First Farmers and Merchants Corporation Reports 2020 Net Income of $14.2 Million, or $3.25 Per Common Share

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 and year ending December 31, 2020.

Key highlights of First Farmers’ results for 2020 include:

• Net income of $14.2 million, or $3.25 per common share, down 12% from $16.1 million, or $3.62 per common share for 2019;
• Adjusted net income, which excludes special items, totaled $13.0 million, or $2.98 per common share, compared with $14.0 million, or $3.15 per common share for 2019 (see non-GAAP reconciliation);
• Stock book value increased to $36.68, up $3.74, or 11%, from the prior year;
• Mortgage banking activities revenue reached record $1.3 million, up 22% from $1.1 million for 2019; and
• Total assets reached record $1.8 billion and total deposits reached record $1.6 billion, while administered trust assets surpassed record $5.9 billion.

Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “We are pleased to report record levels of growth in 2020 including record total assets, total deposits and total administered trust assets which exceeded $5.9 billion. The sustained economic impact resulting from the COVD-19 pandemic led to decreases in our net income and adjusted net income for the fourth quarter and full year. However, we did experience stronger growth towards the latter part of the fourth quarter in our non-interest income, and we saw slight increases in our net interest income for both the fourth quarter and full year. Our continuing efforts to expand multiple revenue streams have been successful with growth in fee income from trust services and mortgage banking activities, the latter up a strong 25% and 22% for the fourth quarter and full year, respectively. Asset quality held up well throughout the year, and we are also pleased that most loans for which payments were deferred for borrowers in response to the global pandemic are back to current status. Additionally, we experienced net recoveries in our loan portfolio which is a tribute to our disciplined lending philosophy. We will continue to assist our customers and businesses in the geographies we serve with the newly announced round of the Small Business Administration Payroll Protection Program. In conclusion, continued diversification of our income streams, solid credit metrics and building long term relationships with our customers, affirms our confidence as we enter 2021.”

Brian K. Williams, President, added, “The economic environment in 2020 presented unprecedented challenges, and I am thankful for the dedication and resilience of our bank team as First Farmers was able to achieve favorable financial performance while maintaining our commitment to serve our customers. The growth of our bank in 2020 alongside a steady focus on safety and soundness exemplifies First Farmers during times of economic stress. As we enter 2021, we are focused on improvement in our net interest margin as this extraordinarily low interest rate environment persists. Further, the investments we made in technology allowed us to transition to remote work early on in the pandemic and promoted our digital services to our customers. In fact, we expect to continue to accelerate the bank’s digital offering and capabilities during the coming year. We are also committed to realizing greater efficiency company-wide as a result of technology investments and process improvement. Despite the uncertainty which has defined 2020, our Board has remained committed to the delivery of meaningful value to our shareholders, as evidenced by the continued support of the cash dividend and extension of the stock repurchase program of up to 200,000 shares through 2021.”

2020 Results of Operations

Net income for 2020 declined to $14.2, down $1.9 million, or 12%, from 2019. 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 2019. Net income, adjusted for special items, was $13.0 million, down $1.0 million, or 7%, from the prior year. Net interest income improved $1.1 million driven by growth in interest earning assets of $237.6 million offset in part by a decline in the net interest margin as a result of the decrease in market interest rates. As a result of the uncertainty related to the COVID-19 induced economic recession, we increased our provision for loan losses $1.1 million from 2019. Non-interest income, adjusted for special items (non-GAAP), was $13.2 million down $176,000, or 1%, driven by the reduction in service fees on deposit accounts as result of the economic recession. Non-interest expense was $40.3 million up $683,000, or 2%, driven by increases in employee health insurance of $588,000 and software support and other computer expense of $462,000 offset in part by a reduction in advertising and promotions expense of $375,000.

Net income for the fourth quarter was $3.3 million down $383,000, or 10%, compared with the linked quarter primarily driven by a decrease in net interest income of $85,000 and an increase in non-interest expense of $459,000. The increase in non-interest expense was due to higher salaries and employee benefits of $399,000 and higher advertising and promotions expense of $104,000, which was offset by a decrease in professional and legal fees of $36,000.

First Farmers ended 2020 with interest earning assets of $1.5 billion up $237.6 million, or 19.0%, propelling total assets to $1.8 billion, a record for the Company. Total loans reached $965 million, an increase of $27 million, or 3%, for the year. Small Business Administration Paycheck Protection Program (“SBA PPP”) loans ended the year at $68.4 million following $17.6 million in loan redemptions recorded during the fourth quarter. Total deposits reached a record $1.6 billion for 2020, an increase of $388 million, or 32%, for the year.

Asset Quality

Total nonperforming assets were down to $1.6 million, or 0.09% of total assets, compared to the previous quarter and down $105,000, or 0.12% of total assets, from the year-earlier quarter. Net recoveries to average loans were 0.01% for the fourth quarter of 2020 compared with net recoveries of 0.01% for the previous quarter and net charge-offs of 0.00% the year-earlier quarter. No provision for loan and lease losses expense was recorded during the fourth quarter of 2020. The allowance for loan and lease losses represented 1.01% of total loans outstanding for the fourth quarter of 2020 compared with 0.98% for the previous quarter and 0.96% for the year-earlier quarter. The allowance for loan and lease losses for the fourth quarter of 2020 represented 1.08% of total loans outstanding, excluding SBA PPP loans. The growth in the allowance was impacted by an increase in allocations for uncertain economic conditions related to the COVID-19 pandemic offset in part by the Company’s continued low level of loan losses and non-performing assets coupled with underlying loan contraction when removing SBA PPP loans for the year.

Capital Management Initiatives

First Farmers did not purchase any shares during the fourth quarter under its stock repurchase program. First Farmers’ Board of Directors extended the stock repurchase program for up to 200,000 shares through December 31, 2021.

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 December 31, 2020, First Farmers reported total assets of approximately $1.8 billion, total shareholders’ equity of approximately $160 million, and administered trust assets of $5.9 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 sale of fixed assets, gain on redemption of 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 UNAUDITED RECONCILIATION OF NON-GAAP MEASURES PRESENTED IN EARNINGS RELEASE (Dollars in thousands, except per share data)
	Three Months Ended										Twelve Months Ended
	December 31,							September 30,			December 31,
	2020			2019				2020			2020				2019
Total non-interest income	$	3,412		$	3,457			$	3,396		$	14,447			$	16,207
Gain on sale of securities		-			(15	)			-			(129	)			(27	)
Gain on equity securities		-			-				-			(242	)			-
Gain on sale of White Bluff office		-			-				-			-				(2,700	)
Gain on sale of fixed assets		-			-				-			(102	)			-
Gain on redemption of bank-owned life insurance		-			-				-			(820	)			(150	)
Adjusted non-interest income	$	3,412		$	3,442			$	3,396		$	13,154			$	13,330
Contingency accrual		-			(1	)			-			-				108
Net income as reported	$	3,297		$	3,477			$	3,680		$	14,194			$	16,056
Total adjustments, net of tax1		-			(12	)			-			(1,170	)			(2,085	)
Adjusted net income	$	3,297		$	3,465			$	3,680		$	13,024			$	13,971
Basic earnings per share	$	0.76		$	0.79			$	0.84		$	3.25			$	3.62
Total adjustments, net of tax1		-			-				-			(0.27	)			(0.47	)
Adjusted basic earnings per share	$	0.76		$	0.79			$	0.84		$	2.98			$	3.15
(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)
			December 31,				December 31,
	(dollars in thousands, except per share data)		2020				2019(1)
ASSETS	Cash and due from banks		$	29,126			$	26,614
	Interest-bearing deposits			105,470				6,712
	Federal funds sold			3,774				819
	Total cash and cash equivalents			138,370				34,145
	Securities:
	Available-for-sale			594,649				329,796
	Held-to-maturity (fair market value $18,195 and $18,005
	as of the periods presented)			17,259				17,606
	Equity securities			2,242				2,000
	Loans held-for-sale			3,679				2,540
	Loans, net of deferred fees			964,695				934,770
	Allowance for loan and lease losses			(9,715	)			(8,960	)
	Net loans			954,980				925,810
	Bank premises and equipment, net			34,421				35,762
	Bank-owned life insurance			34,016				32,198
	Goodwill			9,018				9,018
	Other assets			13,113				14,795
	TOTAL ASSETS		$	1,801,747			$	1,403,670
LIABILITIES	Deposits:
	Noninterest-bearing		$	427,073			$	311,274
	Interest-bearing			1,181,101				908,967
	Total deposits			1,608,174				1,220,241
	Securities sold under agreements to repurchase			11,691				11,742
	Federal Home Loan Bank borrowings			-				5,500
	Accounts payable and other liabilities			21,888				21,799
	TOTAL LIABILITIES			1,641,753				1,259,282
SHAREHOLDERS’	Common stock - $10 par value per share, 8,000,000 shares
EQUITY	authorized; 4,359,738 and 4,379,871 shares issued
	and outstanding as of the periods presented			43,597				43,799
	Retained earnings			108,761				98,945
	Accumulated other comprehensive income			7,541				1,549
	Total shareholders’ equity attributable to First Farmers and Merchants Corporation			159,899				144,293
	Noncontrolling interest - preferred stock of subsidiary			95				95
	TOTAL SHAREHOLDERS’ EQUITY			159,994				144,388
	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,801,747			$	1,403,670
(1) Derived from audited financial statements as of December 31, 2019.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
		Three Months Ended December 31,						Twelve Months Ended December 31,
	(dollars in thousands, except per share data)	2020			2019			2020			2019
INTEREST AND	Interest and fees on loans	$	10,078		$	10,234		$	40,316		$	40,772
DIVIDEND	Income on investment securities
INCOME	Taxable interest		1,130			1,278			4,852			5,042
	Exempt from federal income tax		480			520			1,985			2,143
	Interest from federal funds sold and other		36			59			170			236
	Total interest income		11,724			12,091			47,323			48,193
INTEREST	Interest on deposits		847			1,416			3,750			5,220
EXPENSE	Interest on other borrowings		8			31			44			523
	Total interest expense		855			1,447			3,794			5,743
	Net interest income		10,869			10,644			43,529			42,450
	Provision (provision credit) for loan and lease losses		-			-			700			(360	)
	Net interest income after provision		10,869			10,644			42,829			42,810
NON-INTEREST	Mortgage banking activities		419			334			1,362			1,114
INCOME	Trust services fee income		931			894			3,643			3,598
	Service fees on deposit accounts		1,696			1,806			6,617			7,077
	Investment services fee income		79			137			371			404
	Earnings on bank-owned life insurance		136			115			551			461
	Gain on sale of investments		-			15			129			27
	Gain on redemption of bank-owned life insurance		-			-			820			150
	Gain on sale of White Bluff office		-			-			-			2,700
	Other non-interest income		151			159			954			676
	Total non-interest income		3,412			3,457			14,447			16,207
NON-INTEREST	Salaries and employee benefits		6,237			6,125			24,229			23,710
EXPENSE	Net occupancy expense		572			588			2,478			2,518
	Depreciation expense		514			509			2,074			2,056
	Data processing expense		770			756			3,132			3,007
	Software support and other computer expense		664			561			2,554			2,092
	Legal and professional fees		245			244			927			1,001
	Audits and exams expense		194			153			726			653
	Advertising and promotions		302			285			894			1,269
	Other non-interest expense		795			699			3,267			3,292
	Total non-interest expense		10,293			9,920			40,281			39,598
	Income before provision for income taxes		3,988			4,181			16,995			19,419
	Provision for income taxes		683			696			2,785			3,347
	Net income		3,305			3,485			14,210			16,072
	Noncontrolling interest - dividends on preferred stock subsidiary		8			8			16			16
	Net income available to common shareholders	$	3,297		$	3,477		$	14,194		$	16,056
	Weighted average shares outstanding		4,359,738			4,400,940			4,363,539			4,429,952
	Earnings per share	$	0.76		$	0.79		$	3.25		$	3.62

 

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Three Months Ended
(dollars in thousands, except per share data)	December 31, 2020				September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019
Results of Operations:
Interest income	$	11,724			$	11,763			$	11,761			$	12,075			$	12,091
Interest expense		855				809				835				1,295				1,447
Net interest income		10,869				10,954				10,926				10,780				10,644
Provision for loan and lease losses		-				-				185				515				-
Non-interest income		3,412				3,396				3,735				3,904				3,457
Non-interest expense and non-controlling interest – preferred stock of subsidiary		10,301				9,842				9,636				10,518				9,928
Income before income taxes		3,980				4,508				4,840				3,651				4,173
Income taxes		683				828				823				451				696
Net income for common shareholders	$	3,297			$	3,680			$	4,017			$	3,200			$	3,477
Per Share Data:
Basic earnings per share	$	0.76			$	0.84			$	0.92			$	0.73			$	0.79
Weighted average shares outstanding per quarter		4,359,738				4,359,738				4,359,738				4,375,025				4,400,940
Financial Condition Data and Ratios:
Total securities	$	614,150			$	492,781			$	392,305			$	339,359			$	349,402
Loans, net of deferred fees	$	964,695			$	993,187			$	993,710			$	952,491			$	934,770
Allowance for loan and lease losses	$	(9,715	)		$	(9,712	)		$	(9,695	)		$	(9,485	)		$	(8,960	)
Total assets	$	1,801,747			$	1,717,941			$	1,608,659			$	1,437,929			$	1,403,670
Total deposits	$	1,608,174			$	1,526,143			$	1,416,343			$	1,256,319			$	1,220,241
Book value per share	$	36.68			$	36.18			$	35.61			$	34.56			$	32.94
Net interest income, on a fully taxable-equivalent basis	$	11,115			$	11,204			$	11,187			$	11,059			$	10,926
Net interest margin		2.69	%			2.87	%			3.08	%			3.42	%			3.41	%
Asset Quality Data and Ratios:
Total nonperforming assets	$	1,560			$	1,616			$	1,698			$	1,610			$	1,665
Nonperforming assets to total assets		0.09	%			0.09	%			0.11	%			0.11	%			0.12	%
Allowance for loan and lease losses to total loans		1.01	%			0.98	%			0.98	%			1.00	%			0.96	%
Net (recoveries) charge-offs to average loans (annualized)		(0.01	%)			(0.01	%)			(0.01	%)			0.00	%			0.00	%

 

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