets held for sale     -       -       13,149  
Federal Home Loan Bank stock     6,786       5,674       3,649  
Accrued interest receivable     2,453       2,387       2,104  
Mortgage servicing rights     6,097       7,351       7,487  
Other assets     4,392       4,819       4,543  
        Total Assets   $ 729,372     $ 694,888     $ 591,582  
                         
Demand deposits   $ 128,078     $ 127,086     $ 119,446  
NOW accounts     3,927       2,903       3,273  
Money market and savings     126,167       117,980       130,941  
Certificate of deposit     255,861       253,591       191,053  
  Total deposits     514,033       501,560       444,712  
Borrowings     133,000       112,000       67,000  
Junior subordinated debentures     7,217       7,217       7,217  
Accrued interest payable     1,372       1,129       1,111  
Accounts payable and other liabilities     4,365       4,274       3,996  
    Total Liabilities     659,987       626,181       524,036  
Stockholders' equity     69,385       68,707       67,546  
      Total liabilities and stockholders' equity   $ 729,372     $ 694,888     $ 591,582  
                         
                         
                         
First American International Corp.  
Financial Highlights (unaudited)  
   
    ($ in thousands except per share data)  
Summary Income Statement   Year to Date     Quarter ended  
    6/30/2016     6/30/2015     6/30/2016     6/30/2015  
Interest income   $ 14,226     $ 12,451     $ 7,263     $ 6,318  
Interest expense     2,679       1,976       1,389       984  
  Net interest income     11,547       10,475       5,874       5,334  
Provision for loan losses     367       -       -       -  
  Net interest income after provision for loan losses     11,180       10,475       5,874       5,334  
Non-interest income     2,611       3,794       1,158       2,023  
Non-interest expenses     11,818       12,921       6,106       6,521  
    Income before income taxes     1,974       1,349       926       836  
Income taxes     683       850       342       647  
    Net income   $ 1,291     $ 499     $ 585     $ 189  
Less: Preferred Stock dividends and discount accretion     397       386       199       193  
    Net income available to shareholders   $ 894     $ 113     $ 386     $ (5 )
                                 
    Year to Date     Quarter ended  
    6/30/2016     6/30/2015     6/30/2016     6/30/2015  
Performance Ratios                                
                                 
Return on average assets     0.26 %     0.04 %     0.21 %     0.00 %
Return on average net worth (less TARP)     3.29 %     0.43 %     2.80 %     -0.04 %
Average interest earning assets/bearing liabilities     107.65 %     107.03 %     107.61 %     107.06 %
Net interest rate spread     3.10 %     3.57 %     3.05 %     3.63 %
Net interest margin     3.41 %     3.84 %     3.37 %     3.90 %
Yield on loans     4.75 %     5.43 %     4.67 %     5.47 %
Average cost of deposits     0.83 %     0.74 %     0.86 %     0.74 %
Net interest income after provision/total expense     94.60 %     81.07 %     96.21 %     81.79 %
Non-interest income to total revenue     15.51 %     23.36 %     15.94 %     32.02 %
Non-interest expense to total revenue     70.19 %     79.54 %     72.51 %     78.18 %
Non- interest expense to average assets     1.69 %     2.23 %     1.69 %     2.23 %
                                 
Net Worth and Asset Quality Ratios                                
                                 
Average net worth to average total assets     10.14 %     11.91 %     10.14 %     11.91 %
Total net worth to assets end of period     9.57 %     11.50 %     9.57 %     11.50 %
Non-performing assets to total assets     0.48 %     0.76 %     0.48 %     0.76 %
Non-performing loans to total loans     0.58 %     1.04 %     0.58 %     1.04 %
Allowance for loan losses to total loans     1.53 %     1.91 %     1.53 %     1.91 %
Allowance for loan losses to NPLs     261.80 %     184.10 %     261.80 %     184.10 %
                                 
Capital, Book Value and Earnings Per Share                                
                                 
Risk based total capital ratio (Bank)     15.83 %     20.10 %     15.83 %     20.10 %
Tier 1 risk based capital (Bank)     14.57 %     18.84 %     14.57 %     18.84 %
Leverage ratio (Bank)     10.46 %     12.60 %     10.46 %     12.60 %
                                 
Book value per share basic   $ 24.23     $ 23.60     $ 24.23     $ 23.60  
Diluted EPS available to common shareholders   $ 0.41     $ 0.05     $ 0.18     $ 0.00  
                                 

Contact Information

  • For further information, please contact
    Mark Ricca
    Chief Executive Officer
    (212) 619-8338 Ext 2823