Company Announcements

First Farmers and Merchants Corporation Reports Second Quarter Results

Net Income of $4.5 Million

A nnualized loan growth accelerates to 23%

COLUMBIA, Tenn.--(BUSINESS WIRE)--Jul. 25, 2022-- First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced double digit growth in loans and adjusted net income for the second quarter of 2022, compared with 2021.

“First Farmers’ strong second quarter results benefited from double digit organic loan growth, increased interest income, and higher non-interest income from trust services fee income and service fees on deposit accounts,” stated Brian K. Williams, Chairman and Chief Executive Officer of First Farmers. “For the quarter, total loans grew almost 23% on an annualized basis. We also reported a significant improvement in our efficiency ratio that benefited from our strategy to streamline our operations and move toward innovative technology to support our customers and leverage our long-term growth plans.

“Net income for the second quarter of 2022 was $4.5 million compared with $5.5 million in the second quarter of 2021. Last year’s results included a $1.8 million gain, or $1.3 million on an after-tax basis, on the sale of Visa stock that was not repeated this year. Excluding the Visa stock sale, we had double digit growth in net income. Our asset quality also remained strong and highlights our solid loan underwriting and the continued strength of our local economy,” continued Williams.

Key highlights of First Farmers’ results for the second quarter of 2022 include:

  • Net income was $4.5 million in the second quarter of 2022 compared with $5.5 million in the year-earlier quarter. The decline in net income from last year was due to a $1.8 million gain on the sale of Visa stock in last year’s second quarter. The Visa gain contributed $1.3 million ($0.31 per share) to last year’s second quarter’s results. Net income per common share was $1.05 in the second quarter of 2022 compared with $1.26 in the second quarter of 2021. Net income rose 23.5% from $3.7 million, or $0.85 per common share, in the first quarter of 2022;
  • Adjusted net income, which excludes special items, rose 13.8% to $4.5 million, or $1.03 per common share, compared with $3.9 million, or $0.90 per common share, for the year-earlier quarter (see “Non-GAAP Financial Measures” section);
  • Loan growth was up 5.6% for the quarter (22.6% annualized) and up 8.0% from the year-earlier quarter after excluding SBA Paycheck Protection (“SBA PPP”) loans;
  • Net interest income before provision increased 4.5% to $11.7 million from $11.2 million for the year-earlier quarter.

Williams continued, “We are pleased with our growth in the second quarter and believe our success is due to our team’s focus on customer service and our collaborative team approach across our bank. Our growth strategy has focused our resources to enhance customer experience and generate more opportunities for loan and deposit production. We remain very positive about First Farmers’ continued growth in the second half of 2022.”

Robert E. Krimmel, Chief Financial Officer, added, “Net interest margin rose to 2.46% in the second quarter and benefited from our asset sensitive balance sheet and new loan production. We continue to fund our loan growth from our investment balances and expect this balance sheet shift to enhance future margins and net income as our loan portfolio expands.

“Our core bank earnings were very strong in the second quarter based on improving margins, strength in key non-interest income sources and lower trending non-interest expenses. The quality of these metrics further supports our bank’s efficiency ratio that has improved over the past year and reflects our ongoing strategies to deliver our services more efficiently to our customers. We believe the risk profile of our bank remains very strong and is highlighted by our low levels of nonperforming assets and past due loans, and the quality of new loans generated from our markets.”

Second Quarter 2022 Results of Operations

Net income was down 17.1% to $4.5 million, down $938,000 from the year-earlier second quarter. The decline in earnings was driven by a one-time gain on the sale of Visa stock of $1.8 million, a $1.3 million net of tax gain recognized in the second quarter of 2021. Net income, adjusted for special items, increased to $4.5 million, up $539,000 from the year-earlier second quarter driven by growth in net interest income of $507,000 coupled with a decline in non-interest expense $170,000. The increase in net interest income benefited from the growth in income on investment securities of $821,000 offset in part by a reduction in interest and fees on loans of $495,000. The decrease in interest and fees on loans was impacted by $987,000 of SBA PPP loan fees recognized during the second quarter of 2021. The decline in non-interest expense was due to decreases in data processing expense and salaries and employee benefits expense of $195,000 and $194,000, respectively.

Net income increased $856,000, or 23.2%, from the sequential first quarter while adjusted net income grew $617,000, or 16.1%. The improvement in earnings was due to growth in interest and fees on loans of $398,000 outpacing the growth in income on investment securities of $310,000 coupled with a decline in data processing expense of $572,000.

For the second quarter of 2022, securities available-for-sale declined $42 million from the sequential first quarter. Securities available-for-sale, amortized cost decreased $17 million and was used to fund part of the loan growth for the quarter while the unrealized loss adjustment for securities available-for-sale increased another $25 million for the quarter as bond prices were driven lower with higher interest rates as the Fed raised short-term interest rates and made adjustments to their quantitative tightening program. Our outstanding loan balances increased $50 million, or 22.6% on an annualized basis, to $941 million as the Company delivered, robust loan growth for the quarter. Total deposits decreased $118 million, or 5.9%, from the previous quarter to $1.9 billion but increased $185 million, or 10.9%, from the year-earlier period.

Total shareholders’ equity declined $15 million due to the unrealized loss adjustment to the available-for-sale securities portfolio that totaled $19 million, net of tax, for the second quarter. The decline is viewed as temporary by management since the intention is to hold these securities until maturity. Total unrealized losses related to the available-for-sale investment portfolio increased to $82.1 million compared to unrealized gains of $19.1 from the year-earlier quarter, and unrealized losses of $57.0 million for the first quarter of 2022. The fair market value of the Company’s available-for-sale securities portfolio is adjusted each quarter based on changes in interest rates.

Six Months Results

Net income available to common shareholders was $8.2 million for the first six months of 2022, down 3.1% compared with $8.5 million in the first six months of 2021. Net income per share declined 2.1% to $1.90 for the first six months of 2022 compared with $1.95 in the same period of 2021. The decrease in earnings was driven by a one-time gain on the sale of Visa stock of $1.8 million recognized in the second quarter of 2021 offset in part by growth in net interest income of $1.0 million coupled with a decline in non-interest expense of $435,000. Adjusted net income increased 13.8% to $8.3 million for the first six months of 2022 while adjusted net income per share increased 14.7% compared to the same period in 2021.

The increase in adjusted net income benefited from a 5.5% increase in net interest income after provision for loan losses to $23.1 million supported by growth in income on investment securities of $2.0 million offset in part by a reduction in interest and fees on loans of $1.5 million. The reduction in interest and fees on loans was impacted by $1.8 million in recognized SBA PPP loan fees during the first six months of 2021. Non-interest expenses declined 2.1% in the first six months of 2022 to $20.2 million compared with the same period in 2021. The decrease in non-interest expenses was due mostly to lower salaries and employee benefits and data processing expense; offset by higher software support and other computer expense related to technology upgrades experienced during the first quarter of 2022.

Asset Quality

Nonperforming assets increased to $1.6 million at the end of the second quarter of 2022 and totaled 0.08% of total assets, up from $1.0 million, or 0.05%, from the previous quarter. Nonperforming assets were up $288,000, or 0.07% of total assets, from the year-earlier first quarter. Net recoveries to average loans were 0.02% for the second quarter of 2022 compared with 0.05% for the previous quarter and net charge-offs of 0.00% for the year-earlier quarter. No adjustments were made to provision for loan and lease losses during the second quarter of 2022. The allowance for loan and lease losses represented 1.00% of total loans outstanding for the second quarter of 2022 compared with 1.05% for the previous quarter and 1.05% for the year-earlier quarter.

Capital Management Initiatives

During the second quarter of 2022, First Farmers repurchased 6,950 shares of the Company’s common stock in the open market at an average price of $29.77 per share in accordance with the Company’s stock repurchase program. Authorization to repurchase approximately 193,000 shares remains under the current program, which is set to expire in December 2022, 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 June 30, 2022, First Farmers reported total assets of approximately $2.0 billion, total shareholders’ equity of approximately $109 million, and administered trust assets of $5.6 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, gain on sale of Visa stock, gain on sale of premises and equipment, one-time digital conversion fees, 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

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

2022

 

2021

 

2022

 

2022

 

2021

Total non-interest income

$

3,660

 

 

$

5,658

 

 

$

3,466

 

 

$

7,126

 

 

$

9,208

 

Gain on sale of securities

 

-

 

 

 

(65

)

 

 

-

 

 

 

-

 

 

 

(186

)

Gain on equity securities

 

(25

)

 

 

(239

)

 

 

-

 

 

 

(25

)

 

 

(239

)

Gain on sale of Visa stock

 

-

 

 

 

(1,811

)

 

 

-

 

 

 

(91

)

 

 

-

 

Gain on sale of premises and equipment

 

(91

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,811

)

Adjusted non-interest income

$

3,544

 

 

$

3,543

 

 

$

3,466

 

 

$

7,010

 

 

$

6,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-interest income

$

9,755

 

 

$

9,925

 

 

$

10,425

 

 

$

20,180

 

 

$

20,615

 

One-time digital conversion fees

 

-

 

 

 

-

 

 

 

(207

)

 

 

(207

)

 

 

-

 

Adjusted non-interest expense

$

9,755

 

 

$

9,925

 

 

$

10,218

 

 

$

19,973

 

 

$

20,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income as reported

$

4,538

 

 

$

5,476

 

 

$

3,682

 

 

$

8,220

 

 

$

8,479

 

Total adjustments, net of tax1

 

(86

)

 

 

(1,563

)

 

 

153

 

 

 

67

 

 

 

(1,652

)

Adjusted net income

$

4,452

 

 

$

3,913

 

 

$

3,835

 

 

$

8,287

 

 

$

6,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.05

 

 

$

1.26

 

 

$

0.85

 

 

$

1.90

 

 

$

1.95

 

Total adjustments, net of tax1

 

(0.02

)

 

 

(0.36

)

 

 

0.04

 

 

 

0.02

 

 

 

(0.38

)

Adjusted basic earnings per share

$

1.03

 

 

$

0.90

 

 

$

0.89

 

 

$

1.92

 

 

$

1.57

 

 
(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)

 

 

 

 

 

 

June 30,

 

December 31,

 

 

(dollars in thousands, except per share data)

 

2022

 

2021(1)

ASSETS

 

Cash and due from banks

 

$

32,074

 

$

19,791

 

 

Interest-bearing deposits

 

28,815

 

75,065

 

 

Federal funds sold

 

966

 

8,374

 

 

Total cash and cash equivalents

 

61,855

 

103,230

 

 

Securities:

 

 

 

 

Available-for-sale

 

885,129

 

876,987

 

 

Held-to-maturity (fair market value $14,272 and $15,932 as of the periods presented)

 

15,108

 

15,128

 

 

 

Equity securities

 

2,505

 

 

2,481

 

 

Loans held-for-sale

 

988

 

2,197

 

 

Loans, net of deferred fees

 

941,357

 

886,891

 

 

Allowance for loan and lease losses

 

(9,386

)

(9,605

)

 

Net loans

 

931,971

 

877,286

 

 

Bank premises and equipment, net

 

32,237

 

32,627

 

 

Bank-owned life insurance

 

35,591

 

35,354

 

 

Goodwill

 

9,018

 

9,018

 

 

 

Deferred tax asset

 

23,997

 

 

4,085

 

 

Other assets

 

14,010

 

14,345

 

 

 

TOTAL ASSETS

 

$

2,012,409

 

 

$

1,972,738

 

LIABILITIES

 

Deposits:

 

 

 

Noninterest-bearing

 

$

546,946

 

$

522,725

 

 

Interest-bearing

 

1,333,666

 

1,268,481

 

 

Total deposits

 

1,880,612

 

1,791,206

 

 

 

Accounts payable and accrued liabilities

 

22,641

 

 

22,901

 

 

 

TOTAL LIABILITIES

 

1,903,253

 

 

1,814,107

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

Common stock - $10 par value per share, 8,000,000 shares authorized; 4,309,890 and 4,317,306 shares issued and outstanding as of the periods presented

 

43,099

 

 

43,173

 

 

 

Retained earnings

 

125,767

 

119,507

 

 

Accumulated other comprehensive loss

 

(59,805

)

(4,144

)

 

Total shareholders’ equity attributable to First Farmers and Merchants Corporation

 

109,061

 

158,536

 

 

Noncontrolling interest - preferred stock of subsidiary

 

95

 

95

 

 

TOTAL SHAREHOLDERS’ EQUITY

 

109,156

 

158,631

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

2,012,409

 

 

$

1,972,738

 

 

 

 

 

(1) Derived from audited financial statements as of December 31, 2021.

 
 
 
 
 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

(dollars in thousands, except per share data)

2022

 

2021

 

2022

 

2021

INTEREST AND

Interest and fees on loans

$

8,985

 

$

9,480

 

$

17,572

 

 

$

19,091

 

DIVIDEND

Income on investment securities

 

 

 

 

INCOME

Taxable interest

2,615

 

1,780

 

4,979

 

 

3,021

 

Exempt from federal income tax

512

 

602

 

1,021

 

 

1,095

 

Interest from federal funds sold and other

86

 

10

 

116

 

 

36

 

 

Total interest income

12,198

 

11,872

 

23,688

 

 

23,243

 

INTEREST EXPENSE

Interest on deposits

505

 

685

 

877

 

 

1,463

 

 

Interest on other borrowings

-

 

1

 

-

 

 

1

 

Total interest expense

505

 

686

 

877

 

 

1,464

 

Net interest income

11,693

 

11,186

 

22,811

 

 

21,779

 

(Provision credit) for loan and lease losses

-

 

-

 

(320

)

 

(150

)

 

Net interest income after provision

11,693

 

11,186

 

23,131

 

 

21,929

 

NON-INTEREST

Mortgage banking activities

173

 

367

 

440

 

 

835

 

INCOME

Trust services fee income

1,027

 

1,017

 

2,093

 

 

1,992

 

 

Service fees on deposit accounts

1,944

 

1,795

 

3,694

 

 

3,444

 

Investment services fee income

110

 

89

 

220

 

 

171

 

Earnings on bank-owned life insurance

121

 

124

 

237

 

 

223

 

Gain on sale of investments

-

 

65

 

-

 

 

186

 

 

Gain on equity securities

25

 

-

 

25

 

 

238

 

 

Gain on sale of premises and equipment

91

 

-

 

91

 

 

-

 

 

Gain on sale of Visa stock

-

 

1,811

 

-

 

 

1,811

 

Other non-interest income

169

 

390

 

326

 

 

308

 

 

Total non-interest income

3,660

 

5,658

 

7,126

 

 

9,208

 

NON-INTEREST

Salaries and employee benefits

5,626

 

5,820

 

11,495

 

 

12,220

 

EXPENSE

Net occupancy expense

603

 

648

 

1,141

 

 

1,399

 

Depreciation expense

478

 

501

 

932

 

 

1,010

 

Data processing expense

486

 

681

 

1,544

 

 

1,464

 

 

Software support and other computer expense

965

 

829

 

1,812

 

 

1,553

 

Legal and professional fees

218

 

191

 

519

 

 

417

 

Audits and exams expense

186

 

171

 

362

 

 

347

 

Advertising and promotions

239

 

232

 

442

 

 

488

 

FDIC insurance premium expense

161

 

160

 

330

 

 

313

 

Other non-interest expense

793

 

692

 

1,603

 

 

1,404

 

Total non-interest expense

9,755

 

9,925

 

20,180

 

 

20,615

 

Income before provision for income taxes

5,598

 

6,919

 

10,077

 

 

10,522

 

 

Provision for income taxes

1,052

 

1,435

 

1,849

 

 

2,035

 

Net income

4,546

 

5,484

 

8,228

 

 

8,487

 

Noncontrolling interest - dividends on preferred stock subsidiary

8

 

8

 

8

 

 

8

 

 

Net income available to common shareholders

$

4,538

 

$

5,476

 

$

8,220

 

 

$

8,479

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

4,313,455

 

4,357,546

 

4,315,302

 

 

4,358,470

 

 

Earnings per share

$

1.05

 

$

1.26

 

$

1.90

 

 

$

1.95

 

 
 
 
 
 

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

 

 

For the Three Months Ended

(dollars in thousands, except per share data)

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2 021

 

June 30,

2021

Results of Operations:

 

 

 

 

 

 

 

 

 

Interest income

$

12,198

 

 

$

11,490

 

 

$

12,151

 

 

$

12,143

 

 

$

11,872

 

Interest expense

505

 

 

372

 

 

400

 

 

517

 

 

686

 

Net interest income

11,693

 

 

11,118

 

 

11,751

 

 

11,626

 

 

11,186

 

Provision credit for loan and lease losses

-

 

 

(320

)

 

-

 

 

-

 

 

-

 

Non-interest income

3,660

 

 

3,466

 

 

3,863

 

 

3,712

 

 

5,658

 

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

9,755

 

 

10,425

 

 

11,961

 

 

10,398

 

 

9,933

 

Income before income taxes

5,598

 

 

4,479

 

 

3,653

 

 

4,940

 

 

6,911

 

Income taxes

1,052

 

 

797

 

 

582

 

 

871

 

 

1,435

 

Net income for common shareholders

$

4,546

 

 

$

3,682

 

 

$

3,071

 

 

$

         4,069

 

 

$

       5,476

 

Per Share Data:

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.05

 

 

$

0.85

 

 

$

0.71

 

 

$

0.94

 

 

$

1.26

 

Weighted average shares outstanding per quarter

4,313,455

 

 

4,317,169

 

 

4,326,090

 

 

4,340,048

 

 

4,357,546

 

Financial Condition Data and Ratios:

 

 

 

 

 

 

 

 

 

Total securities

$

902,742

 

 

$

944,543

 

 

$

894,596

 

 

$

848,223

 

 

$

785,606

 

Available-for-sale securities, fair market value

$

885,129

 

 

$

926,944

 

 

$

876,987

 

 

$

829,180

 

 

$

766,552

 

Available-for-sale securities, amortized cost

$

967,235

 

 

$

983,958

 

 

$

883,853

 

 

$

828,465

 

 

$

763,750

 

Loans, net of deferred fees

$

941,357

 

 

$

891,108

 

 

$

886,891

 

 

$

902,234

 

 

$

908,510

 

Allowance for loan and lease losses

$

(9,386

)

 

$

(9,388

)

 

$

(9,605

)

 

$

(9,590

)

 

$

(9,581

)

Total assets

$

2,012,409

 

 

$

2,144,206

 

 

$

1,972,738

 

 

$

1,920,554

 

 

$

1,878,942

 

Total deposits

$

1,880,612

 

 

$

1,998,175

 

 

$

1,791,206

 

 

$

1,736,614

 

 

$

1,695,990

 

Net interest income, on a fully taxable-equivalent basis

$

11,956

 

 

$

11,379

 

 

$

12,013

 

 

$

11,899

 

 

$

11,484

 

Net interest margin

2.46

%

 

2.43

%

 

2.62

%

 

2.63

%

 

2.60

%

Efficiency

62.94

%

 

68.83

%

 

66.57

%

 

67.39

%

 

66.05

%

 

 

 

 

 

 

 

 

 

 

Asset Quality Data and Ratios:

 

 

 

 

 

 

 

 

 

Total nonperforming assets

$

1,635

 

 

$

1,002

 

 

$

1,217

 

 

$

1,579

 

 

$

1,347

 

Nonperforming assets to total assets

0.08

%

 

0.05

%

 

0.06

%

 

0.08

%

 

0.07

%

Allowance for loan and lease losses to total loans

1.00

%

 

1.05

%

 

1.08

%

 

1.06

%

 

1.05

%

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

(0.02

%)

 

(0.05

%)

 

0.00

%

 

0.00

%

 

0.00

%

 
 

 

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

Source: First Farmers and Merchants Corporation