NEW YORK, NY--(Marketwired - Nov 4, 2016) - First American International Corp. (
Net Income and Results of Operations
The Company today reported net income for the quarter ended September 30, 2016 of $1.7 million, or $0.77 per share, and $2.6 million, or $1.18 per share, for the first nine months of 2016. The income available to common shareholders is after deduction of $200,000 in Troubled Asset Relief Program ("TARP") costs, consisting of preferred stock dividends ($85,000) and discount accretion ($115,000) for the quarter and $597,000 in TARP costs, consisting of preferred stock dividends ($255,000) and discount accretion ($342,000) for the first nine months of 2016. This compares to a net income of $745,000, or $0.34 per share, basic and diluted, for the quarter ended September 30, 2015, and $859,000, or $0.39 per share for the nine months ended September 2015 also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.90% for the quarter ended September 30, 2016, compared to 0.50% for the same period in 2015 and a return on average equity of 12.56% for the quarter ended September 30, 2016, compared to 4.40% for the same period in 2015.
The increase in quarterly earnings over the same period in 2015 is due principally to a year-over-year increase in interest income of $1.5 million, or 24.1%, and a decrease in non-interest expense of $1.2 million, or 18.2%, which was partially offset by a year-over-year decrease in non-interest income of $821,000, or 28.3% and an increase in interest expense of $472,000 or 47.6%.
Throughout the quarter and year-to-date the Company continued its intentional loan portfolio growth; this growth was funded principally by increased deposits and borrowings.
"I continue to be very pleased with our progress in growing core earnings and reducing or maintaining operating expenses. As stated last quarter, my optimism is tempered by the impact the prolonged low interest rate environment, competition and regulatory burdens are having on net interest margin and profitability. My enthusiasm is also tempered by the difficulty in growing core deposits, necessary for longer-term growth. To this end, we have further increased our focus on increasing share of wallet from existing customers and attracting new customers. We expect to continue to utilize borrowings and wholesale funding pending an increase in core deposits," said Mark Ricca, President and Chief Executive Officer.
Net Interest Income
Net interest income for the three months ended September 30, 2016, before provision for loan losses, was $6.4 million, an increase of $1.0 million, or 19.7%, from the prior year.
The increase in net interest income is attributable principally to an increase in average interest earning assets of $186.1 million, or 33.3%, from $559.4 million in the third quarter of 2015 to $745.5 million in the same period in 2016, partially offset by an increase in interest expense from an increase in average interest bearing liabilities of $148.5 million, or 37.0%, from $400.9 million in the 2015 quarter to $549.5 million in 2016. Earnings were also negatively impacted by a 45 basis point decrease in net interest margin from 3.84% for the three months ended September 30, 2015 to 3.39% for the same period in 2016.
Interest income increased by $1.5 million, or 24.0%, to $7.8 million in the third quarter of 2016 from $6.3 million in the same quarter in 2015. The yield earned on loans declined 64 basis points to 4.64% for the third quarter of 2016 from 5.28% 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 $118.5 million, including a $49.0 million loan participation purchase at a net yield of 3.32%, and average residential loans outstanding increased $70.9 million when comparing the third quarter of 2016 to the prior year quarter.
The average volume of securities decreased from $92.8 million in the third quarter of 2015 to $79.9 million in the third quarter of 2016. In the 2016 third quarter the Bank sold securities with a book value of $11.3 million, resulting in a $295,000 gain. Proceeds from this sale, as well as security repayments, are expected to be redeployed into loans. The average yield on securities increased by 22 basis points to 2.39%, mainly 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 $26,000 decrease in interest and dividends earned on securities to $477,000 during the third quarter of 2016 compared to the third quarter of 2015.
Interest expense increased during the third quarter of 2016 compared to 2015 by $472,000, or 47.6%, to $1.5 million. The average cost of interest bearing deposits increased 16 basis points to 0.88% in the third quarter of 2016 compared to the same quarter of 2015. This was primarily due to an increase in both the volume and cost of certificates of deposit. The average balance of certificates of deposit, our highest cost deposit category, increased by $68.2 million, from $192.8 million in 2015 to $261.0 million in 2016. The average rate paid on certificates of deposit increased by 13 basis points from 1.03% in 2015 to 1.16% in 2016. The average balance of money market deposit accounts and savings decreased by $489,000, from $128.6 million in 2015 to $128.1 million in 2016 with the average rate paid increasing slightly from 0.30% to 0.33%.
Provision for Loan Losses
The Company made no provision for loan losses in the 3rd quarter of 2016 or the 3rd quarter of 2015. Management believes the existing $9.2 million allowance, equaling 1.41% of total loans, is appropriate.
Non-interest income was $2.1 million for the quarter ended September 30, 2016, a decrease of $821,000, or 28.3%, compared to the quarter ended September 30, 2015. The decrease was mainly driven by 2015 activity, which included a one-time gain of $1.3 million associated with the September 2015 sale of the Bank's property at 135 Bowery, New York, NY. The decrease was mitigated by increased loan fee income of $358,000, mainly related to an increase in the Bank's mortgage servicing rights and increased gain on loan sales, and net gains on the sale of securities of $295,000.
Non-interest expenses were $5.6 million for the quarter ended September 30, 2016 compared to $6.8 million in 2015, a decrease of $1.2 million, or 18.2%. Contributing to the decrease was a $252,000 charge taken in the 3rd quarter of 2015 for costs associated with the Forest Hills branch closing. Further contributing to the decrease were lower occupancy expenses of $249,000, attributable to the Forest Hills branch closing, and lower loan related expenses of $244,000. The decrease in loan related expenses was in part due to a decrease of $95,000 in the Bank's reserve for unused lines of credit and contingent liabilities on loans sold without recourse.
Balance Sheet Highlights
Total assets at September 30, 2016 were $793.1 million, an increase of $192.5 million, or 32.0%, versus September 30, 2015. Total loans receivable were $654.6 million at September 30, 2016, an increase of $208.4 million, or 46.7%, compared to one year earlier. The increase is comprised principally of a $126.3 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 $85.6 million of adjustable rate 1-4 family mortgage loans.
Overnight investments increased by $12.6 million, or 33.2%, to $50.5 million, while investment securities decreased by $29.7 million, or 32.9%, to $60.5 million. In the 2016 3rd quarter the Bank sold securities with a book value of $11.3 million and expects to use the proceeds to fund loan growth.
At September 30, 2016, nonperforming loans totaled $3.3 million, or 0.51% of total loans, compared to $4.9 million, or 1.10% of total loans one year earlier. Total delinquent loans declined by 45% to $2.1 million or 0.33% of total loans at September 30, 2016, compared to $3.9 million or 0.86% of total loans at September 30, 2015. The allowance for loan losses was $9.2 million, or 1.41% of total loans at September 30, 2016, compared to $8.4 million, or 1.88%, at September 30, 2015.
Deposits increased by $100.7 million, or 22.3%, from $452.2 million at September 30, 2015 to $553.0 million, which was utilized to fund loan portfolio growth. Certificates of deposit were $269.7 million, an increase of $69.5 million, or 34.7%. Demand deposits increased $17.2 million, or 13.8%, compared to September 30, 2015. NOW accounts increased $2.7 million, or 90.7%. Savings and money market accounts increased $11.3 million, or 9.1%.
Federal Home Loan Bank of New York ("FHLBNY") borrowings increased by $89.0 million, or 132.8% to $156.0 million at a cost of 1.75% per annum. Total FHLBNY borrowings at September 30, 2016 mainly consist of borrowings with remaining average terms of two to four years. Recent borrowings have been at a higher rate than deposits to help provide a cost-effective, relatively longer-term 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 was $70.8 million, or 8.9% of total assets, at September 30, 2016, a $2.4 million, or 3.4%, increase from September 30, 2015. The increase was due mainly to retained net income.
About First American International Corp.
First American International Corp. is the holding company for First American International Bank, a community development financial institution ("CDFI") and a minority depository institution ("MDI") with eight full service branches, offering consumer and business banking and loan products and services, and non-deposit insured investment products and services, serving principally the Chinese-American communities in Manhattan, Queens and Brooklyn in New York City.
See accompanying unaudited financial data tables for additional information.
The information contained herein is intended to provide the reader with historical information about the financial results of First American International Corp. It is not intended to provide forward looking statements or projections of future results. A variety of factors could cause actual results and experiences to differ materially from historical results and anticipated results based on historical results.
For further information, please contact Mark Ricca, Chief Executive Officer, at (212) 619-8338 Ext 2823.
|First American International Corp.|
|Financial Highlights (unaudited)|
|($ in thousands)|
|Balance Sheet Items||9/30/2016||9/30/2015||6/30/2016|
|Cash and cash equivalents|
|Cash and due from banks - noninterest bearing||$||4,819||$||5,949||$||5,719|
|Due from banks - interest bearing||50,362||37,224||21,207|
|Federal funds sold||174||709||374|
|Total cash and cash equivalents||55,355||43,882||27,300|
|Time deposits with banks||3,697||3,456||3,697|
|Securities available for sale||31,622||69,587||44,574|
|Securities held to maturity||28,852||20,579||28,888|
|Loans held for sale||1,202||1,662||2,770|
|Real estate - commercial||272,486||146,150||260,063|
|Real estate - residential||382,141||296,558||345,286|
|Commercial and industrial||368||2,048||426|
|Consumer and installment||359||613||386|
|Unearned loan fees||(1,990||)||(857||)||(1,377||)|
|Loans receivable, gross||654,566||446,174||607,554|
|Allowance for loan losses||(9,239||)||(8,375||)||(9,234||)|
|Bank premises and equipment||6,615||7,367||6,864|
|Federal Home Loan Bank stock||7,821||3,709||6,786|
|Accrued interest receivable||2,584||2,241||2,453|
|Mortgage servicing rights||6,198||7,453||6,097|
|Money market and savings||135,596||124,298||126,167|
|Certificate of deposit||269,664||200,200||255,861|
|Junior subordinated debentures||7,217||7,217||7,217|
|Accrued interest payable||1,571||1,008||1,372|
|Accounts payable and other liabilities||4,527||4,713||4,365|
|Total liabilities and stockholders' equity||$||793,113||$||600,653||$||729,372|
|First American International Corp.|
|Financial Highlights (unaudited)|
|($ in thousands except per share data)|
|Summary Income Statement||Year to Date||Quarter ended|
|Net interest income||17,860||15,740||6,372||5,325|
|Provision for loan losses||367||-||-||-|
|Net interest income after provision for loan losses||17,493||15,740||6,372||5,325|
|Income before income taxes||4,904||2,806||2,899||1,437|
|Less: Preferred Stock dividends and discount accretion||(597||)||(580||)||(200||)||(195||)|
|Net income available to shareholders||$||2,610||$||859||$||1,711||$||745|
|Year to Date||Quarter ended|
|Return on average assets||0.48||%||0.20||%||0.90||%||0.50||%|
|Return on average net worth (less TARP)||6.46||%||1.69||%||12.56||%||4.40||%|
|Average interest earning assets/bearing liabilities||137.95||%||161.00||%||135.68||%||161.00||%|
|Net interest rate spread||3.10||%||3.58||%||3.10||%||3.56||%|
|Net interest margin||3.40||%||3.84||%||3.39||%||3.84||%|
|Yield on loans||4.71||%||5.19||%||4.64||%||5.28||%|
|Average cost of deposits||0.85||%||0.74||%||0.88||%||0.72||%|
|Net interest income after provision/total expense||100.30||%||80.31||%||114.79||%||78.47||%|
|Non-interest income to total revenue||18.03||%||26.27||%||20.96||%||31.45||%|
|Non-interest expense to total revenue||64.81||%||77.25||%||55.99||%||73.64||%|
|Non-interest expense to average assets||2.43||%||4.48||%||0.73||%||4.59||%|
|Net Worth and Asset Quality Ratios|
|Average net worth to average total assets||9.71||%||8.71||%||9.25||%||8.59||%|
|Total net worth to assets end of period||8.93||%||11.41||%||8.93||%||11.41||%|
|Non-performing assets to total assets||0.42||%||0.82||%||0.42||%||0.82||%|
|Non-performing loans to total loans||0.51||%||1.10||%||0.51||%||1.10||%|
|Allowance for loan losses to total loans||1.41||%||1.88||%||1.41||%||1.88||%|
|Allowance for loan losses to NPLs||275.84||%||171.00||%||275.84||%||171.00||%|
|Capital, Book Value and Earnings Per Share|
|Risk based total capital ratio (Bank)||15.62||%||20.22||%||15.62||%||20.22||%|
|Tier 1 risk based capital (Bank)||14.36||%||18.96||%||14.36||%||18.96||%|
|Leverage ratio (Bank)||10.08||%||12.50||%||10.08||%||12.50||%|
|Book value per share basic||$||24.84||$||23.39||$||24.84||$||23.39|
|Diluted EPS available to common shareholders||$||1.18||$||0.39||$||0.77||$||0.34|
Chief Executive Officer
(212) 619-8338 Ext 2823