Business Wire | Apr 26, 2021 07:00AM EDT

First Farmers and Merchants Corporation Reports First Quarter Net Income of $3.0 Million or $0.69 Per Common Share

Apr. 26, 2021

COLUMBIA, Tenn.--(BUSINESS WIRE)--Apr. 26, 2021--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, 2021.

Key aspects of First Farmers' results for the first quarter of 2021 include:

* Net income of $3.0 million or $0.69 per common share, down 6% from $3.2 million, or $0.73 per common share, for the year-earlier quarter and down 9% from $3.3 million, or $0.76 per common share, for the previous quarter; * Adjusted net income, which excludes special items, totaled $2.9 million, or $0.67 per common share, up 12% from $2.6 million, or $0.59 per common share, for the year-earlier quarter but down 12% from $3.3 million, or $0.76 per common share, for the previous quarter (see non-GAAP reconciliation); * Mortgage banking activities revenue reached $468,000, up 66% from $282,000 for the year-earlier quarter and up 12% from $419,000 for the previous quarter; * Total assets reached a record $1.9 billion and total deposits reached a record $1.7 billion, while administered trust assets reached a record $6.0 billion; and * Provision credit for loan and lease losses of $150,000 compared with provision expense for loan and lease losses of $515,000 for the year-earlier quarter and $0 for the previous quarter.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, "Despite a continued challenging operating environment, we are optimistic about the core operating results of the company as we posted a 12% year-over-year increase in adjusted net income. This came alongside strong balance sheet growth, achieving record total assets and total deposits. Additionally, total administered trust assets surpassed a record $6.0 billion. Net income decreased for both the sequential and year-over-year periods with most of the decrease from the prior quarter attributed to elevated employee benefits costs, including health insurance expense. We also saw increased expenses related to lending technology investments.

Stevens continued, "We are focused on improving our net interest income and net interest margin both of which decreased for the comparison periods, primarily due to low market interest rates, and the purchase of lower yielding investments. With an improving trend in our loan pipeline, we expect to see improvement in our net interest margin in 2021. Our teams' focus on diversifying our revenue streams also resulted in non-interest income increasing from the sequential period and adjusted non-interest income increasing for both the year-over-year and sequential periods. Contributing to this improvement, we experienced strong growth of 66% in mortgage banking income and an 11% increase in trust services fee income, year-over-year, as well as solid growth from the sequential quarter. Looking ahead, First Farmers' operating performance bolstered by the general health of the mid-state economy and improving trends related to the pandemic support the momentum we expect over the balance of the year."

Brian K. Williams, President, added, "Soft loan pipelines at the close of 2020 pointed to the loan contraction experienced during the quarter, when coupled with payoff activity as customers took advantage of the low interest rate environment for refinancing. However, as we moved through the first quarter, loan pipelines were building and support our expectations for loan growth in the coming quarters. First Farmers has continued to assist customers with the second round of the SBA Paycheck Protection Program making just over $24 million of these loans during the first quarter."

Williams continued, "Asset quality remains strong. Total nonperforming assets declined to 0.08% of total assets from 0.09% for the sequential quarter and 0.11% in the year-earlier and no net charge-offs were recorded for the period. We recorded a provision credit for loan and lease losses of $150,000 for the quarter resulting from decreased lending activity and the company's healthy loan quality metrics, compared to a provision expense of $515,000 for the same period last year. Our allowance for loan and lease losses, excluding SBA Paycheck Protection Program loans, now represents 1.12% of total loans outstanding, an increase from 1.08% for the sequential quarter and 1.00% in the year-earlier period."

First Quarter 2021 Results of Operations

Net income declined to $3.0 million, down $197,000, or 6%, from the year-earlier quarter. The reduction in earnings was primarily driven by the gain on redemption of bank owned life insurance of $423,000 recorded in the year-earlier quarter offset in part with a reduction in provision for loan and lease losses. Net income, adjusted for special items, was $2.9 million, up $308,000 or 12% from the year earlier quarter. The increase in adjusted net income from the year-earlier quarter was the result of a reduction in provision for loan and lease loss expense of $665,000 coupled with growth in mortgage banking activities revenue of $186,000 offset in part by lower net interest income of $187,000 and higher technology related expense of $160,000.

Net income declined $294,000, or 9%, from the sequential quarter. The decrease in earnings was primarily driven by elevated non-interest expense of $397,000 and a reduction in net interest income of $276,000 offset in part by improvement in non-interest income of $138,000. The increase in non-interest expense was attributable to salaries and employee benefits of $163,000 and an increase in net occupancy expense of $179,000.

For the first quarter of 2021, securities available-for-sale increased $215 million driven by a reduction in cash balances along with a solid quarter of deposit growth from the previous quarter, with the growth in investments contributing to downward pressure on our net interest margin for the quarter by 0.14%. Our outstanding loan balances decreased $38 million, or 4%, to $927 million from the previous quarter and decreased $25 million, or 3%, from the year-earlier quarter. Small Business Administration Paycheck Protection Program ("SBA PPM") loans ended the first quarter of 2021 at $69 million, which includes $24 million in new loan originations offset by loan redemption during the quarter. Total deposits increased $98 million, or 6%, from the previous quarter to a record $1.706 billion and increased $450 million or 36% from the year-earlier period.

Asset Quality

Total nonperforming assets continued to improve, closing the quarter at $1.5 million, or 0.08% of total assets, down from $1.6 million, or 0.09% of total assets, for the previous quarter and decreased from 0.11% of total assets, in the year-earlier quarter. Net charge-offs to average loans were 0.00% for the first quarter of 2021 compared to net recoveries of 0.01% for the previous quarter and 0.00% for the year-earlier quarter. As a result of further stabilization in the current economic environment coupled with loan contraction and strong loan quality, a provision credit for loan and lease losses of $150,000 was recorded during the first quarter of 2021. The allowance for loan and lease losses, excluding SBA PPM loans, represented 1.12% of total loans outstanding for the first quarter of 2021, up from 1.08% for the previous quarter and 1.00% for the year-earlier quarter.

Capital Management Initiatives

During the first quarter, First Farmers repurchased 930 shares of common stock under a Rule 10b-18 plan under the Securities Exchange Act of 1934 at an average price of $33.93 per share under its stock repurchase program. Authorization to repurchase approximately 199,000 shares remains under the current program, which is set to expire in December 2021, 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, 2021, First Farmers reported total assets of approximately $1.9 billion, total shareholders' equity of approximately $152 million, and administered trust assets of $6.0 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 other fixed assets included in other non-interest income, gain on redemption of 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,

2021 2020 2020

Total non-interest income $ 3,550 $ 3,904 $ 3,412

Gain on sale of securities (121 ) (129 ) -

Gain on sale of fixed assets - (102 ) -

Gain on redemption of bank owned life - (423 ) - insurance

Adjusted non-interest income $ 3,429 $ 3,250 $ 3,412

Net income as reported $ 3,003 $ 3,200 $ 3,297

Total adjustments, net of tax^1 (89 ) (594 ) -

Adjusted net income $ 2,914 $ 2,606 $ 3,297

Basic earnings per share $ 0.69 $ 0.73 $ 0.76

Total adjustments, net of tax^1 (0.02 ) (0.14 ) -

Adjusted basic earnings per share $ 0.67 $ 0.59 $ 0.76

(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 2021 2020^(1) per share data)

ASSETS Cash and due from banks $ 24,228 $ 29,126

Interest-bearing deposits 11,947 105,470

Federal funds sold 414 3,774

Total cash and cash equivalents 36,589 138,370

Securities:

Available-for-sale 809,640 594,649

Held-to-maturity (fair market value $17,335 and $18,195

as of the periods presented) 16,584 17,259

Equity securities 2,242 2,242

Loans held-for-sale 2,735 3,679

Loans, net of deferred fees 927,232 964,695

Allowance for loan and lease (9,575 ) (9,715 ) losses

Net loans 917,657 954,980

Bank premises and equipment, net 34,256 34,421

Bank-owned life insurance 34,115 34,016

Goodwill 9,018 9,018

Other assets 16,182 13,511

TOTAL ASSETS $ 1,879,018 $ 1,802,145

LIABILITIES Deposits:

Noninterest-bearing $ 458,307 $ 427,073

Interest-bearing 1,247,870 1,181,101

Total deposits 1,706,177 1,608,174

Securities sold under agreements - 11,691 to repurchase

Federal Home Loan Bank - - borrowings

Accounts payable and accrued 20,608 22,286 liabilities

TOTAL LIABILITIES 1,726,785 1,642,151

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

EQUITY authorized; 4,358,808 and 4,359,738 shares issued

and outstanding as of the 43,588 43,597 periods presented

Retained earnings 110,826 108,761

Accumulated other comprehensive (2,277 ) 7,541 (loss) income

Total shareholders' equity attributable to First Farmers 152,138 159,899 and Merchants Corporation

Non-controlling interest - 95 95 preferred stock of subsidiary

TOTAL SHAREHOLDERS' EQUITY 152,233 159,994



TOTAL LIABILITIES AND $ 1,879,018 $ 1,802,145 SHAREHOLDERS' EQUITY

^(1) Derived from audited financial statements as of December 31, 2020.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three Months Ended March 31,

(dollars in thousands, except per share data)

2021

2020

INTEREST AND

Interest and fees on loans

$

9,611

$

10,216

DIVIDEND

Income on investment securities

INCOME

Taxable interest

1,241

1,270

Exempt from federal income tax

493

520

Interest from federal funds sold and other

26

69

Total interest income

11,371

12,075

INTEREST

Interest on deposits

778

1,275

EXPENSE

Interest on other borrowings

-

20

Total interest expense

778

1,295

Net interest income

10,593

10,780

Provision (credit) for loan and lease losses

(150

)

515

Net interest income after provision

10,743

10,265

NON-INTEREST

Mortgage banking activities

468

282

INCOME

Trust services fee income

975

877

Service fees on deposit accounts

1,649

1,708

Investment services fee income

82

119

Earnings on bank owned life insurance

99

113

Gain on sale of available-for-sale securities

121

129

Gain on redemption of bank owned life insurance

-

423

Other non-interest income

156

253

Total non-interest income

3,550

3,904

NON-INTEREST

Salaries and employee benefits

6,400

6,521

EXPENSE

Net occupancy expense

751

634

Depreciation expense

509

524

Data processing expense

783

797

Software support and other computer expense

724

564

Legal and professional fees

226

234

Audit and exam expenses

176

184

Advertising and promotions

256

225

FDIC insurance premium expense

153

25

Other non-interest expense

712

810

Total non-interest expense

10,690

10,518

Income before provision for income taxes

3,603

3,651

Provision for income taxes

600

451

Net income before non-controlling interest - dividends on preferred stock of subsidiary

3,003

3,200

Non-controlling interest - dividends on preferred stock subsidiary

-

-

Net income for common shareholders

$

3,003

$

3,200

Weighted average shares outstanding

4,359,405

4,375,025

Earnings per share

$

0.69

$

0.73

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three Months Ended March 31,

(dollars in thousands, except per 2021 2020 share data)

INTEREST AND Interest and fees on loans $ 9,611 $ 10,216

DIVIDEND Income on investment securities

INCOME Taxable interest 1,241 1,270

Exempt from federal income tax 493 520

Interest from federal funds sold and 26 69 other

Total interest income 11,371 12,075

INTEREST Interest on deposits 778 1,275

EXPENSE Interest on other borrowings - 20

Total interest expense 778 1,295

Net interest income 10,593 10,780

Provision (credit) for loan and lease (150 ) 515 losses

Net interest income after provision 10,743 10,265

NON-INTEREST Mortgage banking activities 468 282

INCOME Trust services fee income 975 877

Service fees on deposit accounts 1,649 1,708

Investment services fee income 82 119

Earnings on bank owned life insurance 99 113

Gain on sale of available-for-sale 121 129 securities

Gain on redemption of bank owned life - 423 insurance

Other non-interest income 156 253

Total non-interest income 3,550 3,904

NON-INTEREST Salaries and employee benefits 6,400 6,521

EXPENSE Net occupancy expense 751 634

Depreciation expense 509 524

Data processing expense 783 797

Software support and other computer 724 564 expense

Legal and professional fees 226 234

Audit and exam expenses 176 184

Advertising and promotions 256 225

FDIC insurance premium expense 153 25

Other non-interest expense 712 810

Total non-interest expense 10,690 10,518

Income before provision for income 3,603 3,651 taxes

Provision for income taxes 600 451

Net income before non-controlling interest - dividends on preferred 3,003 3,200 stock of subsidiary

Non-controlling interest - dividends - - on preferred stock subsidiary

Net income for common shareholders $ 3,003 $ 3,200



Weighted average shares outstanding 4,359,405 4,375,025

Earnings per share $ 0.69 $ 0.73

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, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

Results of Operations:

Interest income

$

11,371

$

11,724

$

11,763

$

11,761

$

12,075

Interest expense

778

855

809

835

1,295

Net interest income

10,593

10,869

10,954

10,926

10,780

Provision (credit) for loan and lease losses

(150

)

-

-

185

515

Non-interest income

3,550

3,412

3,396

3,735

3,904

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

10,690

10,301

9,842

9,636

10,518

Income before income taxes

3,603

3,980

4,508

4,840

3,651

Income taxes

600

683

828

823

451

Net income for common shareholders

$

3,003

$

3,297

$

3,680

$

4,017

$

3,200

Per Share Data:

Basic earnings per share

$

0.69

$

0.76

$

0.84

$

0.92

$

0.73

Weighted average shares outstanding per quarter

4,359,405

4,359,738

4,359,738

4,359,738

4,375,025

Financial Condition Data and Ratios:

Total securities

$

828,466

$

614,150

$

492,781

$

392,305

$

339,359

Loans, net of deferred fees

$

927,232

$

964,695

$

993,187

$

993,710

$

952,491

Allowance for loan and lease losses

$

(9,575

)

$

(9,715

)

$

(9,712

)

$

(9,695

)

$

(9,485

)

Total assets

$

1,879,018

$

1,802,145

$

1,717,941

$

1,608,659

$

1,437,929

Total deposits

$

1,706,177

$

1,608,174

$

1,526,143

$

1,416,343

$

1,256,319

Net interest income, on a fully taxable-equivalent basis

$

10,841

$

11,115

$

11,204

$

11,187

$

11,059

Net interest margin

2.55

%

2.69

%

2.87

%

3.08

%

3.42

%

Asset Quality Data and Ratios:

Total nonperforming assets

$

1,546

$

1,560

$

1,616

$

1,698

$

1,610

Nonperforming assets to total assets

0.08

%

0.09

%

0.09

%

0.11

%

0.11

%

Allowance for loan and lease losses to total loans

1.03

%

1.01

%

0.98

%

0.98

%

1.00

%

Net charge-offs (recoveries) to average loans annualized

0.00

%

(0.01

%)

(0.01

%)

(0.01

%)

0.00

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210426005094/en/

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