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First American International Corp. Announces Second Quarter and First Half Results for 2017






NEW YORK, NY — (Marketwired) — 08/09/17 — First American International Corp. (OTCQB: FAIT) () (the “Company”), the holding company for First American International Bank (the “Bank”), today reported net income available to shareholders for the quarter ended June 30, 2017 of $1.7 million and $3.1 million for the first half of 2017. Earnings per share available to common shareholders were $0.79 per share for the second quarter and $1.42 for the first half of 2017, both basic and diluted.

The Company today reported net income for the quarter ended June 30, 2017 of $1.7 million, or $0.79 per share, and $3.1 million, or $1.42 per share, for the first half of 2017. The income available to common shareholders is after deduction of $205,000 of Troubled Asset Relief Program (“TARP”) costs, consisting of preferred stock dividends of $85,000 and discount accretion of $120,000 for the current quarter and $408,000 in TARP costs, consisting of preferred stock dividends ($170,000) and discount accretion ($238,000) for the first half of 2017. This compares to net income of $406,000, or $0.18 per share, basic and diluted, for the quarter ended June 30, 2016, and net income of $936,000 for the first half of 2016, also after deduction of TARP dividends and discount accretion. The Company also reported a return on average assets of 0.80% for the quarter ended June 30, 2017, compared to 0.23% for the same period in 2016 and a return on average common equity of 11.64% for the quarter ended June 30, 2017, compared to 3.00% for the same period in 2016.

The increase in quarterly earnings over the same period in 2016 is due principally to a year-over-year increase in non-interest income of $2.3 million, or 201.3%, and an increase in net interest income of $668,000, or 11.3%, partially offset by a year-over-year increase in non-interest expenses of $1.0 million, or 16.7%. The increase in earnings for the six months ended June 30th over the same period in 2016 is due principally to a year-over-year increase in non-interest income of $2.6 million, or 101.8%, an increase in net interest income of $1.7 million, or 14.9%, and a decrease in loan loss provision expense of $288,000, or 78.5%, partially offset by a year-over-year increase in non-interest expenses of $1.3 million, or 11.5%.

Throughout the first half of 2017, the Company continued to successfully execute on its strategy of generating organic growth in the loan portfolio funded by an increase in retail deposits and generating residential loans for sale on a servicing retained basis. In accordance with management–s strategy, loans receivable decreased by $22.6 million, or 3.2%, to $692.8 million at June 30, 2017 vs. $715.4 million at March 31, 2017 due to the sale of $49.4 million of residential mortgage loans, servicing retained, during the second quarter versus sales of $10.1 million of residential mortgage loans, servicing retained, in the first quarter.

“I continue to be pleased with our progress in growing our residential loan production capacity, resulting in higher loan balances contributing to higher net interest income and higher loan sales resulting in higher fee income. I remain optimistic that we can continue to grow quality earning assets and fee income through loan sales. The Bank–s increase in non-interest expense is a combination of increased consulting fees in connection with improving the Bank–s compliance and audit programs and increased incentive compensation associated with an increase in loan production. The Bank will continue to focus on generating high quality loans, growing core deposits and controlling expenses,” said Mark Ricca, President and Chief Executive Officer.

Net interest income for the three months ended June 30, 2017, before provision for loan losses, was $6.6 million, an increase of $668,000, or 11.3%, from the prior year.

The increase in net interest income is primarily due to an increase in average interest earning assets of $149.3 million, or 21.4%, from $697.8 million in 2016 to $847.1 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 $141.5 million, or 28.8%, from $491.7 million in 2016 to $633.1 million in 2017. Net interest income was also negatively impacted by continued competitive pressures on loan pricing, combined with a rising deposit rate environment during the recent quarter which resulted in a 24 basis point decrease in net interest margin, from 3.37% for the three months ended June 30, 2016 to 3.13% for the same period in 2017.

Interest income increased by $1.2 million, or 17.3%, to $8.5 million in the second quarter of 2017 from $7.3 million in the same quarter of 2016. The increase in interest income is due to a year-over-year increase in average loans outstanding of $129.3 million, or 22.5%, partially offset by a decline in yield. Average residential loans outstanding increased $99.3 million, or 31.2%, and average commercial real estate loans outstanding increased $31.8 million, or 13.2% when compared to the prior year quarter. The yield earned on loans declined 16 basis points to 4.52% for the second quarter of 2017 from 4.68% in 2016. The decrease was due principally 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.

The average volume of securities decreased by $19.3 million, or 23.6%, from $81.7 million in the second quarter of 2016 to $62.4 million in the second 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 46 basis points to 2.59%, principally because management continued its strategy of allowing 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 $32,000 decrease in interest and dividends earned on securities to $404,000 during the second quarter of 2017 compared to $436,000 in the prior year quarter.

Interest expense increased by $591,000, or 42.6%, during the second quarter of 2017 compared to the same quarter of 2016. The average cost of deposits increased 17 basis points to 1.03% in the second quarter of 2017 compared to the prior year quarter. This was largely due to an increase in both the volume and cost of certificates of deposit, resulting from a Chinese New Year campaign during the first quarter of 2017 and greater competition in the Company–s key local markets during the recent quarter. The average balance of certificates of deposit, our highest cost deposit category, increased by $61.6 million, or 24.3%, from $253.2 million in the second quarter of 2016 to $314.8 million in 2017. The average rate paid on certificates of deposit increased by 18 basis points from 1.12% in 2016 to 1.30% in 2017. The average balance of money market deposit accounts and savings increased by $37.8 million, or 31.2%, from $121.0 million in 2016 to $158.8 million in 2017 with the average rate paid increasing from 0.32% to 0.51%.

The Company made no provision for loan losses in the second quarter of 2017 or in the prior year quarter. Management believes the existing $9.3 million allowance at June 30, 2017 is appropriate. The allowance as a percentage of loans was 1.35% at June 30, 2017 compared to 1.53% at June 30, 2016. The reduction in the allowance as a percentage of total loans was due primarily to 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 more robust risk management program and the improved economy, and a strategic decision by management to shift the portfolio mix more towards lower risk residential loans. We remain focused on maintaining our asset quality.

Non-interest income was $3.5 million for the quarter ended June 30, 2017, an increase of $2.3 million, or 201.3%, compared to the quarter ended June 30, 2016. The quarter-over-quarter increase is largely due to a $1.8 million increase in gains on sales of loans to third parties, as the Bank sold $49.4 million of loans to third parties in Q2 2017 versus no third party loan sales in the year ago quarter, combined with a $1.5 million volume- and rate-driven improvement year-over-year in the value of the Bank–s mortgage servicing rights.

Due principally to the increase in sales of residential loans on the secondary market with servicing retained during the current quarter combined with higher mortgage interest rates versus the year ago period, the Company recorded a $236,000 pre-tax gain on the value of Mortgage Servicing Rights (“MSR”) in the second quarter of 2017, compared to a $1.3 million pre-tax loss in the second quarter of 2016. The value of MSRs is the market value of the right to earn fees for servicing loans. Since loan prepayment speeds tend to vary with changes in interest rates, an increase or decrease in interest rates generally results in an increase or decrease in MSR value. MSR values are also impacted by general market driven supply and demand conditions.

These increases in non-interest income were partially offset by a $751,000 one-time gain recognized in June 2016 attributable to satisfying post-sale performance requirements pertaining to the Company–s sale of property at 135 Bowery, New York, NY in late 2015, and a $156,000 decrease in investment and insurance product sales fees, from $293,000 to $137,000.

Non-interest expenses were $7.1 million for the quarter ended June 30, 2017 compared to $6.1 million in 2016, an increase of $1.0 million, or 16.7%. The increase is primarily due to a $482,000 increase in professional fees, largely associated with enhancements to the Bank–s compliance and audit infrastructure, higher volume-driven data processing and loan-related costs, $154,000 and 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, $293,000.

Total assets at June 30, 2017 were $873.9 million, an increase of $144.5 million, or 19.8%, versus June 30, 2016. Total loans receivable were $692.8 million, an increase of $85.3 million, or 14.0%, compared to last year. The increase is due primarily to a $178.0 million, or 51.6%, increase in 5/1 and 7/1 adjustable rate 1-4 family mortgage loans, at an average yield of 4.49%, partially offset by $96.4 million of residential loan sales to third parties, combined with a $6.4 million, or 2.5%, increase in commercial mortgage loans, which generally have a fixed interest rate for the first five years, at an average yield of 4.25%.

Overnight investments at June 30, 2017 were $96.8 million, an increase of $75.6 million versus June 30, 2016, at an average yield of 0.74%. Investment securities at June 30, 2017 were $52.6 million, a decrease of $20.8 million versus the year ago period at an average yield of 2.52%. 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 combined with the proceeds from sales of residential loans on the secondary market in the current quarter. The Bank anticipates redeploying a portion of its overnight investments into new loan originations during the third quarter of 2017.

Non-performing loans increased by $38,000 at June 30, 2017 to $3.57 million, compared to $3.53 million one year earlier. Total delinquent loans increased $300,000, to $1.34 million at June 30, 2017, or 0.19% of the loan portfolio, compared to $1.04 million, or 0.17% of the portfolio at June 30, 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 1.35% of total loans at June 30, 2017, compared to $9.2 million, or 1.53%, at June 30, 2016.

Deposits increased by $114.6 million, or 22.3%, from $514.0 million at June 30, 2016 to $628.7 million at June 30, 2017 and were utilized principally to fund loan portfolio growth. Certificates of deposit were $314.9 million, an increase of $59.0 million, or 23.1%, over the same period. Savings and money market accounts increased $34.7 million, or 27.5%, while demand deposits increased $14.6 million, or 11.4%, when comparing June 30, 2017 to June 30, 2016. NOW accounts increased year-over-year by $6.4 million, or 162.4%.

Federal Home Loan Bank of New York (“FHLBNY”) Borrowings increased by $22.0 million, or 16.5% to $155.0 million, $23.0 million of which occurred during the third quarter of 2016, partially offset by one borrowing in the amount of $1.0 million which matured and was paid off during the first quarter of 2017. The $23.0 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 during the third and fourth quarters of 2016. Total FHLBNY Borrowings at June 30, 2017 mainly consist of borrowings with remaining average terms of two to three years 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 was $76.2 million, or 8.71% of total assets, at June 30, 2017, a $6.8 million, or 9.8%, increase from June 30, 2016. The increase was due primarily to the retention of net income.

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.

For further information, please contact
Michael Lowengrub
Chief Financial Officer
(718) 567-8788 Ext 1388

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Posted by on Aug 9 2017. Filed under Commercial & Investment Banking. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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