Press Release

First Farmers and Merchants Corporation Reports Third Quarter Net Income of $3.9 Million or $0.88 Per Common Share

Company Release - 10/28/2019 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 third quarter ended September 30, 2019.

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

  • Net income of $3.9 million or $0.88 per common share, up 8% from $3.6 million or $0.80 per common share for the year-earlier quarter and up 17% from $3.3 million or $0.75 per common share for the previous quarter;
  • Adjusted net income, which excludes special items, totaled $3.7 million or $0.84 per common share, compared with $3.6 million or $0.80 per common share for the year-earlier quarter and $3.4 million or $0.77 per common share for the previous quarter (see non-GAAP reconciliation);
  • Loan growth of $11 million or 1% from the previous quarter and $30 million or 3% compared with the year-earlier quarter; and
  • Provision credit for loan and lease losses expense of $305,000 compared with $0 for the year-earlier quarter and $55,000 for the previous quarter.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “We are very pleased to report net income for the third quarter of 2019 of $3.9 million, an increase of 8% year over year and 17% from the prior quarter. Net interest margin increased seven basis points year over year, primarily due to an 8% increase in interest and fees on loans, as well as an increase in loans both on a year-over-year and sequential quarterly basis to $902 million. Loan growth reflects continued trust in the economic vibrancies of the markets we serve and growing relationships with our customers. Total deposits grew 3% from the previous quarter and 1% year over year, a testament to growing our business through long-term, generational clients. Income from mortgage banking activities increased a strong 62%, in large part due to the Federal Reserve Bank cutting rates twice during the quarter. These outstanding results reflect solid execution of our strategic plan, which is based on relationship banking for over 100 years, and validates our confidence as we enter the remaining quarter of the year.”

Brian K. Williams, President, added, “I am also pleased with our continued strong asset quality and prudent credit discipline at this last cycle juncture. Total nonperforming assets for the third quarter decreased 8% over the prior-year period, declining two basis points to 0.19% of total assets. Net charge-offs to average loans for the third quarter remained flat at 0.00% compared with the previous quarter, while net recoveries for the year-earlier quarter were 0.01%. We are particularly pleased to report year-over-year increases in net interest margin at a time when many of our peers are experiencing margin pressure. Our Board remains optimistic, and we repurchased 24,000 shares of common stock during the current quarter at an average price of $44.29. Looking ahead, we remain confident in the growth trajectory of our community bank and our team’s ability to remain competitive in today’s marketplace.”

Third Quarter 2019 Results of Operations

The $304,000 increase in earnings for the third quarter of 2019 compared with the year-earlier quarter was driven by a provision credit in the amount of $305,000 and an increase in net interest income of $144,000, offset by an increase in non-interest expense of $169,000. The increase in net interest income reflected improvement in margins and loan growth of $30 million for the third quarter of 2019 compared with the year-earlier quarter. The provision credit was driven by improvement in the credit quality of the loan portfolio along with continued low levels of non-performing assets. The increase in non‑interest expense resulted from increases of $401,000 in salaries and employee benefits expense, offset by decreases of $130,000 in FDIC insurance premium expense, $74,000 in legal and professional fees, and $80,000 in other non-interest expenses. The $557,000 increase in third quarter earnings compared with the previous quarter was driven by recording a provision credit in the amount of $305,000 and an increase in non-interest income of $143,000, coupled with a decline in non-interest expense of $292,000. The decrease in non-interest expense primarily resulted from a decrease of $126,000 in advertising and promotions and $121,000 in contingency accrual.

For the third quarter of 2019, First Farmers experienced an increase in loan balances of $11 million or 1% from the previous quarter and an increase of $30 million or 3% from the year-earlier quarter. Total deposits stood at $1.178 billion at the end of the third quarter of 2019, up $38 million or 3% from the previous quarter and $14 million or 1% from the year-earlier quarter.

Asset Quality

Total nonperforming assets increased to $2.6 million, or 0.19% of total assets, up $1.0 million when compared to the previous quarter, but was down $238,000, or 9% when compared with the year-earlier quarter. Net charge-offs to average loans were 0.00% for the third 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 provision credit for loan and lease losses expense of $305,000 was recorded during the third quarter of 2019 as a result of improvement in the historical loss experience of the loan portfolio, continued low levels of non-performing assets and no net charge-offs for the period. The allowance for loan and lease losses represented 1.00% of total loans outstanding for the third 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 24,000 shares of common stock during the second quarter at an average price of $44.29 per share under its stock repurchase program. Authorization to repurchase 153,000 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 September 30, 2019, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $143 million, and administered trust assets of $5.3 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

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

2019

 

2018

 

2019

 

2019

 

2018

Total non-interest income

$

3,553

 

 

$

3,517

 

$

3,410

 

$

12,750

 

 

$

10,301

 

Gain on sale of securities

 

(12

)

 

 

-

 

 

-

 

 

(12

)

 

 

(6

)

Gain on sale of White Bluff office

 

-

 

 

 

-

 

 

-

 

 

(2,700

)

 

 

-

 

Gain on bank-owned life insurance

 

(150

)

 

 

-

 

 

-

 

 

(150

)

 

 

(50

)

Adjusted non-interest income

$

3,391

 

 

$

3,517

 

$

3,410

 

$

9,888

 

 

$

10,245

 

Contingency accrual

 

(6

)

 

 

-

 

 

115

 

 

109

 

 

 

 

 

-

 

Net income as reported

$

3,895

 

 

$

3,591

 

$

3,338

 

$

12,579

 

 

$

10,625

 

Total adjustments, net of tax1

 

(163

)

 

 

-

 

 

85

 

 

(2,073

)

 

 

(54

)

Adjusted net income

$

3,732

 

 

$

3,591

 

$

3,423

 

$

10,506

 

 

$

10,571

 

Basic earnings per share

$

0.88

 

 

$

0.80

 

$

0.75

 

$

2.83

 

 

$

2.37

 

Total adjustments, net of tax1

 

(0.04

)

 

 

-

 

 

0.02

 

 

(0.47

)

 

 

(0.01

)

Adjusted basic earnings per share

$

0.84

 

 

$

0.80

 

$

0.77

 

$

2.36

 

 

$

2.36

 

 
 (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)

 

 

 

 

 

September 30,

 

December 31,

 

(dollars in thousands, except per share data)

 

2019

 

2018(1)

ASSETS

Cash and due from banks

 

$

28,269

 

$

36,100

 

Interest-bearing deposits

 

8,085

 

4,173

 

Federal funds sold

 

98

 

246

 

Total cash and cash equivalents

 

36,452

 

40,519

 

Securities:

 

 

 

Available-for-sale

 

329,756

 

332,237

 

Held-to-maturity (fair market value $18,032 and $17,615 as of the periods presented)

 

17,617

 

18,644

 

Total securities

 

347,373

 

350,881

 

Loans, net of deferred fees

 

901,560

 

895,191

 

Allowance for loan and lease losses

 

(8,937

)

(9,282

)

Net loans

 

892,623

 

885,909

 

Bank premises and equipment, net

 

36,297

 

31,605

 

Bank-owned life insurance

 

32,083

 

31,960

 

Goodwill

 

9,018

 

9,018

 

Other assets

 

14,760

 

15,225

 

 

TOTAL ASSETS

 

$

1,368,606

 

 

$

1,365,117

 

LIABILITIES

Deposits:

 

Noninterest-bearing

 

$

312,782

 

$

302,345

 

Interest-bearing

 

865,526

 

872,325

 

Total deposits

 

1,178,308

 

1,174,670

 

Securities sold under agreements to repurchase

 

12,667

 

40,579

 

 

Federal Home Loan Bank borrowings

 

12,000

 

 

4,000

 

 

Accounts payable and accrued liabilities

 

22,331

 

 

15,885

 

 

TOTAL LIABILITIES

 

1,225,306

 

 

1,235,134

 

SHAREHOLDERS’

EQUITY

Common stock - $10 par value per share, 8,000,000 shares authorized; 4,404,871 and 4,451,447 shares issued and outstanding as of the periods presented

 

44,049

 

 

44,514

 

Retained earnings

 

97,270

 

89,299

 

Accumulated other comprehensive income (loss)

 

1,886

 

(3,925

)

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

 

143,205

 

129,888

 

Noncontrolling interest - preferred stock of subsidiary

 

95

 

95

 

TOTAL SHAREHOLDERS’ EQUITY

 

143,300

 

129,983

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,368,606

 

 

$

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

September 30,

 

Nine Months Ended

September 30,

 

(dollars in thousands, except per share data)

2019

 

2018

 

2019

 

2018

INTEREST AND

Interest and fees on loans

$

10,386

 

 

$

9,591

 

$

30,538

 

 

$

27,545

DIVIDEND

Income on investment securities

 

 

 

 

INCOME

Taxable interest

1,252

 

 

1,362

 

3,764

 

 

4,029

Exempt from federal income tax

524

 

 

620

 

1,623

 

 

1,906

Interest from federal funds sold and other

43

 

 

40

 

177

 

 

187

 

Total interest income

12,205

 

 

11,613

 

36,102

 

 

33,667

INTEREST

Interest on deposits

1,399

 

 

965

 

3,804

 

 

2,593

EXPENSE

Interest on other borrowings

147

 

 

133

 

492

 

 

253

Total interest expense

1,546

 

 

1,098

 

4,296

 

 

2,846

Net interest income

10,659

 

 

10,515

 

31,806

 

 

30,821

Provision credit for loan and lease losses

(305

)

 

-

 

(360

)

 

-

 

Net interest income after provision

10,964

 

 

10,515

 

32,166

 

 

30,821

NON-INTEREST

Mortgage banking activities

331

 

 

204

 

780

 

 

621

INCOME

Trust services fee income

902

 

 

922

 

2,707

 

 

2,762

 

Service fees on deposit accounts

1,793

 

 

1,861

 

5,271

 

 

5,487

Investment services fee income

74

 

 

227

 

267

 

 

472

Earnings on bank-owned life insurance

116

 

 

125

 

346

 

 

372

Gain on sale of investments

12

 

 

-

 

12

 

 

6

 

Gain on bank-owned life insurance

150

 

 

-

 

150

 

 

50

 

Gain on sale of White Bluff office

-

 

 

-

 

2,700

 

 

-

Other non-interest income

175

 

 

178

 

517

 

 

531

 

Total non-interest income

3,553

 

 

3,517

 

12,750

 

 

10,301

NON-INTEREST

Salaries and employee benefits

6,124

 

 

5,723

 

17,585

 

 

16,263

EXPENSE

Net occupancy expense

678

 

 

720

 

1,930

 

 

2,147

Depreciation expense

527

 

 

372

 

1,547

 

 

1,135

Data processing expense

739

 

 

745

 

2,251

 

 

2,076

 

Software support and other computer expense

509

 

 

561

 

1,531

 

 

1,689

Legal and professional fees

236

 

 

310

 

757

 

 

855

Audits and exams expense

160

 

 

170

 

500

 

 

521

Advertising and promotions

232

 

 

225

 

984

 

 

797

FDIC insurance premium expense

-

 

 

130

 

173

 

 

357

Other non-interest expense

697

 

 

777

 

2,420

 

 

2,567

Total non-interest expense

9,902

 

 

9,733

 

29,678

 

 

28,407

Income before provision for income taxes

4,615

 

 

4,299

 

15,238

 

 

12,715

 

Provision for income taxes

720

 

 

708

 

2,651

 

 

2,082

Net income

3,895

 

 

3,591

 

12,587

 

 

10,633

Noncontrolling interest - dividends on preferred stock subsidiary

-

 

 

-

 

8

 

 

8

 

Net income available to common shareholders

$

3,895

 

 

$

3,591

 

$

12,579

 

 

$

10,625

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

4,426,166

 

 

4,472,684

 

4,439,858

 

 

4,483,392

 

Earnings per share

$

0.88

 

 

$

0.80

 

$

2.83

 

 

$

2.37

 
 
 
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(unaudited)

 

 

For the Three Months Ended

(dollars in thousands, except per share data)

September 30,

2019

 

June 30,

2019

 

March 31,

2019

 

December 31,

2018

 

September 30,

2018

Results of Operations:

 

 

 

 

 

 

 

 

 

Interest income

$

12,205

 

 

$

12,059

 

 

$

11,838

 

 

$

12,226

 

 

$

11,613

 

Interest expense

1,546

 

 

1,381

 

 

1,369

 

 

1,326

 

 

1,098

 

Net interest income

10,659

 

 

10,678

 

 

10,469

 

 

10,900

 

 

10,515

 

(Provision credit) provision for loan and lease losses

(305

)

 

(55

)

 

-

 

 

50

 

 

-

 

Non-interest income

3,553

 

 

3,410

 

 

5,787

 

 

3,740

 

 

3,517

 

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

9,902

 

 

10,194

 

 

9,590

 

 

10,507

 

 

9,733

 

Income before income taxes

4,615

 

 

3,949

 

 

6,666

 

 

4,083

 

 

4,299

 

Income taxes

720

 

 

611

 

 

1,320

 

 

511

 

 

708

 

Net income for common shareholders

$

3,895

 

 

$

3,338

 

 

$

5,346

 

 

$

3,572

 

 

$

3,591

 

Per Share Data:

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.88

 

 

$

0.75

 

 

$

1.20

 

 

$

0.80

 

 

$

0.80

 

Weighted average shares outstanding per quarter

4,426,166

 

 

4,442,627

 

 

4,450,901

 

 

4,461,790

 

 

4,472,684

 

Financial Condition Data and Ratios:

 

 

 

 

 

 

 

 

 

Total securities

$

347,373

 

 

$

341,956

 

 

$

341,241

 

 

$

350,881

 

 

$

374,350

 

Loans, net of deferred fees

$

901,560

 

 

$

890,556

 

 

$

891,487

 

 

$

895,191

 

 

$

871,334

 

Allowance for loan and lease losses

$

(8,937

)

 

$

(9,227

)

 

$

(9,278

)

 

$

(9,282

)

 

$

(9,206

)

Total assets

$

1,368,606

 

 

$

1,369,290

 

 

$

1,346,492

 

 

$

1,365,117

 

 

$

1,363,007

 

Total deposits

$

1,178,308

 

 

$

1,140,513

 

 

$

1,154,809

 

 

$

1,174,670

 

 

$

1,164,432

 

Net interest income, on a fully taxable-equivalent basis

$

10,945

 

 

$

10,974

 

 

$

10,773

 

 

$

11,218

 

 

$

10,844

 

Net interest margin

3.48

%

 

3.55

%

 

3.52

%

 

3.54

%

 

3.41

%

 

 

 

 

 

 

 

 

 

 

Asset Quality Data and Ratios:

 

 

 

 

 

 

 

 

 

Total nonperforming assets

$

2,593

 

 

$

1,616

 

 

$

1,610

 

 

$

1,674

 

 

$

2,831

 

Nonperforming assets to total assets

0.19

%

 

0.12

%

 

0.12

%

 

0.12

%

 

0.21

%

Allowance for loan and lease losses to total loans

1.00

%

 

1.04

%

 

1.04

%

 

1.04

%

 

1.06

%

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

0.00

%

 

0.00

%

 

0.00

%

 

(0.01

%)

 

(0.01

%)

 
 

 

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

Source: First Farmers and Merchants Corporation

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