First Farmers and Merchants Corporation Reports First Quarter Results

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First Farmers and Merchants , the holding company for First Farmers and Merchants Bank, reported its first-quarter 2024 results with positive growth in net interest income and non-interest income. Key highlights include a 16% increase in book value per share to $29.92, sequential quarterly improvement in net interest margin, and continued loan demand. However, net income decreased by 14.8% to $3.4 million, and adjusted net income declined by 23.9% to $3.4 million. Total loans decreased from the previous quarter, while net-interest income decreased by 13.1%. Provision for credit losses expense increased to $65,000. Non-performing assets declined, and capital management initiatives included stock repurchases.

Positive

• Book value per share increased by 16% to $29.92.
• Net interest income showed sequential quarterly improvement.
• Non-interest income grew, while non-interest expenses decreased for the ninth consecutive quarter.
• Total loans decreased from the previous quarter but increased year-over-year.
• Net income decreased by 14.8% to $3.4 million.
• Adjusted net income declined by 23.9% to $3.4 million.
• Net-interest income decreased by 13.1%.
• Provision for credit losses expense increased to $65,000.
• Total non-performing assets declined by 32.84%.
• Capital management initiatives included stock repurchases.

Negative

• Net income decreased by 14.8%.
• Adjusted net income declined by 23.9%.
• Net-interest income decreased by 13.1%.
• Total loans decreased from the previous quarter.
• Provision for credit losses expense increased to $65,000.

Book Value Per Share Increases 16% to $29.92,

Growth in Net Interest Income for Sequential Quarter

COLUMBIA, Tenn.--(BUSINESS WIRE)-- First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced its results for the first quarter of 2024.

“First Farmers’ results for the first quarter were on track with our expectations,” stated Brian K. Williams, Chairman and Chief Executive Officer of First Farmers. “We are pleased to report that our growth in interest income accelerated and outpaced the growth in interest expense during the first quarter, contributing to our net interest margin improvement during the quarter. We also reported that non-interest income grew, and non-interest expenses were down for the ninth consecutive quarter-over-quarter reduction. We expect to report continued sequential quarterly improvement based upon growth in net interest margin and growth in earnings as we progress through the remainder of 2024. We maintain a positive outlook for 2024 given the strategic changes we have made to our balance sheet, continued loan demand and strong credit quality.”

Key highlights of First Farmers’ results for the first quarter of 2024 include:

• Net income decreased 14.8% to $3.4 million from $4.0 million for the year-earlier quarter. Net income per common share decreased 12.6% to $0.82 from $0.94 in the first quarter of 2023. Net income decreased 6.5% from $3.7 million, or $0.88, per common share, reported in the fourth quarter of 2023;
• Adjusted net income, which excludes special items, declined 23.9% to $3.4 million, or $0.80 per common share, compared with $4.4 million, or $1.03 per common share, for the year earlier quarter. First quarter adjusted net income improved 0.1% from $3.4 million, or $0.80 per common share, reported in the fourth quarter of 2023 (see “Non-GAAP Financial Measures” section);
• Total loans decreased $1 million from the fourth quarter of 2023, but increased $46 million, or 4.7%, compared to the first quarter of 2023;
• Net-interest income decreased 13.1% to $10.6 million from $12.2 million for the first quarter of 2023 but was up 5.7% from $10.0 million for the fourth quarter of 2023;
• Provision for credit losses expense increased to $65,000 from $0 for the first quarter of 2023 and was up from a provision credit for credit losses of $230,000 for the fourth quarter of 2023;
• Total non-performing assets declined 32.84% to $945,000 from the fourth quarter of 2023; and
• Book value per share increased 16.3% to $29.92 from $25.72 in the first quarter of 2023 and increased 0.7% from $29.74 for the fourth quarter of 2023.

“Last year was very challenging for the banking industry, and we took steps to protect our deposit base, improve long-term earnings through changes in our balance sheet structure and maintain our strong capital levels,” continued Williams. “The repositioning of our balance sheet contributed to the expansion of our net interest margin during the first quarter. The increase in our net interest margin, which was the first in over four quarters, resulted from a more stable interest rate environment, the shift in the mix of assets, and strong discipline in managing loan pricing and funding costs. We see these positive trends accelerating through the remainder of 2024 and contributing to growth in earnings.

“The impact of higher interest rates remained evident in the first quarter with weaker loan demand as borrowers became more cautious. We see our loan pipelines building as we move into the second quarter supported by the healthy regional economy. Our earning assets composition is consistently improving as maturing investments are used to fund loans at higher market interest rates, and we have established substantial flexibility in our deposit and funding mix. These moves are foundational and will benefit the company’s financial performance beyond 2024,” concluded Williams.

Robert E. Krimmel, Chief Financial Officer, added, “Our programs to manage First Farmers’ balance sheet continued in the first quarter to improve our future profitability. Our investment portfolio is generating approximately $30 million per quarter in liquidity to fund new loan growth. We also elected to reduce municipal deposits and brokered certificates of deposit to further reduce interest expenses and focus on core deposits.

“We reinforced our balance sheet by utilizing the Federal Reserve’s Bank Term Funding Program (BTFP) to take advantage of the lower marginal borrowing costs. This accounted for a $168 million shift over the past two quarters and is expected to save First Farmers approximately $1 million in future interest expense in 2024. We expect this shift to improve our balance sheet flexibility because the BTFP borrowings are fixed for a one-year term that can be prepaid at any time without penalty.

“Our focus remains on maintaining our strong capital position as part of our prudent management of the bank and to provide funding to build shareholder value through stock repurchases and our cash dividend program. Our investments in new technology have contributed to more efficient operations as evidenced by the continued decline in non-interest expense. We expect to report improvements in our efficiency ratio due to our lower cost structure and growing revenue streams from loans and non-interest income. We believe these changes will support our trajectory to report improvement in earnings for 2024.”

First Quarter 2024 Results of Operations

Net income decreased to $3.4 million, down $594,000, or 14.8% from the first quarter of 2023. Net income per share declined 12.6% to $0.82 for the first quarter of 2024 compared with $0.94 for the first quarter of 2023. The decline in earnings for the first quarter of 2024 was due to a decrease in net-interest income of $1.6 million driven by growth in total interest expense of $4.0 million, an increase of 181.8% that was offset in part by an increase in interest and fees on loans of $2.4 million. Non-interest income grew by $729,000, or 26.5%, for the first quarter of 2024 due to improvement in gain on securities of $625,000 and an increase in wealth management and trust fee income of $73,000 compared to the first quarter of 2023. Non-interest expense decreased $206,000 for the first quarter of 2024 driven most notably by a decline in net occupancy expense of $90,000 compared to the first quarter of 2023.

Net income for the first quarter of 2024 was down from the sequential fourth quarter by $240,000, or 6.6%. The decrease in earnings was due to an increase in provision for credit losses expense of $295,000, a decline in non-interest income of $202,000, and an increase in non-interest expense of $184,000 offset by an increase in net interest income of $569,000. Net interest income increased compared to the sequential quarter as the net interest margin grew by 18 basis points. Non-interest income decreased because of the redemption of bank owned life insurance of $331,000 recorded in the sequential quarter. Non-interest expense increased because salaries and employee benefits grew by $287,000 related to annual salary adjustments, offset in part by a reduction in other non-interest expense of $73,000 compared to the sequential quarter.

For the first quarter of 2024, available-for-sale securities decreased by $23 million from the sequential fourth quarter to $670 million, or 35.5% of total assets, and decreased $117 million from $786 million, or 41.1% of total assets, in the first quarter of 2023. Outstanding loan balances decreased $1 million, or 0.1% from the sequential fourth quarter to $1.018 billion but increased $46 million, or 4.7%, from the first quarter of 2023. Total deposits decreased $51 million, or 3.2%, from the sequential fourth quarter to $1.567 billion, and decreased $210 million, or 11.8%, from the first quarter of 2023. The decline in total deposits compared to the sequential quarter was related to a reduction in brokered deposits of $109 million offset in part by municipal deposit growth of $23 million, other commercial deposit growth of $19 million and core deposit growth of $16 million. The reduction in total deposits compared to the first quarter of 2023 was driven by decreases of $175 million in municipal deposits and of $63 million in brokered deposits. The Federal Reserve’s BTFP borrowings increased $64 million, or 61.5%, from the sequential fourth quarter to $168 million.

For the first quarter of 2024, total shareholders’ equity decreased by $16,000 from the sequential fourth quarter to $124 million but increased $14 million from the first quarter of 2023. The decrease in total shareholders’ equity from the sequential fourth quarter resulted from an increase in the unrealized loss adjustment to the available-for-sale securities portfolio that totaled $2 million, net of tax. The reduction in the value of the available-for-sale securities portfolio was driven by an increase in market interest rates compared to the sequential fourth quarter. The book value per share improved 0.6% from the sequential fourth quarter to $29.92 and increased 16.3% compared to the first quarter of 2023.

Asset Quality

Nonperforming assets declined to $945,000, or 0.05% of total assets, down from $1.4 million, or 0.08% of total assets, from the sequential fourth quarter and were up from $873,000, or 0.05% of total assets, from the first quarter of 2023. Net charge-offs to average loans were 0.00% for the first quarter of 2024 compared with net charge-offs of 0.00% for the sequential quarter and net charge-offs of 0.00% for the first quarter of 2023. A provision expense of $65,000 was recorded to the allowance for credit losses during the first quarter of 2024. The increase in provision expense reflected a more cautious stance to protect asset quality as interest rates remained at elevated levels. The allowance for credit losses represented 0.77% of total loans outstanding for the first quarter of 2024 compared with 0.75% for the sequential fourth quarter and 0.87% for the first quarter of 2023. The allowance for credit losses for unfunded commitments declined to $810,000, or 0.26% of total unfunded commitments, for the first quarter of 2024 compared with 0.28% for the sequential fourth quarter and 0.19% for the first quarter of 2023. The allowance for credit losses for held-to-maturity (“HTM”) securities represented 0.06% of total HTM securities for the first quarter of 2024 compared with 0.06% for the sequential fourth quarter and 0.06% for the first quarter of 2023.

Capital Management Initiatives

During the first quarter of 2024, First Farmers repurchased 25,040 shares of the Company’s common stock in the open market and using privately negotiated transactions at an average price of $28.46 with prices ranging from $24.00 to $30.03 per share in accordance with the Company’s stock repurchase program. First quarter 2024 stock repurchases represented a 7,034% increase compared to the sequential fourth quarter and an 87.4% increase compared to the year earlier quarter. Authorization to repurchase approximately 174,960 shares remains under the current program, which is set to expire in December 2024, 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, 2024, First Farmers reported total assets of approximately $1.9 billion, total shareholders’ equity of approximately $124 million, and administered trust assets of $6.0 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 sale 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.

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
	March 31,								December 31, 2023
	2024				2023
Total non-interest income	$	3,483			$	2,754			$	3,685
Loss on sale of securities		-				183				-
(Gain) loss on equity securities		(91	)			351				31
Gain on redemption of bank-owned life insurance		-				-				(331	)
Gain on sale of premises and equipment		-				(4	)			(1	)
Adjusted non-interest income	$	3,392			$	3,284			$	3,384
Total non-interest expense	$	9,853			$	10,059			$	9,669
Net income as reported	$	3,419			$	4,013			$	3,659
Total adjustments, net of tax1		(67	)			392				(309	)
Adjusted net income	$	3,352			$	4,405			$	3,350
Basic earnings per share	$	0.82			$	0.94			$	0.88
Total adjustments, net of tax1		(0.02	)			0.09				(0.08	)
Adjusted basic earnings per share	$	0.80			$	1.03			$	0.80

(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)
				March 31,				December 31,
		(dollars in thousands, except per share data)		2024				2023(1)
ASSETS		Cash and due from banks		$	17,525			$	22,654
		Interest-bearing deposits			53,550				2,689
		Federal funds sold			42				117
		Total cash and cash equivalents			71,117				25,460
		Securities:
		Available-for-sale			669,552				692,763
		Held-to-maturity (fair market value $14,229 and $14,394)			15,029				15,038
		Equity securities			2,214				2,123
		Loans held-for-sale			-				470
		Loans, net of deferred fees			1,017,677				1,018,866
		Allowance for credit losses			(7,803	)			(7,666	)
		Net loans			1,009,874				1,011,200
		Bank premises and equipment, net			29,840				30,208
		Bank-owned life insurance			34,761				34,602
		Goodwill			9,018				9,018
		Deferred tax asset			25,472				24,862
		Other assets			17,249				25,859
		TOTAL ASSETS		$	1,884,126			$	1,871,603
LIABILITIES		Deposits:
		Noninterest-bearing		$	499,975			$	463,858
		Interest-bearing			1,067,108				1,154,706
		Total deposits			1,567,083				1,618,564
		Accounts payable and accrued liabilities			24,818				24,798
		FRB Bank Term Funding Program borrowings			168,000				104,000
		TOTAL LIABILITIES			1,759,901				1,747,362
SHAREHOLDERS’ EQUITY		Common stock - $10 par value per share, 8,000,000 shares authorized; 4,149,102 and 4,174,142 shares issued and outstanding as of the periods presented			41,491				41,741
		Retained earnings			145,210				143,249
		Accumulated other comprehensive loss			(62,571	)			(60,844	)
		Total shareholders’ equity attributable to First Farmers and Merchants Corporation
					124,130				124,146
		Noncontrolling interest - preferred stock of subsidiary			95				95
		TOTAL SHAREHOLDERS’ EQUITY			124,225				124,241
		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,884,126			$	1,871,603

(1)	Derived from audited financial statements as of December 31, 2023.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
		Three Months Ended March 31,
	(dollars in thousands, except per share data)	2024			2023
INTEREST AND	Interest and fees on loans	$	13,890		$	11,450
DIVIDEND	Income on investment securities
INCOME	Taxable interest		2,167			2,440
	Exempt from federal income tax		433			463
	Interest from federal funds sold and other		291			48
	Total interest income		16,781			14,401
INTEREST	Interest on deposits		4,324			1,822
EXPENSE	Interest on other borrowings		1,845			367
	Total interest expense		6,169			2,189
	Net interest income		10,612			12,212
	Provision for credit losses		65			-
	Net interest income after provision		10,547			12,212
NON-INTEREST	Mortgage banking activities		59			40
INCOME	Wealth management and trust fee income		1,157			1,084
	Service fees on deposit accounts		1,684			1,731
	Investment services fee income		101			105
	Earnings on bank owned life insurance		158			116
	Loss on sale of AFS securities		-			(183	)
	Gain (loss) on equity securities		91			(351	)
	Other non-interest income		233			212
	Total non-interest income		3,483			2,754
NON-INTEREST	Salaries and employee benefits		5,623			5,672
EXPENSE	Net occupancy expense		599			689
	Depreciation expense		406			412
	Data processing expense		563			490
	Software support and other computer expense		1,095			1,038
	Legal and professional fees		220			271
	Audit and exam expenses		187			186
	Advertising and promotions		200			245
	FDIC insurance premium expense		218			267
	Other non-interest expense		742			789
	Total non-interest expense		9,853			10,059
	Income before provision for income taxes		4,177			4,907
	Provision for income taxes		758			894
	Net income before non-controlling interest - dividends on preferred stock of subsidiary		3,419			4,013
	Non-controlling interest - dividends on preferred stock subsidiary		-			-
	Net income for common shareholders	$	3,419		$	4,013
	Weighted average shares outstanding		4,166,834			4,273,571
	Earnings per share	$	0.82		$	0.94

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Three Months Ended
(dollars in thousands, except per share data)	March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023
Results of Operations:
Interest income	$	16,781			$	16,091			$	15,240			$	15,020			$	14,401
Interest expense		6,169				6,048				5,237				2,923				2,189
Net interest income		10,612				10,043				10,003				12,097				12,212
Provision (credit) for credit losses		65				(230	)			-				(260	)			-
Non-interest income		3,483				3,685				3,497				3,262				2,754
Non-interest expense and non-controlling interest – preferred stock of subsidiary		9,861				9,677				9,487				9,369				10,059
Income before income taxes		4,169				4,281				4,013				6,250				4,907
Income taxes		758				622				675				1,211				894
Net income for common shareholders	$	3,411			$	3,659			$	3,338			$	5,039			$	4,013
Per Share Data:
Basic earnings per share	$	0.82			$	0.88			$	0.79			$	1.19			$	0.94
Book value per share	$	29.92			$	29.74			$	23.61			$	25.54			$	25.72
Weighted average shares outstanding per quarter		4,166,834				4,174,283				4,206,805				4,244,359				4,273,571
Financial Condition Data and Ratios:
Total securities	$	686,795			$	709,924			$	713,707			$	762,175			$	803,652
Available-for-sale securities, fair market value	$	669,552			$	692,763			$	696,505			$	744,963			$	786,430
Available-for-sale securities, amortized cost	$	755,162			$	776,078			$	810,959			$	845,712			$	880,890
Loans, net of deferred fees	$	1,017,677			$	1,018,866			$	1,004,066			$	964,822			$	972,093
Allowance for credit losses	$	(7,803	)		$	(7,666	)		$	(7,871	)		$	(8,200	)		$	(8,497	)
Total assets	$	1,884,126			$	1,871,603			$	1,868,540			$	1,878,675			$	1,913,481
Total deposits	$	1,567,083			$	1,618,564			$	1,674,673			$	1,657,587			$	1,776,987
Net interest income, on a fully taxable-equivalent basis	$	10,834			$	10,268			$	10,223			$	12,298			$	12,456
Net interest margin		2.39	%			2.21	%			2.22	%			2.64	%			2.67	%
Efficiency		69.72	%			62.84	%			69.17	%			58.04	%			64.05	%
Asset Quality Data and Ratios:
Total nonperforming assets	$	945			$	1,407			$	3,109			$	803			$	873
Nonperforming assets to total assets		0.05	%			0.08	%			0.17	%			0.04	%			0.05	%
Allowance for credit losses to total loans(1)		0.77	%			0.75	%			0.78	%			0.85	%			0.87	%
Net charge-offs (recoveries) to average loans (annualized)		0.00	%			0.00	%			0.00	%			0.00	%			0.00	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240422215139/en/

Robert E. Krimmel

Chief Financial Officer

(931) 380-8257

Source: First Farmers and Merchants Corporation

FAQ

What was the percentage increase in book value per share for First Farmers and Merchants in the first quarter of 2024?

The book value per share increased by 16.3% to $29.92.

How did net interest income change for First Farmers and Merchants in the first quarter of 2024 compared to the first quarter of 2023?

Net-interest income decreased by 13.1% to $10.6 million from $12.2 million for the first quarter of 2023.

What was the provision for credit losses expense in the first quarter of 2024 for First Farmers and Merchants ?

The provision for credit losses expense increased to $65,000 from $0 for the first quarter of 2023.

What was the change in total loans for First Farmers and Merchants in the first quarter of 2024 compared to the first quarter of 2023?

Total loans decreased $1 million from the fourth quarter of 2023 but increased $46 million, or 4.7%, compared to the first quarter of 2023.

How did non-interest income change for First Farmers and Merchants in the first quarter of 2024 compared to the first quarter of 2023?

Non-interest income grew by $729,000, or 26.5%, for the first quarter of 2024 due to improvement in gain on securities of $625,000 and an increase in wealth management and trust fee income of $73,000 compared to the first quarter of 2023.