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FIRST M & F CP
Symbol U : FMFC
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First M&F Credit Metrics and Earnings Improve Across the Board

2012-07-19 18:00 ET - News Release

KOSCIUSKO, Miss., July 19, 2012 /PRNewswire/ -- First M&F Corp. (NASDAQ: FMFC) reported today net income for the quarter ended June 30, 2012 of $1.753 million, or $0.14 basic and diluted earnings per share as compared to $1.106 million, or $0.07 basic and diluted earnings per share for the second quarter of 2011. The Company made net income of $1.607 million, or $0.12 basic and diluted earnings per share for the first quarter of 2012.

Hugh Potts, Jr., Chairman and CEO commented, "Per share earnings have doubled year-over-year, both quarter versus quarter and for the first half. The balance sheet is strengthening too, with asset quality metrics continuing to reflect consistent and material cleanup of the balance sheet. Non-accrual loans are down 80% from a year ago and non-performing assets are down 41%."

Net Interest Income
Reported net interest income was down by 2.68% on lower volumes compared to the second quarter of 2011, with the net interest margin falling slightly to 3.72% on a tax equivalent basis in the second quarter of 2012 as compared to 3.75% in the second quarter of 2011. The net interest margin for the first quarter of 2012 was 3.67% as compared to 3.64% for the fourth quarter of 2011 and 3.72% for the third quarter of 2011. Yields on total loans fell to 5.61% in the second quarter of 2012 from 5.85% in the second quarter of 2011. Yields on total loans fell from the first quarter of 2012 to the second quarter as well. Average total loans were $1.004 billion for the second quarter of 2012 as compared to $1.007 billion for the first quarter of 2012 and $1.053 billion during the second quarter of 2011. Loans held for investment increased by $3.1 million in the second quarter of 2012 but fell by $16.8 million in the first quarter. Mr. Potts stated, "Although loan growth is sluggish, our balance sheet is more efficient now through a combination of lower excess cash and deleveraging." Further commenting, Mr. Potts said, "The net interest margin continues to hold up in a tough credit and interest rate environment even as deposit cost benefits slow down."

Deposit costs decreased in the second quarter of 2012 from the first quarter of 2012 and from the second quarter of 2011, in response to the continuing low rate environment. Deposit costs were .78% in the second quarter of 2012 as compared to 1.20% in the second quarter of 2011. Deposits fell by $49.2 million during the second quarter of 2012 and have fallen by $63.2 million since the second quarter of 2011. Most of the linked-quarter change was in non-core public fund deposits. The year-over-year decrease was mostly retail certificate of deposit funding. Management continues to focus on core deposit growth to encourage relationship-driven deposits as a stable source of funding.

Loans held for investment as a percentage of assets were 62.93% at June 30, 2012 as compared to 64.36% at June 30, 2011 and 63.52% at December 31, 2011. Loans held for investment fell by 5.94% since the second quarter of 2011 and deposits fell by 4.43%.

Non-interest Income
Non-interest income, excluding securities transactions and impairment of investments, for the second quarter of 2012 grew by 35.5% compared to the second quarter of 2011, with deposit-related income up 3.03%. Insurance agency commissions were down 9.40% quarter over quarter. The major contributor to the growth in non-interest income was mortgage income as mortgage origination and sale volumes were influenced by a surge in refinancing. Mortgage income for the quarter was up 459% year-over-year and up 219% compared to the first quarter. Mr. Potts commented, "Our non-interest income base is solid…the boost from mortgage revenues was possible because we were able to gear up our efforts to take advantage of volume opportunities in this low-rate environment."   

A major part of non-interest income consistently comes from deposit sources. Deposit revenues were up 3.03% quarter-over-quarter. Deposit revenues continue to be supported by debit card fee income, which grew by 15.75% in the second quarter of 2012 compared to the second quarter of 2011, while overdraft fee income fell by 2.88%.

Non-interest Expenses
Non-interest expenses were flat in the second quarter of 2012 as compared to the second quarter of 2011 largely due to volume-related increases in mortgage expenses mostly offset by lower foreclosed property expenses and lower salaries and employee benefits. Mr. Potts pointed out that, "Expense results reflect both discipline and savings from McKinley offset somewhat by offense-related resource allocation into growth niches."

Credit Quality
Annualized net loan charge-offs as a percent of average loans for the second quarter of 2012 were 1.26% as compared to .20% for the same period in 2011. Net charge-offs totaled $3.054 million for the quarter versus $.518 million a year ago and $1.149 million in the first quarter of 2012. Non-accrual and 90-day past due loans as a percent of total loans were .79% at the end of the second quarter of 2012 as compared to 3.20% at the end of the 2011 quarter. The allowance for loan losses as a percentage of loans held for investment was 1.56% at June 30, 2012 as compared to 1.80% at June 30, 2011. The provision for loan losses was flat year-over-year. Mr. Potts commented, "Throughout this credit cycle, we have worked on the premise that ultimately there would be a positive correlation between asset quality and earnings. We're seeing that play out now. As investor confidence in the sector improves and as funds flow into the micro-cap space, prices naturally react favorably. Since year-end, we've seen an 82% rise in share price." Further commenting Mr. Potts said, "Credit trends begun in 2010 continue to be positive, sustained and material. Many metrics are at, or near, pre-recession levels and others are in sight."

Balance Sheet
Total assets at June 30, 2012 were $1.561 billion as compared to $1.569 billion at the end of 2011 and $1.623 billion at June 30, 2011. Total loans held for investment were $.983 billion compared to $.996 billion at the end of 2011 and $1.045 billion at June 30, 2011. Deposits were $1.361 billion compared to $1.371 billion at the end of 2011 and $1.424 billion at June 30, 2011. Total capital was $113.917 million, or $10.44 in book value per common share, at June 30, 2012. Commenting on capital, Mr. Potts said, "The Company is accumulating capital, improving ratios and preparing for more stringent regulations coming down the road. We still have preferred capital issued to the Treasury, but it's inexpensive, and as a Community Development Financial Institution under the Community Development Capital Initiative program, we have until 2018 before it re-prices. So with time, patience and good prospects, management intends to avoid a dilutive capital raise. Under present circumstances, our legacy and new shareholders should not be overly concerned about dilution."

In closing Mr. Potts said, "The M&F story continues to materially improve along with performance. The story, though not exotic or flashy, is yet remarkable and noteworthy for its consistency and focus on remediation where it counts – where the problems are." 

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 25 communities in Mississippi, Alabama, and Tennessee.

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)





June 30

December 31

June 30


2012

2011

2011

Cash and due from banks

$           37,147

$           39,976

$           41,146

Interest bearing bank balances

20,708

39,391

103,847

Federal funds sold

6,750

25,000

25,000

Securities available for sale (cost of




  $371,424, $315,890 and $288,304)

377,670

320,774

293,133

Loans held for sale

22,291

26,073

2,117





Loans

982,596

996,340

1,044,595

Allowance for loan losses

15,310

14,953

18,805

     Net loans

967,286

981,387

1,025,790





Bank premises and equipment

37,529

37,989

40,564

Accrued interest receivable

6,060

6,122

5,970

Other real estate

31,077

36,952

30,650

Other intangible assets

4,373

4,586

4,799

Other assets

50,605

50,401

50,074

     Total assets

$      1,561,496

$       1,568,651

$       1,623,090





Non-interest bearing deposits

$         236,145

$          231,718

$          243,626

Interest bearing deposits

1,125,193

1,139,745

1,180,873

     Total deposits

1,361,338

1,371,463

1,424,499





Federal funds and repurchase agreements

3,224

4,398

5,047

Other borrowings

40,333

43,001

45,492

Junior subordinated debt

30,928

30,928

30,928

Accrued interest payable

844

1,023

1,306

Other liabilities

10,912

8,242

5,765

     Total liabilities

1,447,579

1,459,055

1,513,037





Preferred stock, 30,000 shares issued and outstanding

18,198

17,564

16,962

Common stock, 9,172,098, 9,154,936 and 9,131,387




     shares issued & outstanding

45,860

45,775

45,657

Additional paid-in capital

31,890

31,895

31,935

Nonvested restricted stock awards

836

674

718

Retained earnings

16,699

14,456

13,224

Accumulated other comprehensive income  (loss)

434

(768)

1,557

     Total equity

113,917

109,596

110,053

     Total liabilities & equity

$      1,561,496

$       1,568,651

$       1,623,090

 

First M&F Corporation and Subsidiary





Condensed Consolidated Statements of Income (Unaudited)




(In thousands, except share data)






Three Months Ended June 30

Six Months Ended June 30


2012

2011

2012

2011

Interest and fees on loans

$           13,741

$           15,281

$           27,899

$           30,656

Interest on loans held for sale

244

27

417

68

Taxable investments

1,563

1,931

3,053

3,702

Tax exempt investments

319

302

637

616

Federal funds sold

11

15

26

31

Interest bearing bank balances

28

46

79

98

     Total interest income

15,906

17,602

32,111

35,171






Interest on deposits

2,233

3,523

4,746

7,370

Interest on fed funds and repurchase agreements

5

7

11

22

Interest on other borrowings

437

509

888

1,033

Interest on subordinated debt

315

292

586

750

     Total interest expense

2,990

4,331

6,231

9,175






     Net interest income

12,916

13,271

25,880

25,996

Provision for possible loan losses

2,280

2,280

4,560

4,860

     Net interest income after loan loss

10,636

10,991

21,320

21,136






Service charges on deposits

2,548

2,473

5,005

4,931

Mortgage banking income

1,806

323

2,373

679

Agency commission income

848

936

1,677

1,828

Fiduciary and brokerage income

163

152

303

285

Other income

673

572

1,510

1,411

Other-than-temporary impairment on securities, net of $4, $87, $4 and $142 reclassified to/from other comprehensive income

(4)

(85)

(4)

(381)

Gains on AFS securities

1

341

592

1,690

     Total noninterest income

6,035

4,712

11,456

10,443






Salaries and employee benefits

6,737

7,157

13,600

14,113

Net occupancy expense

932

951

1,840

1,940

Equipment expenses

423

451

886

916

Software and processing expenses

346

395

708

794

FDIC insurance assessments

553

577

1,067

1,351

Foreclosed property expenses

1,282

1,468

2,738

3,821

Intangible asset amortization and impairment

106

107

213

214

Other expenses

3,940

3,197

7,253

5,965

     Total noninterest expense

14,319

14,303

28,305

29,114






     Net income before taxes

2,352

1,400

4,471

2,465

Income tax expense

599

294

1,111

409

     Net income

$            1,753

$             1,106

$             3,360

$            2,056






Earnings Per Common Share Calculations:





     Net income

$            1,753

$             1,106

$             3,360

$            2,056

Dividends and accretion on preferred stock

(471)

(440)

(934)

(872)

     Net income applicable to common stock

1,282

666

2,426

1,184

Earnings attributable to participating securities

56

5

61

8

     Net income allocated to common shareholders

$            1,226

$                661

$             2,365

$            1,176






Weighted average shares (basic)

9,164,576

9,118,267

9,160,526

9,113,706

Weighted average shares (diluted)

9,164,576

9,118,267

9,160,526

9,113,706

Basic earnings per share

$              0.14

$               0.07

$               0.26

$              0.13

Diluted earnings per share

$              0.14

$               0.07

$               0.26

$              0.13

 

First M&F Corporation





Financial Highlights






YTD Ended

YTD Ended

YTD Ended

YTD Ended


June 30

December 31

June 30

December 31


2012

2011

2011

2010

Performance Ratios:





Return on assets (annualized)

0.42%

0.27%

0.26%

0.25%

Return on equity (annualized)  (a)

6.06%

4.00%

3.83%

3.74%

Return on common equity (annualized)  (a)

5.21%

2.81%

2.61%

2.87%

Efficiency ratio (c)

74.94%

78.47%

78.92%

78.47%

Net interest margin (annualized, tax-equivalent)

3.69%

3.68%

3.67%

3.43%

Net charge-offs to average loans (annualized)

0.86%

1.05%

0.40%

1.65%

Nonaccrual loans to total loans

0.64%

1.68%

3.13%

3.11%

90 day accruing loans to total loans

0.15%

0.06%

0.07%

0.09%












QTD Ended

QTD Ended

QTD Ended

QTD Ended


June 30

March 31

December 31

September 30


2012

2012

2011

2011

Per Common Share (diluted):





Net income

$              0.14

$               0.12

$               0.05

$              0.10

Cash dividends paid

0.01

0.01

0.01

0.01

Book value

10.44

10.20

10.05

10.23

Closing stock price

5.18

4.80

2.84

3.16






Loan Portfolio Composition: (in thousands)





Commercial, financial and agricultural

$         147,773

$          144,319

$          155,330

$         143,133

Non-residential real estate

567,184

568,811

574,505

603,904

Residential real estate

189,927

188,891

186,815

185,564

Home equity loans

36,183

36,098

37,024

38,320

Consumer loans

41,529

41,376

42,666

44,045

   Total loans

$         982,596

$          979,495

$          996,340

$      1,014,966






Deposit Composition: (in thousands)





Noninterest-bearing deposits

$         236,145

$          238,603

$          231,718

$         222,042

NOW deposits

391,726

421,249

390,256

378,409

MMDA deposits

211,447

222,016

197,849

179,138

Savings deposits

116,598

121,872

119,693

118,814

Core certificates of deposit under $100,000

208,684

213,944

227,867

250,130

Core certificates of deposit $100,000 and over

178,926

176,761

187,513

216,655

Brokered certificates of deposit under $100,000

3,393

3,234

3,539

4,686

Brokered certificates of deposit $100,000 and over

14,419

12,829

13,028

13,985

   Total deposits

$      1,361,338

$       1,410,508

$       1,371,463

$      1,383,859






Nonperforming Assets: (in thousands)





Nonaccrual loans

$            6,443

$           14,604

$           17,177

$           26,622

Other real estate

31,077

34,636

36,952

32,722

Investment securities

639

646

599

509

   Total nonperforming assets

$           38,159

$           49,886

$           54,728

$           59,853

Accruing loans past due 90 days or more

$             1,537

$                245

$                602

$               252

Restructured loans (accruing)

$           18,372

$           19,077

$           19,662

$           19,712

Total nonaccrual loan to loans

0.64%

1.45%

1.68%

2.59%

Total nonperforming credit assets to loans and ORE

3.62%

4.72%

5.11%

5.60%

Total nonperforming assets to assets ratio

2.44%

3.10%

3.49%

3.77%






Allowance For Loan Loss Activity: (in thousands)





Beginning balance

$           16,084

$           14,953

$           16,111

$           18,805

Provision for loan loss

2,280

2,280

2,280

2,580

Charge-offs

(3,460)

(2,061)

(4,001)

(5,419)

Recoveries

406

912

563

145

Ending balance

$           15,310

$           16,084

$           14,953

$           16,111

 

First M&F Corporation





Financial Highlights






QTD Ended

QTD Ended

QTD Ended

QTD Ended


June 30

March 31

December 31

September 30


2012

2012

2011

2011

Condensed Income Statements: (in thousands)










Interest income   

$           15,906

$           16,205

$           16,305

$           17,239

Interest expense

2,990

3,241

3,662

4,014

   Net interest income

12,916

12,964

12,643

13,225

Provision for loan losses

2,280

2,280

2,280

2,580

Noninterest revenues

6,035

5,421

5,912

5,219

Noninterest expenses

14,319

13,986

15,077

14,143

   Net income before taxes                                    

2,352

2,119

1,198

1,721

Income tax expense

599

512

211

391

   Net income

$            1,753

$             1,607

$                987

$            1,330

Preferred dividends

(471)

(463)

(454)

(448)

   Net income applicable to common stock

1,282

1,144

533

882

Earnings attributable to participating securities

56

5

3

4

   Net income allocated to common shareholders

$            1,226

$             1,139

$                530

$               878






Tax-equivalent net interest income

$           13,134

$           13,181

$           12,865

$           13,450






Selected Average Balances: (in thousands)





Assets

$      1,577,420

$       1,607,013

$       1,564,531

$      1,592,030

Loans held for investment

973,545

983,800

993,869

1,028,372

Earning assets

1,420,370

1,445,332

1,401,948

1,433,189

Deposits

1,379,716

1,409,393

1,366,628

1,390,834

Equity

112,466

110,745

110,483

110,412

Common equity

94,430

93,025

93,077

93,307






Selected Ratios:





Return on average assets (annualized)

0.45%

0.40%

0.25%

0.33%

Return on average equity (annualized)  (a)

6.27%

5.84%

3.54%

4.78%

Return on average common equity (annualized)  (a)

5.46%

4.95%

2.27%

3.76%

Average equity to average assets

7.13%

6.89%

7.06%

6.94%

Tangible equity to tangible assets  (b)

7.04%

6.67%

6.71%

6.71%

Tangible common equity to tangible assets  (b)

5.87%

5.55%

5.59%

5.61%

Net interest margin (annualized, tax-equivalent)

3.72%

3.67%

3.64%

3.72%

Efficiency ratio (c)

74.70%

75.18%

80.29%

75.76%

Net charge-offs to average loans (annualized)

1.26%

0.47%

1.37%

2.03%

Nonaccrual loans to total loans

0.64%

1.45%

1.68%

2.59%

90 day accruing loans to total loans

0.15%

0.02%

0.06%

0.02%

Price to book

0.50x

0.47x

0.28x

0.31x

Price to earnings

9.25x

10.00x

14.20x

7.90x

 

First M&F Corporation





Financial Highlights










Historical Earnings Trends:


Earnings

Earnings




Applicable to

Allocated to




Common

Common



Earnings

Stock

Shareholders

EPS


(in thousands)

(in thousands)

(in thousands)

(diluted)

2Q 2012

$            1,753

$             1,282

$             1,226

$              0.14

1Q 2012

1,607

1,144

1,139

0.12

4Q 2011

987

533

530

0.05

3Q 2011

1,330

882

878

0.10

2Q 2011

1,106

666

661

0.07

1Q 2011

950

518

515

0.06

4Q 2010

641

266

267

0.03

3Q 2010

1,245

13,671

13,565

1.49

2Q 2010

1,272

833

826

0.09
















Revenue Statistics:


Non-interest

Non-interest



Revenues

Revenues to

Revenues to



Per FTE

Ttl. Revenues

Avg. Assets



(thousands)

(percent)

(percent)


2Q 2012

$              41.1

31.48%

1.54%


1Q 2012

40.5

29.14%

1.36%


4Q 2011

39.0

31.48%

1.50%


3Q 2011

36.6

27.96%

1.30%


2Q 2011

36.6

25.88%

1.18%


1Q 2011

37.9

30.67%

1.43%


4Q 2010

35.4

28.19%

1.25%


3Q 2010

34.9

27.42%

1.21%


2Q 2010

35.1

29.98%

1.31%

















Expense Statistics:

Non-interest





Expense to

Efficiency




Avg. Assets

Ratio




(percent)

(percent)  (c)



2Q 2012

3.65%

74.70%



1Q 2012

3.50%

75.18%



4Q 2011

3.82%

80.29%



3Q 2011

3.52%

75.76%



2Q 2011

3.59%

78.56%



1Q 2011

3.70%

79.26%



4Q 2010

3.69%

83.22%



3Q 2010

3.35%

75.75%



2Q 2010

3.35%

76.69%



 

First M&F Corporation





Average Balance Sheets/Yields and Costs (tax-equivalent)




(In thousands with yields and costs annualized)

QTD June 2012

QTD June 2011


Average


Average



Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$           30,923

0.37%

$           71,291

0.26%

Federal funds sold

15,082

0.27%

25,000

0.25%

Taxable investments (amortized cost)

333,794

1.88%

262,915

2.95%

Tax-exempt investments (amortized cost)

36,610

5.59%

32,407

5.98%

Loans held for sale

30,416

3.22%

2,928

3.75%

Loans held for investment

973,545

5.69%

1,050,136

5.85%

   Total earning assets

1,420,370

4.57%

1,444,677

5.00%

Non-earning assets

157,050


154,194


   Total average assets

$      1,577,420


$       1,598,871







NOW

$         404,958

0.43%

$          400,942

0.71%

MMDA

217,533

0.37%

167,657

0.77%

Savings

121,778

0.95%

117,783

1.12%

Certificates of Deposit

402,703

1.31%

493,722

1.76%

Short-term borrowings

2,974

0.62%

8,637

0.34%

Other borrowings

71,771

4.21%

77,440

4.15%

   Total interest bearing liabilities

1,221,717

0.98%

1,266,181

1.37%

Non-interest bearing deposits

232,744


216,227


Non-interest bearing liabilities

10,493


7,552


Preferred equity

18,036


16,815


Common equity

94,430


92,096


   Total average liabilities and equity

$      1,577,420


$       1,598,871


Net interest spread


3.59%


3.63%

Effect of non-interest bearing deposits


0.16%


0.20%

Effect of leverage


-0.03%


-0.08%

   Net interest margin, tax-equivalent


3.72%


3.75%

Less tax equivalent adjustment:





   Investments


0.05%


0.05%

   Loans


0.01%


0.02%

Reported book net interest margin


3.66%


3.68%

 

First M&F Corporation





Average Balance Sheets/Yields and Costs (tax-equivalent)




(In thousands with yields and costs annualized)

YTD June 2012

YTD June 2011


Average


Average



Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$           55,067

0.29%

$           82,515

0.24%

Federal funds sold

20,041

0.26%

25,000

0.25%

Taxable investments (amortized cost)

316,708

1.94%

256,026

2.92%

Tax-exempt investments (amortized cost)

35,790

5.71%

33,169

5.98%

Loans held for sale

26,573

3.15%

3,593

3.81%

Loans held for investment

978,672

5.74%

1,053,501

5.88%

   Total earning assets

1,432,851

4.57%

1,453,804

4.94%

Non-earning assets

159,365


156,748


   Total average assets

$      1,592,216


$       1,610,552







NOW

$         412,108

0.45%

$          401,866

0.76%

MMDA

222,067

0.45%

164,635

0.81%

Savings

121,307

0.97%

116,805

1.17%

Certificates of Deposit

409,895

1.35%

503,896

1.81%

Short-term borrowings

4,014

0.53%

16,235

0.27%

Other borrowings

72,439

4.09%

78,843

4.56%

   Total interest bearing liabilities

1,241,830

1.01%

1,282,280

1.44%

Non-interest bearing deposits

229,177


212,809


Non-interest bearing liabilities

9,603


7,188


Preferred equity

17,878


16,674


Common equity

93,728


91,601


   Total average liabilities and equity

$      1,592,216


$       1,610,552


Net interest spread


3.56%


3.50%

Effect of non-interest bearing deposits


0.16%


0.21%

Effect of leverage


-0.03%


-0.04%

   Net interest margin, tax-equivalent


3.69%


3.67%

Less tax equivalent adjustment:





   Investments


0.05%


0.05%

   Loans


0.01%


0.01%

Reported book net interest margin


3.63%


3.61%

 

First M&F Corporation





Notes to Financial Schedules










(a)  Return on equity is calculated as: (Net income attributable to First M&F Corp) divided by (Total equity)







      Return on common equity is calculated as: (Net income attributable to First M&F Corp minus preferred dividends)

      divided by (Total First M&F Corp equity minus preferred stock)






(b) Tangible equity to tangible assets is calculated as: (Total equity minus goodwill and other intangible assets)

      divided by (Total assets minus goodwill and other intangible assets)





      Tangible common equity to tangible assets is calculated as: (Total First M&F Corp equity minus preferred stock

      minus goodwill and other intangible assets) divided by (Total assets minus goodwill and other intangible assets)



(c) Efficiency ratio is calculated as: (Noninterest expense) divided by (Tax-equivalent net interest income plus

      noninterest revenues)







SOURCE First M&F Corp.

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