NEW YORK, NY--(Marketwired - May 7, 2014) - First American International Corp. (
Net Income and Results of Operations
The Company today reported net income of $705,000, or $0.24 per share, diluted, after deduction of $187,000 in Troubled Asset Relief Program ("TARP") preferred stock dividends and discount accretion, for the three months ended March 31, 2014. This compares to net income of $1.1 million, or $0.43 per share, diluted, for the three months ended March 31, 2013, also after deduction of TARP dividends and discount accretion.
Earnings per share, without the TARP deduction, were $0.32 per share, diluted, for the quarter-ended March 31, 2014, compared to $0.52 for the quarter ending March 31, 2013. Return on average assets decreased to 0.51% in the first quarter of 2014 compared to 0.72% in the same quarter of 2013. Return on average equity decreased to 4.32% for the 2014 quarter compared to 8.22% for the same quarter of 2013.
"Although first quarter 2014 results are not as strong as first quarter 2013, we are pleased with our continued progress in repositioning the Bank to grow. However, we expect it will take time to see the full benefit of our efforts as competition for loans and deposits will likely continue to put downward pressure on our net interest margin and may impact our ability to grow. We are also pleased with the commencement of quotation of our common stock on the OTC QB system under the symbol "FAIT." This should provide improved liquidity for our existing and prospective stockholders," said Mark Ricca, President and Chief Executive Officer.
Net Interest Income
Net interest income for the quarter, before provision for loan losses, was $5.6 million, a decrease of $342,000, or 5.8% from the prior year quarter. The decline is due principally to a decrease in the yield earned on loans coupled with an increase in borrowing costs, which increased the average cost of funds. These factors were partially offset by an increase in the volume of securities and a decline in the rates paid on deposits as well as a decline in the volume of certificates of deposit.
The yield earned on loans declined principally because of a shift in the mix of loans towards residential 1-4 family loans and away from commercial mortgage loans, which tend to have higher yields. This shift occurred as the Company temporarily suspended the origination of new commercial mortgage loans and concentrated its efforts throughout 2013 on resolving weaknesses in the commercial mortgage loan portfolio. Average borrowing costs increased as the Company obtained longer term borrowings as an asset/liability management tool to address interest rate risk in the 7/1 and 10/1 fixed/adjustable residential mortgage loans that were originated for the loan portfolio.
The average volume of securities increased from $81.4 million to $100.5 million as excess cash was redeployed into securities investments to increase yields. Although the average yield on securities of 2.16% is substantially lower than the average yield on loans of 6.38%, it is substantially higher than the average yield on short-term overnight investments, especially under current market conditions where overnight investments yield less than 25 basis points. The average cost of deposits declined from 0.84% in the first quarter of 2013 to 0.71% in the first quarter of 2014 due to the continuation of low market interest rates and the fact that excess cash allowed the Company to avoid competing aggressively for certificates of deposit. The average balance of certificates of deposit declined by $22.7 million, from $212.1 million in the first quarter of 2013 to $189.4 million in the first quarter of 2014. The average rate paid on certificates of deposit also declined by 14 basis points from 1.15% in the first quarter of 2013 to 1.01% in the first quarter of 2014.
Overall, for the quarter ended March 31, 2014, the interest rate spread of 4.08% was down 30 basis points from 4.38% for the quarter ended March 31, 2013; the net interest margin of 4.31% was down 28 basis points from 4.59% for the quarter ended March 31, 2013. The loan portfolio of $379.5 million at March 31, 2014 was $37.8 million, or 11.1% higher than at March 31, 2013. The increase is the result of deliberate efforts to increase the loan portfolio because loans are the Company's highest yielding asset category. Non-loan interest earning assets decreased by $13.1 million, or 8.6%, from $152.2 million at March 31, 2013 to $139.1 million at March 31, 2014. This decrease in non-loan interest-earning assets was represented entirely by a decline in overnight investments. Total deposits decreased $26.6 million and borrowings increased $26.0 million from March 31, 2013 to March 31, 2014.
Provision for Loan Losses
The Company took a $157,000 provision during the first quarter of 2014, based on the quarterly analysis of the allowance for loan and lease losses. It did not take a provision for the quarter ended March 31, 2013. The principal reason for the provision was an increase in the gross loan portfolio of $37.8 million. The additional provision represented 0.42% of the increase in loans.
Non-interest income was $1.6 million for the quarter ended March 31, 2014, a decrease of $29,000 compared to the quarter ended March 31, 2013. The largest changes in non-interest income from the 2013 quarter to the 2014 quarter were a $121,000 decrease in mortgage loan related fees offset by an increase in fees from sale of non-deposit products of $102,000. The decrease in mortgage loan and related fees was caused by a decline in residential loan originations, which reduced gains on sales of loans
Non-interest expenses were $5.9 million for the quarter ending March 31, 2014, compared to $5.5 million in first quarter 2013, an increase of $342,000, or 6.2%. The increase is mainly due to increases in salaries and benefits of $545,000 and occupancy expenses of $70,000, partially offset by a decrease in general and administrative expenses of $273,000. Salaries and benefits increased due to higher staffing levels, principally in the loan department, general raises and rising health insurance costs. General and administrative expenses decreased mainly due to a $171,000 decrease in FDIC assessment expense as the improvement in the Bank's condition resulted in lower FDIC insurance premiums.
Balance Sheet Highlights
Total assets at March 31, 2014 were $552.6 million, an increase of $11.3 million, or 2.1%, versus March 31, 2013. Loans receivable, gross were $379.5 million, an increase of $37.8 million compared to last year. The increase is due principally to a $110.6 million increase in 10/1 and 7/1 adjustable rate 1-4 family mortgage loans, partially offset by a $68.4 million decrease in commercial mortgage loans, including commercial real estate, multifamily and construction loans. Commercial mortgage loans decreased as the Company continued to focus on resolving asset quality issues. Investment securities increased by $25.4 million while overnight investments decreased by $35.1 million.
Non-performing loans at March 31, 2014 were $10.4 million compared to $25.1 million one year earlier. Total delinquent loans were $12.0 million at March 31, 2014, compared to $25.8 million at March 31, 2013. Delinquent loans increased $2.1 million from year end 2013, principally due to a $1.5 million loan secured by real estate that became past due 90 days or more during the quarter. The Company monitors delinquent loans closely and continues to work on improving asset quality on an overall basis. The allowance for loan losses was $7.7 million, or 2.07% of total loans at March 31, 2014, compared to $10.3 million, or 2.88%, at March 31, 2013. The reduction in the allowance was principally due to net charge offs of $3.6 million associated in large part with the sale of $13.2 million in non-performing loans during the fourth quarter of 2013, offset by a provision of $488,000 in 2013 and $157,000 in the first quarter 2014.
Deposits at March 31, 2014 were $411.3 million, a decrease of $27.6 million, or 6.3% since March 31, 2013. Certificates of deposit were $188.3 million, a decrease of $26.6 million, or 12.4%, from March 31, 2013. Savings and money market accounts decreased $6.7 million, or 4.7%. Demand deposits increased $6.5 million, or 8.5%. NOW accounts decreased $807,000, or 26.8%. Despite the Company maintaining competitive pricing for deposit products throughout the year, interest rates remained at a relatively low level, causing customers to seek higher returns in other investment vehicles.
Federal Home Loan Bank borrowings increased by $36.0 million to $61.0 million at the end of March 2014. These advances were taken to partially match fund the Bank's 10/1 and 7/1 1-4 family residential loan originations. The remaining borrowings consist of the Company's trust preferred securities transaction originated in 2004.
Stockholders' equity was $66.1 million, or 11.9% of total assets, at March 31, 2014, a $2.2 million, or 3.5% increase from March 31, 2013. The principal cause of the increase was retained earnings.
About First American International Corp
First American International Corp. is the holding company for First American International Bank, a community development financial institution ("CDFI") and a minority depository institution ("MDI") with nine branches serving principally the Chinese-American communities in Manhattan, Queens and Brooklyn in New York City.
See accompanying unaudited financial data tables for additional information.
The information contained herein is intended to provide the reader with historical information about the financial results of First American International Corp. It is not intended to provide forward looking statements or projections of future results. A variety of factors could cause actual results and experiences to differ materially from historical results and anticipated results based on historical results.
|First American International Corp|
|Financial Highlights (unaudited)|
|Balance Sheet Items||$ thousands|
|At 3/31/2014||At 3/1/2013|
|Real estate - commercial||129,665||198,037|
|Real estate - residential||247,123||136,514|
|Commercial and industrial||2,176||6,572|
|Consumer and installment||511||569|
|Loans receivable, gross||379,475||341,692|
|Allowance for possible loan losses||7,682||10,349|
|Other interest earning assets||139,065||148,799|
|Money market and savings||137,524||144,243|
|Certificate of deposit||188,332||214,906|
|Summary Income Statement||For the quarter ended|
|Net interest income||5,552||5,894|
|Provision for loan losses||157||-|
|Net interest income after|
|provision for loan losses||5,395||5,894|
|Income before income taxes||1,103||2,043|
|Performance ratios (Unaudited)|
|Return on average assets||0.51||%||0.72||%|
|Return on average net worth||4.31||%||8.22||%|
|Average interest earning assets/bearing liabilities||130||%||131||%|
|Net interest rate spread||4.08||%||4.38||%|
|Net interest margin||4.31||%||4.59||%|
|Net interest income after provision/total expense||95||%||107||%|
|Non-interest income to total revenue||19.55||%||22.18||%|
|Non-interest expense to total revenue||72.67||%||73.02||%|
|Non-interest expense to average assets||4.24||%||4.26||%|
|Net Worth and Asset Quality Ratios|
|Average net worth to average total assets||11.81||%||12.04||%|
|Total net worth to assets end of period||11.91||%||11.81||%|
|Non-performing assets to total assets||1.97||%||4.67||%|
|Non-performing loans to total loans||2.95||%||6.96||%|
|Allowance for loan losses to total loans||2.07||%||2.88||%|
|Allowance for loan losses to NPLs||70.20||%||41.20||%|
|Risk based total capital ratio (bank)||22.10||%||19.80||%|
|Capital, Book Value and Earnings Per Share|
|Tier 1 risk based capital (bank)||20.84||%||18.53||%|
|Leverage ratio (bank)||12.91||%||13.17||%|
|Book value per share basic||$||22.65||$||21.92|
|Diluted EPS available to Common Shareholders||$||0.24||$||0.43|