First Farmers and Merchants Corporation Reports Record 2022 Results

Rhea-AI Summary

First Farmers and Merchants Corporation (OTC Pink: FFMH) reported a 15.6% increase in net income, achieving a record $18.1 million for 2022, compared to $15.6 million in 2021. The company's net income per common share rose 16.7% to $4.19. Key highlights include a 9.1% growth in net loans and a 6.6% increase in net interest income after provision. The Board rewarded shareholders with a 9.5% dividend increase and extended the share repurchase program through 2023. The company also reported improvements in operating efficiency with a 60.4% efficiency ratio for Q4 2022. However, non-interest income declined 15.7% due to reduced mortgage banking activities.

Positive

• Net income increased 15.6% to a record $18.1 million for 2022.
• Net income per common share rose 16.7% to $4.19.
• Net loans grew 9.1% to $956.8 million.
• Net interest income increased 6.6% to $48.0 million.
• Total non-interest expense decreased 6.5% to $40.2 million.
• Shareholders received a 9.5% increase in quarterly cash dividends.

Negative

• Adjusted non-interest income declined by 15.7% due to lower mortgage banking activities.

Net Income Rises 16% to a Record $18.1 Million

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 2022, compared with 2021.

Commenting on the results, Brian K. Williams, Chairman and Chief Executive Officer of First Farmers, said, “I am incredibly proud of our entire team who helped us achieve record results in 2022. Throughout the year, we maintained a laser focus on our core business lines while attracting new customers and deepening relationships with our existing customer base. This was highlighted by our loan growth reaching 9.1% during 2022 despite the rapid rise in interest rates, which is the highest pace in six years.

“Technology enhancements in 2022 propelled our strategy for improving service levels for our customers and driving greater efficiency throughout the Company. Our focus on innovation will continue in 2023 with key initiatives including the introduction of a new loan origination system, new features for our digital banking platform, and enhancements to services provided to depositors and treasury management clients.

“Alongside the record performance of 2022, the Board of Directors rewarded our shareholders in September with a 9.5% increase in the quarterly cash dividend and extended the share repurchase program through 2023. The fundamentals, which powered our results in 2022, remain in place as we enter 2023, and we are confident in First Farmers’ consistent, sustainable long-term performance for our shareholders,” concluded Williams.

Key highlights of First Farmers’ results for 2022 include:

• Net income rose 15.6% to a record $18.1 million in 2022 compared with $15.6 million for 2021;
• Net income per common share increased 16.7% to a record $4.19 in 2022 from $3.59 in 2021;
• Adjusted net income, which excludes special items, rose 22.5% to $18.1 million in 2022, or $4.21 per common share, compared with $14.8 million, or $3.40 per common share, in 2021 (see “Non-GAAP Financial Measures” section);
• Net interest income after provision increased 6.6% to a record $48.0 million in 2022 from $45.3 million in 2021;
• Net loans grew 9.1% to $956.8 million from 2021; and
• Total non-interest expense fell 6.5% to $40.2 million from 2021 driving improved operating efficiency to 60.40% for the fourth quarter of 2022. 

Robert E. Krimmel, Chief Financial Officer, added, "Our record financial performance in 2022 was highlighted by continued progress in key metrics. We reported growth in our net interest margin, lower non-interest expenses, higher return on assets and an improved efficiency ratio.

“Adjusted non-interest income declined because of mortgage banking activities as higher interest rates reduced demand for home purchases and mortgage refinancing. This was partially offset by higher trust services fee income driven by growth in new client accounts offsetting the impact of weak financial markets during the year. We are very pleased with our trust business which continues to provide a steady level of fee income, as customers choose a more customized service for wealth management.

“We made progress during 2022 in reducing non-interest expense by 6.5% through disciplined cost controls. We also began to experience increased operating efficiencies resulting from our expanded digital and technology platforms, with continued progress expected in this area as we roll out the new digital loan platform in 2023.

“First Farmers’ growth in revenues combined with lower non-interest expenses contributed to our improved fourth quarter efficiency ratio of 60.4%, compared with 66.6% for the same period last year. We are very pleased that these improvements were made through core earnings as well as our programs to streamline operations as we enhance customer service and access to our suite of banking products,” concluded Krimmel.

Fourth Quarter 2022 Results of Operations

Net income was $5.0 million in the fourth quarter of 2022, up $2.0 million, or 63.7%, from the year-earlier quarter. The improvement in earnings was due to one-time executive retirement benefit expenses of $1.5 million ($1.1 million net of tax) recognized during the fourth quarter of 2021, and growth in net-interest income of $953,000 for the fourth quarter of 2022 coupled with a decline in salaries and employee benefits of $676,000 in the quarter. Adjusted net income, which excludes special items, rose 24.8% to $5.0 million, up $1.0 million from the year-earlier quarter. Net interest income improved by $953,000 propelled by net interest margin growth of seven basis points supported by net loan growth of $79 million.

Non-interest income decreased $368,000 and was driven primarily by a reduction in mortgage banking activities of $271,000 impacted by the Federal Reserve’s increase in interest rates, which rose 425 basis points during 2022. Non-interest expense was down by $2.0 million from the year-earlier quarter due primarily to lower salaries and employee benefits expense, including the $1.5 million one-time executive retirement benefit expenses from 2021.

Net income for the fourth quarter of 2022 was up from the sequential third quarter by $224,000, or 4.7%. The improvement in earnings was due primarily to growth in net interest income of $235,000 coupled with a decline in non-interest expense of $156,000, improving the operating efficiency ratio to 60.40%.

For the fourth quarter of 2022, the balance of securities available-for-sale declined $15 million from the sequential third quarter. Securities available-for-sale amortized cost decreased $26 million and was used to fund loan growth for the quarter. The unrealized loss adjustment for securities available-for-sale decreased by $9 million for the quarter as bond prices improved due to lower long-term market interest rates compared to the sequential quarter.

For the fourth quarter of 2022, outstanding loan balances increased $15 million, or 1.6%, from the previous quarter to $957 million and increased $79 million, or 9.1%, from the year-earlier quarter. Loan growth for the quarter benefited from increases in commercial real estate of $9 million and commercial and industrial of $5 million. Total deposits declined by $34 million, or 1.9%, from the sequential third quarter to $1.799 billion, but rose by $7 million, or 0.4%, from the year-earlier quarter. The decline in total deposits during the fourth quarter of 2022 was driven largely by the continued migration of certain client balances to the Company’s Trust department, as customers selected an enhanced level of bank services.

Total shareholders’ equity increased $12 million due to improvement in the unrealized loss adjustment to the available-for-sale securities portfolio that totaled $9 million, net of tax, for the fourth quarter 2022. Tangible book value per share improved 16.3% for the fourth quarter of 2022 compared to the sequential quarter but declined 40.8% compared to the year-earlier quarter. The improvement in the value of the available-for-sale securities portfolio was driven by a decline in long-term market interest rates. Total unrealized losses related to the available-for-sale investment portfolio decreased to $108 million compared to unrealized losses of $120 million for the third quarter of 2022, but rose from unrealized losses of $7 million from the year-earlier quarter. The fair market value of the Company’s available-for-sale securities portfolio is adjusted each quarter based on changes in interest rates.

Twelve Months Results

Net income rose 15.6% to a record $18.1 million, or $4.19 per share, for 2022 compared with $15.6 million, or $3.59 per share, for 2021. The increase in net income benefited from a 6.6% increase in net interest income after provision for loan losses to $48.3 million and a 6.5% decrease in non-interest expense to $40.2 million but was offset in part by a 15.7% decline in non-interest income that included a $1.8 million gain on the sale of Visa stock in 2021.

Net interest income after provision for loan losses improved by $3.0 million propelled by growth in average interest earning assets of $146 million compared to 2021. During the year, asset quality improved leading to an increase in provision credit for loan and leases of $170,000.

Non-interest income declined by 15.7% due to the $1.8 million sale of Visa stock last year along with a reduction in mortgage banking activities of $828,000 that was offset partially by growth in service fees on deposit accounts and trust services fee income. Service fees on deposit accounts were up 7.9% to $7.7 million and trust services fee income were up 2.8% to $4.2 million with new client accounts offsetting the decline in administered assets driven by weakness in the stock and bond markets compared to 2021.

Non-interest expenses declined 6.5% in 2022 to $40.2 million compared with 2021. The decreases were due to lower salaries and employee benefits, including one-time executive retirement benefit expenses of $1.5 million recorded in 2021.

Asset Quality

Asset quality improved in 2022 as measured by a decline in nonperforming assets to $705,000. Nonperforming assets totaled 0.04% of total assets, down from $711,00 or 0.04% from the previous quarter and down from $1.2 million, or 0.06% of total assets, from the year-earlier quarter. Net recoveries to average loans were 0.01% for the fourth quarter of 2022 compared with net recoveries of 0.01% for the previous quarter and net recoveries of 0.00% for the year-earlier quarter. No provision for loan and lease losses was made during the fourth quarter of 2022. The allowance for loan and lease losses represented 0.97% of total loans outstanding for the fourth quarter of 2022 compared with 0.99% for the previous quarter and 1.08% for the year-earlier quarter.

Capital Management Initiatives

During the fourth quarter of 2022, First Farmers repurchased 21,033 shares of the Company’s common stock in the open market and privately negotiated transactions. The average price of the repurchased shares in the fourth quarter of 2022 was $30.49 per share. Stock repurchases increased 55% compared to the third quarter of 2022 and were up 107% compared to the year earlier quarter. First Farmers’ Board of Directors reauthorized the stock repurchase program of up to 200,000 shares through December 2023.

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, 2022, First Farmers reported total assets of approximately $1.9 billion, total shareholders’ equity of approximately $96.7 million, and administered trust assets of $5.7 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, gain on sale of Visa stock, gain on sale of premises and equipment, 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 UNAUDITED RECONCILIATION OF NON-GAAP MEASURES PRESENTED IN EARNINGS RELEASE (Dollars in thousands, except per share data)
	Three Months Ended										Twelve Months Ended
	December 31,							September 30,			December 31,
	2022			2021				2022			2022				2021
Total non-interest income	$	3,495		$	3,863			$	3,526		$	14,147			$	16,783
Loss (gain) on sale of securities		5			(254	)			-			5				(621	)
Gain on equity securities		-			-				-			(25	)			(239	)
Gain on sale of Visa stock		-			-				-			-				(1,811	)
Gain on sale of premises and equipment		-			-				-			(91	)			-
Adjusted non-interest income	$	3,500		$	3,609			$	3,526		$	14,036			$	14,112
Total non-interest expense	$	9,912		$	11,953			$	10,076		$	40,168			$	42,966
One-time executive retirement benefits		-			(1,553	)						-				(1,553	)
One-time digital conversion fees		-			-				-			(207	)			-
Adjusted non-interest expense	$	9,912		$	10,400			$	10,076		$	39,961			$	41,413
Net income as reported	$	5,027		$	3,071			$	4,803		$	18,050			$	15,619
Total adjustments, net of tax1		4			960				-			71				(826	)
Adjusted net income	$	5,031		$	4,031			$	4,803		$	18,121			$	14,793
Basic earnings per share	$	1.17		$	0.71			$	1.12		$	4.19			$	3.59
Total adjustments, net of tax1		-			0.22				-			0.02				(0.19	)
Adjusted basic earnings per share	$	1.17		$	0.93			$	1.12		$	4.21			$	3.40
(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)
			December 31,				December 31,
	(dollars in thousands, except per share data)		2022				2021(1)
ASSETS	Cash and due from banks		$	27,193			$	19,791
	Interest-bearing deposits		1,754				75,065
	Federal funds sold		57				8,374
	Total cash and cash equivalents		29,004				103,230
	Securities:
	Available-for-sale		810,591				876,987
	Held-to-maturity (fair market value $14,162 and $15,932
	as of the periods presented)		15,087				15,128
	Equity securities		2,505				2,481
	Loans held-for-sale		-				2,197
	Loans, net of deferred fees		966,167				886,891
	Allowance for loan and lease losses		(9,382		)		(9,605		)
	Net loans		956,785				877,286
	Bank premises and equipment, net		32,140				32,627
	Bank-owned life insurance		35,829				35,354
	Goodwill		9,018				9,018
	Deferred tax asset		30,511				4,085
	Other assets		20,819				14,345
	TOTAL ASSETS		$	1,942,289			$	1,972,738
LIABILITIES	Deposits:
	Noninterest-bearing		$	534,474			$	522,725
	Interest-bearing		1,264,154				1,268,481
	Total deposits		1,798,628				1,791,206
	Accounts payable and accrued liabilities		21,996				22,901
	FHLB borrowings		25,000				-
	TOTAL LIABILITIES		1,845,624				1,814,107
SHAREHOLDERS’	Common stock - $10 par value per share, 8,000,000 shares
EQUITY	authorized; 4,275,328 and 4,317,306 shares issued
	and outstanding as of the periods presented		42,753				43,173
	Retained earnings		132,905				119,507
	Accumulated other comprehensive loss		(79,088		)		(4,144		)
	Total shareholders’ equity attributable to First Farmers and Merchants Corporation		96,570				158,536
	Noncontrolling interest - preferred stock of subsidiary		95				95
	TOTAL SHAREHOLDERS’ EQUITY		96,665				158,631
	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,942,289			$	1,972,738
(1) Derived from audited financial statements as of December 31, 2021.

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
		Three Months Ended December 31,							Twelve Months Ended December 31,
	(dollars in thousands, except per share data)	2022				2021			2022				2021
INTEREST AND	Interest and fees on loans	$	11,250			$	9,600		$	38,962			$	38,491
DIVIDEND	Income on investment securities
INCOME	Taxable interest	2,466				2,016			10,004				6,789
	Exempt from federal income tax	500				521			2,025				2,169
	Interest from federal funds sold and other	40				14			232				88
	Total interest income	14,256				12,151			51,223				47,537
INTEREST	Interest on deposits	1,142				400			2,829				2,380
EXPENSE	Interest on other borrowings	410				-			410				1
	Total interest expense	1,552				400			3,239				2,381
	Net interest income	12,704				11,751			47,984				45,156
	Provision credit for loan and lease losses	-				-			(320		)		(150		)
	Net interest income after provision	12,704				11,751			48,304				45,306
NON-INTEREST	Mortgage banking activities	56				327			614				1,442
INCOME	Trust services fee income	1,054				1,029			4,160				4,045
	Service fees on deposit accounts	1,987				1,840			7,655				7,093
	Investment services fee income	73				85			406				341
	Earnings on bank-owned life insurance	119				165			475				554
	(Loss) gain on sale of investments	(5		)		254			(5		)		621
	Gain on equity securities	-				-			25				-
	Gain on sale of premises and equipment	-				-			91				-
	Gain on sale of Visa stock	-				-			-				1,811
	Other non-interest income	211				163			726				876
	Total non-interest income	3,495				3,863			14,147				16,783
NON-INTEREST	Salaries and employee benefits	5,696				7,925			23,115				26,499
EXPENSE	Net occupancy expense	486				623			2,202				2,699
	Depreciation expense	421				526			1,786				2,033
	Data processing expense	525				786			2,528				3,034
	Software support and other computer expense	1,029				667			3,821				2,875
	Legal and professional fees	284				220			1,007				794
	Audits and exams expense	211				116			730				637
	Advertising and promotions	277				244			1,074				1,004
	FDIC insurance premium expense	149				171			677				636
	Other non-interest expense	834				675			3,228				2,755
	Total non-interest expense	9,912				11,953			40,168				42,966
	Income before provision for income taxes	6,287				3,661			22,283				19,123
	Provision for income taxes	1,252				582			4,217				3,488
	Net income	5,035				3,079			18,066				15,635
	Noncontrolling interest - dividends on preferred stock subsidiary	8				8			16				16
	Net income available to common shareholders	$	5,027			$	3,071		$	18,050			$	15,619
	Weighted average shares outstanding	4,290,886				4,326,090			4,305,557				4,345,665
	Earnings per share	$	1.17			$	0.71		$	4.19			$	3.59

FIRST FARMERS AND MERCHANTS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Three Months Ended
(dollars in thousands, except per share data)	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Results of Operations:
Interest income	$	14,256			$	13,279			$	12,198			$	11,490			$	12,151
Interest expense	1,552				810				505				372				400
Net interest income	12,704				12,469				11,693				11,118				11,751
Provision credit for loan and lease losses	-				-				-				(320		)		-
Non-interest income	3,495				3,526				3,660				3,466				3,863
Non-interest expense and non-controlling interest – preferred stock of subsidiary	9,920				10,076				9,763				10,425				11,961
Income before income taxes	6,279				5,919				5,590				4,479				3,653
Income taxes	1,252				1,116				1,052				797				582
Net income for common shareholders	$	5,027			$	4,803			$	4,538			$	3,682			$	3,071
Per Share Data:
Basic earnings per share	$	1.17			$	1.12			$	1.05			$	0.85			$	0.71
Weighted average shares outstanding per quarter	4,290,886				4,301,056				4,313,455				4,317,169				4,326,090
Financial Condition Data and Ratios:
Total securities	$	828,183			$	842,896			$	902,742			$	944,543			$	894,596
Available-for-sale securities, fair market value	$	810,591			$	825,293			$	885,129			$	926,944			$	876,987
Available-for-sale securities, amortized cost	$	918,936			$	944,987			$	967,235			$	983,958			$	883,853
Loans, net of deferred fees	$	966,167			$	951,279			$	941,357			$	891,108			$	886,891
Allowance for loan and lease losses	$	(9,382	)		$	(9,383	)		$	(9,386	)		$	(9,388	)		$	(9,605	)
Total assets	$	1,942,289			$	1,941,415			$	2,012,409			$	2,144,206			$	1,972,738
Total deposits	$	1,798,628			$	1,833,041			$	1,880,612			$	1,998,175			$	1,791,206
Net interest income, on a fully taxable-equivalent basis	$	12,943			$	12,726			$	11,956			$	11,379			$	12,013
Net interest margin	2.69		%		2.61		%		2.46		%		2.43		%		2.62		%
Efficiency	60.40		%		62.15		%		62.94		%		68.83		%		66.57		%
Asset Quality Data and Ratios:
Total nonperforming assets	$	705			$	711			$	1,635			$	1,002			$	1,217
Nonperforming assets to total assets	0.04		%		0.04		%		0.08		%		0.05		%		0.06		%
Allowance for loan and lease losses to total loans	0.97		%		0.99		%		1.00		%		1.05		%		1.08		%
Net recoveries to average loans (annualized)	(0.01		%)		(0.01		%)		(0.02		%)		(0.05		)%		0.00		%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230123005156/en/

Robert E. Krimmel

Chief Financial Officer

(931) 380-8257

Source: First Farmers and Merchants Corporation

FAQ

What were the net income results for FFMH in 2022?

FFMH reported a net income of $18.1 million in 2022, a 15.6% increase compared to $15.6 million in 2021.

How much did FFMH increase its quarterly cash dividend?

FFMH increased its quarterly cash dividend by 9.5% in September 2022.

What was the loan growth percentage for FFMH in 2022?

FFMH experienced a loan growth of 9.1% in 2022.

What is the efficiency ratio reported by FFMH for Q4 2022?

FFMH reported an efficiency ratio of 60.4% for the fourth quarter of 2022.

How did net interest income change for FFMH in 2022?

Net interest income for FFMH increased by 6.6% to $48.0 million in 2022.