NEW YORK, NY--(Marketwired - Apr 18, 2016) - First American International Corp. (
Net Income and Results of Operations
The Company today reported net income for the year ended December 31, 2015 of $166,000, or $0.08 per share, basic and diluted, after deduction of $784,000 in Troubled Asset Relief Program ("TARP") costs, consisting of preferred stock dividends ($340,000), discount accretion ($437,000) and minority preferred stock dividend ($7,000). This compares to net income of $1,066,000, or $0.48 per share, basic and diluted, for the year ended December 31, 2014, also after deduction of $762,000 of TARP dividends ($340,000), discount accretion ($415,000) and minority preferred stock dividend ($7,000). The Company also reported a return on average assets 0.03% for the year ended December 31, 2015, compared to 0.19% for the same period in 2014 and a return on average equity of 0.33% for year ended December 31, 2015, compared to 2.11% for the same period in 2014.
The decrease is due principally to a year-over-year increase in non-interest expense of $900,000, or 3.5%, and an increase in allowance for loan losses of $628,000, or 300%, due to an increase in the loan portfolio. Net interest margin decreased to 3.74% for the twelve months ended December 31, 2015, compared to 4.03% for the same period in 2014. This decrease was substantially offset by an increase in average earning assets of $31.4 million from $528.9 million in 2014 to $560.3 million in 2015. The combined impact of the decrease in net interest margin and the increase in average earning assets resulted in a $232,000 or 0.9% reduction in net interest income.
"While the results are disappointing, there are a number of positive accomplishments that occurred during the year that we anticipate will enable FAIC to move closer to peer performance in 2016, including a $110 million, or 27%, increase in the loan portfolio from $405 million at December 31, 2014 to $515 million at December 31, 2015. The majority of the loan portfolio increase occurred during December 2015, with net growth of $68 million during that month, which was the principal reason we recorded a $628,000 provision in 2015 for loan losses. We expect those loans to generate net interest income of approximately $1.3 million during 2016. We continue to maintain a strong capital base, which supports our ability to grow and build shareholder value. At December 31, 2015, the Bank's leverage ratio stood at 12.07%, well above the 8.00% needed to be considered well capitalized," said Mark Ricca, President and Chief Executive Officer.
Net Interest Income
Net interest income for 2015, before provision for loan losses, was $21.0 million, a decrease of $359,000 or 1.68% from the prior year. As discussed below, the decline is due principally to a one-time $1.3 million interest income recovery from a non-performing loan during Q4 of 2014.
The yield earned on loans declined 81 basis points to 5.26% for 2015 from 6.07% in 2014. The decrease was principally because of the $1.3 million interest recovery in 2014 and the continued reduction in the yields on loans, especially in the commercial real estate portfolio due to competitive market conditions. Partially offsetting these decreases was an increase in loans outstanding. The average balance of commercial real estate loans increased $15.9 million, while the average balance of 1-4 family loans increased $41.6 million for the year. To accelerate the growth in earning assets, in December 2015 the Bank purchased $49 million in loan participations in New York City multi-family loans.
Interest expense increased by $126,000, or 3.2%, driven principally by an $84,000 increase in borrowing costs and a $36,000 increase in the cost of deposits. Borrowing costs increased by $84,000 to $1.4 million due to $7.1 million of higher average borrowings in 2015 as the Company increased longer term borrowings to reduce interest rate risk. The cost of deposits increased by $36,000 to $2.4 million principally because the average rate paid on deposits increasing 2 basis points to 0.74% in 2015 compared to 2014 ($63,000 additional expense), offset partially by a $3.8 million, or 1.1%, decrease in average deposits in 2015 compared to 2014 ($27,000 reduced expense). The average balance of certificates of deposit increased by $3.8 million, or 2.0%, from $189.2 million in 2014 to $193.0 million in 2015, resulting in a $40,000 increase in interest expense. The average rate paid on certificates of deposit increased by 1 basis point from 1.04% in 2014 to 1.05% in 2015, resulting in a $19,000 increase in interest expense.
The average volume of securities decreased from $106.1 million in 2014 to $96.0 million in 2015. This was mainly due to not reinvesting in municipal bonds as they matured and selling $12 million of securities in November to redeploy the cash into loans. The average yield on securities increased by 4 basis points due to the Bank replaced maturing municipal bonds with higher yielding taxable corporate bonds. The net effect of the decrease in volume and the increase in yield was a drop of $165,000 in interest earned on securities during 2015.
The average balance of overnight investments declined from $43.7 million to $29.7 million from 2014 to 2015 as excess cash was deployed into higher yielding loans. The yield on these balances increased from 0.28% in 2014 to 0.38% in 2015.
Overall, for the year ended December 31, 2015, the interest rate spread of 3.46% was down 33 basis points from 3.79% for the year ended December 31, 2014; the net interest margin of 3.74% was down 29 basis points from 4.03% from the year ended December 31, 2014. The reduction in the interest rate spread was mainly because of the decline in the interest rate earned on loans from 6.04% in 2014 to 5.26% in 2015 and to a much lesser extent, to the increase in the cost of interest bearing liabilities from 0.98% in 2014 to 1.00% in 2015.
The total loan portfolio of $515.3 million at December 31, 2015 was $110.6 million, or 27.3%, higher than at December 31, 2014. The Company purchased $49 million in Commercial Real Estate loan participations in December 2015, which increased the year-end balance by over 10% but, due to the late timing of the addition, did not have a significant effect on the average balances or interest income in 2015. Non-loan interest earning assets decreased by $31.9 million, or 24.6%, from $130.6 million at December 31, 2014 to $98.5 million at December 31, 2015. This decrease in non-loan interest-earning assets was due primarily to a $32 million decrease in the securities portfolio.
Total deposits increased by $9.9 million from $435.6 million at December 31, 2014 to $445.5 million at December 31, 2015, which increase was utilized to fund loan portfolio growth. Borrowings from the Federal Home Loan Bank increased by $56 million to $117 million and consist mainly of three to five year term borrowings at a higher rate than deposits undertaken to help manage our interest rate risk. The average interest cost on these borrowings decreased from 2.17% in 2014 to 2.07% while the total expense paid increased by $84,000 to $1.4 million in 2015.
Provision for Loan Losses
The Company made a provision for loan losses of $628,000 in 2015 compared to $157,000 in 2014, due principally to the increase in total loans of $110.0 million during 2015 compared to an increase of $43.0 million during 2014 and a higher level of loan loss recoveries in 2014 than 2015. Management believes the existing $8.7 million allowance, aggregating 1.68% of total loans, is appropriate.
Non-interest Income
Non-interest income was $8.1 million for the year ended December 31, 2015, an increase of $235,000, or 3.0%, compared to the year ended December 31, 2014. The increase is mainly due to the gain on sale of the real property at 135 Bowery of $1.3 million, and an increase in gains on sale of loans of $644,000, partially offset by $859,000 in 2014 miscellaneous income in connection with resolving prior year expense accruals that did not recur in 2015, a $295,000 reduction in the gain on sale of securities and a $193,000 reduction in the Bank Enterprise Award.
The principal reason for the increase in the gain on sale of mortgage loans is an increase in the value of mortgage servicing rights of $555,000.
The Company expects to recognize a $750,000 additional gain in connection with the sale of the real property located at 135 Bowery that occurred in the third quarter of 2015. That amount is being held in escrow pending satisfaction of certain conditions and that the Company believes will be fully satisfied during the second quarter of 2016.
Non-interest Expenses
Non-interest expenses were $26.4 million for the year ended December 31, 2015 compared to $25.5 million in 2014, an increase of $900,000, or 3.5%. The increase is mainly due to an increase in salaries and benefits of $1.0 million, an increase in alternative minimum and occupancy taxes paid to New York State and New York City of $317,000, an increase in FDIC insurance of $128,000 and an increase in other loan expenses of $101,000, partially offset by a decrease in occupancy expenses of $479,000 and a decrease in professional fees of $246,000.
Salaries and benefits increased due to higher staffing levels, principally in the loan department, salary increases for existing employees and rising health insurance costs. The decrease in occupancy expenses is primarily due to a $408,000 lease accounting charge in 2014.
TAXES
During 2015, New York City changed its law to bring City taxes into conformity with New York State taxes. These changes make it unlikely that the Company will be paying any significant New York City income taxes in the future. Therefore, the Company has established a valuation allowance of $378,000, net of federal taxes, for its New York City deferred tax asset in 2015.
The changes in New York tax law are expected to reduce the Company's combined Federal and New York effective income tax rate to 34% starting in year 2015.
Balance Sheet Highlights
Assets
Total assets at December 31, 2015 were $642.7 million, an increase of $66.2 million, or 11.5%, versus December 31, 2014. Total loans receivable were $515.3 million, an increase of $110.5 million compared to the prior year. The increase in the loan portfolio was partially offset by a $32.1 million decrease in investment securities. The increase in the loan portfolio is attributable principally to the purchase of $49.0 million of participating interests in multi-family mortgage loans in December 2015, a $33.8 million increase in adjustable rate 1-4 family mortgage loans and a $29.3 million increase in other commercial real estate loans originated by the Company.
Asset Quality
Asset quality continued to improve as non-performing loans declined at December 31, 2015 to $5.2 million, compared to $5.9 million one year earlier. As a percentage of loans, non-performing loans declined to 1.01% from 1.48%. Total delinquent loans declined to $2.7 million at December 31, 2015, compared to $6.9 million one year earlier. The Company monitors delinquent loans closely and continues to work on improving asset quality on an overall basis. The allowance for loan losses was $8.7 million, or 1.68% of total loans at December 31, 2015, compared to $8.0 million, or 1.97%, at December 31, 2014. The increase in the allowance was principally due to the increase in the loan portfolio, partially offset by the reduction in the Bank's historical loss experience, calculated based upon the most recent rolling twelve quarter look back period.
Deposits
Deposits increased to $445.5 million at December 31, 2015, an increase of $9.9 million, or 2.3%, since December 31, 2014. During 2015, demand deposits increased $22.1 million, or 22.2%. Retail certificates of deposit decreased $14.2 million, or 7.6%, broker and listing CDs increased $11.2 million or 128%, and savings and money market accounts decreased $10.0 million, or 7.2%. NOW accounts increased $877,000, or 36.5%.
Borrowings
Federal Home Loan Bank borrowings increased $56.0 million in 2015 to $117 million. The Bank took most of these advances to partially match fund the Bank's purchase of $49.0 million of multi-family loan participations in December. The remaining borrowings of $7.2 million consist of the Company's trust preferred securities originated in 2004.
Stockholders' Equity
Stockholders' equity was $67.6 million, or 10.51% of total assets, at December 31, 2015, a $301,000, or 0.4% increase from December 31, 2014.
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 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, extension 1388.
| First American International Corp. | |||||||||||||||
| Financial Highlights (unaudited) | |||||||||||||||
| $ thousands | |||||||||||||||
| Balance Sheet Items | 12/31/2015 | 9/30/2015 | 12/31/2014 | ||||||||||||
| Cash and due from banks - noninterest bearing | $ | 5,316 | $ | 5,949 | $ | 5,625 | |||||||||
| Due from banks - interest bearing | 20,927 | 37,224 | 20,736 | ||||||||||||
| Federal funds sold | 809 | 709 | 1,333 | ||||||||||||
| Time deposits with banks | 3,947 | 3,456 | 3,456 | ||||||||||||
| Securities available for sale | 50,546 | 69,587 | 85,507 | ||||||||||||
| Securities held to maturity | 22,278 | 20,579 | 19,339 | ||||||||||||
| Total securities | 72,824 | 90,166 | 104,846 | ||||||||||||
| Loans | |||||||||||||||
| Loans held for sale | 4,723 | 1,662 | 4,984 | ||||||||||||
| Real estate - commercial | 207,095 | 146,150 | 128,784 | ||||||||||||
| Real estate - residential | 307,725 | 296,558 | 273,899 | ||||||||||||
| Commercial and industrial | 577 | 2,048 | 2,217 | ||||||||||||
| Consumer and installment | 493 | 613 | 670 | ||||||||||||
| Unearned loan fees | (599 | ) | (857 | ) | (816 | ) | |||||||||
| Loans receivable, gross | 515,290 | 444,511 | 404,753 | ||||||||||||
| Allowance for loan losses | (8,730 | ) | (8,375 | ) | (7,981 | ) | |||||||||
| Loans, net | 506,561 | 436,136 | 396,772 | ||||||||||||
| Bank premises and equipment | 7,319 | 7,367 | 7,812 | ||||||||||||
| Fixed assets held for sale | - | - | 12,871 | ||||||||||||
| Federal Home Loan Bank stock | 5,899 | 3,709 | 3,322 | ||||||||||||
| Accrued interest receivable | 2,181 | 2,241 | 2,097 | ||||||||||||
| Mortgage servicing rights | 7,379 | 7,453 | 7,246 | ||||||||||||
| Other assets | 4,785 | 4,581 | 5,354 | ||||||||||||
| Total assets | $ | 642,669 | $ | 600,653 | $ | 576,454 | |||||||||
| Demand deposits | $ | 121,502 | $ | 124,705 | $ | 99,452 | |||||||||
| NOW accounts | 3,281 | 3,018 | 2,403 | ||||||||||||
| Money market and savings | 128,150 | 124,298 | 138,158 | ||||||||||||
| Certificate of deposit | 192,538 | 200,200 | 195,550 | ||||||||||||
| Total deposits | 445,471 | 452,222 | 435,564 | ||||||||||||
| Borrowings | 117,000 | 67,000 | 61,000 | ||||||||||||
| Junior subordinated debentures | 7,217 | 7,217 | 7,217 | ||||||||||||
| Accrued interest payable | 1,063 | 1,008 | 1,039 | ||||||||||||
| Accounts payable and other liabilities | 4,323 | 4,712 | 4,341 | ||||||||||||
| Total liabilities | 575,074 | 532,159 | 509,161 | ||||||||||||
| Stockholders' equity | 67,595 | 68,494 | 67,293 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 642,669 | $ | 600,653 | $ | 576,454 | |||||||||
| First American International Corp. | |||||||||||||||||
| Financial Highlights (unaudited) | |||||||||||||||||
| $ thousands except per share data | |||||||||||||||||
| Summary Income Statement | For the year ended | For the quarter ended | |||||||||||||||
| 12/31/2015 | 12/31/2014 | 12/31/2015 | 12/31/2014 | ||||||||||||||
| Interest income | $ | 24,976 | $ | 25,208 | $ | 6,159 | $ | 8,066 | |||||||||
| Interest expense | 4,024 | 3,898 | 1,057 | 1,021 | |||||||||||||
| Net interest income | 20,951 | 21,310 | 5,102 | 7,045 | |||||||||||||
| Provision for loan losses | 628 | 157 | 628 | - | |||||||||||||
| Net interest income after provision for loan losses | 20,323 | 21,153 | 4,474 | 7,045 | |||||||||||||
| Non-interest income | 8,104 | 7,869 | 1,382 | 1,825 | |||||||||||||
| Non-interest expense | 26,383 | 25,483 | 6,600 | 8,050 | |||||||||||||
| Income (loss) before income taxes | 2,044 | 3,538 | (743 | ) | 820 | ||||||||||||
| Income taxes | 1,095 | 1,710 | (254 | ) | 765 | ||||||||||||
| Net income (loss) | 949 | 1,828 | (489 | ) | 56 | ||||||||||||
| Less: preferred stock dividends and discount accretion | 784 | 763 | 188 | 183 | |||||||||||||
| Net Income (loss) available to shareholders | $ | 166 | $ | 1,066 | $ | (677 | ) | $ | (127 | ) | |||||||
| Performance ratios (unaudited) | |||||||||||||||||
| Year-to-date | Quarter ended | ||||||||||||||||
| 12/31/2015 | 12/31/2014 | 12/31/2015 | 12/31/2014 | ||||||||||||||
| Return on average assets | 0.03 | % | 0.19 | % | -0.11 | % | -0.02 | % | |||||||||
| Return on average net worth | 0.19 | % | 2.11 | % | -1.33 | % | -0.26 | % | |||||||||
| Average interest earning assets/bearing liabilities | 108 | % | 107 | % | 109 | % | 107 | % | |||||||||
| Net interest rate spread | 3.46 | % | 3.79 | % | 3.15 | % | 4.95 | % | |||||||||
| Net interest margin | 3.74 | % | 4.03 | % | 3.46 | % | 5.20 | % | |||||||||
| Yield on Loans | 5.26 | % | 6.04 | % | 4.92 | % | 7.73 | % | |||||||||
| Net interest income after provision/total expense | 77.03 | % | 83.01 | % | 67.80 | % | 87.52 | % | |||||||||
| Non-interest income to total revenue | 24.50 | % | 23.79 | % | 18.33 | % | 18.45 | % | |||||||||
| Non-interest expense to total revenue | 79.76 | % | 77.04 | % | 87.51 | % | 81.38 | % | |||||||||
| Non-interest expense to average assets | 4.48 | % | 4.53 | % | 4.35 | % | 5.58 | % | |||||||||
| Net Worth and Asset Quality Ratios | |||||||||||||||||
| Average net worth to average total assets | 8.66 | % | 8.99 | % | 8.40 | % | 8.53 | % | |||||||||
| Total net worth to assets end of period | 10.52 | % | 11.67 | % | 10.52 | % | 11.67 | % | |||||||||
| Non-performing assets to total assets | 0.81 | % | 0.82 | % | 0.81 | % | 0.82 | % | |||||||||
| Non-performing loans to total loans | 1.01 | % | 1.10 | % | 1.01 | % | 1.10 | % | |||||||||
| Allowance for loan losses to total loans | 1.69 | % | 1.97 | % | 1.69 | % | 1.97 | % | |||||||||
| Allowance for loan losses to NPLs | 167.68 | % | 133.40 | % | 170.79 | % | 108.62 | % | |||||||||
| Risk based total capital ratio (bank) | 18.03 | % | 21.16 | % | 18.03 | % | 21.16 | % | |||||||||
| Capital, Book Value and Earnings Per Share | |||||||||||||||||
| Tier 1 risk based capital (bank) | 16.77 | % | 19.90 | % | 16.77 | % | 19.90 | % | |||||||||
| Leverage ratio (bank) | 12.07 | % | 12.51 | % | 12.07 | % | 12.51 | % | |||||||||
| Book value per share basic | $ | 22.98 | $ | 22.84 | $ | 22.98 | $ | 22.84 | |||||||||
| Diluted EPS available to common shareholders | $ | 0.08 | $ | 0.48 | $ | (0.31 | ) | $ | (0.06 | ) | |||||||
Contact Information:
Contact
Neil Hecht
Chief Financial Officer
718-567-8788, extension 1388