COLUMBIA, Tenn.–(BUSINESS WIRE)–$FFMH–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 |
|||||||||||||||||
|
|
|||||||||||||||||
|
|
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 |
|||||||||
|
|
|||||||||
|
|
|
|
(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 |
||||||||||||||
|
|
||||||||||||||
|
|
|
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 |
|||||||||||||||||||
|
|
|||||||||||||||||||
|
|
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 |
%) |
|||||
Contacts
Robert E. Krimmel
Chief Financial Officer
(931) 380-8257
