COLUMBIA, Tenn. (July 22, 2019) – First Farmers and Merchants Corporation (OTC Pink: FFMH), the holding company for First Farmers and Merchants Bank, today announced unaudited financial results for the second quarter ended June 30, 2019.
Key highlights of First Farmers’ results for the second quarter of 2019 include:
- Net income of $3.3 million or $0.75 per common share, down 15% from $3.9 million or $0.87 per common share for the year-earlier quarter and down 38% from $5.3 million or $1.20 per common share for the previous quarter;
- Adjusted net income, which excludes special items, totaled $3.4 million or $0.77 per common share, compared with $3.9 million or $0.86 per common share for the year-earlier quarter and $3.4 million or $0.75 per common share for the previous quarter (see non-GAAP reconciliation);
- Net interest margin improved 17 basis points from the year-earlier quarter and up three basis points from the previous quarter; and
- Administered trust assets surpassed $5 billion during the second quarter.
Commenting on the results, T. Randy Stevens, Chairman and Chief Executive Officer of First Farmers, said, “We are pleased to report continued quarterly sequential adjusted earnings growth for the second quarter. This is the result of an increase in our net interest margin of three basis points for the prior quarter and 17 basis points year over year, as well as a 2% year-over-year increase in loan growth to $891 million. While our total deposits experienced a slight decrease, most of this was due to the sale of our White Bluff office during the first quarter. Our interest and fees on loans grew a strong 12% year over year, and we saw solid growth in our trust services fee income and mortgage banking activities, which combined to contribute 35% of our total fee-based lines of business, a testament to our diverse revenue streams. On another note, I am proud of all of our employees as we grew administered trust assets to over $5 billion, a corporate milestone. As we move into the second half of the year, we remain confident in our ability to execute on our long-term strategies and reward our shareholders for their continued optimism in our company.”
Brian K. Williams, President, added, “I am pleased that our growth has not affected our strong credit metrics, which define our portfolio and our lending philosophy. Nonperforming assets for the current quarter declined nine basis points to just 0.12% of total assets from 0.21% for the same period last year and remained flat on a sequential quarter basis. In a year of increases in net interest margin, this is a result of prudent loan underwriting and emphasizes our strategy to build long-lasting relationships with our customers through a systematic approach to grow our business. Considering the solid fundamentals driving our business and the strategic opportunities we see ahead, we are confident in our future and are grateful to our shareholders for their long-term commitment to First Farmers.”
Second Quarter 2019 Results of Operations
The $567,000 decline in earnings for the second quarter of 2019 compared with the year-earlier quarter was driven by an increase of $1.1 million in non-interest expense offset by an increase in net interest income after provision of $361,000. The increase in net interest income reflected an improvement in margins and loan growth of $20.2 million for the second quarter of 2019 compared with the year-earlier quarter. The increase in non-interest expense resulted from increases of $556,000 in employee health insurance expense, $365,000 in salaries and other employee benefits expense and an increase of $180,000 in advertising and promotions. These increases, primarily salaries, advertising and promotions, reflect key investments in our team and our newer markets. The $2.0 million decrease in second quarter earnings compared with the previous quarter was driven by the one-time gain on sale of the Company’s White Bluff office totaling $2.0 million, net of tax. The increase in net interest income reflected an improvement in margins for the second quarter of 2019 compared with the previous quarter. The increase in non-interest expense primarily resulted from an increase of $429,000 in employee health insurance expense.
For the second quarter of 2019, First Farmers experienced a decline in loan balances of $931,000 or less than 1% from the previous quarter but achieved loan growth of $20.2 million or 2% from the year-earlier quarter. Total deposits stood at $1.140 billion at the end of the second quarter of 2019, down $14 million from the previous quarter and down $51 million or 4% from the year-earlier quarter. The outstanding loan balances and total deposits were affected by the sale of $4 million of loans and $29 million of deposits in connection with the sale of the White Bluff office during the first quarter of 2019.
Asset Quality
Total nonperforming assets remained flat at $1.6 million, or 0.12% of total assets, when compared to the previous quarter, but was down from $2.8 million, or 0.21% of total assets, when compared with the year-earlier quarter. Net charge-offs to average loans were 0.00% for the second quarter of 2019 compared with net charge-offs of 0.00% for the previous quarter and net recoveries of 0.01% for the year-earlier quarter. A credit to provision for loan and lease losses expense of $55,000 was recorded during the second quarter of 2019 as a result of improving credit metrics compared to the prior quarter. The allowance for loan and lease losses represented 1.04% of total loans outstanding for the second quarter of 2019 compared with 1.04% for the previous quarter and 1.06% for the year-earlier quarter.
Capital Management Initiatives
First Farmers repurchased 17,000 shares of common stock during the second quarter at an average price of $42.75 per share under its stock repurchase program. Authorization to repurchase 177,000 shares remains under the current program, which is set to expire in December 2019, 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 June 30, 2019, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $141 million, and administered trust assets of $5.2 billion. For more information about First Farmers, visit us on the Web at www.myfirstfarmers.com under “Investor Relations.”
