First Farmers and Merchants Corporation Reports First Quarter Net Income Of $3.2 Million Or $0.73 Per Common Share

COLUMBIA, Tenn.--()--First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced unaudited financial results for the quarter ending March 31, 2020.

Key aspects of First Farmers’ results for the first quarter of 2020 include:

  • Net income of $3.2 million or $0.73 per common share, down 40% from $5.3 million or $1.20 per common share for the year-earlier quarter and down 8% from $3.5 million or $0.79 per common share for the previous quarter;
  • Adjusted net income, which excludes special items, totaled $2.6 million or $0.59 per common share, down 22% from $3.4 million or $0.75 per common share for the year-earlier quarter and down 25% from $3.5 million or $0.79 per common share for the previous quarter (see non‑GAAP reconciliation);
  • Net interest income of $10.8 million, up 3% from $10.5 million and up 1% from $10.6 million for the previous quarter;
  • Adjusted non-interest income, which excludes special items, totaled $3.3 million, up 5% from $3.1 million for the year-earlier quarter and down 6% from $3.4 million for the previous quarter (see non-GAAP reconciliation);
  • Loan growth of $15 million or 2% from the previous quarter and $61 million or 7% compared with the year-earlier quarter; and
  • Provision for loan and leases losses expense of $515,000 compared with $0 for the year‑earlier and previous quarters.

     

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “Despite a very difficult economic environment, which contributed to decreases in year-over-year and sequential-quarter net income and adjusted net income, we are pleased with the underlying fundamentals driving our business, including increases in net interest income for the aforementioned periods, as well as an increase in total non‑interest income over the same period last year, excluding the sale of our White Bluff office in the first quarter of 2019. Our net interest margin also increased slightly from the sequential quarter. Further, we experienced growth both year-over-year and in the sequential-quarter, resulting in record total loans and deposit base. Considering the strong credit metrics driving our business, the resiliency of the markets we serve and the opportunities we continue to see ahead, we remain confident in our ability to continue to reward our shareholders for their loyalty.”

Stevens further commented, “The COVID-19 pandemic has caused disruptions to the global economy and the communities in which we operate. In response, we have implemented social distancing guidelines that include separating department office spaces while allowing remote work. Our utmost concern is the health and welfare of our employees and customers, and we continually monitor Federal, State and local rules in the geographies we serve. As a result of this pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted, and First Farmers made the decision to participate in the Payroll Protection Program (“PPP”) administered by the Small Business Administration (“SBA”) to help as many small businesses as possible in Middle Tennessee. We received over 500 inquiries from small businesses, and we were able to process over 250 applications prior to the SBA notification on April 16, 2020, that they were no longer taking applications because the funding set aside for PPP loans had been exhausted. We are proud of the PPP loans we were able to get approved, and we are hopeful that the PPP program will receive additional Congressional funding so that we can complete the remaining customer inquiries we have received.”

Brian K. Williams, President, added, “We increased our provision for loan and lease loss expense to $515,000 as a result of the current economic environment and loan growth from the same period last year. Our allowance for loan and lease losses now represents 1.0% of total loans outstanding, an increase from 0.96% for the sequential quarter, but down from 1.04% in the year‑earlier period. We are particularly pleased with the excellent credit quality that continues to define both our loan portfolio and our lending metrics. Total nonperforming assets declined to just 0.11% of total assets from 0.12% in the year-earlier quarter and on a sequential-quarter basis, highlighting our efforts to maintain a disciplined approach to the way we build our business. The strength of First Farmers’ balance sheet will serve our company and its shareholders well as we navigate the unprecedented economic environment in which we are now operating.”

First Quarter 2020 Results of Operations

Net income declined to $3.2 million, down $2.1 million or 40% from the year-earlier quarter. The reduction in earnings was primarily driven by the one-time gain on sale of the Company’s White Bluff office totaling $2.0 million, net of tax, in the year-earlier quarter. Net income, adjusted for special items, was $2.6 million, down $745,000 or 22% from the year earlier quarter. The decrease in adjusted net income from the year-earlier quarter was the result of an increase in employee health insurance expense of $719,000 coupled with an increase in provision for loan and lease loss expense of $515,000 as a result of the deteriorating economic environment and to support loan growth, offset in part by improvement in net interest income of $311,000.

Net income decreased $277,000 or 8% from the sequential quarter. The decrease in earnings was primarily driven by the increase in provision for loan and lease loss expense of $515,000 as a result of the deteriorating economic environment and to support loan growth coupled with an increase in health insurance expense of $474,000, offset in part by the gain on redemption of a bank-owned life insurance policy.

For the first quarter of 2020, the outstanding loan balances increased $15 million or 2% to a record $952 million from the previous quarter and increased $61 million or 7% from the year-earlier quarter. Total deposits increased $36 million or 3% from the previous quarter to a record $1.256 billion and increased $102 million or 9% from the year-earlier period.

Asset Quality

Total nonperforming assets continued to improve, closing the quarter at $1.6 million, or 0.11% of total assets, down from $1.7 million, or 0.12% of total assets, for the previous quarter and decreased from $1.6 million, or 0.12% of total assets, in the year-earlier quarter. Net charge offs to average loans were 0.00% for the first quarter of 2020, which was the same for both the previous quarter and the year-earlier quarter. As a result of the change in the current economic environment coupled with loan growth, a provision for loan and lease losses of $515,000 was recorded during the first quarter of 2020. The allowance for loan and lease losses represented 1.00% of total loans outstanding for the first quarter of 2020, up from 0.96% for the previous quarter but down from 1.04% for the year-earlier quarter.

Capital Management Initiatives

During the first quarter, First Farmers repurchased 20,000 shares of common stock at an average price of $45.03 per share under its stock repurchase program. Authorization to repurchase approximately 180,000 shares remains under the current program, which is set to expire in December 2020, unless extended or otherwise completed.

About First Farmers and Merchants Corporation and First Farmers and Merchants Bank

First Farmers and Merchants Corporation is the holding company for First Farmers and Merchants Bank, a community bank serving the Middle Tennessee area through 22 offices in seven Middle Tennessee counties. As of March 31, 2020, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $151 million, and administered trust assets of $5.2 billion. For more information about First Farmers, visit us on the Web at www.myfirstfarmers.com under “Investor Relations.”

Cautionary Note Regarding Forward Looking Statements

This news release may contain certain “forward-looking statements” that represent First Farmers’ expectations or beliefs concerning future events and often use words or phrases such as “opportunities,” “prospects,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions. Such forward-looking statements contained herein represent the current expectations, plans or forecast of First Farmers and are about matters that are inherently subject to risks and uncertainties. These statements are not guarantees of future results or performance and readers are cautioned to not place undue reliance on them, whether included in this news release or made elsewhere from time to time by First Farmers or on its behalf. First Farmers disclaims any obligation to update such forward-looking statements.

Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. First Farmers management uses non-GAAP financial measures, including: (i) adjusted net income and (ii) adjusted basic earnings per share, in its analysis of the Company’s performance. These non-GAAP financial measures exclude the following from net income: securities gains and losses, sale of office location gains and losses, sale of other fixed assets included in other non-interest income, gain on redemption of bank owned life insurance, contingency loss on litigation and the income tax effect of adjustments. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company.

 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES PRESENTED IN EARNINGS RELEASE

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

March 31,

 

December 31,

2019

 

2020

 

2019

 

Total non-interest income

$

3,904

 

$

5,787

 

$

3,457

Gain on sale of securities

 

(129)

 

 

-

 

 

(15)

Gain on sale of White Bluff office

 

-

 

 

(2,700)

 

 

-

Gain on sale of fixed assets

 

(102)

 

 

-

 

 

-

Gain on redemption of bank owned life insurance

 

(423)

 

 

-

 

 

-

Adjusted non-interest income

$

3,250

 

$

3,087

 

$

3,442

Contingency loss on litigation

 

-

 

 

-

 

 

(1)

Net income as reported

$

3,200

 

$

5,346

 

$

3,477

Total adjustments, net of tax1

 

(594)

 

 

(1,995)

 

 

(12)

Adjusted net income

$

2,606

 

$

3,351

 

$

3,465

Basic earnings per share

$

0.73

 

$

1.20

 

$

0.79

Total adjustments, net of tax1

 

(0.14)

 

 

(0.45)

 

 

-

Adjusted basic earnings per share

$

0.59

 

$

0.75

 

$

0.79

(1) The effective tax rate of 26.1% is used to determine net of tax amounts.

 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

(unaudited)

 

 

 

March 31,

December 31,

 

(dollars in thousands, except per share data)

 

2020

 

 

2019(1)

 

ASSETS

Cash and due from banks

 

$

27,506

$

26,614

Interest-bearing deposits

 

27,436

6,712

Federal funds sold

 

8,393

819

Total cash and cash equivalents

 

63,335

34,145

Securities:

 

 

 

Available-for-sale

 

319,765

329,796

Held-to-maturity (fair market value $18,097 and $18,005 as of the periods presented)

 

17,594

17,606

 

Equity securities

 

2,000

 

2,000

Loans held-for-sale

 

2,171

2,540

Loans, net of deferred fees

 

952,491

934,770

Allowance for loan and lease losses

 

(9,485)

(8,960)

Net loans

 

943,006

925,810

Bank premises and equipment, net

 

35,933

35,762

Bank-owned life insurance

 

32,252

32,198

Goodwill

9,018

9,018

Other assets

 

12,855

14,795

 

TOTAL ASSETS

 

$

1,437,929

 

$

1,403,670

LIABILITIES

Deposits:

 

 

Noninterest-bearing

 

$

326,669

$

311,274

Interest-bearing

 

929,650

908,967

Total deposits

 

1,256,319

1,220,241

Securities sold under agreements to repurchase

 

10,337

11,742

 

Federal Home Loan Bank borrowings

 

-

 

5,500

 

Accounts payable and accrued liabilities

 

20,488

 

21,799

 

TOTAL LIABILITIES

 

1,287,144

 

1,259,282

SHAREHOLDERS’
EQUITY

 

 

 

 

 

 

Common stock - $10 par value per share, 8,000,000 shares authorized; 4,359,738 and 4,379,871 shares issued and outstanding as of the periods presented

 

43,597

 

43,799

Retained earnings

 

100,513

98,945

Accumulated other comprehensive income

 

6,580

1,549

Total shareholders’ equity attributable to First Farmers and Merchants Corporation

 

150,690

144,293

Noncontrolling interest - preferred stock of subsidiary

 

95

95

TOTAL SHAREHOLDERS’ EQUITY

 

150,785

144,388

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,437,929

 

$

1,403,670

 

 

 

 

(1) Derived from audited financial statements as of December 31, 2019.

 
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

Three Months Ended March 31,

 

(dollars in thousands, except per share data)

2020

 

2019

INTEREST AND

Interest and fees on loans

$

10,216

 

$

9,934

DIVIDEND

Income on investment securities

 

INCOME

Taxable interest

1,270

 

1,268

Exempt from federal income tax

520

 

558

Interest from federal funds sold and other

69

 

78

 

Total interest income

12,075

 

11,838

INTEREST

Interest on deposits

1,275

 

1,206

EXPENSE

Interest on other borrowings

20

 

163

Total interest expense

1,295

 

1,369

Net interest income

10,780

 

10,469

Provision for loan and lease losses

515

 

-

 

Net interest income after provision

10,265

 

10,469

NON-INTEREST

Mortgage banking activities

282

192

INCOME

Trust services fee income

877

 

887

 

Service fees on deposit accounts

1,708

 

1,650

Investment services fee income

119

 

82

Earnings on bank owned life insurance

113

 

115

 

Gain on sale of available-for-sale securities

129

 

-

 

Gain on redemption of bank owned life insurance

423

 

-

 

Gain on sale of White Bluff office

-

 

2,700

Other non-interest income

253

 

161

 

Total non-interest income

3,904

 

5,787

NON-INTEREST

Salaries and employee benefits

6,521

 

5,542

EXPENSE

Net occupancy expense

634

 

629

Depreciation expense

524

 

506

Data processing expense

797

 

746

 

Software support and other computer expense

564

 

485

Legal and professional fees

234

 

264

 

Audit and exam expenses

184

 

158

 

Advertising and promotions

225

 

394

FDIC insurance premium expense

25

 

83

Other non-interest expense

810

 

783

Total non-interest expense

10,518

 

9,590

Income before provision for income taxes

3,651

 

6,666

 

Provision for income taxes

451

 

1,320

Net income before noncontrolling interest - dividends on preferred stock of subsidiary

3,200

 

5,346

Noncontrolling interest - dividends on preferred stock subsidiary

-

 

-

 

Net income for common shareholders

$

3,200

 

$

5,346

 

 

 

 

 

Weighted average shares outstanding

4,375,025

 

4,450,901

 

Earnings per share

$

0.73

 

$

1.20

 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

 

For the Three Months Ended

 

(dollars in thousands, except per share data)

March 31, 2020

 

December 31, 2019

 

September 30, 2019

 

June 30,

2019

 

March 31, 2019

Results of Operations:

 

 

 

 

 

 

 

 

 

Interest income

$

12,075

 

$

12,091

 

$

12,205

 

$

12,059

 

$

11,838

Interest expense

1,295

 

1,447

 

1,546

 

1,381

 

1,369

Net interest income

10,780

 

10,644

 

10,659

 

10,678

 

10,469

Provision (credit) for loan and lease losses, net

515

 

-

 

(305)

 

(55)

 

-

Non-interest income

3,904

 

3,457

 

3,553

 

3,410

 

5,787

Non-interest expense and non-controlling interest – preferred stock of subsidiary

10,518

 

9,928

 

9,902

 

10,194

 

9,590

Income before income taxes

3,651

 

4,173

 

4,615

 

3,949

 

6,666

Income taxes

451

 

696

 

720

 

611

 

1,320

Net income for common shareholders

$

3,200

 

$

3,477

 

$

3,895

 

$

3,338

 

$

5,346

Per Share Data:

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.73

 

$

0.79

 

$

0.88

 

$

0.75

 

$

1.20

Weighted average shares outstanding per quarter

4,375,025

 

4,400,940

 

4,426,166

 

4,442,627

 

4,450,901

Financial Condition Data and Ratios:

 

 

 

 

 

 

 

 

 

Total securities

$

343,360

 

$

349,402

 

$

347,373

 

$

341,956

 

$

341,241

Loans, net of deferred fees

$

952,491

 

$

934,770

 

$

901,560

 

$

890,556

 

$

891,487

Allowance for loan and lease losses

$

(9,485)

 

$

(8,960)

 

$

(8,937)

 

$

(9,227)

 

$

(9,278)

Total assets

$

1,437,929

 

$

1,403,670

 

$

1,368,606

 

$

1,369,290

 

$

1,346,492

Total deposits

$

1,256,319

 

$

1,220,241

 

$

1,178,308

 

$

1,140,513

 

$

1,154,809

Net interest income, on a fully taxable-equivalent basis

$

11,059

 

$

10,926

 

$

10,945

 

$

10,974

 

$

10,773

Net interest margin

 

3.42%

 

 

3.41%

 

 

3.48%

 

 

3.55%

 

 

3.52%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Data and Ratios:

 

 

 

 

 

 

 

 

 

Total nonperforming assets

$

1,610

 

$

1,665

 

$

2,593

 

$

1,616

 

$

1,610

Nonperforming assets to total assets

0.11%

 

0.12%

 

0.19%

 

0.12%

 

0.12%

Allowance for loan and lease losses to total loans

1.00%

 

0.96%

 

1.00%

 

1.04%

 

1.04%

Net charge-offs to average loans annualized

0.00%

 

0.00%

 

0.00%

 

0.00%

 

0.00%

 

 

Contacts

Robert E. Krimmel
Chief Financial Officer
(931) 380-8257

$Cashtags

Contacts

Robert E. Krimmel
Chief Financial Officer
(931) 380-8257