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First Farmers and Merchants Corporation Reports Improved Third Quarter Results

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Net Income Rises 10.6% to $4.1 Million

Adjusted Net Income Increases 6.9% to $3.9 Million

COLUMBIA, Tenn., October 25, 2021--(BUSINESS WIRE)--First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced growth in net interest income and net income for the third quarter ended September 30, 2021, compared with the prior year’s third quarter. The Company also reported record assets and deposits for the third quarter ended September 30, 2021.

Key highlights of First Farmers’ results for the third quarter of 2021 include:

  • Net income rose 10.6% to $4.1 million from $3.7 million for the year-earlier quarter. Net income per common share increased 11.1% to $0.94 from $0.84 in the third quarter of 2020. Net income declined 25.7% from $5.5 million, or $1.26 per common share, reported in the second quarter of 2021 that included a one-time gain of $1.3 million, net of tax, on the sale of the Company’s Visa Class B common stock;

  • Adjusted net income, which excludes special items, rose 6.9% to $3.9 million, or $0.91 per common share, compared with $3.7 million, or $0.84 per common share, for the year-earlier quarter. Third quarter adjusted income rose 0.6% from $3.9 million, or $0.90 per common share, reported in the second quarter of 2021 (see non-GAAP reconciliation);

  • Net interest income increased 6.1% to $11.6 million from $11.0 million for the year-earlier quarter and was up 3.9% from $11.2 million for the second quarter of 2021;

  • Loan growth, excluding SBA Paycheck Protection ("SBA PPP") loans, was up 2.7% for the quarter; and

  • Total assets reached a record $1.9 billion and total deposits reached a record $1.7 billion.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, "We are pleased to report continued growth in the third quarter with record deposits and assets as well as a solid increase in net income compared with last year’s third quarter. These strong results allowed us to increase our stock repurchases during the quarter, which were up 87.9% to 20,477 shares compared with 10,900 shares repurchased in the second quarter, and a significant increase over our first quarter purchases of 930 shares. This marked our third consecutive quarterly increase in stock repurchases and an increase in the return of a portion of our earnings to First Farmers’ shareholders."

Brian K. Williams, President, added, "Our excellent third quarter results were driven by the outstanding performance of our First Farmers team, which continues to serve our customers at a high level, as well as our strong local economy. This was our second consecutive quarter of organic loan growth coming at the same time we are winding down our SBA PPP loan redemptions. The growth in loans and investments during the third quarter contributed to higher net interest income, our largest source of earnings. We also reported growth in non-interest income that was driven by continued strength in trust services fee income and improved service fees on deposit accounts as deposits rose to a record $1.7 billion."

"First Farmers earnings growth has benefited from the longstanding quality of our loan portfolio. We recorded no provision for loans losses for the last two quarters due to our low level of charge-offs, past due loans and classified loans. We expect the high quality of our loan portfolio combined with momentum in interest income and non-interest income to continue into the fourth quarter. We are optimistic about the way 2021 performance is shaping up as we enter the final quarter of the year."

Third Quarter 2021 Results of Operations

Net income increased to $4.1 million, up $389,000, or 10.6%, from the year-earlier quarter. The improvement in earnings was driven by solid growth in operating leverage. Net interest income improved $672,000 with growth in the net interest margin of three basis points supported by an increase in interest on investments of $568,000 along with a reduction in interest expense of $292,000. Non-interest income increased $316,000 driven by the gain on sale of available-for-sale securities of $181,000 coupled with an increase in service fees on deposit accounts of $129,000 and continued momentum in trust services fee income. The improvement in revenue was in part offset by growth in salaries and employee benefits of $516,000 to support our continued growth.

Net income, adjusted for special items, was $3.9 million, up $255,000 from the year-earlier quarter. The increase in adjusted net income from the year-earlier quarter was due to increases in net interest income of $672,000 and non-interest income of $135,000. Non-interest expense was up by $556,000 from the year-earlier quarter due primarily to an increase in salaries and employee benefits expense.

Net income decreased $1.4 million, or 25.7% from the sequential second quarter. The decrease in earnings was due primarily to the gain on the sale of Visa class B stock in the amount $1.3 million, net of tax, recognized during the second quarter. Net income, adjusted for special items, was slightly higher at $3.9 million, compared with the previous quarter.

For the third quarter of 2021, the outstanding loan balances decreased $5 million, or 0.6%, from the previous quarter to $903 million and decreased $90 million, or 9.1%, from the year-earlier quarter. Loan contraction for the quarter was driven by SBA PPP loan forgiveness of $29 million. Loan balances, excluding SBA PPP loans, increased $24 million, or 2.7%, for the quarter. Total deposits increased $41 million, or 2.4%, from the previous quarter to a record $1.736 billion, and increased $210 million, or 13.8%, from the year-earlier quarter.

Nine Months Results

Net income available to common shareholders rose 15.2% to $12.5 million, or $2.88 per share, for the first nine months of 2021 compared with $10.9 million, or $2.50 per share, in the first nine months of 2020. The increase in net income benefited from a 5.0% increase in net interest income after provision for loan losses to $33.6 million and a 17.1% increase in non-interest income to $12.9 million, including the $1.8 million gain on sale of the Visa stock.

First Farmers reported organic growth from banking services, trust services and mortgage banking activities. Service fees on deposits rose 6.8% to $5.3 million, trust services fee income increased 11.2% to $3.0 million and revenue from mortgage banking activities was up 18.2% to $1.1 million compared with the first nine months of 2020.

Non-interest expenses rose 3.4% in the first nine months of 2021 to $31.0 million compared with the same period in 2020. The increases were due mostly to higher salaries and employee benefits, net occupancy expense, software support, and advertising and promotions; offset by lower expenses for data processing expense, legal and professional fees, and other non-interest expenses.

Asset Quality

Total nonperforming assets remained at a historically low level increasing slightly to $1.6 million, or 0.08% of total assets, up from $1.3 million or 0.07% from the previous quarter. Net charge-offs to average loans were 0.00% for the third quarter of 2021 compared with net charge-offs of 0.00% for the previous quarter and net recoveries of 0.01% for the year-earlier quarter. No provision for loan and lease losses expense was recorded during the third quarter of 2021. The allowance for loan and lease losses represented 1.06% of total loans outstanding for the third quarter of 2021 compared with 1.05% for the previous quarter and 0.98% for the year-earlier quarter. The allowance for loan and lease losses for the third quarter of 2021 represented 1.07% of total loans outstanding, excluding SBA PPP loans.

Capital Management Initiatives

During the third quarter, First Farmers repurchased 20,477 shares of the Company’s common stock. Of this amount, 10,477 shares were repurchased under a Rule 10b-18 plan of the Securities Exchange Act of 1934 at an average price of $35.04 per share in accordance with the Company’s stock repurchase program. The Company also repurchased 10,000 shares through privately negotiated transactions at an average price of $42.75 per share. Authorization to repurchase approximately 168,000 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 September 30, 2021, First Farmers reported total assets of approximately $1.9 billion, total shareholders’ equity of approximately $161 million, and administered trust assets of $6.2 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, gain on sale of Visa Class B stock, gain on sale of fixed assets, 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

Nine Months Ended

September 30,

June 30,

September 30,

2021

2020

2021

2021

2020

Total non-interest income

$

3,712

$

3,396

$

5,658

$

12,920

$

11,035

Gain on sale of securities

(181)

-

(65)

(367)

(129)

Gain on equity securities

-

-

(239)

(239)

(242)

Gain on sale of Visa Class B Stock

-

-

(1,811)

(1,811)

-

Gain on sale of fixed assets

-

-

-

-

(102)

Gain on redemption of bank-owned life insurance

-

-

-

-

(820)

Adjusted non-interest income

$

3,531

$

3,396

$

3,543

$

10,503

$

9,742

Net income as reported

$

4,069

$

3,680

$

5,476

$

12,548

$

10,897

Total adjustments, net of tax1

(134)

-

(1,563)

(1,786)

(1,170)

Adjusted net income

$

3,935

$

3,680

$

3,913

$

10,762

$

9,727

Basic earnings per share

$

0.94

$

0.84

$

1.26

$

2.88

$

2.50

Total adjustments, net of tax1

(0.03)

-

(0.36)

(0.41)

(0.27)

Adjusted basic earnings per share

$

0.91

$

0.84

$

0.90

$

2.47

$

2.23

(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)

September 30,

December 31,

(dollars in thousands, except per share data)

2021

2020(1)

ASSETS

Cash and due from banks

$

28,197

$

29,126

Interest-bearing deposits

55,085

105,470

Federal funds sold

6

3,774

Total cash and cash equivalents

83,288

138,370

Securities:

Available-for-sale

829,180

594,649

Held-to-maturity (fair market value $17,364 and $18,195

as of the periods presented)

16,562

17,259

Equity securities

2,481

2,242

Loans held-for-sale

1,852

3,679

Loans, net of deferred fees

903,234

964,695

Allowance for loan and lease losses

(9,590)

(9,715)

Net loans

893,644

954,980

Bank premises and equipment, net

33,332

34,421

Bank-owned life insurance

35,190

34,016

Goodwill

9,018

9,018

Other assets

16,007

13,511

TOTAL ASSETS

$

1,920,554

$

1,802,145

LIABILITIES

Deposits:

Noninterest-bearing

$

490,317

$

427,073

Interest-bearing

1,246,297

1,181,101

Total deposits

1,736,614

1,608,174

Securities sold under agreements to repurchase

-

11,691

Accounts payable and accrued liabilities

22,563

22,286

TOTAL LIABILITIES

1,759,177

1,642,151

SHAREHOLDERS’

Common stock - $10 par value per share, 8,000,000 shares

EQUITY

authorized; 4,327,431 and 4,359,738 shares issued

and outstanding as of the periods presented

43,274

43,597

Retained earnings

117,646

108,761

Accumulated other comprehensive income

362

7,541

Total shareholders’ equity attributable to First Farmers and Merchants Corporation

161,282

159,899

Noncontrolling interest - preferred stock of subsidiary

95

95

TOTAL SHAREHOLDERS’ EQUITY

161,377

159,994

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,920,554

$

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
September 30,

Nine Months Ended
September 30,

(dollars in thousands, except per share data)

2021

2020

2021

2020

INTEREST AND

Interest and fees on loans

$

9,800

$

9,996

$

28,891

$

30,238

DIVIDEND

Income on investment securities

INCOME

Taxable interest

1,752

1,245

4,773

3,722

Exempt from federal income tax

553

492

1,648

1,505

Interest from federal funds sold and other

38

30

74

134

Total interest income

12,143

11,763

35,386

35,599

INTEREST

Interest on deposits

517

801

1,980

2,903

EXPENSE

Interest on other borrowings

-

8

1

36

Total interest expense

517

809

1,981

2,939

Net interest income

11,626

10,954

33,405

32,660

Provision (provision credit) for loan and lease losses

-

-

(150)

700

Net interest income after provision

11,626

10,954

33,555

31,960

NON-INTEREST

Mortgage banking activities

280

349

1,115

943

INCOME

Trust services fee income

1,024

963

3,016

2,712

Service fees on deposit accounts

1,809

1,680

5,253

4,921

Investment services fee income

85

97

256

292

Earnings on bank-owned life insurance

166

148

389

415

Gain on sale of investments

181

-

367

129

Gain on redemption of bank-owned life

insurance

-

-

-

820

Gain on sale of Visa class B stock

-

-

1,811

-

Other non-interest income

167

159

713

803

Total non-interest income

3,712

3,396

12,920

11,035

NON-INTEREST

Salaries and employee benefits

6,354

5,838

18,574

17,992

EXPENSE

Net occupancy expense

677

622

2,076

1,906

Depreciation expense

497

517

1,507

1,560

Data processing expense

784

788

2,248

2,362

Software support and other computer expense

655

691

2,208

1,890

Legal and professional fees

157

209

574

682

Audits and exams expense

174

184

521

532

Advertising and promotions

272

198

760

592

FDIC insurance premium expense

152

107

465

234

Other non-interest expense

676

688

2,080

2,238

Total non-interest expense

10,398

9,842

31,013

29,988

Income before provision for income taxes

4,940

4,508

15,462

13,007

Provision for income taxes

871

828

2,906

2,102

Net income

4,069

3,680

12,556

10,905

Noncontrolling interest - dividends on preferred stock subsidiary

-

-

8

8

Net income available to common shareholders

$

4,069

$

3,680

$

12,548

$

10,897

Weighted average shares outstanding

4,340,048

4,359,738

4,352,262

4,364,815

Earnings per share

$

0.94

$

0.84

$

2.88

$

2.50

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

For the Three Months Ended

(dollars in thousands, except per share data)

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

Results of Operations:

Interest income

$

12,143

$

11,872

$

11,371

$

11,724

$

11,763

Interest expense

517

686

778

855

809

Net interest income

11,626

11,186

10,593

10,869

10,954

Provision (provision credit) for loan and lease losses

-

-

(150

)

-

-

Non-interest income

3,712

5,658

3,550

3,412

3,396

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

10,398

9,933

10,690

10,301

9,842

Income before income taxes

4,940

6,911

3,603

3,980

4,508

Income taxes

871

1,435

600

683

828

Net income for common shareholders

$

4,069

$

5,476

$

3,003

$

3,297

$

3,680

Per Share Data:

Basic earnings per share

$

0.94

$

1.26

$

0.69

$

0.76

$

0.84

Weighted average shares outstanding per quarter

4,340,048

4,357,546

4,359,405

4,359,738

4,359,738

Financial Condition Data and Ratios:

Total securities

$

848,223

$

785,606

$

828,466

$

614,150

$

492,781

Loans, net of deferred fees

$

903,234

$

908,510

$

927,232

$

964,695

$

993,187

Allowance for loan and lease losses

$

(9,590

)

$

(9,581

)

$

(9,575

)

$

(9,715

)

$

(9,712

)

Total assets

$

1,920,554

$

1,878,942

$

1,879,018

$

1,802,145

$

1,717,941

Total deposits

$

1,736,614

$

1,695,990

$

1,706,177

$

1,608,174

$

1,526,143

Net interest income, on a fully taxable-equivalent basis

$

11,899

$

11,484

$

10,841

$

11,115

$

11,204

Net interest margin

2.63

%

2.60

%

2.55

%

2.69

%

2.87

%

Asset Quality Data and Ratios:

Total nonperforming assets

$

1,579

$

1,347

$

1,546

$

1,560

$

1,616

Nonperforming assets to total assets

0.08

%

0.07

%

0.08

%

0.09

%

0.09

%

Allowance for loan and lease losses to total loans

1.06

%

1.05

%

1.03

%

1.01

%

0.98

%

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

0.00

%

0.00

%

0.00

%

(0.01

%)

(0.01

%)

View source version on businesswire.com: https://www.businesswire.com/news/home/20211025005118/en/

Contacts

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