First M&F Corp. Reports Preliminary 2009 Results; Reports Additional Marks

Jan 19, 2010, 19:45 ET from First M&F Corp.

KOSCIUSKO, Miss., Jan. 19 /PRNewswire-FirstCall/ -- First M&F Corp. (Nasdaq: FMFC) reported preliminary results for 2009 today of a net loss of $44.048 million attributable to common shareholders, or $4.86 basic and diluted earnings per share, compared to earnings of $0.522 million, or $0.06 basic and diluted earnings per share for 2008.  The Company's final results are pending the completion of a review for potential impairment of goodwill as required by FASB ASC 350.  The Company expects to complete this review and report its final results before March 16, 2010, the filing date for its 10-K with the Securities and Exchange Commission.  The reported preliminary results do not include any fourth quarter impairment charge which may be required by the goodwill impairment study now underway.  Any goodwill impairment will result in a non-cash charge to earnings, reducing goodwill and equity but will have no effect on regulatory capital since it is excluded from regulatory capital.

The fall in earnings was largely due to real estate loan impairments which led to extraordinary provision expense primarily in the first and fourth quarters. Hugh Potts, Jr., Chairman and CEO, commented, "Our 2009 loss is disappointing to say the least.  The recognition of appropriate marks in our loan and other real estate portfolio has been painful in the effect on earnings and capital but should pave the way for an improved 2010 when positive earnings and capital retention are expected.  We remain well-capitalized in spite of the toll of 2009.  The intense scrutiny applied to our loan portfolio, while extraordinary by historical norms, was necessary and is now woven into the fabric of our risk management.  We believe that risk management in the Company continues to improve including the reduction of portfolio concentrations and a redistribution of risk based on portfolio diversification and tighter underwriting standards."

Mr. Potts commented further, "We have reported in previous periods some signs of a lessening of the pace of extraordinary impairments.  This is still our outlook for 2010.  The deterioration of acquisition, construction and development loans has begun to somewhat stabilize and our fourth quarter provisioning and charge-offs reflects the fine-tuning of our risk measurement process."

Net income for the quarter ended December 31, 2009 was a loss of $10.881 million attributable to common shareholders, or $1.20 basic and diluted earnings per share, compared to a loss of $4.300 million, or $.47 basic and diluted earnings per share for the fourth quarter of 2008.

For the fourth quarter of 2009 the annualized return on assets was a negative 2.49%, while return on equity was a negative 31.38%. Comparatively, the return on assets for the fourth quarter of 2008 was a negative 1.08%, with a negative return on equity of 12.27%. The return on assets for 2009 was a negative 2.62%, while the return on equity was a negative 30.92%.

Net Interest Income

Net interest income was down by 4.41% compared to the fourth quarter of 2008, with the net interest margin decreasing to 3.28% in the fourth quarter of 2009 as compared to 3.60% in the fourth quarter of 2008. The significant contributor to the decrease in net interest income was erosion in spreads as non-performing assets, primarily non-accrual loans, steadily increased throughout the year. "The margin compression of 2009 should dissipate and the margin should improve going forward as non-performing assets are turned to cash or are rehabilitated," said Mr. Potts.  The net interest margin for the third quarter of 2009 was 3.40% as compared to 3.16% for the second quarter of 2009 and 3.33% for the first quarter of 2009. Loan yields decreased to 6.04% in the fourth quarter of 2009 from 6.43% in the fourth quarter of 2008. Loan yields also decreased slightly from the third quarter of 2009 to the fourth quarter. Average loans were $1.103 billion for the fourth quarter of 2009 as compared to $1.107 billion for the third quarter of 2009 and $1.202 million during the fourth quarter of 2008. Loans fell by $40.768 million in the fourth quarter of 2009 and by $8.633 million in the third quarter.  Deposit costs fell in the fourth quarter of 2009 from the third quarter of 2009 and from the fourth quarter of 2008, as deposits were re-priced downward throughout 2009 in the current stable low-rate environment.  Deposit costs were 1.87% in the fourth quarter of 2009 as compared to 2.63% in the fourth quarter of 2008. Deposits grew by $31.446 million during the fourth quarter of 2009. Management plans to continue to emphasize and focus on core deposit growth by developing relationship-driven deposit gathering while de-emphasizing non-core deposit funding such as public deposits. Loans as a percentage of assets were 63.01% at December 31, 2009 as compared to 73.68% at December 31, 2008 and 65.56% at September 30, 2009. Loans fell by 10.05% during 2009 while deposits grew by 10.06%.

Non-interest Income

Non-interest income, excluding securities transactions and other-than-temporary impairment on securities, for the fourth quarter of 2009 was flat compared to the fourth quarter of 2008, with deposit-related income down by 3.04% and mortgage income up 110.11%.  Insurance agency commissions were down by 8.35%.  

Non-interest income, excluding securities transactions and other-than-temporary impairment on securities, was down 3.70% for 2009 versus 2008.  Over half of non-interest income is from deposit sources, which was down 6.12% year over year. Deposit revenues continue to be supported by debit card fee income, which increased by 18.04% in 2009 over 2008, and overdraft fee income, which, however, decreased by 12.01% for the year. Commission revenues from traditional insurance products were down 5.92% year over year.

Non-interest income includes non-cash other-than-temporary impairment charges of $.417 million in the fourth quarter and $.829 million in 2009 on pooled trust preferred securities held in the investment portfolio.  These charges reflect credit losses expected due to deferrals and defaults by issuing institutions and cash flow analyses.

Non-interest Expenses

Non-interest expenses were up by 27.13% in the fourth quarter of 2009 as compared to the fourth quarter of 2008.  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 slightly.

Non-interest expenses increased by 45.72% for 2009 as compared to 2008.  Most of the increase in total non-interest expense year over year was due to significant increases in losses on Other Real Estate, a significant increase in FDIC insurance assessments and the impairment of goodwill and other intangibles. Excluding those significant items, non-interest expense fell year over year by .50%.  Salaries and benefits were down by 2.21% for 2009.  The number of full-time equivalent employees at the end of 2009 was 517 as compared to 525 at the end of the third quarter of 2009 and 547 at the end of 2008.

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the fourth quarter of 2009 were 8.87% as compared to 1.79% for the same period in 2008. Non-accrual and 90-day past due loans as a percent of total loans were 4.40% at the end of 2009 as compared to 2.22% at the end of 2008. Annualized net charge-offs as a percentage of average loans for 2009 were 4.50% as compared to .75% for 2008. The allowance for loan losses as a percentage of loans was 2.25% at December 31, 2009 as compared to 2.10% at December 31, 2008. The provision for loan losses increased in 2009 from $19.734 million in 2008 to $49.601 million in 2009.  The additional provisioning was made primarily in light of continued deterioration in appraised collateral values on collateral-dependent real estate loans and other real estate and disposition experience.

Mr. Potts commented, "Non-performing assets fell to $70.6 million at year-end, the result of carefully orchestrated problem credit remediation or resolution through either foreclosure and ultimate sale or charge off.  The work-out process is improving and accelerating as 2009 moves into 2010.  Continued high provisioning in the quarter, after a large provision in the first quarter, reflects appropriate and sometimes rather severe marks based on continuing real estate price adjustments from reappraisals but also from experience as we build a database based on the realities of the market."

Balance Sheet

Total assets grew by 5.19% in 2009, to $1.680 billion from $1.597 billion.  Total equity fell to $121.351 million, a 10.75% decrease from 2008. Total loans were $1.058 billion compared to $1.177 billion at the end of 2008. Deposits were $1.388 billion compared to $1.261 billion at the end of 2008.  Book value per common share decreased to $10.20 per share at the end of 2009, an 11.84% decrease from 2008.

In conclusion Mr. Potts said, "The arduous and expensive experience of 2008 and 2009 is now behind us.  The M&F management team and family of associates have made many necessary, difficult decisions.  The focus, however, is now ahead. The prospects for 2010 and beyond are much more encouraging."

Growth

In the fourth quarter of 2008 the Company closed two branches in Brandon, Rankin County, Mississippi and replaced them with one new branch in that county.  In the fourth quarter of 2009, the Company closed four branches, one each in Starkville, Philadelphia and Southaven, Mississippi and one in Crestview, Florida.  In the first quarter of 2010 the Company plans to close two branches in Shelby County, Tennessee and one branch in Shelby County, Alabama.  These closures are designed to improve the Company's efficiencies and cost structure without exiting any markets.

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 Mississippi, Alabama, Tennessee and Florida.

Caution Concerning ForwardLooking Statements

This document includes certain "forwardlooking 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

2009

2008

Cash and due from banks

42,446 

47,738 

Interest bearing bank balances

84,746 

6,556 

Federal funds sold

70,000 

9,350 

Securities available for sale (cost of

 $280,514 and $223,882)

284,599 

227,145 

Loans held for sale

10,266 

7,698 

Loans

1,058,340 

1,176,595 

Allowance for loan losses

24,014 

24,918 

    Net loans

1,034,326 

1,151,677 

Bank premises and equipment

42,919 

44,642 

Accrued interest receivable

7,598 

9,832 

Other real estate

23,578 

11,061 

Goodwill

16,772 

32,572 

Other intangible assets

5,439 

7,127 

Other assets

57,066 

41,467 

    Total assets

1,679,755 

1,596,865 

Non-interest bearing deposits

228,579 

178,689 

Interest bearing deposits

1,159,684 

1,082,698 

    Total deposits

1,388,263 

1,261,387 

Federal funds and repurchase agreements

8,642 

9,728 

Other borrowings

122,510 

151,547 

Junior subordinated debt

30,928 

30,928 

Accrued interest payable

2,933 

3,537 

Other liabilities

5,128 

3,770 

    Total liabilities

1,558,404 

1,460,897 

Preferred stock, 30,000 shares issued and outstanding

28,838 

Common stock, 9,069,346 and 9,063,346

    shares issued & outstanding

45,347 

45,317 

Additional paid-in capital

31,926 

30,447 

Nonvested restricted stock awards

734 

780 

Retained earnings

14,177 

60,133 

Accumulated other comprehensive income

328 

(727)

    Total First M&F Corp equity

121,350 

135,950 

Noncontrolling interests in subsidiaries

18 

    Total equity

121,351 

135,968 

    Total liabilities & equity

1,679,755 

1,596,865 

First M&F Corporation and Subsidiary

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except share data)

Three Months Ended December 31

Twelve Months Ended December 31

2009

2008

2009

2008

Interest and fees on loans

16,635 

19,327 

66,782 

81,487 

Interest on loans held for sale

86 

58 

278 

299 

Taxable investments

2,213 

2,130 

9,531 

9,023 

Tax exempt investments

488 

557 

2,105 

2,164 

Federal funds sold

34 

38 

95 

182 

Interest bearing bank balances

30 

13 

42 

133 

    Total interest income

19,486 

22,123 

78,833 

93,288 

Interest on deposits

5,452 

7,119 

23,701 

32,255 

Interest on fed funds and repurchase agreements

14 

68 

97 

327 

Interest on other borrowings

1,329 

1,682 

5,449 

6,717 

Interest on subordinated debt

504 

505 

1,992 

1,993 

    Total interest expense

7,299 

9,374 

31,239 

41,292 

    Net interest income

12,187 

12,749 

47,594 

51,996 

Provision for possible loan losses

15,761 

10,684 

49,601 

19,734 

    Net interest income (expense) after loan loss

(3,574)

2,065 

(2,007)

32,262 

Service charges on deposits

2,838 

2,927 

10,976 

11,692 

Mortgage banking income

395 

188 

1,823 

1,202 

Agency commission income

856 

934 

3,881 

4,125 

Fiduciary and brokerage income

117 

132 

489 

585 

Other income

622 

650 

3,174 

3,521 

Other-than-temporary impairment on securities, net of

$1,503 and $2,715 charged to other comprehensive

income

(417)

(829)

Gains on AFS securities

14 

456 

    Total noninterest income

4,425 

4,832 

19,970 

21,131 

Salaries and employee benefits

6,748 

6,761 

28,314 

28,954 

Net occupancy expense

1,306 

1,095 

4,614 

4,210 

Equipment expenses

682 

923 

2,877 

3,594 

Software and processing expenses

440 

597 

1,898 

2,072 

FDIC insurance assessments

711 

325 

3,276 

575 

Foreclosed property expenses

4,493 

1,106 

7,283 

1,913 

Goodwill impairment

15,800 

Intangible asset amortization and impairment

107 

121 

1,688 

485 

Other expenses

3,617 

3,313 

13,350 

12,481 

    Total noninterest expense

18,104 

14,241 

79,100 

54,284 

    Net income (loss) before taxes

(17,253)

(7,344)

(61,137)

(891)

Income tax expense (benefit)

(6,715)

(2,991)

(18,104)

(1,436)

    Net income (loss)

(10,538)

(4,353)

(43,033)

545 

Net income (loss) attributable to noncontrolling interests

(6)

19 

    Net income (loss) attributable to First M&F Corp

(10,539)

(4,357)

(43,027)

526 

Earnings Per Common Share Calculations:

    Net income (loss) attributable to First M&F Corp

(10,539)

(4,357)

(43,027)

526 

Dividends and accretion on preferred stock

436 

1,464 

    Net income (loss) applicable to common stock

(10,975)

(4,357)

(44,491)

526 

Earnings (loss) attributable to participating securities  (a)

(94)

(57)

(443)

    Net income (loss) allocated to common shareholders

(10,881)

(4,300)

(44,048)

522 

Weighted average shares (basic)

9,069,346 

9,061,862 

9,066,880 

9,061,730 

Weighted average shares (diluted)

9,069,346 

9,061,862 

9,066,880 

9,062,384 

Basic earnings (loss) per share  (a)

($1.20)

($0.47)

($4.86)

$0.06 

Diluted earnings (loss) per share

($1.20)

($0.47)

($4.86)

$0.06 

First M&F Corporation

Financial Highlights

YTD Ended

YTD Ended

December 31

December 31

2009

2008

Performance Ratios:

Return on assets (annualized)

-2.62%

0.03%

Return on equity (annualized)  (b)

-30.92%

0.37%

Return on common equity (annualized)  (b)

-39.02%

0.37%

Efficiency ratio

89.87%

72.77%

Net interest margin (annualized, tax-equivalent)

3.29%

3.67%

Net charge-offs to average loans (annualized)

4.50%

0.75%

Nonaccrual loans to total loans

4.17%

1.74%

90 day accruing loans to total loans

0.23%

0.48%

QTD Ended

QTD Ended

QTD Ended

QTD Ended

December 31

September 30

June 30

March 31

2009

2009

2009

2009

Per Common Share (diluted):

Net income (loss)

(1.20)  

(0.06)  

(0.61)  

(2.99)  

Cash dividends paid

0.01   

0.01   

0.01   

0.13   

Book value

10.20   

11.57   

11.46   

12.14   

Closing stock price

2.21   

3.75   

4.07   

6.12   

Loan Portfolio Composition: (in thousands)

Commercial, financial and agricultural

120,446   

124,836   

135,325   

132,812   

Non-residential real estate

643,761   

677,777   

672,359   

720,783   

Residential real estate

195,361   

197,760   

205,068   

204,003   

Home equity loans

44,560   

44,250   

44,827   

45,116   

Consumer loans

44,598   

44,318   

40,728   

37,451   

Other loans

9,614   

10,167   

9,434   

9,087   

  Total loans

1,058,340   

1,099,108   

1,107,741   

1,149,252   

Deposit Composition: (in thousands)

Noninterest-bearing deposits

228,579   

196,999   

181,163   

191,386   

NOW deposits

309,545   

294,303   

286,265   

283,521   

MMDA deposits

161,570   

155,858   

163,112   

179,313   

Savings deposits

112,764   

112,370   

113,061   

114,529   

Certificates of deposit under $100,000

279,810   

283,531   

281,698   

274,187   

Certificates of deposit $100,000 and over

277,919   

306,728   

274,472   

258,664   

Brokered certificates of deposit under $100,000

18,076   

7,028   

9,776   

11,560   

  Total deposits

1,388,263   

1,356,817   

1,309,547   

1,313,160   

Nonperforming Assets: (in thousands)

Nonaccrual loans

44,549   

69,019   

74,420   

52,084   

Other real estate

23,578   

28,114   

22,575   

10,907   

Investment securities

825   

610   

1,047   

-   

  Total nonperforming assets

68,952   

97,743   

98,042   

62,991   

Accruing loans past due 90 days or more

2,479   

6,351   

5,608   

1,409   

Restructured loans (accruing)

4,620   

3,664   

3,664   

3,664   

Total nonaccrual loan to loans

4.17%

6.24%

6.69%

4.51%

Total nonperforming credit assets to loans and ORE

6.24%

8.57%

8.54%

5.40%

Total nonperforming assets to assets ratio

4.10%

5.83%

6.03%

3.84%

Allowance For Loan Loss Activity: (in thousands)

Beginning balance

32,695   

31,323   

41,506   

24,918   

Provision for loan loss

15,761   

4,805   

9,195   

19,840   

Charge-offs

(24,556)  

(3,597)  

(19,579)  

(3,508)  

Recoveries

114   

164   

201   

256   

Ending balance

24,014   

32,695   

31,323   

41,506   

First M&F Corporation

Financial Highlights

QTD Ended

QTD Ended

QTD Ended

QTD Ended

December 31

September 30

June 30

March 31

2009

2009

2009

2009

Condensed Income Statements: (in thousands)

Interest income

19,486   

19,926   

19,160   

20,261   

Interest expense

7,299   

7,628   

7,895   

8,417   

  Net interest income

12,187   

12,298   

11,265   

11,844   

Provision for loan losses

15,761   

4,805   

9,195   

19,840   

Noninterest revenues

4,425   

5,381   

4,976   

5,188   

Noninterest expenses

18,104   

14,140   

15,815   

31,041   

  Net income (loss) before taxes

(17,253)  

(1,266)  

(8,769)  

(33,849)  

Income tax expense (benefit)

(6,715)  

(1,137)  

(3,660)  

(6,592)  

Noncontrolling interest

1   

7   

2   

(16)  

  Net income (loss)

(10,539)  

(136)  

(5,111)  

(27,241)  

Preferred dividends

436   

435   

439   

154   

  Net income (loss) applicable to common stock

(10,975)  

(571)  

(5,550)  

(27,395)  

Earnings (loss) attributable to participating securities  (a)

(94)  

9   

(52)  

(306)  

  Net income (loss) allocated to common shareholders

(10,881)  

(580)  

(5,498)  

(27,089)  

Tax-equivalent net interest income

12,537   

12,670   

11,654   

12,216   

Selected Average Balances: (in thousands)

Assets

1,676,504   

1,646,710   

1,611,513   

1,645,555   

Loans held for investment

1,093,694   

1,100,109   

1,131,370   

1,165,086   

Earning assets

1,518,371   

1,478,169   

1,478,819   

1,486,073   

Deposits

1,361,049   

1,315,758   

1,303,615   

1,304,905   

Equity

133,240   

135,365   

138,120   

150,128   

Common equity

104,471   

106,694   

109,510   

135,791   

Selected Ratios:

Return on average assets (annualized)

-2.49%

-0.03%

-1.27%

-6.71%

Return on average equity (annualized)  (b)

-31.38%

-0.40%

-14.84%

-73.59%

Return on average common equity (annualized)  (b)

-41.67%

-2.13%

-20.33%

-81.82%

Average equity to average assets

7.95%

8.22%

8.57%

9.12%

Tangible equity to tangible assets  (c)

5.98%

6.74%

6.88%

7.18%

Tangible common equity to tangible assets  (c)

4.24%

5.00%

5.09%

5.41%

Net interest margin (annualized, tax-equivalent)

3.28%

3.40%

3.16%

3.33%

Efficiency ratio

106.73%

78.34%

95.10%

80.41%

Net charge-offs to average loans (annualized)

8.87%

1.24%

6.87%

1.13%

Nonaccrual loans to total loans

4.17%

6.24%

6.69%

4.51%

90 day accruing loans to total loans

0.23%

0.57%

0.50%

0.12%

Price to book (x)

0.22   

0.32   

0.36   

0.50   

Price to earnings (x)

N/A

N/A

N/A

N/A

First M&F Corporation

Financial Highlights

Historical Earnings Trends:  (a)

Earnings

Earnings

Applicable to

Allocated to

Common

Common

Earnings

Stock

Shareholders

EPS

(in thousands)

(in thousands)

(in thousands)

(diluted)

4Q 2009

(10,539)

(10,975)

(10,881)

(1.20)

3Q 2009

(136)

(571)

(580)

(0.06)

2Q 2009

(5,111)

(5,550)

(5,498)

(0.61)

1Q 2009

(27,241)

(27,395)

(27,089)

(2.99)

4Q 2008

(4,357)

(4,357)

(4,300)

(0.47)

3Q 2008

2,210 

2,210 

2,183 

0.24 

2Q 2008

(466)

(466)

(458)

(0.05)

1Q 2008

3,139 

3,139 

3,097 

0.34 

4Q 2007

3,561 

3,561 

3,517 

0.38 

3Q 2007

3,808 

3,808 

3,760 

0.42 

2Q 2007

3,535 

3,535 

3,492 

0.38 

Revenue Statistics:

Non-interest

Non-interest

Revenues

Revenues to

Revenues to

Contribution

Per FTE

Ttl. Revenues

Avg. Assets

Margin

(thousands)

(percent)

(percent)

(percent)  (d)

4Q 2009

32.8   

26.09%

1.05%

60.22%

3Q 2009

34.4   

29.81%

1.30%

60.64%

2Q 2009

31.2   

29.92%

1.24%

56.11%

1Q 2009

32.3   

29.81%

1.28%

58.85%

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%

Expense Statistics:

Non-interest

Expense to

Efficiency

Avg. Assets

Ratio

(percent)

(percent)  (e)

4Q 2009

4.28%

106.73%

3Q 2009

3.41%

78.34%

2Q 2009

3.94%

95.10%

1Q 2009

7.65%

80.41%

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%

First M&F Corporation

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

(In thousands with yields and costs annualized)

QTD December 2009

QTD December 2008

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

59,852   

0.20%

9,086   

0.56%

Federal funds sold

65,479   

0.20%

19,568   

0.78%

Taxable investments (amortized cost)

237,842   

3.69%

161,999   

5.23%

Tax-exempt investments (amortized cost)

52,275   

5.91%

57,598   

6.13%

Loans held for sale

9,229   

3.71%

5,208   

4.44%

Loans held for investment

1,093,694   

6.06%

1,196,806   

6.44%

  Total earning assets

1,518,371   

5.18%

1,450,265   

6.17%

Non-earning assets

158,133   

161,179   

  Total average assets

1,676,504   

1,611,444   

NOW

296,806   

1.18%

214,154   

1.49%

MMDA

169,439   

1.14%

179,120   

2.25%

Savings

112,482   

1.36%

114,742   

2.02%

Certificates of Deposit

576,285   

2.54%

568,279   

3.30%

Short-term borrowings

10,036   

0.56%

13,127   

2.08%

Other borrowings

163,422   

4.45%

194,655   

4.47%

  Total interest bearing liabilities

1,328,470   

2.18%

1,284,077   

2.90%

Non-interest bearing deposits

206,037   

178,088   

Non-interest bearing liabilities

8,757   

7,967   

Preferred equity

28,768   

-   

Common equity

104,472   

141,312   

  Total average liabilities and equity

1,676,504   

1,611,444   

Net interest spread

3.00%

3.27%

Effect of non-interest bearing deposits

0.29%

0.35%

Effect of leverage

-0.01%

-0.02%

  Net interest margin, tax-equivalent

3.28%

3.60%

Less tax equivalent adjustment:

  Investments

0.08%

0.09%

  Loans

0.02%

0.01%

Reported book net interest margin

3.18%

3.50%

First M&F Corporation

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

(In thousands with yields and costs annualized)

YTD December 2009

YTD December 2008

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

25,151   

0.17%

6,954   

1.92%

Federal funds sold

43,871   

0.22%

9,810   

1.86%

Taxable investments (amortized cost)

234,942   

4.06%

176,284   

5.12%

Tax-exempt investments (amortized cost)

56,021   

5.99%

55,990   

6.16%

Loans held for sale

8,120   

3.42%

6,170   

4.85%

Loans held for investment

1,122,308   

5.97%

1,200,628   

6.80%

  Total earning assets

1,490,413   

5.39%

1,455,836   

6.51%

Non-earning assets

154,747   

165,867   

  Total average assets

1,645,160   

1,621,703   

NOW

280,484   

1.28%

211,006   

1.50%

MMDA

167,425   

1.34%

177,582   

2.35%

Savings

113,397   

1.48%

115,027   

2.30%

Certificates of Deposit

569,623   

2.84%

587,695   

3.79%

Short-term borrowings

10,448   

0.93%

13,860   

2.36%

Other borrowings

165,548   

4.49%

186,978   

4.66%

  Total interest bearing liabilities

1,306,925   

2.39%

1,292,148   

3.20%

Non-interest bearing deposits

190,541   

179,237   

Non-interest bearing liabilities

8,538   

8,312   

Preferred equity

25,141   

-   

Common equity

114,015   

142,006   

  Total average liabilities and equity

1,645,160   

1,621,703   

Net interest spread

3.00%

3.31%

Effect of non-interest bearing deposits

0.30%

0.39%

Effect of leverage

-0.01%

-0.03%

  Net interest margin, tax-equivalent

3.29%

3.67%

Less tax equivalent adjustment:

  Investments

0.08%

0.09%

  Loans

0.02%

0.01%

Reported book net interest margin

3.19%

3.57%

First M&F Corporation

Notes to Financial Schedules

(a)  Effective January 1, 2009 the Company adopted FSP EITF 03-6-1 which clarifies that unvested restricted stock awards

that contain nonforfeitable rights to dividends are considered participating securities and therefore are included in the

two-class method calculation of earnings per share. Under this method, all distributed and undistributed earnings are

allocated to the Company's common shares and the Company's restricted stock grant shares based on their respective

rights to receive dividends. Earnings per share have been revised to reflect the retrospective application of the FSP.

(b)  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)

(c)  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)

(d)  Contribution margin is calculated as: (Tax-equivalent net interest income plus noninterest revenues minus salaries

and benefits) divided by (Tax-equivalent net interest income plus noninterest revenues)

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

noninterest revenues)

SOURCE First M&F Corp.