NEW YORK, NY--(Marketwired - Aug 18, 2015) - First American International Corp. (
Net Income and Results of Operations
The Company today reported net income for the six months ended June 30, 2015 of $112,000, or $0.05 per share, basic and diluted, after deduction of $386,000 in Troubled Asset Relief Program ("TARP") preferred stock dividends and discount accretion. This compares to net income of $854,000, or $0.39 per share, basic and diluted, for the six months ended June 30, 2014, also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.04% for the six months ended June 30, 2015, compared to 0.31% for the same period in 2014 and a return on average equity of 0.44% for six months ended June 30, 2015, compared to 3.46% for the same period in 2014.
The lower net income is due principally to a year-over-year $1.3 million increase in non-interest expense, or 11.39%, and a $190 thousand increase in income taxes. These were partially offset by an increase of $508 thousand in non-interest income, a decrease of $157 thousand in provision for loan loss and an increase of $110 thousand in net interest income.
The $1.3 million increase in non-interest expense, as detailed below, is due principally to an increase of $657 thousand in general and administrative expenses, including a one-time charge for loans serviced for others of $230 thousand, FDIC insurance due to the inadvertent under-accrual in 2014 of $131 thousand and professional services of $110 thousand and an increase of $562 thousand in salaries and benefits expense due to additional staffing and increased health insurance costs.
Net interest margin decreased to 3.78% for the six months ended June 30, 2015, compared to 3.92% for the same period in 2014. However, net interest income increased $110 thousand due to an increase in average interest earning assets of $24.5 million from $520.4 million in 2014 to $544.9 million in 2015, partially offset by an increase of $6.9 million in average interest bearing liabilities from $399.4 million in 2014 to $406.3 million.
"Although the financial performance has declined year-over-year, the Company has increased its loan origination capabilities resulting in a 17% year-over-year net loan growth, which we believe will benefit shareholders and customers in the long term. We continue to invest in the Company's ability to grow deposits and control expenses. 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," said Mark Ricca, President and Chief Executive Officer.
Net Interest Income
Net interest income for the six months ended June 30, 2015, before provision for loan losses, was $10.3 million, an increase of $110,000 or 1.08% from the prior year.
Interest income increased by $180 thousand to $12.3 million in the six months ended June 30, 2015 from $12.1 million in the same period in 2014. This includes, in 2015, $208 thousand of interest from payoffs of non-performing loans and loans that were returned to accrual status, which the Company recorded as interest income. There were no such loans that affected income in 2014.
The yield earned on loans declined 48 basis points to 5.37% for the first six months of 2015 from 5.85% in 2014. The decrease was principally because of a lower interest rate environment. Residential loans outstanding increased $38.8 million for the year, with an average yield of 4.58% and commercial real estate loans increased $23.9 million, with an average yield of 4.37%.
The average cost of deposits increased 3 basis points to 0.73% for the first six months of 2015 compared to the same period of 2014. The average balance of certificates of deposit increased by $6.1 million, from $187.5 million in 2014 to $193.6 million in 2015. The average rate paid on certificates of deposit increased by 3 basis points from 1.02% in 2014 to 1.05% in 2015. The average balance of money market deposit accounts and savings accounts decreased by $133 thousand, from $141.2 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 decreased from $103.8 million in 2014 to $101.2 million in 2015; with the excess cash being redeployed into loans at increased yields. In addition, the average yield on securities declined by 20 basis points due to a reduction in interest rates and the Bank investing in shorter term investments.
Overall, for the six months ended June 30, 2015, the interest rate spread of 3.54% was down 16 basis points from 3.70% for the same period in 2014; the net interest margin of 3.78% was down 14 basis points from 3.92% from 2014. The reduction in the interest rate spread and net interest margin was mostly due to the decline in the interest rate earned on loans.
The average balance of the loan portfolio of $418.2 million for the six months ended June 30, 2015 was $45.6 million, or 12.3%, higher than for the same period in 2014. The average balance of the investment portfolio and interest bearing deposits decreased by $21.2 million, or 14.3%, from $147.9 million for the six months ended June 30, 2014 to $126.7 million for the first half of 2015. This decrease in non-loan interest-earning assets was due primarily to redeploying low yielding assets to new loans.
The average balance of deposits increased by $5.9 million from $331.1 million at June 30, 2014 to $337.0 million at June 30, 2015, and were utilized to fund loan portfolio growth. Borrowings from the Federal Home Loan Bank increased $6.0 million to $67 million. The Bank secured the new borrowings for liquidity purposes. The remainder of the borrowings consists of five year and seven year term borrowings obtained prior to 2015 at a higher rate than deposits to help manage the Bank's interest rate risk.
Provision for Loan Losses
The Company made no provision for loan losses in the first six months of 2015 and made a provision of $157,000 in the first six months of 2014. Management believes the existing $8.3 million allowance, aggregating 1.91% of total loans, is appropriate.
Non-interest Income
Non-interest income was $4.0 million for the six months ended June 30, 2015, an increase of $508 thousand, or 14.7%, compared to the six months ended June 30, 2014. The increase is mainly due to an increase of $542,000 in the gain on sale of mortgage loans of $1.2 million; an increase of $305,000 in alternative investment income, offset by a $219,000 decrease in service and transaction fees and a $120,000 decrease in gain on sale of securities. The gain on sale of mortgage loans includes a fair value upward adjustment of mortgage servicing rights of $266,000 in 2015 and compared to a reduction of $132,000 in 2014.
Non-interest Expenses
Non-interest expenses were $12.9 million for the six months ended June 30, 2015 compared to $11.6 million in 2014, an increase of $1.3 million, or 11.3%. The increase is mainly due to an increase in general and administrative expenses of $657,000, and an increase in salaries and benefits of $563,000.
The increase in general and administrative expenses is mainly due to a one-time charge for loans serviced for others of $230,000, an increase in FDIC insurance of $131,000 due to booking two quarter's expenses in one quarter, an increase in professional fees of $114,000, an increase of $78,000 in office supplies and printing and $57,000 in capital taxes to New York State and City. 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.
Pre-tax Income
Pre-tax income for the six months ended June 30, 2015 was $1,349,000 compared to pretax income for the same period in 2014 of $1,890,000. On a quarterly basis, pretax income for the first and second quarters of 2015 was $513,000 and $836,000, respectively, compared to pretax income for the first and second quarters of 2014 of $1,102,000 and $788,000 respectively.
Income Taxes
Income tax expense of $851,000 included a one-time charge of $560,000, $369,000 after federal tax benefit, as a reserve against New York City deferred taxes. New York City passed a law in second quarter of 2015 which effectively eliminated future New York City income taxes due to the tax benefits derived from the Company's real estate loans. New York State passed a similar law last year and the Company took a charge against its New York State deferred taxes in the fourth quarter of 2014.
New York City and New York State capital taxes of approximately $150,000 annually are charged to non-interest expense. Capital taxes for New York State began in January 2015 and New York City only began in April 2015. Through June 30, 2015, $57,000 of capital taxes have been expensed.
Balance Sheet Highlights
Assets
Total assets at June 30, 2015 were $591.9 million, an increase of $36.2 million, or 6.5%, versus June 30, 2014. Total loans receivable were $436.2 million, an increase of $64.8 million compared to same period last year. The increase is due principally to a $38.7 million increase in adjustable rate 1-4 family mortgage loans and a $25.3 million increase in commercial real estate and multifamily loans. Investment securities decreased by $11.9 million while overnight investments decreased by $8.6 million. Total cash at June 30, 2015 was $28.9 million, a decrease of $9.1 million from June 30, 2014, which is principally the result of redeploying cash into higher yielding loan assets.
Fixed assets held for sale at June 30, 2015 increased to $13.1 million, compared to $0 at June 30, 2014 and Bank premises and equipment decreased during the same period by $12.3 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 assets declined by 39.9% at June 30, 2015 to $4.5 million, compared to $7.3 million one year earlier. Total delinquent loans declined by 32.7% to $6.1 million at June 30, 2015, compared to $9.0 million at June 30, 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 1.91% of total loans at June 30, 2015, compared to $7.8 million, or 2.11%, at June 30, 2014. The increase in the allowance was due to net recoveries and no new provision needed.
Deposits
Deposits increased to $444.8 million at June 30, 2015, an increase of $30.9 million, or 7.5%, versus June 30, 2014. Demand deposits increased $33.0 million to $119.6 million, or 38.2%, compared to June 30, 2014. NOW accounts increased $1.4 million, or 79.2%. Savings and money market accounts decreased $11.3 million, or 8.0%. Certificates of deposit were $191.1 million, an increase of $7.8 million, or 4.3%.
Borrowings
Federal Home Loan Bank Borrowings increased by $6.0 million to $67.0 million compared to last year, which increase the Company incurred to fund loan growth and manage liquidity. The remaining borrowings of $7.2 million consist of the Company's trust preferred securities transaction originated in 2004.
Stockholders' Equity
Stockholders' equity was $67.5 million, or 11.41% of total assets, at June 30, 2015, a $919 thousand, or 1.4% increase from June 30, 2014. The increase was mainly due to net income and proceeds from stock options that directors and officers exercised.
Subsequent Event
In August 2015, a subsidiary of the Bank, entered into a contract to sell the property located at 135 Bowery, New York, NY after the Bank determined that it did not require any part of the building for its own use. The Bank expects the closing to occur during the third or fourth quarter of 2015. The Company expect to recognize a gain if the sale is consummated, but the amount of the gain will depend upon future events.
About First American International Corp.
First American International Corp. is the holding company for First American International Bank, a community development financial institution ("CDFI") and a minority depository institution ("MDI") with nine branches and two mortgage offices serving principally the Chinese-American communities in Manhattan, Queens and Brooklyn in New York City.
See accompanying unaudited financial data tables for additional information. Some items, specifically related to adjustments for Financial Accounting Standard ("FAS") 91 Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, in the prior year financial statements were reclassified to conform to the current presentation.
The information contained herein is intended to provide the reader with historical information about the financial results of First American International Corp. It is not intended to provide forward looking statements or projections of future results. A variety of factors could cause actual results and experiences to differ materially from historical results and anticipated results based on historical results.
| First American International Corp. | |||||||||
| Financial Highlights (unaudited) | |||||||||
| ($ thousands) | |||||||||
| Balance Sheet Items | |||||||||
| 06/30/15 | 03/31/15 | 06/30/14 | |||||||
| Cash and due from banks - noninterest bearing | 5,819 | 5,623 | 6,450 | ||||||
| Due from banks - interest bearing | 23,122 | 19,815 | 31,689 | ||||||
| Federal funds sold | 795 | 623 | 789 | ||||||
| Time deposits with banks | 3,209 | 3,456 | 3,817 | ||||||
| Securities available for sale | 72,665 | 80,289 | 103,416 | ||||||
| Securities held to maturity | 18,816 | 19,110 | - | ||||||
| Total securities | 91,481 | 99,399 | 103,416 | ||||||
| Real estate - commercial | 144,491 | 129,326 | 119,160 | ||||||
| Real estate - residential | 288,915 | 285,178 | 250,154 | ||||||
| Commercial and industrial | 1,810 | 2,401 | 1,580 | ||||||
| Consumer and installment | 977 | 654 | 498 | ||||||
| Loans receivable, gross | 436,193 | 417,559 | 371,392 | ||||||
| Unearned loan fees | (912 | ) | (844 | ) | (793 | ) | |||
| Allowance for possible loan losses | (8,294 | ) | (8,290 | ) | (7,818 | ) | |||
| Loans held for sale | 1,683 | 1,176 | 2,810 | ||||||
| Bank premises and equipment | 7,678 | 7,743 | 19,942 | ||||||
| Fixed assets held for sale | 13,149 | 12,928 | - | ||||||
| Federal Home Loan Bank stock | 3,649 | 3,367 | 3,514 | ||||||
| Accrued interest receivable | 2,104 | 2,231 | 1,892 | ||||||
| Mortgage servicing rights | 7,487 | 7,256 | 7,461 | ||||||
| Other assets | 4,768 | 5,151 | 11,165 | ||||||
| Total Assets | 591,931 | 577,193 | 555,726 | ||||||
| Demand deposits | 119,559 | 105,146 | 86,540 | ||||||
| NOW accounts | 3,273 | 3,115 | 1,826 | ||||||
| Money market and savings | 130,949 | 136,303 | 142,310 | ||||||
| Certificate of deposit | 191,053 | 187,441 | 183,224 | ||||||
| Total deposits | 444,834 | 432,005 | 413,900 | ||||||
| Borrowings | 67,000 | 62,000 | 61,000 | ||||||
| Junior subordinated debentures | 7,217 | 7,217 | 7,217 | ||||||
| Accrued interest payable | 1,103 | 1,038 | 1,012 | ||||||
| Accounts payable and other liabilities | 4,231 | 7,255 | 5,970 | ||||||
| Total Liabilities | 524,385 | 509,515 | 489,099 | ||||||
| Stockholders' equity | 67,546 | 67,678 | 66,627 | ||||||
| Total Liabilities and stockholders' equity | 591,931 | 577,193 | 555,726 | ||||||
| Summary Income Statement | For the six months ended | For the quarter ended | |||||||
| 06/30/15 | 06/30/14 | 06/30/15 | 06/30/14 | ||||||
| Interest income | 12,285 | 12,105 | 6,139 | 6,119 | |||||
| Interest expense | 1,976 | 1,906 | 985 | 958 | |||||
| Net interest income | 10,309 | 10,199 | 5,154 | 5,161 | |||||
| Provision for loan losses | - | 157 | - | - | |||||
| Net interest income after provision for loan losses | 10,309 | 10,042 | 5,154 | 5,161 | |||||
| Non-interest income | 3,961 | 3,453 | 2,203 | 1,756 | |||||
| Bank Enterprise Award grant | - | - | - | - | |||||
| Non-interest expenses | 12,921 | 11,605 | 6,521 | 6,130 | |||||
| Income before income taxes | 1,349 | 1,890 | 836 | 787 | |||||
| Income taxes | 851 | 661 | 647 | 263 | |||||
| Net income | 498 | 1,229 | 189 | 524 | |||||
| Less Preferred Stock Dividends and Discount Accretion | 386 | 375 | 194 | 188 | |||||
| Net Income Available to Shareholders | 112 | 854 | (5 | ) | 336 | ||||
| First American International Corp. | |||||||||
| Selected Financial Data (Unaudited) | |||||||||
| ($ in thousands) | Year-to-date | Quarter ended | |||||||
| 06/30/15 | 06/30/14 | 06/30/15 | 06/30/14 | ||||||
| Average Balances | |||||||||
| Securities | 101,152 | 103,838 | 99,803 | 108,224 | |||||
| Loans receivable, net | 418,181 | 372,537 | 422,534 | 373,268 | |||||
| Assets | 578,889 | 556,394 | 579,537 | 558,205 | |||||
| Deposits | 337,057 | 331,141 | 325,419 | 332,475 | |||||
| Performance Ratios | |||||||||
| Return on average assets | 0.04 | % | 0.31 | % | 0.00 | % | 0.24 | % | |
| Return on average net worth | 0.44 | % | 3.46 | % | -0.04 | % | 2.72 | % | |
| Average interest earning assets/bearing liabilities | 133.94 | % | 130.31 | % | 136.73 | % | 130.24 | % | |
| Net interest rate spread | 3.54 | % | 3.70 | % | 3.51 | % | 3.73 | % | |
| Net interest margin | 3.78 | % | 3.92 | % | 3.78 | % | 3.96 | % | |
| Yield on loans | 5.37 | % | 5.85 | % | 5.31 | % | 5.88 | % | |
| Average cost of deposits | 0.73 | % | 0.70 | % | 0.74 | % | 0.70 | % | |
| Net interest income after provision/total expense | 79.79 | % | 86.53 | % | 79.04 | % | 81.64 | % | |
| Non-interest income to total revenue | 24.38 | % | 22.20 | % | 26.41 | % | 22.30 | % | |
| Non-interest expense to total revenue | 79.54 | % | 74.59 | % | 78.18 | % | 77.83 | % | |
| Non-interest expense to average assets | 4.46 | % | 4.17 | % | 4.50 | % | 4.39 | % | |
| Asset Quality Ratios | |||||||||
| Non-performing assets to total assets | 0.76 | % | 1.35 | % | 0.76 | % | 1.35 | % | |
| Non-performing loans to total loans | 1.04 | % | 2.02 | % | 1.04 | % | 2.02 | % | |
| Allowance for loan losses to total loans | 1.91 | % | 2.11 | % | 1.91 | % | 2.11 | % | |
| Allowance for loan losses to non-performing loans | 184.10 | % | 104.34 | % | 184.10 | % | 104.34 | % | |
| Capital Ratios | |||||||||
| Average equity to average assets (Company) | 8.74 | % | 8.53 | % | 8.73 | % | 8.52 | % | |
| Equity to total assets end of period (Company) | 8.54 | % | 8.93 | % | 8.54 | % | 8.93 | % | |
| Tier 1 leverage capital (Bank)(well capitalized 5%) | 12.60 | % | 12.91 | % | 12.60 | % | 12.91 | % | |
| Tier 1 risk-based capital (Bank)(well capitalized 8%) | 18.84 | % | 21.18 | % | 18.84 | % | 21.18 | % | |
| Total risk-basedcapital (Bank)(well capitalized 10%) | 20.10 | % | 22.44 | % | 20.10 | % | 22.44 | % | |
| Book value per share basic | $22.99 | $22.88 | $22.99 | $22.88 | |||||
| Diluted EPS available to Common Shareholders | $0.05 | $0.39 | $0.00 | $0.15 | |||||
Contact Information:
For further information, please contact
Neil Hecht
Chief Financial Officer
(718) 567-8788 Ext 1388