Press Release

First Farmers and Merchants Corporation Reports Second Quarter Net Income of $3.3 Million or $0.75 Per Common Share

Company Release - 7/22/2019 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 second quarter ended June 30, 2019.

Key highlights of First Farmers’ results for the second quarter of 2019 include:

  • Net income of $3.3 million or $0.75 per common share, down 15% from $3.9 million or $0.87 per common share for the year-earlier quarter and down 38% from $5.3 million or $1.20 per common share for the previous quarter;
  • Adjusted net income, which excludes special items, totaled $3.4 million or $0.77 per common share, compared with $3.9 million or $0.86 per common share for the year-earlier quarter and $3.4 million or $0.75 per common share for the previous quarter (see non-GAAP reconciliation);
  • Net interest margin improved 17 basis points from the year-earlier quarter and up three basis points from the previous quarter; and
  • Administered trust assets surpassed $5 billion during the second quarter.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “We are pleased to report continued quarterly sequential adjusted earnings growth for the second quarter. This is the result of an increase in our net interest margin of three basis points for the prior quarter and 17 basis points year over year, as well as a 2% year-over-year increase in loan growth to $891 million. While our total deposits experienced a slight decrease, most of this was due to the sale of our White Bluff office during the first quarter. Our interest and fees on loans grew a strong 12% year over year, and we saw solid growth in our trust services fee income and mortgage banking activities, which combined to contribute 35% of our total fee-based lines of business, a testament to our diverse revenue streams. On another note, I am proud of all of our employees as we grew administered trust assets to over $5 billion, a corporate milestone. As we move into the second half of the year, we remain confident in our ability to execute on our long-term strategies and reward our shareholders for their continued optimism in our company.”

Brian K. Williams, President, added, “I am pleased that our growth has not affected our strong credit metrics, which define our portfolio and our lending philosophy. Nonperforming assets for the current quarter declined nine basis points to just 0.12% of total assets from 0.21% for the same period last year and remained flat on a sequential quarter basis. In a year of increases in net interest margin, this is a result of prudent loan underwriting and emphasizes our strategy to build long-lasting relationships with our customers through a systematic approach to grow our business. Considering the solid fundamentals driving our business and the strategic opportunities we see ahead, we are confident in our future and are grateful to our shareholders for their long-term commitment to First Farmers.”

Second Quarter 2019 Results of Operations

The $567,000 decline in earnings for the second quarter of 2019 compared with the year-earlier quarter was driven by an increase of $1.1 million in non-interest expense offset by an increase in net interest income after provision of $361,000. The increase in net interest income reflected an improvement in margins and loan growth of $20.2 million for the second quarter of 2019 compared with the year-earlier quarter. The increase in non-interest expense resulted from increases of $556,000 in employee health insurance expense, $365,000 in salaries and other employee benefits expense and an increase of $180,000 in advertising and promotions. These increases, primarily salaries, advertising and promotions, reflect key investments in our team and our newer markets. The $2.0 million decrease in second quarter earnings compared with the previous quarter was driven by the one-time gain on sale of the Company’s White Bluff office totaling $2.0 million, net of tax. The increase in net interest income reflected an improvement in margins for the second quarter of 2019 compared with the previous quarter. The increase in non-interest expense primarily resulted from an increase of $429,000 in employee health insurance expense.

For the second quarter of 2019, First Farmers experienced a decline in loan balances of $931,000 or less than 1% from the previous quarter but achieved loan growth of $20.2 million or 2% from the year-earlier quarter. Total deposits stood at $1.140 billion at the end of the second quarter of 2019, down $14 million from the previous quarter and down $51 million or 4% from the year-earlier 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 of 2019.

Asset Quality

Total nonperforming assets remained flat at $1.6 million, or 0.12% of total assets, when compared to the previous quarter, but was down from $2.8 million, or 0.21% of total assets, when compared with the year-earlier quarter. Net charge-offs to average loans were 0.00% for the second quarter of 2019 compared with net charge-offs of 0.00% for the previous quarter and net recoveries of 0.01% for the year-earlier quarter. A credit to provision for loan and lease losses expense of $55,000 was recorded during the second quarter of 2019 as a result of improving credit metrics compared to the prior quarter. The allowance for loan and lease losses represented 1.04% of total loans outstanding for the second quarter of 2019 compared with 1.04% for the previous quarter and 1.06% for the year-earlier quarter.

Capital Management Initiatives

First Farmers repurchased 17,000 shares of common stock during the second quarter at an average price of $42.75 per share under its stock repurchase program. Authorization to repurchase 177,000 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 June 30, 2019, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $141 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, gain on sale of White Bluff office, gain on bank owned life insurance, contingency accrual 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

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

2019

 

2018

 

2019

 

2019

 

2018

Total non-interest income

$

3,410

 

$

3,407

 

$

5,787

 

$

9,197

 

$

6,784

Gain on sale of securities

 

-

 

 

(6)

 

 

-

 

 

-

 

 

(6)

Gain on sale of White Bluff office

 

-

 

 

-

 

 

(2,700)

 

 

(2,700)

 

 

-

Gain on bank-owned life insurance

 

-

 

 

(50)

 

 

-

 

 

-

 

 

(50)

Adjusted non-interest income

$

3,410

 

$

3,351

 

$

3,087

 

$

6,497

 

$

6,728

Contingency accrual

 

115

 

 

-

 

 

-

 

 

115

 

 

-

Net income as reported

$

3,338

 

$

3,905

 

$

5,346

 

$

8,684

 

$

7,034

Total adjustments, net of tax1

 

85

 

 

(54)

 

 

(1,995)

 

 

(1,910)

 

 

(54)

Adjusted net income

$

3,423

 

$

3,851

 

$

3,351

 

$

6,774

 

$

6,980

Basic earnings per share

$

0.75

 

$

0.87

 

$

1.20

 

$

1.95

 

$

1.57

Total adjustments, net of tax1

 

0.02

 

 

(0.01)

 

 

(0.45)

 

 

(0.43)

 

 

(0.01)

Adjusted basic earnings per share

$

0.77

 

$

0.86

 

$

0.75

 

$

1.52

 

$

1.56

 

(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)

 

 

 

June 30,

 

December 31,

 

(dollars in thousands, except per share data)

 

2019

 

2018(1)

 

ASSETS

Cash and due from banks

 

$

22,228

$

36,100

Interest-bearing deposits

 

33,095

4,173

Federal funds sold

 

94

246

Total cash and cash equivalents

 

55,417

40,519

Securities:

 

 

 

Available-for-sale

 

323,369

332,237

Held-to-maturity (fair market value $18,753 and $17,615

 

 

 

as of the periods presented)

 

18,587

18,644

Total securities

 

341,956

350,881

Loans, net of deferred fees

 

890,556

895,191

Allowance for loan and lease losses

 

(9,227)

(9,282)

Net loans

 

881,329

885,909

Bank premises and equipment, net

 

36,343

31,605

Bank-owned life insurance

 

32,191

31,960

Goodwill

 

9,018

9,018

Other assets

 

13,036

15,225

 

TOTAL ASSETS

 

$

1,369,290

 

$

1,365,117

LIABILITIES

Deposits:

 

Noninterest-bearing

 

$

313,659

$

302,345

Interest-bearing

 

826,854

872,325

Total deposits

 

1,140,513

1,174,670

Securities sold under agreements to repurchase

 

36,992

40,579

 

Federal Home Loan Bank borrowings

 

30,000

 

4,000

 

Accounts payable and accrued liabilities

 

21,047

 

15,885

 

TOTAL LIABILITIES

 

1,228,552

 

1,235,134

SHAREHOLDERS’

Common stock - $10 par value per share, 8,000,000 shares

 

 

 

EQUITY

authorized; 4,428,908 and 4,451,447 shares issued

 

 

 

 

and outstanding as of the periods presented

 

44,289

 

44,514

Retained earnings

 

95,125

89,299

Accumulated other comprehensive income (loss)

 

1,229

(3,925)

Total shareholders’ equity before noncontrolling interest – preferred stock of subsidiary

 

140,643

129,888

Noncontrolling interest - preferred stock of subsidiary

 

95

95

TOTAL SHAREHOLDERS’ EQUITY

 

140,738

129,983

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,369,290

 

$

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
June 30,

 

Six Months Ended
June 30,

 

(dollars in thousands, except per share data)

2019

 

2018

 

2019

 

2018

INTEREST AND

Interest and fees on loans

$

10,218

 

$

9,150

 

$

20,152

 

$

17,954

DIVIDEND

Income on investment securities

 

 

 

 

INCOME

Taxable interest

1,244

 

1,425

 

2,512

 

2,665

Exempt from federal income tax

541

 

632

 

1,099

 

1,287

Interest from federal funds sold and other

56

 

73

 

134

 

148

 

Total interest income

12,059

 

11,280

 

23,897

 

22,054

INTEREST

Interest on deposits

1,199

 

836

 

2,405

 

1,628

EXPENSE

Interest on other borrowings

182

 

72

 

345

 

120

Total interest expense

1,381

 

908

 

2,750

 

1,748

Net interest income

10,678

 

10,372

 

21,147

 

20,306

Provision credit for loan and lease losses

(55)

 

-

 

(55)

 

-

 

Net interest income after provision

10,733

 

10,372

 

21,202

 

20,306

NON-INTEREST

Mortgage banking activities

257

 

175

 

449

 

416

INCOME

Trust services fee income

918

 

880

 

1,805

 

1,840

 

Service fees on deposit accounts

1,828

 

1,851

 

3,478

 

3,627

Investment services fee income

111

 

144

 

193

 

244

Earnings on bank-owned life insurance

115

 

125

 

230

 

247

Gain on sale of investments

-

 

6

 

-

 

6

 

Gain on bank-owned life insurance

-

 

50

 

-

 

50

 

Gain on sale of White Bluff office

-

 

-

 

2,700

 

-

Other non-interest income

181

 

176

 

342

 

354

 

Total non-interest income

3,410

 

3,407

 

9,197

 

6,784

NON-INTEREST

Salaries and employee benefits

5,919

 

5,093

 

11,461

 

10,540

EXPENSE

Net occupancy expense

623

 

817

 

1,252

 

1,427

Depreciation expense

514

 

379

 

1,020

 

763

Data processing expense

766

 

642

 

1,512

 

1,331

 

Software support and other computer expense

537

 

587

 

1,022

 

1,128

Legal and professional fees

257

 

265

 

521

 

545

Audits and exams expense

182

 

176

 

340

 

351

Advertising and promotions

358

 

267

 

752

 

572

FDIC insurance premium expense

90

 

98

 

173

 

227

Other non-interest expense

940

 

739

 

1,722

 

1,790

Total non-interest expense

10,186

 

9,063

 

19,775

 

18,674

Income before provision for income taxes

3,957

 

4,716

 

10,624

 

8,416

 

Provision for income taxes

611

 

803

 

1,931

 

1,374

Net income

3,346

 

3,913

 

8,693

 

7,042

Noncontrolling interest - dividends on preferred stock subsidiary

8

 

8

 

8

 

8

 

Net income available to common shareholders

$

3,338

 

$

3,905

 

$

8,685

 

$

7,034

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

4,442,627

 

4,484,717

 

4,446,741

 

4,488,835

 

Earnings per share

$

0.75

 

$

0.87

 

$

1.95

 

$

1.57

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

 

For the Three Months Ended

(dollars in thousands, except per share data)

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Results of Operations:

 

 

 

 

 

 

 

 

 

Interest income

$

12,059

 

 

$

11,838

 

 

$

12,226

 

 

$

11,613

 

 

$

11,280

 

Interest expense

1,381

 

 

1,369

 

 

1,326

 

 

1,098

 

 

908

 

Net interest income

10,678

 

 

10,469

 

 

10,900

 

 

10,515

 

 

10,372

 

(Provision credit) provision for loan and lease losses

(55

)

 

-

 

 

50

 

 

-

 

 

-

 

Non-interest income

3,410

 

 

5,787

 

 

3,740

 

 

3,517

 

 

3,407

 

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

10,194

 

 

9,590

 

 

10,507

 

 

9,733

 

 

9,071

 

Income before income taxes

3,949

 

 

6,666

 

 

4,083

 

 

4,299

 

 

4,708

 

Income taxes

611

 

 

1,320

 

 

511

 

 

708

 

 

803

 

Net income for common shareholders

$

3,338

 

 

$

5,346

 

 

$

3,572

 

 

$

3,591

 

 

$

3,905

 

Per Share Data:

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.75

 

 

$

1.20

 

 

$

0.80

 

 

$

0.80

 

 

$

0.87

 

Weighted average shares outstanding per quarter

4,442,627

 

 

4,450,901

 

 

4,461,790

 

 

4,472,684

 

 

4,484,717

 

Financial Condition Data and Ratios:

 

 

 

 

 

 

 

 

 

Total securities

$

341,956

 

 

$

341,241

 

 

$

350,881

 

 

$

374,350

 

 

$

389,577

 

Loans, net of deferred fees

$

890,556

 

 

$

891,487

 

 

$

895,191

 

 

$

871,334

 

 

$

870,351

 

Allowance for loan and lease losses

$

(9,227

)

 

$

(9,278

)

 

$

(9,282

)

 

$

(9,206

)

 

$

(9,187

)

Total assets

$

1,369,290

 

 

$

1,346,492

 

 

$

1,365,117

 

 

$

1,363,007

 

 

$

1,366,045

 

Total deposits

$

1,140,513

 

 

$

1,154,809

 

 

$

1,174,670

 

 

$

1,164,432

 

 

$

1,191,828

 

Net interest income, on a fully taxable-equivalent basis

$

12,354

 

 

$

12,144

 

 

$

12,544

 

 

$

11,941

 

 

$

11,641

 

Net interest margin

3.55

%

 

3.52

%

 

3.54

%

 

3.41

%

 

3.38

%

 

 

 

 

 

 

 

 

 

 

Asset Quality Data and Ratios:

 

 

 

 

 

 

 

 

 

Total nonperforming assets

$

1,616

 

 

$

1,610

 

 

$

1,674

 

 

$

2,831

 

 

$

2,836

 

Nonperforming assets to total assets

0.12

%

 

0.12

%

 

0.12

%

 

0.21

%

 

0.21

%

Allowance for loan and lease losses to total loans

1.04

%

 

1.04

%

 

1.04

%

 

1.06

%

 

1.06

%

Net charge-offs (recoveries) to average loans (annualized)

0.00

%

 

0.00

%

 

(0.01

%)

 

(0.01

%)

 

(0.01

%)

 

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

Source: First Farmers and Merchants Corporation

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