Credit Quality drives quarterly earnings improvement for First M&F

KOSCIUSKO, Miss., April 18, 2013 /PRNewswire/ -- First M&F Corp. (NASDAQ: FMFC) reported a profit today for the first quarter ended March 31, 2013 of $2.598 million.  Net income allocated to common shareholders was $2.020 million or $0.22 basic and diluted earnings per share compared to a profit of $1.139 million or $0.12 basic and diluted earnings per share for the first quarter of 2012.  Hugh S. Potts, Jr., CEO and Chairman of the Board, commented, "This quarter is reflective of the established trends of previous quarters and the current state of the economy." Continuing further Potts said, "That is, our improving asset quality metrics, a trend started many quarters ago, and the stabilization of real estate values, has allowed meaningful reductions in credit-related expenses and the current profitable quarter."

Net Interest Income

Net interest income was down by 5.69% compared to the first quarter of 2012, with the net interest margin falling to 3.53% on a tax equivalent basis in the first quarter of 2013 as compared to 3.67% in the first quarter of 2012. The most significant contributor to the decrease in net interest income was the erosion in net interest spreads as the opportunities to re-price deposits waned even as earning asset yields continued downward.  Mr. Potts commented, "Also reflective of current economic realities is the compression of the net interest margin arising from continued low rates, diminishing spreads and trends toward flat or modest loan growth." 

The net interest margin for the fourth quarter of 2012 was 3.56% as compared to 3.73% for the third quarter of 2012 and 3.72% for the second quarter of 2012. Loans Held for Investment yields decreased to 5.28% in the first quarter of 2013 from 5.80% in the first quarter of 2012.   Overall loan yields fell also from the fourth quarter of 2012 to the first quarter. Average total loans were $990.968 million for the first quarter of 2013 as compared to $1.008 billion for the fourth quarter of 2012 and $1.007 billion during the first quarter of 2012. Loans Held for Investment increased by $12.184 million in the first quarter of 2013 but fell by $11.854 million in the fourth quarter of 2012.  Deposit costs decreased in the first quarter of 2013 from the fourth quarter of 2012, continuing a trend in declining deposit costs dating back to the fourth quarter of 2007 as costs have reflected the low-rate environment since then. Deposit costs were 0.55% in the first quarter of 2013 as compared to 0.85% in the first quarter of 2012. Deposits fell by $49.900 million, or 3.56% during the first quarter of 2013, primarily from one large depositor. Loans Held for Investment as a percentage of assets were 63.70% at March 31, 2013 as compared to 60.95% at March 31, 2012 and 60.90% at December 31, 2012. Loans grew by less than 1.00% since the first quarter of 2012 while deposits fell by 4.09%.

Non-interest Income

Non-interest income, excluding securities transactions, for the first quarter of 2013 increased by 17.72% compared to the first quarter of 2012, with deposit-related income down 3.50% and mortgage income, bolstered by a somewhat improving housing market and refinancings, up 127.69%.  Insurance agency commissions were down slightly, by 1.09%.  Mr. Potts commented, "Mortgage volumes and revenues have been a bright spot in the last few quarters.  M&F Bank was successful in gearing up to take advantage of the opportunities presented."

Non-interest Expenses

Non-interest expenses were lower by 7.49% in the first quarter of 2013 as compared to the first quarter of 2012.  Salaries and benefits expense decreased by 7.30%, mostly due to lower medical benefits costs, while the major contributor to the overall non-interest expense decrease was the 59.62% fall in foreclosed property expense as credit issues began to dissipate, as property values continued to stabilize and as new credit issues continued to wane.  "M&F continues to manage its portfolio of Other Real Estate downward," said Mr. Potts, "as we're still dealing with the residual aftermath of the real estate collapse."    

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the first quarter of 2013 were 0.21% as compared to 0.47% for the same period in 2012. Non-accrual and 90-day past due loans as a percent of total loans were 0.75% at the end of the first quarter of 2013 as compared to 1.47% at the end of the 2012 quarter.

The allowance for loan losses as a percentage of loans was 1.85% at March 31, 2013 as compared to 1.64% at March 31, 2012. The provision for loan losses fell to $1.280 million in the first quarter of 2013 from $2.280 million in the first quarter of 2012.  Mr. Potts commented, "The trend of decreasing credit-related expenses, primarily through lower provisions for loan losses, is the result of quarters and years of credit remediation and recovery by M&F associates.  This gratifying pattern of improvement and contribution to earnings, though, will soon run its course and the Company will have to look to profitable asset growth and increased operating efficiencies to spur long-term earnings growth."

Balance Sheet

Total assets at March 31, 2013 were $1.551 billion as compared to $1.602 billion at the end of 2012 and $1.607 billion at March 31, 2012. Total Loans Held for Investment were $987.657 million compared to $975.473 million at the end of 2012 and $979.495 million at March 31, 2012. Deposits were $1.353 billion compared to $1.403 billion at the end of 2012 and $1.411 billion at March 31, 2012. Total capital was $120.771 million, while common equity was $101.558 million, or $11.00 in book value per share, at March 31, 2013. 

Conclusion   

Looking forward, Mr. Potts said, "The challenges ahead for First M&F are common to the banking sector as a whole: profitable growth in a low rate environment complicated by a still struggling economy, modest loan demand and narrowing spreads.  The potential merger with Renasant, announced in February, should open up greater growth markets and opportunities with higher efficiencies, creating improved shareholder value.  M&F associates look forward to the challenge and the change."  In conclusion, Mr. Potts said, "While we await various approvals from regulators and shareholders, we have a patient, thankful and optimistic comfort in the Providential orchestration of the future of M&F, Renasant and the U.S.A.  A thorough discussion of the merger will be forthcoming for shareholder enlightenment and decision.  Meanwhile, M&F associates are committed to serving well, as always."

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 26 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)






March 31

December 31

March 31



2013

2012

2012


Cash and due from banks

$           32,543

$           54,811

$           38,688


Interest bearing bank balances

31,590

94,313

51,900


Federal funds sold

10,000

10,000

25,000


Securities available for sale (cost of





  $370,679, $341,273 and $361,199)

377,051

348,562

365,970


Loans held for sale

17,573

21,014

28,684







Loans

987,657

975,473

979,495


Allowance for loan losses

18,269

17,492

16,084


     Net loans

969,388

957,981

963,411







Bank premises and equipment

36,871

37,264

37,831


Accrued interest receivable

5,863

5,683

6,098


Other real estate

24,820

25,970

34,636


Other intangible assets

4,053

4,159

4,479


Other assets

40,768

41,926

50,445


     Total assets

$      1,550,520

$       1,601,683

$       1,607,142







Non-interest bearing deposits

$         252,453

$          276,295

$          238,603


Interest bearing deposits

1,100,322

1,126,380

1,171,905


     Total deposits

1,352,775

1,402,675

1,410,508







Federal funds and repurchase agreements

2,250

3,720

3,738


Other borrowings

34,877

36,007

41,673


Junior subordinated debt

30,928

30,928

30,928


Accrued interest payable

628

661

868


Other liabilities

8,291

9,249

8,072


     Total liabilities

1,429,749

1,483,240

1,495,787







Preferred stock, 30,000 shares issued and outstanding

19,213

18,865

17,877


Common stock, 9,233,917, 9,230,799 and 9,162,721)





     shares issued & outstanding

46,170

46,154

45,814


Additional paid-in capital

32,497

32,469

31,892


Nonvested restricted stock awards

325

244

700


Retained earnings

21,184

19,180

15,508


Accumulated other comprehensive income  (loss)

1,382

1,531

(436)


     Total equity

120,771

118,443

111,355


     Total liabilities & equity

$      1,550,520

$       1,601,683

$       1,607,142
































First M&F Corporation and Subsidiary





Condensed Consolidated Statements of Income (Unaudited)




(In thousands, except share data)






Three Months Ended March 31



2013

2012



Interest and fees on loans

$           12,698

$           14,158



Interest on loans held for sale

56

173



Taxable investments

1,231

1,490



Tax exempt investments

352

318



Federal funds sold

6

15



Interest bearing bank balances

58

51



     Total interest income

14,401

16,205








Interest on deposits

1,516

2,513



Interest on fed funds and repurchase agreements

4

6



Interest on other borrowings

371

451



Interest on subordinated debt

283

271



     Total interest expense

2,174

3,241








     Net interest income

12,227

12,964



Provision for possible loan losses

1,280

2,280



     Net interest income after loan loss

10,947

10,684








Service charges on deposits

2,371

2,457



Mortgage banking income

1,291

567



Agency commission income

820

829



Fiduciary and brokerage income

160

140



Other income

1,044

837



Gains on AFS securities

16

591



     Total noninterest income

5,702

5,421








Salaries and employee benefits

6,362

6,863



Net occupancy expense

865

908



Equipment expenses

432

463



Software and processing expenses

356

362



FDIC insurance assessments

348

514



Foreclosed property expenses

588

1,456



Intangible asset amortization and impairment

106

107



Other expenses

3,882

3,313



     Total noninterest expense

12,939

13,986








     Net income before taxes

3,710

2,119



Income tax expense

1,112

512



     Net income

$            2,598

$             1,607








Earnings Per Common Share Calculations:





     Net income

$            2,598

$             1,607



Dividends and accretion on preferred stock

(497)

(463)



     Net income applicable to common stock

2,101

1,144



Earnings attributable to participating securities

81

5



     Net income allocated to common shareholders

$            2,020

$             1,139








Weighted average shares (basic)

9,231,457

9,156,476



Weighted average shares (diluted)

9,345,384

9,156,476



Basic earnings per share

$              0.22

$               0.12



Diluted earnings per share

$              0.22

$               0.12




























First M&F Corporation





Financial Highlights






YTD Ended

YTD Ended

YTD Ended

YTD Ended


March 31

December 31

March 31

December 31


2013

2012

2012

2011

Performance Ratios:





Return on assets (annualized)

0.67%

0.44%

0.40%

0.27%

Return on equity (annualized)  (a)

8.84%

6.12%

5.84%

4.00%

Return on common equity (annualized)  (a)

8.51%

5.30%

4.95%

2.81%

Efficiency ratio (c)

71.25%

74.98%

75.18%

78.47%

Net interest margin (annualized, tax-equivalent)

3.53%

3.67%

3.67%

3.68%

Net charge-offs to average loans (annualized)

0.21%

0.61%

0.47%

1.05%

Nonaccrual loans to total loans

0.72%

0.75%

1.45%

1.68%

90 day accruing loans to total loans

0.03%

0.03%

0.02%

0.06%












QTD Ended

QTD Ended

QTD Ended

QTD Ended


March 31

December 31

September 30

June 30


2013

2012

2012

2012

Per Common Share (diluted):





Net income

$              0.22

$               0.14

$               0.14

$              0.14

Cash dividends paid

0.01

0.01

0.01

0.01

Book value

11.00

10.79

10.69

10.44

Closing stock price

14.15

6.98

7.42

5.18






Loan Portfolio Composition: (in thousands)





Commercial, financial and agricultural

$         150,125

$          153,550

$          155,890

$         147,773

Non-residential real estate

557,453

542,859

554,475

567,184

Residential real estate

203,260

200,992

197,629

189,927

Home equity loans

39,047

37,736

37,196

36,183

Consumer loans

37,772

40,336

42,137

41,529

   Total loans

$         987,657

$          975,473

$          987,327

$         982,596






Deposit Composition: (in thousands)





Noninterest-bearing deposits

$         252,453

$          276,295

$          233,684

$         236,145

NOW deposits

419,376

423,461

386,371

391,726

MMDA deposits

207,931

214,091

216,620

211,447

Savings deposits

119,728

118,123

117,404

116,598

Core certificates of deposit under $100,000

182,245

188,733

201,361

208,684

Core certificates of deposit $100,000 and over

159,913

165,979

177,084

178,926

Brokered certificates of deposit under $100,000

3,295

3,549

3,417

3,393

Brokered certificates of deposit $100,000 and over

7,834

12,444

13,533

14,419

   Total deposits

$      1,352,775

$       1,402,675

$       1,349,474

$      1,361,338






Nonperforming Assets: (in thousands)





Nonaccrual loans

$            7,277

$             7,444

$             6,219

$            6,443

Other real estate

24,820

25,970

28,002

31,077

Investment securities

604

733

644

639

   Total nonperforming assets

$           32,701

$           34,147

$           34,865

$           38,159

Accruing loans past due 90 days or more

$                268

$                321

$                408

$             1,537

Restructured loans (accruing)

$           21,657

$           21,800

$           16,784

$           18,372

Total nonaccrual loan to loans

0.72%

0.75%

0.62%

0.64%

Total nonperforming credit assets to loans and ORE

3.12%

3.27%

3.29%

3.62%

Total nonperforming assets to assets ratio

2.11%

2.13%

2.24%

2.44%






Allowance For Loan Loss Activity: (in thousands)





Beginning balance

$           17,492

$           16,656

$           15,310

$           16,084

Provision for loan loss

1,280

1,980

1,980

2,280

Charge-offs

(747)

(1,584)

(1,035)

(3,460)

Recoveries

244

440

401

406

Ending balance

$           18,269

$           17,492

$           16,656

$           15,310





















First M&F Corporation





Financial Highlights






QTD Ended

QTD Ended

QTD Ended

QTD Ended


March 31

December 31

September 30

June 30


2013

2012

2012

2012

Condensed Income Statements: (in thousands)










Interest income

$           14,401

$           15,186

$           15,625

$           15,906

Interest expense

2,174

2,545

2,753

2,990

   Net interest income

12,227

12,641

12,872

12,916

Provision for loan losses

1,280

1,980

1,980

2,280

Noninterest revenues

5,702

5,735

5,607

6,035

Noninterest expenses

12,939

13,913

14,060

14,319

   Net income before taxes

3,710

2,483

2,439

2,352

Income tax expense

1,112

652

645

599

   Net income

$            2,598

$             1,831

$             1,794

$            1,753

Preferred dividends

(497)

(488)

(479)

(471)

   Net income applicable to common stock

2,101

1,343

1,315

1,282

Earnings attributable to participating securities

81

53

51

56

   Net income allocated to common shareholders

$            2,020

$             1,290

$             1,264

$            1,226






Tax-equivalent net interest income

$           12,458

$           12,859

$           13,088

$           13,134






Selected Average Balances: (in thousands)





Assets

$      1,570,994

$       1,585,467

$       1,546,416

$      1,577,420

Loans held for investment

977,198

982,894

984,282

973,545

Earning assets

1,431,054

1,436,348

1,396,824

1,420,370

Deposits

1,369,784

1,381,667

1,343,559

1,379,716

Equity

119,209

117,529

115,544

112,466

Common equity

100,171

98,837

97,186

94,430






Selected Ratios:





Return on average assets (annualized)

0.67%

0.46%

0.46%

0.45%

Return on average equity (annualized)  (a)

8.84%

6.19%

6.18%

6.27%

Return on average common equity (annualized)  (a)

8.51%

5.40%

5.38%

5.46%

Average equity to average assets

7.59%

7.41%

7.47%

7.13%

Tangible equity to tangible assets  (b)

7.55%

7.15%

7.28%

7.04%

Tangible common equity to tangible assets  (b)

6.31%

5.97%

6.08%

5.87%

Net interest margin (annualized, tax-equivalent)

3.53%

3.56%

3.73%

3.72%

Efficiency ratio (c)

71.25%

74.83%

75.21%

74.70%

Net charge-offs to average loans (annualized)

0.21%

0.46%

0.26%

1.26%

Nonaccrual loans to total loans

0.72%

0.75%

0.62%

0.64%

90 day accruing loans to total loans

0.03%

0.03%

0.04%

0.15%

Price to book

1.29x

0.65x

0.69x

0.50x

Price to earnings

16.08x

12.46x

13.25x

9.25x




































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)

1Q 2013

$            2,598

$             2,101

$             2,020

$              0.22

4Q 2012

1,831

1,343

1,290

0.14

3Q 2012

1,794

1,315

1,264

0.14

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
















Revenue Statistics:


Non-interest

Non-interest



Revenues

Revenues to

Revenues to



Per FTE

Ttl. Revenues

Avg. Assets



(thousands)

(percent)

(percent)


1Q 2013

$              40.4

31.40%

1.47%


4Q 2012

40.2

30.85%

1.44%


3Q 2012

39.9

29.99%

1.44%


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%

















Expense Statistics:

Non-interest





Expense to

Efficiency




Avg. Assets

Ratio




(percent)

(percent)  (c)



1Q 2013

3.34%

71.25%



4Q 2012

3.49%

74.83%



3Q 2012

3.62%

75.21%



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%

































First M&F Corporation





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




(In thousands with yields and costs annualized)

QTD March 2013

QTD March 2012


Average


Average



Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$           76,526

0.31%

$           79,212

0.26%

Federal funds sold

10,000

0.24%

25,000

0.25%

Taxable investments (amortized cost)

309,373

1.61%

299,622

2.00%

Tax-exempt investments (amortized cost)

44,187

5.16%

34,969

5.83%

Loans held for sale

13,770

1.65%

22,729

3.06%

Loans held for investment

977,198

5.28%

983,800

5.80%

   Total earning assets

1,431,054

4.15%

1,445,332

4.57%

Non-earning assets

139,940


161,681


   Total average assets

$      1,570,994


$       1,607,013







NOW

$         422,966

0.22%

$          419,260

0.46%

MMDA

212,106

0.18%

226,602

0.52%

Savings

118,719

0.80%

120,835

0.99%

Certificates of Deposit

361,037

1.08%

417,086

1.39%

Short-term borrowings

5,337

0.31%

5,054

0.48%

Other borrowings

66,173

4.01%

73,107

3.97%

   Total interest bearing liabilities

1,186,338

0.74%

1,261,944

1.03%

Non-interest bearing deposits

254,957


225,610


Non-interest bearing liabilities

10,490


8,714


Preferred equity

19,038


17,720


Common equity

100,171


93,025


   Total average liabilities and equity

$      1,570,994


$       1,607,013


Net interest spread


3.41%


3.54%

Effect of non-interest bearing deposits


0.13%


0.16%

Effect of leverage


-0.01%


-0.03%

   Net interest margin, tax-equivalent


3.53%


3.67%

Less tax equivalent adjustment:





   Investments


0.05%


0.05%

   Loans


0.01%


0.01%

Reported book net interest margin


3.47%


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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