Upward Earnings and Asset Quality trends continue for First M&F

KOSCIUSKO, Miss., Oct. 19, 2012 /PRNewswire/ -- First M&F Corp. (NASDAQ: FMFC) reported today a net profit for the quarter ended September 30, 2012 of $1.794 million compared to $1.330 million at September 30, 2011. Net income for the quarter allocated to common shareholders was $1.264 million or $0.14 basic and diluted earnings per share, compared to September 30, 2011 net income of $.878 million and $.10 per share. Common net income for the quarter ended September 30, 2012 was $1.315 million or $0.14 per share versus the year-ago quarter common net income of $.882 million or $.10 basic and diluted earnings per share. Second quarter of 2012 earnings allocated to common shareholders were $1.226 million, or $.14 basic and diluted earnings per share.

Hugh Potts, Jr., Chairman and CEO commented, "Earnings per share in this third quarter are up 40% over the year ago quarter, with year over year earnings per share up 74%. Increased mortgage revenue has been a bright spot as well as lower credit costs. Our focus and persistence over the last several quarters are bearing the fruit of greatly improved credit metrics with our stock value responding very positively to the trends we've demonstrated."

Net Interest Income

Reported net interest income was down 2.67% compared to the third quarter of 2011, although the net interest margin increased slightly to 3.73% on a tax equivalent basis in the third quarter of 2012 as compared to 3.72% in the third quarter of 2011. The significant contributor to the stability in the net interest margin year over year is the improvement, though slight, in spreads, primarily due to lower cost of funds. The net interest margin for the second quarter of 2012 was 3.72% as compared to 3.67% for the first quarter of 2012 and 3.64% for the fourth quarter of 2011. Loan yields fell to 5.48% in the third quarter of 2012 from 5.81% in the third quarter of 2011. Loan yields decreased from the second quarter of 2012 to the third quarter as well as the Company strove to increase loan volumes in the face of continued tepid demand. Average loans were $1.007 billion for the third quarter of 2012 as compared to $1.004 billion for the second quarter of 2012 and $1.035 billion during the third quarter of 2011. Loans held for investment did grow by $4.7 million in the third quarter of 2012 and by $3.1 million in the second quarter.

Deposit costs decreased in the third quarter of 2012 from the second quarter of 2012 and from the third quarter of 2011, in response to the continuing low rate environment. Deposit costs were .73% in the third quarter of 2012 as compared to 1.10% in the third quarter of 2011. Deposits fell by $11.9 million during the third quarter of 2012 consistent with historic seasonal fluctuations and have fallen $34.4 million since the third quarter of 2011. Management plans to continue to focus on relationship-driven deposits as a stable source of funding. Mr. Potts commented, "With interest rates low and the Fed targeting low rates for the foreseeable future, as well as a lackluster economy, the pressure on the net interest margin of all banks is great and mounting. The ability to hold spreads up by re-pricing funding sources is waning. As NIM issues persist, increasing efficiencies and overhead discipline will play more of a role."

Loans held for investment as a percentage of assets were 63.6% at September 30, 2012 as compared to 64.0% at September 30, 2011 and 63.5% at December 31, 2011. Loans held for investment fell by 2.72% since the third quarter of 2011 while deposits fell by 2.48%.

Non-interest Income

Non-interest income, excluding securities transactions and impairment of investments, for the third quarter of 2012 improved by 14.12% compared to the third quarter of 2011, with most of the increase attributable to higher mortgage banking income. Deposit-related income, the single largest non-interest income category, was down 4.85%, largely due to lower overdraft fee income which fell by 12.79%. Debit card fee income was up 11.11%. Insurance agency commissions were virtually flat quarter over quarter.  

Non-interest Expenses

Non-interest expenses were also virtually flat in the third quarter of 2012 as compared to the third quarter of 2011. Drops in Salaries and Benefits as well as Occupancy, Equipment and Foreclosed property expenses were largely offset by higher mortgage expenses from higher mortgage volumes. Mr. Potts commented, "We have initiated several cost savings and efficiency projects during this credit cycle designed to position the bank to better deal with the continuing low-growth economy. The positive overhead effects of those initiatives and the improvements in our credit issues are being seen in 2012."

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the third quarter of 2012 were .26% as compared to 2.03% for the same period in 2011. Net charge-offs totaled $.634 million for the quarter versus $5.274 million a year ago and $3.054 million in the second quarter of 2012. Non-accrual and 90-day past due loans as a percent of total loans were .66% at the end of the third quarter of 2012 as compared to 2.61% at the end of the 2011 quarter. The allowance for loan losses as a percentage of loans was 1.69% at September 30, 2012 as compared to 1.59% at September 30, 2011. The provision for loan losses fell to $1.980 million in the third quarter of 2012 from $2.580 million in the third quarter of 2011. Mr. Potts commented, "As noted last quarter, virtually every credit trend we measure continues to move in a positive direction. Our improving credit quality is beginning to positively impact earnings in the reduction of provision expense, foreclosed property expenses and even FDIC premiums."

Balance Sheet

Total assets at September 30, 2012 were $1.553 billion as compared to $1.569 billion at the end of 2011 and $1.587 billion at September 30, 2011. Total loans held for investment were $.987 billion compared to $.996 billion at the end of 2011 and $1.015 billion at September 30, 2011. Deposits were $1.349 billion compared to $1.371 billion at the end of 2011 and $1.384 billion at September 30, 2011. Total capital was $117.004 million or $10.69 in book value per common share at September 30, 2012. Further commenting, Mr. Potts said, "Increasing earnings are contributing to a consistent growth in our capital.  Our strategy of non-dilutive capital building and balance sheet strengthening through credit resolution is progressing quarter by quarter."

In closing, Mr. Potts said, "From the first quarter of 2010 through the third quarter of 2012, the recovery of First M&F has been noteworthy in its magnitude, consistency and results. From every perspective, much value has been restored. The trends have been validated by consistency over the period but the full restoration of performance, quality and value has not yet been attained. We believe that value follows quality. The progress, both real and significant, spurs us on to further improvement."

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)





September 30

December 31

September 30


2012

2011

2011

Cash and due from banks

$           41,605

$           39,976

$           42,545

Interest bearing bank balances

42,777

39,391

66,026

Federal funds sold

-

25,000

25,000

Securities available for sale (cost of




  $345,957, $315,890 and $301,274)

354,188

320,774

307,167

Loans held for sale

23,548

26,073

11,676





Loans

987,327

996,340

1,014,966

Allowance for loan losses

16,656

14,953

16,111

     Net loans

970,671

981,387

998,855





Bank premises and equipment

37,429

37,989

40,382

Accrued interest receivable

6,123

6,122

5,915

Other real estate

28,002

36,952

32,722

Other intangible assets

4,266

4,586

4,693

Other assets

44,568

50,401

51,886

     Total assets

$      1,553,177

$       1,568,651

$       1,586,867





Non-interest bearing deposits

$         233,684

$          231,718

$          222,042

Interest bearing deposits

1,115,790

1,139,745

1,161,817

     Total deposits

1,349,474

1,371,463

1,383,859





Federal funds and repurchase agreements

5,225

4,398

8,374

Other borrowings

38,984

43,001

44,315

Junior subordinated debt

30,928

30,928

30,928

Accrued interest payable

806

1,023

1,237

Other liabilities

10,756

8,242

7,374

     Total liabilities

1,436,173

1,459,055

1,476,087





Preferred stock, 30,000 shares issued and outstanding

18,528

17,564

17,260

Common stock, 9,215,092, 9,154,936 and 9,142,717




     shares issued & outstanding

46,075

45,775

45,714

Additional paid-in capital

32,350

31,895

31,917

Nonvested restricted stock awards

304

674

647

Retained earnings

17,923

14,456

14,016

Accumulated other comprehensive income  (loss)

1,824

(768)

1,226

     Total equity

117,004

109,596

110,780

     Total liabilities & equity

$      1,553,177

$       1,568,651

$       1,586,867

 

First M&F Corporation and Subsidiary





Condensed Consolidated Statements of Income (Unaudited)




(In thousands, except share data)






Three Months Ended September 30

Nine Months Ended September 30


2012

2011

2012

2011

Interest and fees on loans

$           13,697

$           15,063

$           41,596

$           45,719

Interest on loans held for sale

162

53

579

121

Taxable investments

1,421

1,746

4,474

5,448

Tax exempt investments

325

318

962

934

Federal funds sold

-

16

26

47

Interest bearing bank balances

20

43

99

141

     Total interest income

15,625

17,239

47,736

52,410






Interest on deposits

2,032

3,234

6,778

10,604

Interest on fed funds and repurchase agreements

5

8

16

30

Interest on other borrowings

423

479

1,311

1,512

Interest on subordinated debt

293

293

879

1,043

     Total interest expense

2,753

4,014

8,984

13,189






     Net interest income

12,872

13,225

38,752

39,221

Provision for possible loan losses

1,980

2,580

6,540

7,440

     Net interest income after loan loss

10,892

10,645

32,212

31,781






Service charges on deposits

2,589

2,721

7,594

7,652

Mortgage banking income

1,357

524

3,730

1,203

Agency commission income

1,001

1,010

2,678

2,838

Fiduciary and brokerage income

114

146

417

431

Other income

598

558

2,108

1,969

Other-than-temporary impairment on securities, net of





$17, $71, $21 and $214 reclassified to/from other





comprehensive income

(25)

(200)

(29)

(581)

Gains (losses) on AFS securities

(27)

460

565

2,150

     Total noninterest income

5,607

5,219

17,063

15,662






Salaries and employee benefits

6,900

7,457

20,500

21,570

Net occupancy expense

917

992

2,757

2,932

Equipment expenses

422

476

1,308

1,392

Software and processing expenses

354

368

1,062

1,162

FDIC insurance assessments

333

545

1,400

1,896

Foreclosed property expenses

1,176

1,483

3,914

5,304

Intangible asset amortization and impairment

107

106

320

320

Other expenses

3,851

2,716

11,104

8,681

     Total noninterest expense

14,060

14,143

42,365

43,257






     Net income before taxes

2,439

1,721

6,910

4,186

Income tax expense

645

391

1,756

800

     Net income

$            1,794

$             1,330

$             5,154

$            3,386






Earnings Per Common Share Calculations:





     Net income

$            1,794

$             1,330

$             5,154

$            3,386

Dividends and accretion on preferred stock

(479)

(448)

(1,413)

(1,320)

     Net income applicable to common stock

1,315

882

3,741

2,066

Earnings attributable to participating securities

51

4

112

12

     Net income allocated to common shareholders

$            1,264

$                878

$             3,629

$            2,054






Weighted average shares (basic)

9,185,803

9,133,481

9,169,013

9,120,370

Weighted average shares (diluted)

9,187,397

9,133,481

9,169,013

9,120,370

Basic earnings per share

$              0.14

$               0.10

$               0.40

$              0.23

Diluted earnings per share

$              0.14

$               0.10

$               0.40

$              0.23

 

First M&F Corporation





Financial Highlights






YTD Ended

YTD Ended

YTD Ended

YTD Ended


September 30

December 31

September 30

December 31


2012

2011

2011

2010

Performance Ratios:





Return on assets (annualized)

0.44%

0.27%

0.28%

0.25%

Return on equity (annualized)  (a)

6.10%

4.00%

4.15%

3.74%

Return on common equity (annualized)  (a)

5.27%

2.81%

3.00%

2.87%

Efficiency ratio (c)

75.03%

78.47%

77.85%

78.47%

Net interest margin (annualized, tax-equivalent)

3.70%

3.68%

3.69%

3.43%

Net charge-offs to average loans (annualized)

0.66%

1.05%

0.94%

1.65%

Nonaccrual loans to total loans

0.62%

1.68%

2.59%

3.11%

90 day accruing loans to total loans

0.04%

0.06%

0.02%

0.09%












QTD Ended

QTD Ended

QTD Ended

QTD Ended


September 30

June 30

March 31

December 31


2012

2012

2012

2011

Per Common Share (diluted):





Net income

$            0.14

$             0.14

$              0.12

$             0.05

Cash dividends paid

0.01

0.01

0.01

0.01

Book value

10.69

10.44

10.20

10.05

Closing stock price

7.42

5.18

4.80

2.84






Loan Portfolio Composition: (in thousands)





Commercial, financial and agricultural

$       155,890

$        147,773

$        144,319

$       155,330

Non-residential real estate

554,475

567,184

568,811

574,505

Residential real estate

197,629

189,927

188,891

186,815

Home equity loans

37,196

36,183

36,098

37,024

Consumer loans

42,137

41,529

41,376

42,666

   Total loans

$       987,327

$        982,596

$        979,495

$       996,340






Deposit Composition: (in thousands)





Noninterest-bearing deposits

$       233,684

$        236,145

$        238,603

$       231,718

NOW deposits

386,371

391,726

421,249

390,256

MMDA deposits

216,620

211,447

222,016

197,849

Savings deposits

117,404

116,598

121,872

119,693

Core certificates of deposit under $100,000

201,361

208,684

213,944

227,867

Core certificates of deposit $100,000 and over

177,084

178,926

176,761

187,513

Brokered certificates of deposit under $100,000

3,417

3,393

3,234

3,539

Brokered certificates of deposit $100,000 and over

13,533

14,419

12,829

13,028

   Total deposits

$    1,349,474

$    1,361,338

$    1,410,508

$    1,371,463






Nonperforming Assets: (in thousands)





Nonaccrual loans

$           6,219

$           6,443

$         14,604

$         17,177

Other real estate

28,002

31,077

34,636

36,952

Investment securities

644

639

646

599

   Total nonperforming assets

$         34,865

$         38,159

$         49,886

$         54,728

Accruing loans past due 90 days or more

$              408

$           1,537

$              245

$              602

Restructured loans (accruing)

$         16,784

$         18,372

$         19,077

$         19,662

Total nonaccrual loan to loans

0.62%

0.64%

1.45%

1.68%

Total nonperforming credit assets to loans and ORE

3.29%

3.62%

4.72%

5.11%

Total nonperforming assets to assets ratio

2.24%

2.44%

3.10%

3.49%






Allowance For Loan Loss Activity: (in thousands)





Beginning balance

$         15,310

$         16,084

$         14,953

$         16,111

Provision for loan loss

1,980

2,280

2,280

2,280

Charge-offs

(1,035)

(3,460)

(2,061)

(4,001)

Recoveries

401

406

912

563

Ending balance

$         16,656

$         15,310

$         16,084

$         14,953






 

First M&F Corporation





Financial Highlights






QTD Ended

QTD Ended

QTD Ended

QTD Ended


September 30

June 30

March 31

December 31


2012

2012

2012

2011

Condensed Income Statements: (in thousands)










Interest income

$         15,625

$         15,906

$         16,205

$         16,305

Interest expense

2,753

2,990

3,241

3,662

   Net interest income

12,872

12,916

12,964

12,643

Provision for loan losses

1,980

2,280

2,280

2,280

Noninterest revenues

5,607

6,035

5,421

5,912

Noninterest expenses

14,060

14,319

13,986

15,077

   Net income before taxes

2,439

2,352

2,119

1,198

Income tax expense

645

599

512

211

   Net income

$           1,794

$           1,753

$           1,607

$              987

Preferred dividends

(479)

(471)

(463)

(454)

   Net income applicable to common stock

1,315

1,282

1,144

533

Earnings attributable to participating securities

51

56

5

3

   Net income allocated to common shareholders

$           1,264

$           1,226

$           1,139

$              530






Tax-equivalent net interest income

$         13,088

$         13,134

$         13,181

$         12,865






Selected Average Balances: (in thousands)





Assets

$    1,546,416

$    1,577,420

$    1,607,013

$    1,564,531

Loans held for investment

984,282

973,545

983,800

993,869

Earning assets

1,396,824

1,420,370

1,445,332

1,401,948

Deposits

1,343,559

1,379,716

1,409,393

1,366,628

Equity

115,544

112,466

110,745

110,483

Common equity

97,186

94,430

93,025

93,077






Selected Ratios:





Return on average assets (annualized)

0.46%

0.45%

0.40%

0.25%

Return on average equity (annualized)  (a)

6.18%

6.27%

5.84%

3.54%

Return on average common equity (annualized)  (a)

5.38%

5.46%

4.95%

2.27%

Average equity to average assets

7.47%

7.13%

6.89%

7.06%

Tangible equity to tangible assets  (b)

7.28%

7.04%

6.67%

6.71%

Tangible common equity to tangible assets  (b)

6.08%

5.87%

5.55%

5.59%

Net interest margin (annualized, tax-equivalent)

3.73%

3.72%

3.67%

3.64%

Efficiency ratio (c)

75.21%

74.70%

75.18%

80.29%

Net charge-offs to average loans (annualized)

0.26%

1.26%

0.47%

1.37%

Nonaccrual loans to total loans

0.62%

0.64%

1.45%

1.68%

90 day accruing loans to total loans

0.04%

0.15%

0.02%

0.06%

Price to book

0.69x

0.50x

0.47x

0.28x

Price to earnings

13.25x

9.25x

10.00x

14.20x

 

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)

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

4Q 2010

641

266

267

0.03

3Q 2010

1,245

13,671

13,565

1.49
















Revenue Statistics:


Non-interest

Non-interest



Revenues

Revenues to

Revenues to



Per FTE

Ttl. Revenues

Avg. Assets



(thousands)

(percent)

(percent)


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%


4Q 2010

35.4

28.19%

1.25%


3Q 2010

34.9

27.42%

1.21%

















Expense Statistics:

Non-interest





Expense to

Efficiency




Avg. Assets

Ratio




(percent)

(percent)  (c)



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%



4Q 2010

3.69%

83.22%



3Q 2010

3.35%

75.75%



 

First M&F Corporation





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




(In thousands with yields and costs annualized)

QTD September 2012

QTD September 2011


Average


Average



Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$         28,177

0.29%

$           74,683

0.23%

Federal funds sold

660

0.31%

25,000

0.25%

Taxable investments (amortized cost)

323,015

1.75%

265,438

2.61%

Tax-exempt investments (amortized cost)

37,945

5.44%

33,294

6.04%

Loans held for sale

22,745

2.83%

6,402

3.27%

Loans held for investment

984,282

5.54%

1,028,372

5.82%

   Total earning assets

1,396,824

4.51%

1,433,189

4.83%

Non-earning assets

149,592


158,841


   Total average assets

$     1,546,416


$      1,592,030







NOW

$        384,075

0.38%

$         383,104

0.51%

MMDA

207,344

0.27%

175,471

0.65%

Savings

117,534

0.96%

118,273

1.09%

Certificates of Deposit

401,500

1.23%

490,297

1.72%

Short-term borrowings

4,594

0.49%

6,319

0.48%

Other borrowings

70,430

4.04%

75,641

4.05%

   Total interest bearing liabilities

1,185,477

0.92%

1,249,105

1.27%

Non-interest bearing deposits

233,107


223,689


Non-interest bearing liabilities

12,288


8,824


Preferred equity

18,358


17,105


Common equity

97,186


93,307


   Total average liabilities and equity

$     1,546,416


$      1,592,030


Net interest spread


3.59%


3.56%

Effect of non-interest bearing deposits


0.15%


0.19%

Effect of leverage


-0.01%


-0.03%

   Net interest margin, tax-equivalent


3.73%


3.72%

Less tax equivalent adjustment:





   Investments


0.05%


0.05%

   Loans


0.01%


0.01%

Reported book net interest margin


3.67%


3.66%

 

First M&F Corporation





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




(In thousands with yields and costs annualized)

YTD September 2012

YTD September 2011


Average


Average



Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

$         46,038

0.29%

$          79,876

0.24%

Federal funds sold

13,534

0.26%

25,000

0.25%

Taxable investments (amortized cost)

318,825

1.87%

259,198

2.81%

Tax-exempt investments (amortized cost)

36,513

5.61%

33,211

6.00%

Loans held for sale

25,288

3.06%

4,539

3.55%

Loans held for investment

980,556

5.68%

1,045,033

5.86%

   Total earning assets

1,420,754

4.55%

1,446,857

4.91%

Non-earning assets

156,084


157,453


   Total average assets

$     1,576,838


$     1,604,310







NOW

$        402,695

0.43%

$        395,544

0.68%

MMDA

217,124

0.39%

168,287

0.75%

Savings

120,040

0.97%

117,299

1.14%

Certificates of Deposit

407,076

1.31%

499,313

1.78%

Short-term borrowings

4,209

0.52%

12,893

0.31%

Other borrowings

71,765

4.08%

77,764

4.39%

   Total interest bearing liabilities

1,222,909

0.98%

1,271,100

1.39%

Non-interest bearing deposits

230,496


216,475


Non-interest bearing liabilities

10,505


7,740


Preferred equity

18,039


16,819


Common equity

94,889


92,176


   Total average liabilities and equity

$     1,576,838


$     1,604,310


Net interest spread


3.57%


3.52%

Effect of non-interest bearing deposits


0.16%


0.20%

Effect of leverage


-0.03%


-0.03%

   Net interest margin, tax-equivalent


3.70%


3.69%

Less tax equivalent adjustment:





   Investments


0.05%


0.05%

   Loans


0.01%


0.02%

Reported book net interest margin


3.64%


3.62%

 

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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