Heng W. Chen, EVP, CFO and Treasurer
Thank you, Dunson, and good afternoon everyone. Before we discuss our fourth quarter results I want to give the summary of the agreement of merger with Asia Bancshares. The purchase price is expected to be $126 million subject to adjustment, and so the purchase price will be approximately 1.6 times the expected closing book value, and it’s a mix of approximately 45% to 55% stock and the remainder in cash. We expect that this acquisition will be accreted by 2% to 3% to annual earnings, excluding any one-time merger and restructuring charges. This acquisition is expected to reduce our risk-based capital ratios by approximately 40 basis points. We expect the tangible book value dilution to be earned back in slightly over four years.
For the fourth quarter we announced net income of $35.6 million or $0.44 per share. Our net interest margin was 3.36% in the fourth quarter of 2014 compared to 3.31% in the third quarter 2014, and compared to 3.30% for the fourth quarter of 2013. In the fourth and third quarters of 2014, interest recoveries and prepayment penalties added four basis points and nine basis points respectively to the net interest margin. $100 million of structured repurchase agreements at 3.5% matured in November 2014, adding two basis points to the fourth quarter net interest margin. An additional $50 million of structured repurchase agreements at 3.5% matured on January 8, 2015 and together with the fourth quarter impact of $100 million of fourth quarter maturities or add additional four basis points to the net interest margin for the first quarter of 2015. Non–interest income during the fourth quarter of 2014 was $8.1 million. Non-interest expenses increased by $0.8 million to $41.1 million in the fourth quarter of 2014 compared to $40.3 million in the same quarter a year ago. The increase was mainly due to increases in marketing expenses of $0.7 million in the fourth quarter and increase of $0.5 million in OREO expense, partially offset by a decrease and $0.7 million in salaries and employee benefit expense in 2014. The effective tax rate for the fourth quarter of 2014 was 37.1%.
For 2015, as a result of additional purchases of low income housing and renewable energy tax credits, we expect that our effective tax rate for 2015 will be between 33.5% and 32%. The additional pretax amortization expense for these investments will be between $7.5 million and $10 million for the full year 2015. At December 31, 2014, our Tier 1 leverage capital ratio increased to 12.99%, our Tier 1 risk-based capital ratio increased to 14.97%, and our total risk-based capital ratio increased to 16.22% as compared to September 30, 2014. All ratios domestically exceeded well-capitalized minimum ratios under all the regulatory guidelines. At December 31, 2014, our Tier 1 common risk-based capital ratio was 13.74%. Net charge-offs for the fourth quarter of 2014 were $5.8 million or 0.07% of average loans compared to net recoveries of $5.2 million in the third quarter 2014 and charge-off at $8.3 million the same quarter a year ago. The substantial majority of the fourth quarter 2014 charge-offs were against specific reserves established in prior quarters for two impaired loans. Our loan loss reversal was $2 million for the fourth quarter 2014 compared to reversal of $5.1 million for the third quarter of 2014 and zero for the fourth quarter of 2013. Our non-accrual loans, excluding non-accrual loans held for sale increased 7.5% or $4.9 million during the fourth quarter to $70.2 million or 0.79% of period-end loans as compared to the third quarter of 2014.
Dunson K. Cheng, Chairman, President and CEO
Thank you, Heng. We will now proceed to the question and answer portion of the call.
