COLUMBIA, Tenn. (January 25, 2021) – 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:
- 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.”
