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, 2020 |
|||||||||
|
2021 |
|
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 insurance |
|
- |
|
|
|
(423 |
) |
|
|
- |
|
|
Adjusted non-interest income |
$ |
3,429 |
|
|
$ |
3,250 |
|
|
$ |
3,412 |
|
|
Net income as reported |
$ |
3,003 |
|
|
$ |
3,200 |
|
|
$ |
3,297 |
|
|
Total adjustments, net of tax1 |
|
(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 tax1 |
|
(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 per share data) |
|
2021 |
|
2020(1) |
|||||
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 losses |
|
(9,575 |
) |
(9,715 |
) |
|||||
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 to repurchase |
|
- |
|
11,691 |
|
|||||
|
Federal Home Loan Bank borrowings |
|
- |
|
|
- |
|
|||
|
Accounts payable and accrued liabilities |
|
20,608 |
|
|
22,286 |
|
|||
|
TOTAL LIABILITIES |
|
1,726,785 |
|
|
1,642,151 |
|
|||
SHAREHOLDERS’ |
Common stock - $10 par value per share, 8,000,000 shares |
|
|
|
||||||
EQUITY |
authorized; 4,358,808 and 4,359,738 shares issued |
|
|
|
||||||
|
and outstanding as of the periods presented |
|
43,588 |
|
|
43,597 |
|
|||
Retained earnings |
|
110,826 |
|
108,761 |
|
|||||
Accumulated other comprehensive (loss) income |
|
(2,277 |
) |
7,541 |
|
|||||
Total shareholders’ equity attributable to First Farmers and Merchants Corporation |
|
152,138 |
|
159,899 |
|
|||||
Non-controlling interest - preferred stock of subsidiary |
|
95 |
|
95 |
|
|||||
TOTAL SHAREHOLDERS’ EQUITY |
|
152,233 |
|
159,994 |
|
|||||
|
|
|||||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
1,879,018 |
|
|
$ |
1,802,145 |
|
|
(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 FINANCIAL HIGHLIGHTS (unaudited) |
||||||||||||||||||||
For the Three Months Ended |
||||||||||||||||||||
(dollars in thousands, except per share data) |
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|||||||||||
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/
Contacts
Robert E. Krimmel
Chief Financial Officer
(931) 380-8257