FIRST M & F CORPORATION 
By
Net income for the quarter ended
For the fourth quarter of 2008 the annualized return on assets was a negative 1.08%, while return on equity was a negative 12.27%. Comparatively, the return on assets for the fourth quarter of 2007 was .87%, with a return on equity of 10.13%. The return on assets for 2008 was .03%, while the return on equity was .37%.
"There has been little abatement in the mounting, negative trends in
credit issues related to slowing residential real estate sales at reduced
prices during the 4th quarter," said
Mr. Potts commented in conclusion, "2008 was a harsh year for First M&F as the economy revealed risk exposures in a significant portion of our portfolio, principally acquisition, construction and development projects. 2009 will be spent in dealing with this exposure and pursuing business opportunities, both commercial and retail, across the financial horizon. As 2009 unfolds we will take appropriate measures to stabilize and build shareholder value through both opportunistic and remedial action."
Net Interest Income
Net interest income was down by 7.11% compared to the fourth quarter of
2007, with the net interest margin decreasing to 3.60% in the fourth quarter
of 2008 as compared to 3.83% in the fourth quarter of 2007. The significant
contributor to the decrease in net interest income was erosion in spreads as
funding costs failed to keep pace with the drop in asset yields. The net
interest margin for the third quarter of 2008 was 3.70% as compared to 3.73%
for the second quarter of 2008 and 3.66% for the first quarter of 2008. Loan
yields decreased to 6.43% in the fourth quarter of 2008 from 7.74% in the
fourth quarter of 2007. Loan yields also decreased from the third quarter of
2008 to the fourth quarter as the prime rate continued to fall in the fourth
quarter. Average loans were
Non-interest Income
Non-interest income, excluding securities transactions, for the fourth quarter of 2008 was down 7.91% compared to the fourth quarter of 2007, with deposit-related income down by 2.04% and mortgage income down by 45.51%. Insurance agency commissions were down by 4.69%.
Non-interest income, excluding securities transactions, was virtually flat for 2008 versus 2007. Over half of non-interest income is from deposit sources. Deposit revenues continue to be supported by debit card fee income, which increased by 24.55% in 2008 over 2007, and overdraft fee income, which increased by 4.72% for the year. Commission revenues from traditional insurance products were virtually flat year over year.
Non-interest Expenses
Non-interest expenses were up by 9.34% in the fourth quarter of 2008 as compared to the fourth quarter of 2007. Most of the increase in expenses was due to asset quality issues in the form of higher Other Real Estate expenses and write-downs and higher FDIC insurance fees. Salaries and benefits were down by 9.76% as cost control measures began to take effect.
Non-interest expenses increased by 6.22% for 2008 as compared to 2007. Salaries and benefits were down by 1.34% for 2008. Most of the increase year over year was due to significant increases in losses on Other Real Estate and an increase in FDIC insurance assessments. The number of full-time equivalent employees at the end of 2008 was 547 as compared to 550 at the end of the third quarter of 2008 and 563 at the end of 2007.
Credit Quality
Annualized net loan charge-offs as a percent of average loans for the
fourth quarter of 2008 were 1.79% as compared to .45% for the same period in
2007. Non-accrual and 90-day past due loans as a percent of total loans were
2.22% at the end of 2008 as compared to .62% at the end of 2007. Annualized
net charge-offs as a percentage of average loans for 2008 were .75% as
compared to .28% for 2007. The allowance for loan losses as a percentage of
loans was 2.12% at
Mr. Potts commented, "Our capital remains more than adequate with our
leverage ratio at 8.19%. We expect further asset quality issues will arise in
2009 but we also expect our capital to withstand that pressure. We have
announced preliminary approval by the Treasury Department of our participation
in the Capital Purchase Program and expect to consummate that transaction in
early 2009. We will call a special shareholders meeting to make technical
provisions in our articles of incorporation to authorize the issuance of Class
B non-voting preferred as a condition precedent to participation in the
capital program in the amount of
Balance Sheet
Total assets fell by 3.44% in 2008, to
Growth
The Company opened a full-service banking location in
About First M&F Corporation
First M&F Corp., the parent of M&F Bank, is committed to proceed with its
mission of making the mid-south better through the delivery of excellence in
financial services to 33 communities in
Caution Concerning Forward-Looking Statements
This document includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market and regulatory factors. More detailed information about those factors is contained in First M&F Corporation's filings with the Securities and Exchange Commission.
First M&F Corporation
Condensed Consolidated Statements of Condition (Unaudited)
(In thousands, except share data)
December 31 December 31
2008 2007
Cash and due from banks 47,738 54,240
Interest bearing bank balances 6,556 3,480
Federal funds sold 9,350 2,000
Securities available for sale (cost
of $223,882 and $236,575) 227,145 237,138
Loans held for sale 7,698 5,571
Loans 1,176,595 1,219,435
Allowance for loan losses 24,918 14,217
Net loans 1,151,677 1,205,218
Bank premises and equipment 44,642 45,545
Accrued interest receivable 9,832 12,434
Other real estate 11,061 6,232
Goodwill 32,572 32,572
Other intangible assets 7,127 7,612
Other assets 41,467 41,709
Total assets 1,596,865 1,653,751
Non-interest bearing deposits 178,689 191,206
Interest bearing deposits 1,082,698 1,071,249
Total deposits 1,261,387 1,262,455
Federal funds and repurchase
agreements 9,728 9,676
Other borrowings 151,547 201,312
Junior subordinated debt 30,928 30,928
Accrued interest payable 3,537 5,151
Other liabilities 3,770 4,131
Total liabilities 1,460,897 1,513,653
Noncontrolling interest in subsidiaries 18 18
Common stock, 9,063,346, 9,067,580
and 9,066,080 shares issued & outstanding 45,317 45,338
Additional paid-in capital 30,447 30,475
Nonvested restricted stock awards 780 643
Retained earnings 60,133 64,395
Accumulated other comprehensive
income (727) (771)
Total equity 135,950 140,080
Total liabilities & equity 1,596,865 1,653,751
First M&F Corporation and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except share data)
Three Months Ended Twelve Months Ended
December 31 December 31
2008 2007 2008 2007
Interest and fees on loans 19,327 23,421 81,487 89,796
Interest on loans held for
sale 58 86 299 439
Taxable investments 2,130 2,360 9,023 9,514
Tax exempt investments 557 458 2,164 1,798
Federal funds sold 38 41 182 144
Interest bearing bank balances 13 48 133 225
Total interest income 22,123 26,414 93,288 101,916
Interest on deposits 7,119 9,673 32,255 36,632
Interest on fed funds and
repurchase agreements 68 145 327 609
Interest on other borrowings 1,682 2,367 6,717 8,644
Interest on subordinated debt 505 504 1,993 1,991
Total interest expense 9,374 12,689 41,292 47,876
Net interest income 12,749 13,725 51,996 54,040
Provision for possible loan
losses 10,684 630 19,734 2,520
Net interest income after
loan loss 2,065 13,095 32,262 51,520
Service charges on deposits 2,927 2,988 11,692 10,962
Mortgage banking income 188 345 1,202 1,491
Agency commission income 934 980 4,125 4,148
Fiduciary and brokerage income 132 154 585 598
Other income 650 779 3,521 4,016
Loss on extinguishment of debt - - - (126)
Gains (losses) on AFS
investments 1 (37) 6 (37)
Total noninterest income 4,832 5,209 21,131 21,052
Salaries and employee benefits 6,761 7,492 28,954 29,348
Net occupancy expense 1,095 1,074 4,210 3,841
Equipment expenses 923 930 3,594 3,629
Software and processing
expenses 597 374 2,072 1,463
Intangible asset amortization 121 121 484 547
Other expenses 4,744 3,034 14,970 12,277
Total noninterest expense 14,241 13,025 54,284 51,105
Net income before taxes (7,344) 5,279 (891) 21,467
Income taxes (2,990) 1,716 (1,429) 6,988
Noncontrolling interest in
earnings (losses) of
subsidiaries, net of income
taxes of $2, $3, $7 and $12 3 2 12 21
Net income (4,357) 3,561 526 14,458
Weighted average shares
(basic) 9,061,862 9,066,096 9,061,730 9,060,137
Weighted average shares
(diluted) 9,061,862 9,107,391 9,087,155 9,109,117
Basic earnings per share ($0.48) $0.40 $0.06 $1.60
Diluted earnings per share ($0.48) $0.39 $0.05 $1.59
Return on assets (annualized) -1.08% 0.87% 0.03% 0.92%
Return on equity (annualized) -12.27% 10.13% 0.37% 10.78%
Efficiency ratio 79.29% 67.78% 72.77% 67.07%
Net interest margin (annualized,
tax-equivalent) 3.60% 3.83% 3.67% 3.93%
Net charge-offs to average
loans (annualized) 1.79% 0.45% 0.75% 0.28%
Nonaccrual loans to total
loans 1.74% 0.53% 1.74% 0.53%
90 day accruing loans to total
loans 0.48% 0.09% 0.48% 0.09%
First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
December 31 September 30 June 30 March 31
2008 2008 2008 2008
Per Common Share (diluted):
Net income (0.48) 0.24 (0.05) 0.34
Cash dividends paid 0.13 0.13 0.13 0.13
Book value 15.00 15.55 15.38 15.83
Closing stock price 8.46 11.58 12.55 14.50
Loan Portfolio Composition:
(in thousands)
Commercial, financial and
agricultural 127,704 145,743 139,933 165,605
Non-residential real estate 745,700 759,279 752,437 737,964
Residential real estate 209,696 208,718 210,813 211,205
Home equity loans 45,791 46,201 45,623 45,796
Consumer loans 37,908 38,001 39,501 39,478
Other loans 9,796 8,271 6,895 6,120
Total loans 1,176,595 1,206,213 1,195,202 1,206,168
Deposit Composition: (in
thousands)
Noninterest-bearing deposits 178,687 178,980 187,145 187,080
NOW deposits 217,334 219,612 215,521 210,295
MMDA deposits 182,364 176,199 192,372 182,824
Savings deposits 114,281 115,041 117,645 117,532
Certificates of deposit under
$100,000 272,463 279,389 273,213 289,531
Certificates of deposit
$100,000 and over 276,763 265,216 274,807 299,394
Brokered certificates of
deposit 19,495 17,026 7,674 26,919
Total deposits 1,261,387 1,251,463 1,268,377 1,313,575
Nonperforming Assets: (in
thousands)
Nonaccrual loans 20,564 22,095 11,317 9,472
Other real estate 11,061 7,191 6,545 6,927
Total nonperforming assets 31,625 29,286 17,862 16,399
Accruing loans past due 90
days or more 5,686 634 4,013 5,451
Restructured loans (accruing) 3,664 - - -
Total nonaccrual loan to loans 1.74% 1.82% 0.94% 0.78%
Total nonperforming assets to
loans and other real estate 2.65% 2.40% 1.48% 1.34%
Total nonperforming assets to
assets ratio 1.98% 1.78% 1.10% 1.00%
Allowance For Loan Loss
Activity: (in thousands)
Beginning balance 19,618 18,901 14,196 14,217
Provision for loan loss 10,684 2,190 6,080 780
Charge-offs (5,501) (1,648) (1,516) (1,041)
Recoveries 117 175 141 240
Ending balance 24,918 19,618 18,901 14,196
First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
December 31 September 30 June 30 March 31
2008 2008 2008 2008
Condensed Income Statements:
(in thousands)
Interest income 22,123 22,479 23,405 25,281
Interest expense 9,374 9,459 10,305 12,154
Net interest income 12,749 13,020 13,100 13,127
Provision for loan losses 10,684 2,190 6,080 780
Noninterest revenues 4,832 5,517 5,270 5,512
Noninterest expenses 14,241 13,229 13,460 13,354
Net income before taxes (7,344) 3,118 (1,170) 4,505
Income taxes (2,990) 904 (707) 1,364
Noncontrolling interest 3 4 3 2
Net income (4,357) 2,210 (466) 3,139
Tax-equivalent net interest
income 13,131 13,400 13,464 13,475
Selected Average Balances: (in
thousands)
Assets 1,611,444 1,599,213 1,621,565 1,654,951
Loans held for investment 1,196,806 1,198,943 1,193,703 1,213,122
Earning assets 1,450,265 1,439,302 1,452,877 1,481,144
Deposits 1,254,382 1,253,701 1,279,024 1,295,443
Equity 141,312 140,315 144,050 142,371
Selected Ratios:
Return on average assets
(annualized) -1.08% 0.55% -0.12% 0.76%
Return on average equity
(annualized) -12.27% 6.27% -1.30% 8.87%
Average equity to average
assets 8.77% 8.77% 8.88% 8.60%
Net interest margin
(annualized, tax-equivalent) 3.60% 3.70% 3.73% 3.66%
Efficiency ratio 79.29% 69.93% 71.85% 70.33%
Net charge-offs to average
loans (annualized) 1.79% 0.49% 0.46% 0.27%
Nonaccrual loans to total
loans 1.74% 1.82% 0.94% 0.78%
90 day accruing loans to total
loans 0.48% 0.05% 0.33% 0.45%
Price to book (x) 0.56 0.74 0.82 0.92
Price to earnings (x) N/A 12.06 N/A 10.66
First M&F Corporation
Financial Highlights
Historical Earnings Trends: EPS
(in thousands) (diluted)
4Q 2008 (4,357) (0.48)
3Q 2008 2,210 0.24
2Q 2008 (466) (0.05)
1Q 2008 3,139 0.34
4Q 2007 3,561 0.39
3Q 2007 3,808 0.42
2Q 2007 3,535 0.39
1Q 2007 3,554 0.39
4Q 2006 3,739 0.41
3Q 2006 3,665 0.40
2Q 2006 3,251 0.36
Non- Non-
Revenue Statistics: interest interest
Revenues Revenues Contribu-
Revenues to Ttl. to Avg. tion
Per FTE Revenues Assets Margin
(thousands)(percent) (percent)(percent)
4Q 2008 32.8 26.90% 1.19% 62.36%
3Q 2008 34.4 29.16% 1.37% 61.78%
2Q 2008 33.4 28.13% 1.31% 61.00%
1Q 2008 33.7 29.03% 1.34% 59.68%
4Q 2007 34.3 27.31% 1.29% 61.21%
3Q 2007 35.0 27.83% 1.36% 62.58%
2Q 2007 33.4 26.23% 1.28% 61.04%
1Q 2007 33.7 29.96% 1.50% 61.88%
4Q 2006 33.5 28.03% 1.38% 62.47%
3Q 2006 34.0 28.63% 1.44% 62.98%
2Q 2006 33.1 26.31% 1.28% 61.35%
Expense Statistics: Non-interest
Expense to Efficiency
Avg. Assets Ratio
(percent) (percent)
4Q 2008 3.52% 79.29%
3Q 2008 3.29% 69.93%
2Q 2008 3.34% 71.85%
1Q 2008 3.25% 70.33%
4Q 2007 3.19% 67.78%
3Q 2007 3.24% 66.08%
2Q 2007 3.26% 67.02%
1Q 2007 3.37% 67.41%
4Q 2006 3.38% 68.48%
3Q 2006 3.28% 65.11%
2Q 2006 3.27% 66.99%
Contribution Margin:
(Tax-equivalent net interest income + noninterest revenues -
salaries and benefits)
divided by
(Tax-equivalent net interest income + noninterest revenues)
Efficiency Ratio:
Noninterest expense
divided by
(Tax-equivalent net interest income + noninterest revenues)
First M&F Corporation
Average Balance Sheets/Yields and Costs (tax-equivalent)
(In thousands with yields and costs
annualized) QTD December 2008 QTD December 2007
Average Yield/ Average Yield/
Balance Cost Balance Cost
Interest bearing bank balances 9,086 0.56% 4,616 4.18%
Federal funds sold 19,568 0.78% 3,656 4.34%
Taxable investments (amortized cost) 161,999 5.23% 191,632 4.89%
Tax-exempt investments (amortized
cost) 57,598 6.13% 46,488 6.24%
Loans held for sale 5,208 4.44% 6,089 5.56%
Loans held for investment 1,196,806 6.44% 1,200,977 7.75%
Total earning assets 1,450,265 6.17% 1,453,458 7.30%
Non-earning assets 161,179 172,298
Total average assets 1,611,444 1,625,756
NOW 214,154 1.49% 181,676 1.43%
MMDA 179,120 2.25% 137,052 2.82%
Savings 114,742 2.02% 105,331 2.88%
Certificates of Deposit 568,279 3.30% 621,897 4.65%
Short-term borrowings 13,127 2.08% 12,977 4.41%
Other borrowings 194,655 4.47% 227,435 5.01%
Total interest bearing
liabilities 1,284,077 2.90% 1,286,368 3.91%
Non-interest bearing deposits 178,088 188,496
Non-interest bearing liabilities 7,967 11,454
Capital 141,312 139,438
Total average liabilities and
equity 1,611,444 1,625,756
Net interest spread 3.27% 3.39%
Effect of non-interest bearing
deposits 0.35% 0.50%
Effect of leverage -0.02% -0.06%
Net interest margin, tax-
equivalent 3.60% 3.83%
Less tax equivalent adjustment:
Investments 0.09% 0.07%
Loans 0.01% 0.01%
Reported book net interest margin 3.50% 3.75%
First M&F Corporation
Average Balance Sheets/Yields and Costs (tax-equivalent)
(In thousands with yields and costs
annualized) YTD December 2008 YTD December 2007
Average Yield/ Average Yield/
Balance Cost Balance Cost
Interest bearing bank balances 6,954 1.92% 4,693 4.80%
Federal funds sold 9,810 1.86% 3,388 4.24%
Taxable investments (amortized cost) 176,284 5.12% 197,167 4.83%
Tax-exempt investments (amortized
cost) 55,990 6.16% 45,875 6.25%
Loans held for sale 6,170 4.85% 8,161 5.38%
Loans held for investment 1,200,628 6.80% 1,148,275 7.83%
Total earning assets 1,455,836 6.51% 1,407,559 7.33%
Non-earning assets 165,867 166,071
Total average assets 1,621,703 1,573,630
NOW 211,006 1.50% 191,092 1.40%
MMDA 177,582 2.35% 133,557 2.58%
Savings 115,027 2.30% 101,367 2.78%
Certificates of Deposit 587,695 3.79% 599,393 4.62%
Short-term borrowings 13,860 2.36% 12,445 4.89%
Other borrowings 186,978 4.66% 208,738 5.09%
Total interest bearing
liabilities 1,292,148 3.20% 1,246,592 3.84%
Non-interest bearing deposits 179,237 182,598
Non-interest bearing liabilities 8,312 10,357
Capital 142,006 134,083
Total average liabilities and
equity 1,621,703 1,573,630
Net interest spread 3.31% 3.49%
Effect of non-interest bearing
deposits 0.39% 0.49%
Effect of leverage -0.03% -0.05%
Net interest margin, tax-
equivalent 3.67% 3.93%
Less tax equivalent adjustment:
Investments 0.09% 0.08%
Loans 0.01% 0.01%
Reported book net interest margin 3.57% 3.84%
SOURCE First M&F Corp.
