Growth in Net Income of 11% from Sequential
Quarter
Record Loans of $1.054 Billion
First Farmers and Merchants Corporation (OTC Pink: FFMH), the
holding company for First Farmers and Merchants Bank, today
announced its results for the second quarter of 2024.
“We reported growth in net income and net interest margin
compared to the first quarter of 2024 that benefited from loan
growth to a record $1.054 billion and our proactive management of
funding costs,” stated Brian K. Williams, Chairman and Chief
Executive Officer of First Farmers. “As expected, our earnings were
down compared with last year due to the higher interest rate
environment and doubling of interest expense over the past year. We
remain very positive about the remainder of the year based on our
loan pipeline, strong asset quality and the strategic changes we
made to our balance sheet to benefit earnings as interest rates
remain at an elevated level or begin to decline.”
Key highlights of First Farmers’ results for the second quarter
of 2024 include:
- Net income decreased 24.8% to $3.8 million from $5.0 million
for the year-earlier quarter. Net income per common share decreased
22.8% to $0.92 from $1.19 in the second quarter of 2023. Net income
increased 10.9% from $3.4 million, or $0.82, per common share,
reported in the first quarter of 2024;
- Adjusted net income, which excludes special items, declined
27.7% to $3.7 million, or $0.90 per common share, compared with
$5.1 million, or $1.21 per common share, for the year earlier
quarter. Second quarter adjusted net income improved 10.9% from
$3.4 million, or $0.80 per common share, reported in the first
quarter of 2024 (see “Non-GAAP Financial Measures” section);
- Total loans increased $36 million, or 14% annualized, to a
record $1.054 billion from the first quarter of 2024, and increased
$89 million, or 9.2%, compared to the second quarter of 2023;
- Net interest margin improved for the second consecutive quarter
to 2.48%;
- Efficiency improved to 67.37% compared to 69.72% from the first
quarter of 2024;
- Total non-performing assets declined 8.7% to $863,000 from the
first quarter of 2024;
- Book value per share increased 20.1% to $30.68 from $25.54 in
the second quarter of 2023 and increased 2.5% from $29.92 for the
first quarter of 2024; and
- Total stock repurchased increased to 55,000 shares, up 119.6%,
from the first quarter of 2024, and increased 29.3% from the second
quarter of 2023.
“We accelerated stock repurchases during the second quarter
based on our confidence in First Farmers’ outlook,” continued
Williams. “This was our largest quarterly stock repurchase since
2016. We continued to invest in our future by hiring a high
performing three-person treasury management team that will
strengthen our core deposit base and enhance services to our
business customers. We also added a secondary mortgage operations
manager to accelerate our mortgage lending capabilities. First
Farmers’ investments in digital banking and lending technology are
also improving our operational efficiencies and customer service.
We believe these strategic moves will continue to build earnings
performance and shareholder value in the future.”
Robert E. Krimmel, Chief Financial Officer, added, “Our second
quarter marked the second consecutive quarterly improvement in our
net interest margin, highlighting our success in repositioning
First Farmers’ balance sheet over the past year and our trajectory
of earnings for the second half of 2024. We also benefited from a
disciplined approach to loan and deposit pricing during the quarter
and a shift in the mix of interest-earning assets.
“Our investment portfolio is generating approximately $34
million per quarter in liquidity for the remainder of the year to
fund new loan growth. We are also focused on maintaining our high
credit standards and remain selective in funding new loan
opportunities. This quarter marked a decline in nonperforming
assets, and the minimal increase in the second quarter’s provision
for credit losses was due primarily to growth in our loan
portfolio. Our capital levels remain solid and the impact from the
fair value adjustment of our investment portfolio continues to
diminish at a measured pace. Book value per share marked the third
consecutive quarter of growth and reached the highest level since
the fourth quarter of 2021.”
Second Quarter 2024 Results of Operations
Net income decreased to $3.8 million, down $1.2 million, or
24.8% from the second quarter of 2023. Net income per share
declined 22.8% to $0.92 for the second quarter of 2024 compared
with $1.19 for the second quarter of 2023. The decline in earnings
for the second quarter of 2024 resulted from a decrease in net
interest income of $1.1 million driven by growth in total interest
expense of $3.1 million, an increase of 106.1% that was offset in
part by an increase in interest and fees on loans of $2.2 million.
Provision for credit losses expense increased by $320,000 primarily
driven by a provision credit of $260,000 recorded in the second
quarter of 2023. Non-interest expense grew $419,000 for the second
quarter of 2024 driven by increases in health insurance expense of
$137,000, employee incentive expense of $126,000, software support
and other computer expense of $79,000, and data processing expense
of $72,000 compared to the second quarter of 2023. Non-interest
income improved, offsetting the decline in net interest income by
$261,000 due to a loss on sale of securities of $134,000 recorded
in the second quarter of 2023, an increase in the gain on disposal
of premises and equipment of $98,000, and an increase in wealth
management and trust fee income of $87,000, offset in part by a
reduction in service fees on deposit accounts of $70,000 compared
to the second quarter of 2023. The reduction in service fees on
deposit accounts was due in part to lower fees from debit card
transactions resulting from decreased levels of consumer
spending.
Net income for the second quarter of 2024 was up from the
sequential first quarter by $371,000, or 10.9%. The increase in
earnings was due to growth in net interest income of $339,000
driven by higher interest and fees on loans and lower interest
expense on deposits. During the quarter, the net interest margin
increased by nine basis points supported by growth in loan yields
of five basis points along with a decline in the total cost of
interest-bearing liabilities of three basis points. Non-interest
income increased $40,000 driven by growth in service fees on
deposit accounts of $87,000 offset in part by a decrease in
mortgage banking activities of $41,000. Non-interest expense
decreased $73,000 because of lower net occupancy expense of $38,000
and legal and professional fees of $32,000.
For the second quarter of 2024, available-for-sale securities
decreased by $25 million from the sequential first quarter to $644
million, or 34.8% of total assets, and decreased $101 million from
$745 million, or 39.7% of total assets, from the second quarter of
2023. Outstanding loan balances increased $36 million, or 3.6%,
from the sequential first quarter to a record $1.054 billion and
increased $89 million, or 9.2%, from the second quarter of 2023.
The loan growth compared to the sequential quarter was broad-based
and covered five different loan segments. Total deposits decreased
$43 million, or 2.7%, from the sequential first quarter to $1.524
billion, and decreased $134 million, or 8.1%, from the second
quarter of 2023. The decline in total deposits compared to the
sequential quarter was related to a reduction in core deposits of
$21 million, municipal deposits of $17 million, and other
commercial deposits of $8 million offset in part by growth in
brokered deposits of $3 million. The core deposit reduction
compared to the sequential quarter was related to commercial
accounts making their estimated Federal income tax payments. The
reduction in total deposits compared to the second quarter of 2023
was primarily driven by decreases in brokered deposits of $106
million, municipal deposits of $38 million, and core deposits of $7
million offset in part by an increase in other commercial deposits
of $17 million.
For the second quarter of 2024, total shareholders’ equity
increased by $1.5 million from the sequential first quarter to
$125.7 million and increased $17.8 million from the second quarter
of 2023. The increase in total shareholders’ equity from the
year-earlier quarter primarily resulted from a decrease in the
unrealized loss adjustment to the available-for-sale securities
portfolio that totaled $11.6 million, net of tax, and growth in
retained earnings of $6.4 million, net of stock repurchases and
cash dividends. The reduction in the fair value loss adjustment of
the available-for-sale securities portfolio was driven by a
decrease in the portfolio compared to the year-earlier quarter. The
book value per share improved 2.5% from the sequential first
quarter to $30.68 and increased 20.1% compared to the second
quarter of 2023.
Six Months Results
Net income available to common shareholders was $7.2 million for
the first six months of 2024, down 20.4% compared with $9.1 million
in the first six months of 2023. Net income per share declined
18.4% to $1.74 for the first six months of 2024 compared with $2.13
for the same period in 2023. The decline in earnings was driven by
a decrease in net interest income of $2.7 million, an increase in
provision for credit losses of $385,000, and higher non-interest
expense of $212,000, offset in part by an increase in non-interest
income of $989,000 compared to the same period in 2023. Adjusted
net income was $7.1 million for the first six months of 2024, down
25.9% compared with $9.5 million in the first six months of 2023.
Adjusted net income per share declined 24.5% to $1.70 for the first
six months of 2024 compared with $2.25 for the same period in
2023.
The decline in adjusted net income for the first six months of
2024 was due to a decrease in net interest income of $2.7 million
driven by growth in total interest expense of $7.1 million, an
increase of 138.5%, that was offset in part by an increase in
interest and fees on loans of $4.6 million compared to the same
period in 2023. Provision for credit losses increased by $385,000
driven by a provision credit of $260,000 recorded in the second
quarter of 2023 and provision expense of $125,000 recorded in 2024
for loan growth. The increase in adjusted non-interest income of
$134,000 was attributable to revenue from wealth management and
trust services fees of $160,000 and earnings on bank-owned life
insurance of $68,000, offset in part by a decrease in service fees
on deposit accounts of $117,000 compared to the first six months of
2023. The increase in non-interest expense of $212,000 was due to
higher health insurance expense of $158,000, data processing
expense of $145,000, and software support and other computer
expense of $136,000, offset in part by a decline in net occupancy
expense of $151,000 compared to the first six months of 2023.
Asset Quality
Nonperforming assets declined to $863,000, or 0.05% of total
assets, down from $945,000, or 0.05% of total assets, from the
sequential first quarter but up from $803,000, or 0.04% of total
assets, from the second quarter of 2023. Net charge-offs to average
loans were 0.00% for the second quarter of 2024 compared with net
charge-offs of 0.00% for the sequential quarter and net charge-offs
of 0.00% for the second quarter of 2023. A provision expense of
$60,000 was recorded to the allowance for credit losses during the
second quarter of 2024. The increase in provision expense was due
to higher loan balances during the quarter. The allowance for
credit losses represented 0.77% of total loans outstanding for the
second quarter of 2024 compared with 0.77% for the sequential first
quarter and 0.85% for the second quarter of 2023. The allowance for
credit losses for unfunded commitments declined to $610,000, or
0.21% of total unfunded commitments, for the second quarter of 2024
compared with 0.26% for the sequential first quarter and 0.19% for
the second quarter of 2023. The allowance for credit losses for
held-to-maturity (“HTM”) securities represented 0.06% of total HTM
securities for the second quarter of 2024 compared with 0.06% for
the sequential first quarter and 0.06% for the second quarter of
2023.
Capital Management Initiatives
During the second quarter of 2024, First Farmers repurchased
55,000 shares of the Company’s common stock in the open market and
through privately negotiated transactions at an average price of
$29.44, with prices ranging from $26.00 to $30.03 per share in
accordance with the Company’s stock repurchase program. The second
quarter 2024 stock repurchases represented the highest level of
stock repurchases since the second quarter of 2016, a 120% increase
compared to the sequential first quarter and a 29% increase
compared to the year earlier quarter. Authorization to repurchase
approximately 119,960 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 June 30, 2024, First Farmers reported total assets
of approximately $1.9 billion, total shareholders’ equity of
approximately $126 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 not to 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 disposal 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
Six Months Ended
June 30,
March 31,
June 30,
2024
2023
2024
2024
2023
Total non-interest income
$
3,523
$
3,262
$
3,483
$
7,006
$
6,017
Loss on sale of securities
-
134
-
-
317
(Gain) loss on equity securities
-
-
(91
)
(91
)
351
Gain on redemption of bank-owned life
insurance
(2
)
-
-
(2
)
-
Gain on disposal of premises and
equipment
(98
)
-
-
(98
)
(4
)
Adjusted non-interest income
$
3,423
$
3,396
$
3,392
$
6,815
$
6,681
Total non-interest expense
$
9,780
$
9,361
$
9,853
$
19,633
$
19,421
Net income as reported
$
3,790
$
5,039
$
3,419
$
7,209
$
9,051
Total adjustments, net of tax1
(74
)
99
(67
)
(142
)
491
Adjusted net income
$
3,716
$
5,138
$
3,352
$
7,067
$
9,542
Basic earnings per share
$
0.92
$
1.19
$
0.82
$
1.74
$
2.13
Total adjustments, net of tax1
(0.02
)
0.02
(0.02
)
(0.04
)
0.12
Adjusted basic earnings per share
$
0.90
$
1.21
$
0.80
$
1.70
$
2.25
(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)
June 30,
December 31,
(dollars in thousands, except per
share data)
2024
2023(1)
ASSETS
Cash and due from banks
$
26,667
$
22,654
Interest-bearing deposits
2,336
2,689
Federal funds sold
28
117
Total cash and cash equivalents
29,031
25,460
Securities:
Available-for-sale
644,451
692,763
Held-to-maturity (fair market value
$15,053 and $14,394)
16,169
15,038
Equity securities
2,214
2,123
Loans held-for-sale
-
470
Loans, net of deferred fees
1,053,814
1,018,866
Allowance for credit losses
(8,064
)
(7,666
)
Net loans
1,045,750
1,011,200
Bank premises and equipment, net
29,592
30,208
Bank-owned life insurance
36,314
34,602
Goodwill
9,018
9,018
Deferred tax asset
25,366
24,862
Other assets
16,432
25,859
TOTAL ASSETS
$
1,854,337
$
1,871,603
LIABILITIES
Deposits:
Noninterest-bearing
$
465,712
$
463,858
Interest-bearing
1,058,365
1,154,706
Total deposits
1,524,077
1,618,564
Accounts payable and accrued
liabilities
26,559
24,798
FRB Bank Term Funding Program
borrowings
168,000
104,000
FHLB Borrowings
10,000
-
TOTAL LIABILITIES
1,728,636
1,747,362
SHAREHOLDERS’ EQUITY
Common stock - $10 par value per share,
8,000,000 shares authorized; 4,094,102 and 4,174,142 shares issued
and outstanding as of the periods presented
40,941
41,741
Retained earnings
146,926
143,249
Accumulated other comprehensive loss
(62,261
)
(60,844
)
Total shareholders’ equity attributable to
First Farmers and Merchants Corporation
125,606
124,146
Noncontrolling interest - preferred stock
of subsidiary
95
95
TOTAL SHAREHOLDERS’
EQUITY
125,701
124,241
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
$
1,854,337
$
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
June 30,
Six Months Ended
June 30,
(dollars in thousands, except per
share data)
2024
2023
2024
2023
INTEREST AND DIVIDEND
INCOME
Interest and fees on loans
$
14,160
$
11,959
$
28,050
$
23,409
Income on investment securities
Taxable interest
2,134
2,376
4,301
4,816
Exempt from federal income tax
436
448
869
911
Interest from federal funds sold and
other
245
237
536
285
Total interest income
16,975
15,020
33,756
29,421
INTEREST EXPENSE
Interest on deposits
3,976
2,918
8,300
4,740
Interest on other borrowings
2,048
5
3,893
372
Total interest expense
6,024
2,923
12,193
5,112
Net interest income
10,951
12,097
21,563
24,309
Provision (credit) for credit losses
60
(260
)
125
(260
)
Net interest income after provision
10,891
12,357
21,438
24,569
NON-INTEREST INCOME
Mortgage banking activities
18
35
77
75
Wealth management and trust services
fees
1,167
1,080
2,324
2,164
Service fees on deposit accounts
1,771
1,841
3,455
3,572
Investment services fee income
114
84
215
189
Earnings on bank-owned life insurance
154
129
312
244
Loss on sale of available-for-sale
securities
-
(134
)
-
(317
)
Gain on disposal of premises and
equipment
98
-
98
4
Gain (loss) on equity securities
-
-
91
(351
)
Gain on redemption of bank-owned life
insurance
2
-
2
-
Other non-interest income
199
227
432
437
Total non-interest income
3,523
3,262
7,006
6,017
NON-INTEREST EXPENSE
Salaries and employee benefits
5,599
5,286
11,222
10,957
Net occupancy expense
561
622
1,160
1,311
Depreciation expense
405
410
811
822
Data processing expense
581
509
1,144
999
Software support and other computer
expense
1,111
1,032
2,206
2,070
Legal and professional fees
188
170
408
441
Audits and exams expense
172
181
359
367
Advertising and promotions
210
249
410
494
FDIC insurance premium expense
222
226
440
493
Other non-interest expense
731
676
1,473
1,467
Total non-interest expense
9,780
9,361
19,633
19,421
Income before provision for income
taxes
4,634
6,258
8,811
11,165
Provision for income taxes
836
1,211
1,594
2,106
Net income
3,798
5,047
7,217
9,059
Noncontrolling interest - dividends on
preferred stock subsidiary
8
8
8
8
Net income available to common
shareholders
$
3,790
$
5,039
$
7,209
$
9,051
Weighted average shares outstanding
4,127,442
4,244,359
4,146,840
4,258,884
Earnings per share
$
0.92
$
1.19
$
1.74
$
2.13
FIRST FARMERS AND MERCHANTS
CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS
(unaudited)
For the Three Months
Ended
(dollars in thousands, except per
share data)
June 30,
2024
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
Results of Operations:
Interest income
$
16,975
$
16,781
$
16,091
$
15,240
$
15,020
Interest expense
6,024
6,169
6,048
5,237
2,923
Net interest income
10,951
10,612
10,043
10,003
12,097
Provision (credit) for credit losses
60
65
(230
)
-
(260
)
Non-interest income
3,523
3,483
3,685
3,497
3,262
Non-interest expense and non-controlling
interest – preferred stock of subsidiary
9,788
9,853
9,677
9,487
9,369
Income before income taxes
4,626
4,177
4,281
4,013
6,250
Income taxes
836
758
622
675
1,211
Net income for common shareholders
$
3,790
$
3,419
$
3,659
$
3,338
$
5,039
Per Share Data:
Basic earnings per share
$
0.92
$
0.82
$
0.88
$
0.79
$
1.19
Book value per share
$
30.68
$
29.92
$
29.74
$
23.61
$
25.54
Weighted average shares outstanding per
quarter
4,127,442
4,166,834
4,174,283
4,206,805
4,244,359
Financial Condition Data and
Ratios:
Total securities
$
662,834
$
686,795
$
709,924
$
713,707
$
762,175
Available-for-sale securities, fair market
value
$
644,451
$
669,552
$
692,763
$
696,505
$
744,963
Available-for-sale securities, amortized
cost
$
729,602
$
755,162
$
776,078
$
810,959
$
845,712
Loans, net of deferred fees
$
1,053,814
$
1,017,677
$
1,018,866
$
1,004,066
$
964,822
Allowance for credit losses
$
(8,064
)
$
(7,803
)
$
(7,666
)
$
(7,871
)
$
(8,200
)
Total assets
$
1,854,337
$
1,884,126
$
1,871,603
$
1,868,540
$
1,878,675
Total deposits
$
1,524,077
$
1,567,083
$
1,618,564
$
1,674,673
$
1,657,587
Net interest income, on a fully
taxable-equivalent basis
$
11,188
$
10,834
$
10,268
$
10,223
$
12,298
Net interest margin
2.48
%
2.39
%
2.21
%
2.22
%
2.64
%
Efficiency
67.37
%
69.72
%
62.84
%
69.17
%
58.04
%
Asset Quality Data and Ratios:
Total nonperforming assets
$
863
$
945
$
1,407
$
3,109
$
803
Nonperforming assets to total assets
0.05
%
0.05
%
0.08
%
0.17
%
0.04
%
Allowance for credit losses to total
loans
0.77
%
0.77
%
0.75
%
0.78
%
0.85
%
Net charge-offs 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/20240722676382/en/
Robert E. Krimmel Chief Financial Officer (931)
380-8257