COLUMBIA, Tenn.--(BUSINESS WIRE)--First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced double digit growth in net income for the first quarter of 2022, compared with 2021. The Company also reported record assets and deposits for the quarter ended March 31, 2022.
Key highlights of First Farmers’ results for the first quarter of 2022 include:
- Net income rose 22.6% to $3.7 million from $3.0 million in the year-earlier quarter. Net income per common share increased 23.8% to $0.85 from $0.69 in the first quarter of 2021. Net income rose 19.9% from $3.1 million, or $0.71 per common share, in the fourth quarter of 2021;
- Adjusted net income, which excludes special items, rose 31.6% to $3.8 million, or $0.89 per common share, compared with $2.9 million, or $0.67 per common share, for the year-earlier quarter (see “Non-GAAP Financial Measures” section);
- Net interest income before provision increased 5.0% to $11.1 million from $10.6 million for the year-earlier quarter;
- During the first quarter of 2022, the Company completed its conversion to an enhanced digital platform. First quarter 2022 noninterest expense included one-time fees of $207,000 related to the new platform;
- Provision credit for loan and lease losses was $320,000 compared with provision credit for loan and lease losses of $150,000 for the year-earlier quarter and $0 for the previous quarter;
- Total nonperforming assets dropped to $1.0 million, or 0.05% of total assets; and
- Total assets reached a record $2.1 billion and total deposits reached a record $2.0 billion.
Commenting on the results, Brian K. Williams, Chairman and Chief Executive Officer of First Farmers, said, “We are pleased to report solid growth in net income, deposits and assets during the first quarter. We also reported a return to organic loan growth following the expiration of the Small Business Administration’s Paycheck Protection Program (PPP) last year. Our pipeline for new loans is also strong representing growth from across our markets.
“First Farmers’ loan quality continued to improve in the first quarter of 2022. We reported a decrease in nonperforming loans compared with the fourth quarter and the prior year’s first quarter. These improvements were reflected in this quarter’s provision credit for loan and lease losses that contributed to our double-digit growth in net income.
“Last year, we announced plans to significantly enhance our customers’ digital banking experience. The conversion was completed successfully during the first quarter, and our operations team did an excellent job. Our new digital banking platform is best-in-class and provides First Farmers’ customers with enhanced services and access to their retail and business accounts. We also expect to roll out additional services and upgrades in the future with the enhanced backbone of the new platform.”
Robert E. Krimmel, Chief Financial Officer, added, “We have a very strong balance sheet that is positioned well to fund new loan growth and grow interest income. Our balance sheet is favorably weighted towards assets, allowing First Farmers to benefit from rising interest rates in the coming year.
“Last year, our net interest income benefited from higher loan fees generated through First Farmers participation in the SBA’s PPP. We recorded $518,000 in SBA PPP loan fees during the fourth quarter of 2021 that boosted our net interest margin; however, this program expired last year and there was no comparable benefit in the first quarter of 2022. The Federal Reserve is expected to raise interest rates in 2022 to combat higher inflation, and we expect this will benefit our earnings through higher loan yields and growth in our net interest margin in 2022.
“We remain focused on building our sources of noninterest income and reported higher trust services fee income and service fees on deposits in the first quarter of 2022. This growth was offset partially by lower mortgage banking activities due to a reduction in mortgage loan refinancing activity as rates increased and reduced housing inventory weighed on purchase volume in many of our markets. We also remain focused on expense control and reported lower noninterest expenses in the first quarter of 2022. Our new digital banking platform provides a solid foundation to scale our digital banking services and improve our operating efficiency as we grow in the future.”
First Quarter 2022 Results of Operations
Net income rose 22.6% to $3.7 million, up $679,000 from the year-earlier first quarter. The improvement in earnings was driven by growth in net interest income of $525,000, a $265,000 decline in non-interest expense and a $170,000 increase in provision credit for loan and lease losses. Net income, adjusted for special items, was $3.8 million, up $921,000, or 31.6%, from the year earlier quarter. The increase in adjusted net income benefited from $1.1 million of growth in income on investment securities offset in part by a decline of $803,000 in SBA PPP loan fees, a $531,000 decline in salaries and employee benefits and a $170,000 increase in provision credit for loan and lease loss expense. The increase in provision credit was related to improving credit quality metrics for our loan portfolio and a $93,000 recovery for a loan charged off in the fourth quarter of 2021.
Net income increased $611,000, or 19.9%, from the sequential fourth quarter while adjusted net income decreased $196,000, or 4.9%. The decrease in adjusted earnings was due to a $518,000 decline in SBA PPP fees due to the expiration of the program, partially offset by a provision credit for allowance for loan and lease losses of $320,000.
For the first quarter of 2022, securities available-for-sale increased $100 million driven by growth in deposits from the previous quarter. The growth in securities available-for-sale was offset partially by an unrealized loss adjustment of $50 million as bond prices were driven lower with higher interest rates as the Fed discontinued its quantitative easing program and raised short-term interest rates.
Our outstanding loan balances increased $4 million, or 1.9% on an annualized basis, to $891 million as we returned to organic loan growth for the quarter. Total deposits increased $207 million, or 11.6%, from the previous quarter to a record $2.0 billion and increased $292 million, or 17.1%, from the year-earlier period. Total shareholders’ equity declined $34 million due to the unrealized loss adjustment to our available-for-sale securities portfolio that totaled $37 million, net of tax, for the first quarter. The fair market value of our available-for-sale securities portfolio is adjusted each quarter based on changes in interest rates.
“We expect the rising interest rate environment predicted for 2022 to have a negative impact on the value of our available-for-sale securities portfolio,” continued Krimmel. “However, given the quality of our investments and the structure of its cashflow, we expect these unrealized loss adjustments to be temporary and reverse over time as the portfolio pays down.”
Asset Quality
Asset quality improved in the first quarter of 2022. Nonperforming assets declined to $1.0 million at the end of the first quarter of 2022 and totaled 0.05% of total assets, down from $1.2 million, or 0.06%, from the previous quarter. Nonperforming assets were down $544,000, or 0.08% of total assets, from the year-earlier first quarter. Net recoveries to average loans were 0.05% for the first quarter of 2022 compared with net charge-offs of 0.00% for the previous quarter and 0.00% for the year-earlier quarter. A provision credit in the amount of $320,000 was recorded during the first quarter of 2022. The allowance for loan and lease losses represented 1.05% of total loans outstanding for the first quarter of 2022 compared with 1.08% for the previous quarter and 1.03% for the year-earlier quarter.
Capital Management Initiatives
During the first quarter of 2022, First Farmers repurchased 466 shares of the Company’s common stock under a Rule 10b-18 plan of the Securities Exchange Act of 1934 at an average price of $34.66 per share in accordance with the Company’s stock repurchase program. Authorization to repurchase approximately 199,000 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 March 31, 2022, First Farmers reported total assets of approximately $2.1 billion, total shareholders’ equity of approximately $124 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, one-time executive retirement benefits, 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
|
|||||||||||
|
|||||||||||
|
Three Months Ended |
||||||||||
|
March 31, |
|
December 31, 2021 |
||||||||
|
2022 |
|
2021 |
|
|||||||
Total non-interest income |
$ |
3,466 |
|
|
$ |
3,550 |
|
|
$ |
3,863 |
|
Gain on sale of securities |
|
- |
|
|
|
(121 |
) |
|
|
(254 |
) |
Adjusted non-interest income |
$ |
3,466 |
|
|
$ |
3,429 |
|
|
$ |
3,609 |
|
|
|
|
|
|
|
|
|
|
|||
Total non-interest expense |
$ |
10,425 |
|
|
$ |
10,690 |
|
|
$ |
11,953 |
|
One-time employee benefit accrual adjustment |
|
- |
|
|
|
- |
|
|
|
(1,553 |
) |
One-time digital conversion fees |
|
(207 |
) |
|
|
- |
|
|
|
- |
|
Adjusted non-interest expense |
$ |
10,218 |
|
|
$ |
10,690 |
|
|
$ |
10,400 |
|
|
|
|
|
|
|
|
|
|
|||
Net income as reported |
$ |
3,682 |
|
|
$ |
3,003 |
|
|
$ |
3,071 |
|
Total adjustments, net of tax1 |
|
153 |
|
|
|
(89 |
) |
|
|
960 |
|
Adjusted net income |
$ |
3,835 |
|
|
$ |
2,914 |
|
|
$ |
4,031 |
|
Basic earnings per share |
$ |
0.85 |
|
|
$ |
0.69 |
|
|
$ |
0.71 |
|
Total adjustments, net of tax1 |
|
0.04 |
|
|
|
(0.02 |
) |
|
|
0.22 |
|
Adjusted basic earnings per share |
$ |
0.89 |
|
|
$ |
0.67 |
|
|
$ |
0.93 |
|
(1) The effective tax rate of 26.1% is used to determine net of tax amounts. |
|||||||||||
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
|
|||||||||
|
|||||||||
|
|
|
(unaudited) |
|
|
||||
|
|
|
March 31, |
|
December 31, |
||||
|
(dollars in thousands, except per share data) |
|
2022 |
|
2021(1) |
||||
ASSETS |
Cash and due from banks |
|
$ |
28,534 |
|
$ |
19,791 |
|
|
Interest-bearing deposits |
|
178,790 |
|
75,065 |
|
||||
Federal funds sold |
|
745 |
|
8,374 |
|
||||
Total cash and cash equivalents |
|
208,069 |
|
103,230 |
|
||||
Securities: |
|
|
|
||||||
Available-for-sale |
|
926,944 |
|
876,987 |
|
||||
Held-to-maturity (fair market value $15,013 and $15,932 as of the periods presented) |
|
15,118 |
|
15,128 |
|
||||
|
Equity securities |
|
2,481 |
|
|
2,481 |
|
||
Loans held-for-sale |
|
931 |
|
2,197 |
|
||||
Loans, net of deferred fees |
|
891,108 |
|
886,891 |
|
||||
Allowance for loan and lease losses |
|
(9,388 |
) |
(9,605 |
) |
||||
Net loans |
|
881,720 |
|
877,286 |
|
||||
Bank premises and equipment, net |
|
32,554 |
|
32,627 |
|
||||
Bank-owned life insurance |
|
35,471 |
|
35,354 |
|
||||
Goodwill |
|
9,018 |
|
9,018 |
|
||||
Other assets |
|
31,900 |
|
18,430 |
|
||||
|
TOTAL ASSETS |
|
$ |
2,144,206 |
|
|
$ |
1,972,738 |
|
LIABILITIES |
Deposits: |
|
|
||||||
Noninterest-bearing |
|
$ |
666,854 |
|
$ |
522,725 |
|
||
Interest-bearing |
|
1,331,321 |
|
1,268,481 |
|
||||
Total deposits |
|
1,998,175 |
|
1,791,206 |
|
||||
Securities sold under agreements to repurchase |
|
- |
|
- |
|
||||
|
Accounts payable and accrued liabilities |
|
21,729 |
|
|
22,901 |
|
||
|
TOTAL LIABILITIES |
|
2,019,904 |
|
|
1,814,107 |
|||
SHAREHOLDERS’ EQUITY |
Common stock - $10 par value per share, 8,000,000 shares authorized; 4,316,840 and 4,317,306 shares issued and outstanding as of the periods presented |
43,168 |
43,173 |
|
|||||
Retained earnings |
|
122,272 |
|
119,507 |
|
||||
Accumulated other comprehensive (loss) income |
|
(41,233 |
) |
(4,144 |
) |
||||
Total shareholders’ equity attributable to First Farmers and Merchants Corporation |
|
124,207 |
|
158,536 |
|
||||
Noncontrolling interest - preferred stock of subsidiary |
|
95 |
|
95 |
|
||||
TOTAL SHAREHOLDERS’ EQUITY |
|
124,302 |
|
158,631 |
|
||||
|
|
||||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
2,144,206 |
|
|
$ |
1,972,738 |
|
|
|
|
|
||||||
(1) Derived from audited financial statements as of December 31, 2021. |
|||||||||
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
|
||||||||
|
||||||||
|
|
Three Months Ended March 31, |
||||||
|
(dollars in thousands, except per share data) |
2022 |
|
2021 |
||||
INTEREST AND |
Interest and fees on loans |
$ |
8,587 |
|
|
$ |
9,611 |
|
DIVIDEND |
Income on investment securities |
|
||||||
INCOME |
Taxable interest |
2,364 |
|
|
1,241 |
|
||
Exempt from federal income tax |
509 |
|
|
493 |
|
|||
Interest from federal funds sold and other |
30 |
|
|
26 |
|
|||
|
Total interest income |
11,490 |
|
|
11,371 |
|
||
INTEREST |
Interest on deposits |
372 |
|
|
778 |
|
||
EXPENSE |
Interest on other borrowings |
- |
|
|
- |
|
||
Total interest expense |
372 |
|
|
778 |
|
|||
Net interest income |
11,118 |
|
|
10,593 |
|
|||
Provision credit for loan and lease losses |
(320 |
) |
|
(150 |
) |
|||
|
Net interest income after provision |
11,438 |
|
|
10,743 |
|
||
NON-INTEREST |
Mortgage banking activities |
267 |
|
|
468 |
|
||
INCOME |
Trust services fee income |
1,066 |
|
|
975 |
|
||
|
Service fees on deposit accounts |
1,750 |
|
|
1,649 |
|
||
Investment services fee income |
110 |
|
|
82 |
|
|||
Earnings on bank owned life insurance |
116 |
|
|
99 |
|
|||
|
Gain on sale of available-for-sale securities |
- |
|
|
121 |
|
||
Other non-interest income |
157 |
|
|
156 |
|
|||
|
Total non-interest income |
3,466 |
|
|
3,550 |
|
||
NON-INTEREST |
Salaries and employee benefits |
5,869 |
|
|
6,400 |
|
||
EXPENSE |
Net occupancy expense |
662 |
|
|
751 |
|
||
Depreciation expense |
454 |
|
|
509 |
|
|||
Data processing expense |
1,058 |
|
|
783 |
|
|||
|
Software support and other computer expense |
847 |
|
|
724 |
|
||
Legal and professional fees |
301 |
|
|
226 |
|
|||
|
Audit and exam expenses |
176 |
|
|
176 |
|
||
|
Advertising and promotions |
203 |
|
|
256 |
|
||
FDIC insurance premium expense |
169 |
|
|
153 |
|
|||
Other non-interest expense |
686 |
|
|
712 |
|
|||
Total non-interest expense |
10,425 |
|
|
10,690 |
|
|||
Income before provision for income taxes |
4,479 |
|
|
3,603 |
|
|||
|
Provision for income taxes |
797 |
|
|
600 |
|
||
Net income before non-controlling interest - dividends on preferred stock of subsidiary |
3,682 |
|
|
3,003 |
|
|||
Non-controlling interest - dividends on preferred stock subsidiary |
- |
|
|
- |
|
|||
|
Net income for common shareholders |
$ |
3,682 |
|
|
$ |
3,003 |
|
|
|
|
|
|
||||
Weighted average shares outstanding |
4,317,169 |
|
|
4,359,405 |
|
|||
|
Earnings per share |
$ |
0.85 |
|
|
$ |
0.69 |
|
FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES
|
|||||||||||||||||||
|
|||||||||||||||||||
|
For the Three Months Ended |
||||||||||||||||||
(dollars in thousands, except per share data) |
March 31, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
June 30, 2021 |
|
March 31, 2021 |
||||||||||
Results of Operations: |
|
|
|
|
|
|
|
|
|
||||||||||
Interest income |
$ |
11,490 |
|
|
$ |
12,151 |
|
|
$ |
12,143 |
|
|
$ |
11,872 |
|
|
$ |
11,371 |
|
Interest expense |
372 |
|
|
400 |
|
|
517 |
|
|
686 |
|
|
778 |
|
|||||
Net interest income |
11,118 |
|
|
11,751 |
|
|
11,626 |
|
|
11,186 |
|
|
10,593 |
|
|||||
Provision credit for loan and lease losses |
(320 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(150 |
) |
|||||
Non-interest income |
3,466 |
|
|
3,863 |
|
|
3,712 |
|
|
5,658 |
|
|
3,550 |
|
|||||
Non-interest expense and non-controlling interest – preferred stock of subsidiary |
10,425 |
|
|
11,961 |
|
|
10,398 |
|
|
9,933 |
|
|
10,690 |
|
|||||
Income before income taxes |
4,479 |
|
|
3,653 |
|
|
4,940 |
|
|
6,911 |
|
|
3,603 |
|
|||||
Income taxes |
797 |
|
|
582 |
|
|
871 |
|
|
1,435 |
|
|
600 |
|
|||||
Net income for common shareholders |
$ |
3,682 |
|
|
$ |
3,071 |
|
|
$ |
4,069 |
|
|
$ |
5,476 |
|
|
$ |
3,003 |
|
Per Share Data: |
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings per share |
$ |
0.85 |
|
|
$ |
0.71 |
|
|
$ |
0.94 |
|
|
$ |
1.26 |
|
|
$ |
0.69 |
|
Weighted average shares outstanding per quarter |
4,317,169 |
|
|
4,326,090 |
|
|
4,340,048 |
|
|
4,357,546 |
|
|
4,359,405 |
|
|||||
Financial Condition Data and Ratios: |
|
|
|
|
|
|
|
|
|
||||||||||
Total securities |
$ |
944,543 |
|
|
$ |
894,596 |
|
|
$ |
848,223 |
|
|
$ |
785,606 |
|
|
$ |
828,466 |
|
Available-for-sale securities, fair market value |
$ |
926,944 |
|
|
$ |
876,987 |
|
|
$ |
829,180 |
|
|
$ |
766,552 |
|
|
$ |
809,640 |
|
Available-for-sale securities, amortized cost |
$ |
983,958 |
|
|
$ |
883,853 |
|
|
$ |
828,465 |
|
|
$ |
763,750 |
|
|
$ |
813,993 |
|
Loans, net of deferred fees |
$ |
891,108 |
|
|
$ |
886,891 |
|
|
$ |
829,895 |
|
|
$ |
908,510 |
|
|
$ |
927,232 |
|
Allowance for loan and lease losses |
$ |
(9,388 |
) |
|
$ |
(9,605 |
) |
|
$ |
(9,590 |
) |
|
$ |
(9,581 |
) |
|
$ |
(9,575 |
) |
Total assets |
$ |
2,144,206 |
|
|
$ |
1,972,738 |
|
|
$ |
1,920,554 |
|
|
$ |
1,878,942 |
|
|
$ |
1,879,018 |
|
Total deposits |
$ |
1,998,175 |
|
|
$ |
1,791,206 |
|
|
$ |
1,736,614 |
|
|
$ |
1,695,990 |
|
|
$ |
1,706,177 |
|
Net interest income, on a fully taxable-equivalent basis |
$ |
11,379 |
|
|
$ |
12,013 |
|
|
$ |
11,899 |
|
|
$ |
11,484 |
|
|
$ |
10,841 |
|
Net interest margin |
2.43 |
% |
|
2.62 |
% |
|
2.63 |
% |
|
2.60 |
% |
|
2.55 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Asset Quality Data and Ratios: |
|
|
|
|
|
|
|
|
|
||||||||||
Total nonperforming assets |
$ |
1,002 |
|
|
$ |
1,217 |
|
|
$ |
1,579 |
|
|
$ |
1,347 |
|
|
$ |
1,546 |
|
Nonperforming assets to total assets |
0.05 |
% |
|
0.06 |
% |
|
0.08 |
% |
|
0.07 |
% |
|
0.08 |
% |
|||||
Allowance for loan and lease losses to total loans |
1.05 |
% |
|
1.08 |
% |
|
1.06 |
% |
|
1.05 |
% |
|
1.03 |
% |
|||||
Net (recoveries) charge-offs to average loans (annualized) |
(0.05 |
%) |
|
0.00 |
% |
|
0.00 |
% |
|
0.00 |
% |
|
0.00 |
% |
|||||
