Company Announcements

Book Value Per Share Surges 27.2%, Highlighting Continued Balance Sheet Strength

COLUMBIA, Tenn.--(BUSINESS WIRE)--Jul. 28, 2025-- First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced its results for the second quarter of 2025.

“I am incredibly proud of our team for delivering another strong quarter, with net income increasing 22.0% and book value per share surging 27.2% from the prior year,” stated Brian K. Williams, Chairman and Chief Executive Officer of First Farmers. “This performance is a direct result of the dedication of our entire banking team, who are deeply committed to our customers and our community.”

“While the broader national economic picture remains complex, the Middle Tennessee market continues to be dynamic, and our team’s disciplined work allows us to effectively navigate these challenges. As the market for high-quality loans remains competitive, our foundational strength and sound credit principles allow us to be selective as we continue to support our customers.”

Key highlights of First Farmers’ results for the second quarter of 2025 include:

• Net income increased 22.0% to $4.6 million from $3.8 million for the year-earlier quarter. Net income per common share increased 25.2% to $1.15 from $0.92 in the second quarter of 2024. Net income increased 3.7% from $4.5 million, or $1.11, per common share, reported in the first quarter of 2025;
• Adjusted net income, which excludes special items, increased 17.8% to $4.4 million, or $1.09 per common share, compared with $3.7 million, or $0.90 per common share, for the year-earlier quarter. Second quarter adjusted net income increased 4.8% from $4.2 million, or $1.04 per common share, reported in the first quarter of 2025 (see “Non-GAAP Financial Measures” section);
• Total loans increased $1.6 million from the first quarter of 2025, but declined $49.0 million, or 4.7%, compared to the second quarter of 2024;
• Net interest income increased 19.3% to $13.1 million from $11.0 million for the second quarter of 2024 and was up 3.5% from $12.6 million for the first quarter of 2025;
• Provision for credit losses decreased to $0 from $60,000 for the second quarter of 2024 and was down from provision for credit losses expense of $325,000 for the first quarter of 2025;
• Net interest margin expanded for the sixth consecutive quarter to 3.14%;
• Average core deposits grew $43.9 million, or 3.5%, year-over-year; and
• Book value per share increased 27.2% to $39.02 from $30.68 in the second quarter of 2024 and increased 5.9% from $36.85 for the first quarter of 2025.

“Our strong capital position is the engine that supports strategic investments in our future growth,” said Williams. “A key win this quarter was the successful recruitment of seasoned leadership for our business banking division, and our focus now shifts to building out a full team of producers to deepen relationships, opening the door for First Farmers to serve more area businesses. Along with key additions to our wealth management team, these investments in proven talent are central to our strategy.”

“We are also elevating the capabilities of our mortgage banking division and expect to see significant progress in the second half of the year. We are confident these initiatives are helping forge the path for sustained growth and will create significant long-term value for our shareholders,” added Williams.

“We saw strong net interest margin improvement this quarter, an area we have been laser focused on,” said Jill A. Giles, Chief Financial Officer for First Farmers. “The key to this was shifting our balance sheet out of more expensive funding sources, increasing the strength of our core deposit franchise, which grew 3.5% year-over-year. Simultaneously, we are proactively managing our earning assets, capitalizing on opportunities to reprice maturing loans and investments into the current rate environment.”

“Strong improvement in our performance metrics allows us to make pivotal investments back into our company. The year-over-year increase in our operating expense is intentional, reflecting both an investment in performance-based incentives which reward strong results and strategic investments in modernizing our benefits package to retain and attract top talent,” added Giles.

Net income for the second quarter of 2025 grew $835,000, or 22.0%, compared to the year-earlier quarter. The increase in net income was primarily due to growth in net interest income offset in part by an increase in total non-interest expense. Growth in net interest income was the direct result of proactive balance sheet management, which significantly reduced interest expense by eliminating costly borrowings and improving the Company’s liability mix compared to the year-earlier quarter. The Company’s net interest margin expanded for the sixth consecutive quarter due to the easing of deposit cost pressures and reduced reliance on non-core funding as compared to the second quarter of 2024. Total non-interest expense increased $1.3 million, or 12.8%, compared to the second quarter of 2024 primarily due to an increase in salaries and employee benefits expense of $922,000, and software support and other computer expenses of $137,000. The increase in salaries and employee benefits expenses was driven by an increase in annual salary adjustments. Additionally, the Company saw higher expenses for performance-based employee incentives and benefits, which correlates with higher earnings and growth in net interest margin as compared to the year-earlier quarter. Non-interest income increased $132,000, or 3.7%, compared to the prior-year quarter, while adjusted non-interest income declined by $105,000 due to the decline in transaction-based interchange fee income for the second quarter of 2025.

Net income for the second quarter of 2025 was up from the sequential first quarter by $164,000, or 3.7%. The increase in earnings was due to a decrease in provision for credit losses and an increase in total non-interest income, offset in part by an increase in non-interest expense. Net interest income continued its positive trend, increasing from the prior quarter as the net interest margin grew by 12 basis points to 3.14%. The Company recorded no provision for credit losses expense in the second quarter of 2025. The prior quarter included provision expense of $325,000, driven by an increase in loans rated for closer monitoring and an increase in unfunded loan commitment balances. Non-interest expense increased as salaries and employee benefits grew by $600,000, mostly related to increases in employee health insurance expense of $392,000 and performance-based incentives and benefits of $241,000 compared to the sequential quarter.

For the second quarter of 2025, investment securities decreased by $19.2 million from the sequential first quarter to $590 million, or 33.8% of total assets, and decreased $72.9 million from $663 million, or 35.7% of total assets, from the second quarter of 2024. Outstanding loan balances grew $1.6 million, or 0.2%, from the sequential first quarter to $1.005 billion and declined $49.0 million, or 4.7%, from the second quarter of 2024. Loan demand continued to be soft in the second quarter of 2025 as the Company saw borrowers taking a cautious approach resulting from elevated interest rates and general economic uncertainty; however, our lending teams remain disciplined in their credit focus while continuing to support the local economy. Total deposits decreased $39.5 million, or 2.5%, from the sequential first quarter to $1.566 billion, and increased $42.3 million, or 2.8%, from the second quarter of 2024. The decrease in deposits compared to the sequential quarter was related to municipal deposit decline of $13.2 million and a decline in core deposits of $24.6 million. A decrease in core deposit balances during the second quarter is typical as federal income tax payments are made. The increase in total deposits compared to the second quarter of 2024 was driven by growth in core deposits of $40.5 million and brokered deposits of $19.4 million, offset in part by decreases of $25.3 million in municipal deposits.

The Company had no outstanding borrowings as of June 30, 2025, and March 31, 2025, respectively, as the continued stability and year-over-year growth of core deposits has allowed the Company to strategically eliminate dependency on non-core funding sources. The Company’s outstanding Federal Reserve Bank Term Funding Program (“BTFP”) borrowings as of June 30, 2024, in the amount of $168 million were paid off in the fourth quarter of 2024.

For the second quarter of 2025, total shareholders’ equity increased by $7.7 million from the sequential first quarter to $156.1 million and grew $30.4 million from the second quarter of 2024. The increase in total shareholders’ equity from the first quarter of 2025 was primarily driven by net income of $4.6 million and a positive change of $5.2 million in accumulated other comprehensive income, offset in part by dividends paid of $1.1 million and stock repurchases of $1.0 million. The positive change in accumulated other comprehensive income resulted from a decrease in the unrealized loss adjustment to the available-for-sale securities portfolio totaling $5.2 million, net of tax. The improvement in the value of the available-for-sale securities portfolio was primarily related to ongoing maturity roll-off of the portfolio compared to the sequential first quarter. The book value per share improved 5.9% from the sequential first quarter to $39.02 and increased 27.2% compared to the second quarter of 2024. This strong growth reflects the tangible value the Company’s balance sheet strategy is creating for shareholders.

Non-performing loans were $1.3 million, or 0.13% of total loans, flat from $1.3 million, or 0.13% of total loans, in the sequential first quarter and were up from $863,000, or 0.08% of total loans, in the second quarter of 2024. Net charge-offs to average loans were 0.01% for the second quarter of 2025 compared with 0.00% for the sequential quarter and 0.00% for the second quarter of 2024. No provision expense was recorded to the allowance for credit losses during the second quarter of 2025. The allowance for credit losses represented 0.82% of total loans outstanding for the second quarter of 2025 compared with 0.82% for the sequential first quarter and 0.77% for the second quarter of 2024. The allowance for credit losses for unfunded commitments increased to $575,000, or 0.23% of total unfunded commitments, for the second quarter of 2025 compared with 0.21% for the sequential first quarter and decreased from $610,000, or 0.21% of total unfunded commitments, for the second quarter of 2024. Overall, the Company's asset quality metrics remained strong and stable during the quarter, reflecting a disciplined approach to credit risk management in the current economic environment.

First Farmers’ capital ratios improved compared to the sequential quarter and second quarter of 2024. The Bank’s capital ratios remain well above the regulatory minimum guidelines. This robust capital base provides the flexibility to both invest in the strategic growth initiatives outlined previously and return value to shareholders through dividends and the Company’s share repurchase program. During the second quarter of 2025, First Farmers repurchased 25,000 shares of the Company’s common stock in the open market and in privately negotiated transactions at an average price of $38.80 with prices ranging from $35.25 to $40.00 per share in accordance with the Company’s stock repurchase program. Second quarter 2025 stock repurchases increased 25.0% compared to the sequential first quarter and were down 54.5% compared to the year-earlier quarter. Authorization to repurchase approximately 155,000 shares remains under the current program, which is set to expire in December 2025, unless extended or otherwise completed.

For the six months ended June 30, 2025, First Farmers reported net income of $9.1 million, or $2.26 per share, compared with $7.2 million, or $1.74 per share, in the same period of 2024. The change reflects growth in net interest income offset in part by increases in provision for credit losses and non-interest expense. The growth in net interest income for the six months ended June 30, 2025, was attributable to the reduction in interest expense for deposits and borrowings as the balance sheet liability mix improved compared to the year-earlier period. Provision for credit losses increased by $200,000 primarily driven by provision expense of $325,000 recorded in the first quarter of 2025 due to an increase in loans rated for closer monitoring. Non-interest expense grew $1.9 million for the six months ended June 30, 2025 driven by increases in salaries expense of $811,000, performance-based incentives and benefits of $350,000, core provider and software support of $352,000, and recruitment and other professional services expense of $166,000.

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, 2025, First Farmers reported total assets of approximately $1.7 billion, total shareholders’ equity of approximately $156 million, and administered trust assets of $6.3 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 redemption of bank-owned life insurance, gain on disposal of premises and equipment, 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.

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For additional information contact
Jill A. Giles
Chief Financial Officer
(931) 380-8284

Source: First Farmers and Merchants Corporation