First Farmers and Merchants Corporation Reports Record 2018 Net Income of $14.2 Million or $3.17 Per Common Share
COLUMBIA, Tenn.--(BUSINESS WIRE)--Jan 28, 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 quarter and year ending December 31, 2018.
Key highlights of First Farmers’ results for 2018 include:Net income of $14.2 million or $3.17 per common share compared with $10.4 million or $2.29 per common share for 2017; Adjusted net income, which excludes special items, totaled $13.8 million or $3.08 per common share compared with $11.4 million or $2.51 per common share for 2017 (see non-GAAP reconciliation); Quarterly cash dividend increased 5% to $0.21 per share; Non-interest income of $14.0 million, up 15% from $12.5 million for 2017; The opening of its second Davidson County office on December 27, 2018, at 2306 21 st Avenue South, which it purchased from First Tennessee Bank; and The closing of the sale of its White Bluff office, announced in 2018, to F&M Bank on January 18, 2019.
Commenting on the announcement, T. Randy Stevens, Chairman and Chief Executive Officer, said, “We are pleased to report record earnings for 2018, as measured by both net income and adjusted net income, the latter of which excludes the year-over-year disparity caused by tax reform in the fourth quarter last year and provides the most rigorous benchmark for our progress and performance. Solid loan growth during the year, along with continued strong asset quality and higher non-interest income contributed by our fee-income services, all combined to increase adjusted net income per common share 23% in 2018. With these strong fundamentals driving our performance, together with the opportunities we see ahead associated with our further expansion into the Nashville market and other aspects of our measured branching strategy, we look forward with confidence to ongoing success in 2019.”
Brian K. Williams, President, added, “My thanks go to all our team members for their hard work and dedicated efforts to make 2018 so prosperous – for our customers, company and shareholders. I truly believe we have assembled one of the best banking teams in the state, which contributed greatly to our growth during the past year and the remarkable earnings we reported. Another factor underscoring our success last year was our team’s ability to adhere to a sound pricing discipline, which, as a result, complemented loan growth and led to continued expansion of net interest margin at a time when many other competitors are experiencing margin pressure. As we look ahead, we continue to believe the economic climate in our state remains strong and vibrant and our competitive position is attractive in an increasingly disrupted banking environment. We like what we see coming in 2019, and we invite our customers and shareholders to grow with us.”
Fourth Quarter 2018 Results of Operations
The increase in net interest income reflected improved margins and loan growth of $40 million over the course of 2018. The Company’s higher non-interest income compared with the year-earlier quarter resulted from a gain on redemption of bank owned life insurance of $492,000 coupled with increases of $95,000 in trust services fee income and $93,000 in service fees on deposits, which were offset in part by a loss of $211,000 on the sale of available-for-sale securities. The increase in non-interest expense was due to higher salaries and employee benefits of $706,000 related to the hiring of several key team members for newer banking offices and an increase in employee health insurance expense of $400,000 since the year-earlier quarter.
The $19,000 decrease in fourth quarter earnings compared with the linked quarter was driven by increases in employee health insurance expense of $482,000, a loss of $211,000 on the sale of available-for-sale securities, and an increase in advertising and promotions expense of $200,000, which were offset in part by higher net interest income of $385,000 and non-interest income of $223,000. The increase in net interest income reflected improvement in margins and loan growth, while the increase in non-interest income reflected a gain on redemption of bank owned life insurance of $492,000 in the fourth quarter of 2018 compared with the previous quarter.
First Farmers achieved loan growth of $40 million or 5% as of December 31, 2018, from the year-earlier period and $24 million from the linked quarter. Interest income is expected to improve in 2019 as a result of the growth in loan balances. Total deposits stood at $1.175 billion at the end of the fourth quarter of 2018, down $32 million or 3% from the year-earlier quarter but up $10 million or 1% from the linked quarter.
Total nonperforming assets decreased 40% to $1.7 million or 0.12% of total assets at December 31, 2018, from $2.8 million or 0.21% of total assets for the linked quarter and $2.8 million or 0.20% of total assets for the year-earlier quarter. Net recoveries to average loans were 0.01% for the fourth quarter of 2018, remaining virtually flat compared with both the linked and year-earlier quarters. As a result of loan growth, a provision for loan and lease losses expense in the amount of $50,000 was recorded during the fourth quarter of 2018. The allowance for loan and lease losses represented 1.04% of total loans outstanding as of December 31, 2018, compared with 1.06% for the linked quarter and 1.07% for the year-earlier quarter.
Capital Management Initiatives
During the fourth quarter of 2018, First Farmers’ Board of Directors voted to increase the Company’s regular quarterly cash dividend $0.01 or 5% to $0.21 per share. This dividend marked the third increase in the Company’s cash payout over the past five years, for a cumulative increase of 13%.
Under its stock repurchase program, First Farmers repurchased 14,000 shares of common stock during the fourth quarter, at an average price of $43.75 per share, and 42,000 shares of common stock for the year, at an average price of $42.92 per share. First Farmers’ Board of Directors extended the stock repurchase program for up to 200,000 shares through December 31, 2019.
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 23 offices in eight Middle Tennessee counties. As of December 31, 2018, First Farmers reported total assets of approximately $1.4 billion, total shareholders’ equity of approximately $130 million, and administered trust assets of $4.9 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 and losses, gain on redemption of bank owned life insurance, deferred tax asset revaluation 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.
(1) The effective tax rate of 26.1% is used to determine net of tax amounts for 2018 periods presented. The effective tax rate of 38.5% is used to determine net of tax amounts for 2017 periods presented.
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CONTACT: Robert E. Krimmel
Chief Financial Officer
KEYWORD: UNITED STATES NORTH AMERICA TENNESSEE
INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE
SOURCE: First Farmers and Merchants Corporation
Copyright Business Wire 2019.
PUB: 01/28/2019 07:00 AM/DISC: 01/28/2019 07:01 AM