NEW YORK, NY--(Marketwired - May 10, 2017) - First American International Corp. (
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