Press Release

First Farmers and Merchants Corporation Reports Record First Quarter Net Income of $5.3 Million or $1.20 Per Common Share

Company Release - 4/22/2019 7:00 AM ET

COLUMBIA, Tenn.--(BUSINESS WIRE)-- 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, 2019.

Key highlights of First Farmers' results for the first quarter of 2019 include:

  • Net income of $5.3 million or $1.20 per common share, up 71% from $3.1 million or $0.70 per common share for the year-earlier quarter and up 50% from $3.6 million or $0.80 per common share for the previous quarter;
  • Adjusted net income, which excludes special items, totaled $3.4 million or $0.75 per common share, compared with $3.1 million or $0.70 per common share for the year-earlier quarter and $3.2 million or $0.72 per common share for the previous quarter (see non-GAAP reconciliation);
  • Recorded a one-time gain on the sale of the Company's White Bluff office totaling $2.0 million, net of tax; and
  • Non-interest income of $5.8 million, up 71% from $3.4 million for the year-earlier quarter and up 55% from $3.7 million for the previous quarter.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, "We are pleased to begin the new year with strong financial performance, highlighted by record first quarter earnings, significant margin expansion and increases in our loan portfolio and deposit base – all compared with the year-earlier quarter. Notably, even excluding non-operational items, net income increased solidly over the first quarter of 2018. Considering the sound fundamentals driving our business, the economic vibrancy of the markets we serve, and the opportunities we continue to see ahead as we pursue long-term growth, we remain confident about the coming year and our ability to continue to reward our shareholders for their loyalty."

Brian K. Williams, President, added, "While there are many accomplishments that stand out in First Farmers' quarterly results, we are particularly pleased with the excellent credit quality that continues to define both our loan portfolio and our lending philosophy. Nonperforming assets declined to just 0.12% of total assets from 0.20% in the year-earlier quarter and remained level on a sequential quarter basis. Importantly, these improvements occurred against the backdrop of a year-over-year increase in net interest margin, which further underscores our efforts to maintain a disciplined approach to the way we build our business. After all, we are not just adding loans to a portfolio, we are building relationships that we expect will grow and prosper for years to come."

First Quarter 2019 Results of Operations

The $2.2 million increase in reported quarterly earnings for the first quarter of 2019 compared with the year-earlier quarter was primarily driven by the one-time gain on sale of the Company's White Bluff office totaling $2.0 million, net of tax. Adjusted net income, which excludes this gain and other special items, increased $222,000 compared with the year-earlier quarter. The increase in adjusted net income was the result of improvement in net interest income of $535,000, offset in part by a decrease in non-interest income of $290,000. The improvement in net interest income was bolstered by the growth in net interest margin of 20 basis points as loan yields increased at a faster pace than deposit costs.

The improvement in first quarter of 2019 earnings of $1.7 million compared with the previous quarter was driven by the aforementioned one-time gain on sale of an office totaling $2.0 million, net of tax. Adjusted net income in the first quarter of 2019, which excludes this gain and other special items, increased $115,000 compared with the previous quarter. The increase in adjusted net income primarily reflected a decline in non-interest expense of $909,000 offset by decreases in net interest income of $431,000 and non-interest income of $372,000. The decrease in non-interest expense for the quarter includes a reduction of $957,000 in salaries and employee benefits expense primarily due to a decrease in employee health insurance expense. Net interest margin declined to 3.51% compared with 3.54% for the previous quarter.

For the first quarter of 2019, the outstanding loan balances increased $28 million from the year-earlier quarter and decreased $4 million from the previous quarter. Total deposits stood at $1.154 billion at the end of the first quarter of 2019, down $49 million from the year-earlier quarter and $20 million from the previous quarter. The outstanding loan balances and total deposits were affected by the sale of $4 million of loans and $29 million of deposits in connection with the sale of the White Bluff office during the first quarter. Excluding the impact of the sale of the White Bluff office, outstanding loan balances were steady compared with the previous quarter, while total deposits increased $9 million during the first quarter of 2019.

Asset Quality

Total nonperforming assets declined to $1.6 million, or 0.12% of total assets, from $2.7 million, or 0.20% of total assets, in the year-earlier quarter and decreased from $1.7 million, or 0.12% of total assets, for the previous quarter. Net charge offs to average loans were 0.00% for the first quarter of 2019 compared to net recoveries of 0.02% for the year-earlier quarter and net recoveries of 0.01% for the previous quarter. As a result of the improvement in the quality of the loan portfolio coupled with a modest decline in loan balances, no provision for loan and lease losses was recorded during the first quarter of 2019. The allowance for loan and lease losses represented 1.04% of total loans outstanding for the first quarter of 2019 compared with 1.06% for the year-earlier quarter and 1.04% for the previous quarter.

Capital Management Initiatives

During the first quarter, First Farmers repurchased 6,000 shares of common stock at an average price of $42.75 per share under its stock repurchase program. Authorization to repurchase approximately 194,000 shares remains under the current program, which is set to expire in December 2019, 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, 2019, First Farmers reported total assets of approximately $1.3 billion, total shareholders' equity of approximately $137 million, and administered trust assets of $5.1 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, gain on bank owned life insurance 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,

2018

2019     2018
Total non-interest income $ 5,787 $ 3,377 $ 3,740
Loss on sale of securities - - 211
Gain on sale of White Bluff office (2,700 ) - -
Gain on redemption of bank owned life insurance   -     -   (492 )
Adjusted non-interest income $ 3,087   $ 3,377 $ 3,459  
Net income as reported $ 5,346 $ 3,129 $ 3,572
Total adjustments, net of tax1   (1,995 )   -   (336 )
Adjusted net income $ 3,351   $ 3,129 $ 3,236  
Basic earnings per share $ 1.20 $ 0.70 $ 0.80
Total adjustments, net of tax1   (0.45 )   -   (0.08 )
Adjusted basic earnings per share $ 0.75   $ 0.70 $ 0.72  
 

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

 
 
 
 
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 
          (unaudited)    
March 31, December 31,
(dollars in thousands, except per share data) 2019

2018(1)

ASSETS Cash and due from banks $ 19,938 $ 36,100
Interest-bearing deposits 12,323 4,173
Federal funds sold 448   246  
Total cash and cash equivalents 32,709   40,519  
Securities:
Available-for-sale 322,642 332,237

Held-to-maturity (fair market value $18,344 and $17,615 as of the periods presented)

18,599   18,644  
Total securities 341,241   350,881  
Loans, net of deferred fees 891,487 895,191
Allowance for loan and lease losses (9,278 ) (9,282 )
Net loans 882,209 885,909
Bank premises and equipment, net 36,138 31,605
Bank-owned life insurance 32,075 31,960
Goodwill 9,018 9,018
Deferred tax assets 1,000 3,062
Other assets 12,102   12,163  
TOTAL ASSETS $ 1,346,492   $ 1,365,117  
LIABILITIES Deposits:

 

Noninterest-bearing $ 295,793 $ 302,345
Interest-bearing 859,016   872,325  
Total deposits 1,154,809   1,174,670  
Securities sold under agreements to repurchase 34,979 40,579
Federal Home Loan Bank borrowings - 4,000
Accounts payable and accrued liabilities 20,162   15,885  
TOTAL LIABILITIES 1,209,950   1,235,134  

 

 

 

SHAREHOLDERS'

EQUITY

Common stock - $10 par value per share, 8,000,000 shares authorized; 4,445,747 and 4,451,447 shares issued and outstanding as of the periods presented

44,457

44,514

Retained earnings 93,215 89,299
Accumulated other comprehensive loss (1,225 ) (3,925 )
Total shareholders' equity attributable to First Farmers and Merchants Corporation 136,447   129,888  
Noncontrolling interest - preferred stock of subsidiary 95   95  
TOTAL SHAREHOLDERS' EQUITY 136,542   129,983  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,346,492   $ 1,365,117  
 
(1) Derived from audited financial statements as of December 31, 2018.
 
 
 
 
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

 
          Three Months Ended March 31,
(dollars in thousands, except per share data) 2019     2018
INTEREST AND Interest and fees on loans $ 9,934 $ 8,804
DIVIDEND Income on investment securities
INCOME Taxable interest 1,268 1,240
Exempt from federal income tax 558 655
Interest from federal funds sold and other 78 75
Total interest income 11,838 10,774
INTEREST Interest on deposits 1,206 792
EXPENSE Interest on other borrowings 163 48
Total interest expense 1,369 840
Net interest income 10,469 9,934
Provision for loan and lease losses - -
Net interest income after provision 10,469 9,934
NON-INTEREST Mortgage banking activities 192 241
INCOME Trust services fee income 887 960
Service fees on deposit accounts 1,650 1,776
Investment services fee income 82 100
Earnings on bank owned life insurance 115 122
Gain on sale of White Bluff office 2,700 -
Other non-interest income 161 178
Total non-interest income 5,787 3,377
NON-INTEREST Salaries and employee benefits 5,542 5,447
EXPENSE Net occupancy expense 629 610
Depreciation expense 506 384
Data processing expense 746 689
Software support and other computer expense 485 541
Legal and professional fees 264 280
Audit and exam expenses 158 175
Advertising and promotions 394 305
FDIC insurance premium expense 83 129
Other non-interest expense 783 1,051
Total non-interest expense 9,590 9,611
Income before provision for income taxes 6,666 3,700
Provision for income taxes 1,320 571
Net income before noncontrolling interest - dividends on preferred stock of subsidiary 5,346 3,129
Noncontrolling interest - dividends on preferred stock subsidiary - -
Net income for common shareholders $ 5,346 $ 3,129
 
Weighted average shares outstanding 4,450,901 4,493,000
Earnings per share $ 1.20 $ 0.70
 
 
 
 
 

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,

2019

   

December 31,

2018

   

September 30,

2018

   

June 30,

2018

 

   

March 31,

2018

Results of Operations:
Interest income $ 11,838 $ 12,226 $ 11,613 $ 11,280 $ 10,774
Interest expense 1,369   1,326   1,098   908   840  
Net interest income 10,469 10,900 10,515 10,372 9,934
Provision (credit) for loan and lease losses, net - 50 - - -
Non-interest income 5,787 3,740 3,517 3,407 3,377
Non-interest expense and non-controlling interest – preferred stock of subsidiary 9,590   10,507   9,733   9,071   9,611  
Income before income taxes 6,666 4,083 4,299 4,708 3,700
Income taxes 1,320   511   708   803   571  
Net income for common shareholders $ 5,346   $ 3,572   $ 3,591   $ 3,905   $ 3,129  
Per Share Data:
Basic earnings per share $ 1.20 $ 0.80 $ 0.80 $ 0.87 $ 0.70
Weighted average shares outstanding per quarter 4,450,901 4,461,790 4,472,684 4,484,717 4,493,000
Financial Condition Data and Ratios:
Total securities $ 341,241 $ 350,881 $ 374,350 $ 389,577 $ 401,556
Loans, net of deferred fees $ 891,487 $ 895,191 $ 871,334 $ 870,351 $ 863,150
Allowance for loan and lease losses $ (9,278 ) $ (9,282 ) $ (9,206 ) $ (9,187 ) $ (9,171 )
Total assets $ 1,346,492 $ 1,365,117 $ 1,363,007 $ 1,366,045 $ 1,372,253
Total deposits $ 1,154,809 $ 1,174,670 $ 1,164,432 $ 1,191,828 $ 1,203,432
Net interest margin 3.51 % 3.54 % 3.41 % 3.38 % 3.31 %
 
Asset Quality Data and Ratios:
Total nonperforming assets $ 1,610 $ 1,674 $ 2,831 $ 2,836 $ 2,735
Nonperforming assets to total assets 0.12 % 0.12 % 0.21 % 0.21 % 0.20 %
Allowance for loan and lease losses to total loans 1.04 % 1.04 % 1.06 % 1.06 % 1.06 %
Net charge-offs (recoveries) to average loans annualized 0.00 % (0.01 %) (0.01 %) (0.01 %) (0.02 %)
 
 
 

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

Source: First Farmers and Merchants Corporation

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