First Farmers and Merchants Corporation Reports First Quarter Net Income Of $3.2 Million Or $0.73 Per Common Share

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 quarter ending March 31, 2020.

Key aspects of First Farmers’ results for the first quarter of 2020 include:

• Net income of $3.2 million or $0.73 per common share, down 40% from $5.3 million or $1.20 per common share for the year-earlier quarter and down 8% from $3.5 million or $0.79 per common share for the previous quarter;
• Adjusted net income, which excludes special items, totaled $2.6 million or $0.59 per common share, down 22% from $3.4 million or $0.75 per common share for the year-earlier quarter and down 25% from $3.5 million or $0.79 per common share for the previous quarter (see non‑GAAP reconciliation);
• Net interest income of $10.8 million, up 3% from $10.5 million and up 1% from $10.6 million for the previous quarter;
• Adjusted non-interest income, which excludes special items, totaled $3.3 million, up 5% from $3.1 million for the year-earlier quarter and down 6% from $3.4 million for the previous quarter (see non-GAAP reconciliation);
• Loan growth of $15 million or 2% from the previous quarter and $61 million or 7% compared with the year-earlier quarter; and
• Provision for loan and leases losses expense of $515,000 compared with $0 for the year‑earlier and previous quarters.

   

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “Despite a very difficult economic environment, which contributed to decreases in year-over-year and sequential-quarter net income and adjusted net income, we are pleased with the underlying fundamentals driving our business, including increases in net interest income for the aforementioned periods, as well as an increase in total non‑interest income over the same period last year, excluding the sale of our White Bluff office in the first quarter of 2019. Our net interest margin also increased slightly from the sequential quarter. Further, we experienced growth both year-over-year and in the sequential-quarter, resulting in record total loans and deposit base. Considering the strong credit metrics driving our business, the resiliency of the markets we serve and the opportunities we continue to see ahead, we remain confident in our ability to continue to reward our shareholders for their loyalty.”

Stevens further commented, “The COVID-19 pandemic has caused disruptions to the global economy and the communities in which we operate. In response, we have implemented social distancing guidelines that include separating department office spaces while allowing remote work. Our utmost concern is the health and welfare of our employees and customers, and we continually monitor Federal, State and local rules in the geographies we serve. As a result of this pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted, and First Farmers made the decision to participate in the Payroll Protection Program (“PPP”) administered by the Small Business Administration (“SBA”) to help as many small businesses as possible in Middle Tennessee. We received over 500 inquiries from small businesses, and we were able to process over 250 applications prior to the SBA notification on April 16, 2020, that they were no longer taking applications because the funding set aside for PPP loans had been exhausted. We are proud of the PPP loans we were able to get approved, and we are hopeful that the PPP program will receive additional Congressional funding so that we can complete the remaining customer inquiries we have received.”

Brian K. Williams, President, added, “We increased our provision for loan and lease loss expense to $515,000 as a result of the current economic environment and loan growth from the same period last year. Our allowance for loan and lease losses now represents 1.0% of total loans outstanding, an increase from 0.96% for the sequential quarter, but down from 1.04% in the year‑earlier period. We are particularly pleased with the excellent credit quality that continues to define both our loan portfolio and our lending metrics. Total nonperforming assets declined to just 0.11% of total assets from 0.12% in the year-earlier quarter and on a sequential-quarter basis, highlighting our efforts to maintain a disciplined approach to the way we build our business. The strength of First Farmers’ balance sheet will serve our company and its shareholders well as we navigate the unprecedented economic environment in which we are now operating.”

First Quarter 2020 Results of Operations

Net income declined to $3.2 million, down $2.1 million or 40% from the year-earlier quarter. The reduction in earnings was primarily driven by the one-time gain on sale of the Company’s White Bluff office totaling $2.0 million, net of tax, in the year-earlier quarter. Net income, adjusted for special items, was $2.6 million, down $745,000 or 22% from the year earlier quarter. The decrease in adjusted net income from the year-earlier quarter was the result of an increase in employee health insurance expense of $719,000 coupled with an increase in provision for loan and lease loss expense of $515,000 as a result of the deteriorating economic environment and to support loan growth, offset in part by improvement in net interest income of $311,000.

Net income decreased $277,000 or 8% from the sequential quarter. The decrease in earnings was primarily driven by the increase in provision for loan and lease loss expense of $515,000 as a result of the deteriorating economic environment and to support loan growth coupled with an increase in health insurance expense of $474,000, offset in part by the gain on redemption of a bank-owned life insurance policy.

For the first quarter of 2020, the outstanding loan balances increased $15 million or 2% to a record $952 million from the previous quarter and increased $61 million or 7% from the year-earlier quarter. Total deposits increased $36 million or 3% from the previous quarter to a record $1.256 billion and increased $102 million or 9% from the year-earlier period.

Asset Quality

Total nonperforming assets continued to improve, closing the quarter at $1.6 million, or 0.11% of total assets, down from $1.7 million, or 0.12% of total assets, for the previous quarter and decreased from $1.6 million, or 0.12% of total assets, in the year-earlier quarter. Net charge offs to average loans were 0.00% for the first quarter of 2020, which was the same for both the previous quarter and the year-earlier quarter. As a result of the change in the current economic environment coupled with loan growth, a provision for loan and lease losses of $515,000 was recorded during the first quarter of 2020. The allowance for loan and lease losses represented 1.00% of total loans outstanding for the first quarter of 2020, up from 0.96% for the previous quarter but down from 1.04% for the year-earlier quarter.

Capital Management Initiatives

During the first quarter, First Farmers repurchased 20,000 shares of common stock at an average price of $45.03 per share under its stock repurchase program. Authorization to repurchase approximately 180,000 shares remains under the current program, which is set to expire in December 2020, 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, 2020, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $151 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, sale of office location gains and losses, sale of other fixed assets included in other non-interest income, gain on redemption of bank owned life insurance, contingency loss on litigation 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.

Contacts

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