M&F Clean-Up, Earnings Continue for Third Consecutive Quarter; Recognizes Gain on Exchange of Preferred Shares.

Oct 20, 2010, 08:00 ET from First M&F Corporation

KOSCIUSKO, Miss., Oct. 20 /PRNewswire-FirstCall/ -- First M&F Corp. (Nasdaq: FMFC) reported today a net profit for the quarter ended September 30, 2010 of $1.245 million.  Net income for the quarter allocated to common shareholders was $13.565 million including a gain on the exchange of preferred stock of $12.867 million, or $1.49 basic and diluted earnings per share.  Common net income excluding the gain on exchange was $.801 million, or $.08 basic and diluted earnings per share, compared to the second quarter of 2010 earnings of $.826 million, or $.09 basic and diluted earnings per share and a loss of $.580 million, or $(.06) basic and diluted earnings per share for the third quarter of 2009.

Hugh Potts, Jr., Chairman and CEO commented, "Trends and actual performance of the Company continue to improve.  There is substance and progress year-to-date, in the third quarter and certainly year over year.  The tepid economy makes a more accelerated recovery of our performance very challenging.  However, the improvement in pre-tax, pre-provision core earnings, stable and overall declining nonperforming assets and credit-related expense reductions all give evidence of performance improvement."

The Company recently announced its certification as a Community Development Financial Institution.  Mr. Potts commented, "Our certification as a Community Development Financial Institution late in the quarter should accelerate our performance and enable us to better serve our markets, communities and shareholders.  The certification allowed us to exchange our 5% TARP preferred for 2% TARP preferred, significantly lowering the capital cost."  The extinguishment of the Company's original TARP preferred also resulted in a fair value gain, the effect of which is to reduce preferred stock carrying value and increase common earnings and retained earnings.

Net Interest Income

Reported net interest income was flat compared to the third quarter of 2009, with the net interest margin increasing to 3.60% on a tax equivalent basis in the third quarter of 2010 as compared to 3.40% in the third quarter of 2009. The significant contributors to the increase in net interest margin year over year was the improvement in spreads, primarily due to lower cost of funds followed by a trend downward in new nonaccrual loans. The net interest margin for the second quarter of 2010 was 3.40% as compared to 3.16% for the first quarter of 2010 and 3.28% for the fourth quarter of 2009.  Loan yields fell to 5.90% in the third quarter of 2010 from 6.07% in the third quarter of 2009. Loan yields decreased from the second quarter of 2010 to the third quarter as well as the Company strove to increase loan volumes in the face of tepid demand. Average loans were $1.052 billion for the third quarter of 2010 as compared to $1.045 billion for the second quarter of 2010 and $1.107 billion during the third quarter of 2009. Loans increased by $8.9 million in the third quarter of 2010 and fell by $4.3 million in the second quarter.

Deposit costs decreased in the third quarter of 2010 from the second quarter of 2010 and from the third quarter of 2009, in response to the continuing low rate environment.  Deposit costs were 1.60% in the third quarter of 2010 as compared to 2.03% in the third quarter of 2009. Deposits fell by $21.9 million during the third quarter of 2010 consistent with historic summertime runoff and have fallen $34.9 million since the third quarter of 2009. Management plans to continue to focus on core deposit growth for 2010 to encourage relationship-driven deposits as a stable source of funding.

Loans as a percentage of assets were 67.7% at September 30, 2010 as compared to 65.6% at September 30, 2009 and 63.64% at December 31, 2009. Loans fell by 4.74% since the third quarter of 2009 while deposits fell by 2.57%.

Non-interest Income

Non-interest income, excluding securities transactions and impairment of investments, for the third quarter of 2010 fell by 7.69% compared to the third quarter of 2009, with deposit-related income down 6.24%.  Insurance agency commissions were up by 1.37%.  

A major part of non-interest income is from deposit sources. Although down overall, deposit revenues continue to be supported by debit card fee income, which was up 27.1% in the third quarter of 2010 compared to the third quarter of 2009, while overdraft fee income decreased by 15.97%.

Non-interest Expenses

Non-interest expenses were down by 7.28% in the third quarter of 2010 as compared to the third quarter of 2009 largely due to lower foreclosed property expenses and cost-savings initiatives put in place in late 2009 and early 2010, including the closure of seven branch locations.  As part of the expense initiatives, salaries and benefits expenses fell by 3.56% versus the year ago quarter.

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the third quarter of 2010 were 0.19% as compared to 1.24% for the same period in 2009.  Net charge-offs totaled $.504 million for the quarter versus $3.433 million a year ago and $5.194 million in the second quarter of 2010.  Non-accrual and 90-day past due loans as a percent of total loans were 3.61% at the end of the third quarter of 2010 as compared to 6.81% at the end of the 2009 quarter. The allowance for loan losses as a percentage of loans was 1.92% at September 30, 2010 as compared to 2.97% at September 30, 2009. The provision for loan losses fell to $2.280 million in the third quarter of 2010 from $4.805 million in the third quarter of 2009 as the pace of loan impairments and past dues continue to trend downward.  Mr. Potts commented, "In a statistical and macro-economic sense the Great Recession of 2008-2009 may have ended.  The wreckage in financial and economic terms is far from over.  Recovery has been and will be much longer and more difficult to achieve in this economy.  The Company, however, shall not lose focus on asset quality and reduction of non-performing assets."

Balance Sheet

Total assets at September 30, 2010 were $1.547 billion as compared to $1.663 billion at the end of 2009 and $1.676 billion at September 30, 2009. Total loans were $1.047 billion compared to $1.058 billion at the end of 2009 and $1.099 billion at September 30, 2009. Deposits were $1.322 billion compared to $1.388 billion at the end of 2009 and $1.357 billion at September 30, 2009. Total capital was $108.8 million or $10.18 in book value per common share at September 30, 2010.

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)

September 30

December 31

September 30

2010

2009

2009

Cash and due from banks

36,232

42,446

38,809

Interest bearing bank balances

32,904

84,810

57,934

Federal funds sold

25,000

70,000

50,000

Securities available for sale (cost of

 $265,814, $280,470 and $296,828)

272,467

284,550

303,305

Loans held for sale

3,893

10,266

6,726

Loans

1,047,013

1,058,340

1,099,108

Allowance for loan losses

20,077

24,014

32,695

    Net loans

1,026,936

1,034,326

1,066,413

Bank premises and equipment

41,143

42,919

43,574

Accrued interest receivable

6,617

7,598

8,280

Other real estate

38,631

23,578

28,114

Goodwill

0

0

16,772

Other intangible assets

5,119

5,439

5,546

Other assets

57,693

57,036

50,996

    Total assets

1,546,635

1,662,968

1,676,469

Non-interest bearing deposits

220,556

228,579

196,999

Interest bearing deposits

1,101,323

1,159,684

1,159,818

    Total deposits

1,321,879

1,388,263

1,356,817

Federal funds and repurchase agreements

25,685

8,642

12,164

Other borrowings

50,141

122,510

133,751

Junior subordinated debt

30,928

30,928

30,928

Accrued interest payable

1,554

2,933

2,973

Other liabilities

7,691

5,062

6,086

    Total liabilities

1,437,878

1,558,338

1,542,719

Preferred stock, 30,000 shares issued and outstanding

16,164

28,838

28,778

Common stock, 9,097,552, 9,069,346 and 9,069,346

    shares issued & outstanding

45,488

45,347

45,347

Additional paid-in capital

31,893

31,926

31,922

Nonvested restricted stock awards

756

734

765

Retained earnings

12,050

(2,595)

25,242

Accumulated other comprehensive income

2,406

379

1,695

    Total First M&F Corp equity

108,757

104,629

133,749

Noncontrolling interests in subsidiaries

-

1

1

    Total equity

108,757

104,630

133,750

    Total liabilities & equity

1,546,635

1,662,968

1,676,469

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

2010

2009

2010

2009

Interest and fees on loans

15,532

16,798

46,607

50,147

Interest on loans held for sale

46

76

170

192

Taxable investments

1,863

2,507

5,940

7,318

Tax exempt investments

374

519

1,196

1,617

Federal funds sold

17

22

67

61

Interest bearing bank balances

23

4

109

12

    Total interest income

17,855

19,926

54,089

59,347

Interest on deposits

4,471

5,758

14,632

18,249

Interest on fed funds and repurchase agreements

15

26

49

83

Interest on other borrowings

576

1,345

2,488

4,120

Interest on subordinated debt

499

499

1,487

1,488

    Total interest expense

5,561

7,628

18,656

23,940

    Net interest income

12,294

12,298

35,433

35,407

Provision for possible loan losses

2,280

4,805

6,940

33,840

    Net interest income after loan loss

10,014

7,493

28,493

1,567

Service charges on deposits

2,629

2,804

7,675

8,138

Mortgage banking income

330

468

1,142

1,428

Agency commission income

1,112

1,097

2,945

3,025

Fiduciary and brokerage income

141

120

406

372

Other income

567

688

2,084

2,552

Other-than-temporary impairment on securities, net of

$11, $988, $13 and $1,206 recognized in other

comprehensive income

(56)

(237)

(422)

(412)

Gains on AFS securities

23

441

1,735

442

    Total noninterest income

4,746

5,381

15,565

15,545

Salaries and employee benefits

6,853

7,106

20,571

21,566

Net occupancy expense

1,023

1,134

2,969

3,308

Equipment expenses

550

706

1,859

2,195

Software and processing expenses

408

465

1,227

1,458

FDIC insurance assessments

808

750

2,493

2,565

Foreclosed property expenses

166

508

1,041

2,790

Goodwill impairment

-

-

-

15,800

Intangible asset amortization and impairment

107

107

320

1,581

Other expenses

3,196

3,364

9,382

9,733

    Total noninterest expense

13,111

14,140

39,862

60,996

    Net income (loss) before taxes

1,649

(1,266)

4,196

(43,884)

Income tax expense (benefit)

407

(1,137)

828

(11,389)

    Net income (loss)

1,242

(129)

3,368

(32,495)

Net income (loss) attributable to noncontrolling interests

(3)

7

(2)

(7)

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

1,245

(136)

3,370

(32,488)

Earnings Per Common Share Calculations:

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

1,245

(136)

3,370

(32,488)

Dividends and accretion on preferred stock

(441)

(435)

(1,317)

(1,028)

Gain on exchange of preferred stock  (Note 1)

12,867

-

12,867

-

    Net income (loss) applicable to common stock

13,671

(571)

14,920

(33,516)

Earnings (loss) attributable to participating securities

106

9

116

(349)

    Net income (loss) allocated to common shareholders

13,565

(580)

14,804

(33,167)

Weighted average shares (basic)

9,087,769

9,069,346

9,075,554

9,066,049

Weighted average shares (diluted)

9,087,769

9,069,346

9,075,554

9,066,049

Basic earnings (loss) per share

$1.49

($0.06)

$1.63

($3.66)

Diluted earnings (loss) per share

$1.49

($0.06)

$1.63

($3.66)

First M&F Corporation

Financial Highlights

YTD Ended

YTD Ended

YTD Ended

YTD Ended

September 30

December 31

September 30

December 31

2010

2009

2009

2008

Performance Ratios:

Return on assets (annualized)

0.28%

-3.63%

-2.66%

0.03%

Return on equity (annualized)  (a)

4.23%

-42.97%

-30.77%

0.37%

Return on common equity (annualized)  (a)

3.54%

-53.73%

-38.23%

0.37%

Efficiency ratio

76.86%

89.87%

84.38%

72.77%

Net interest margin (annualized, tax-equivalent)

3.38%

3.29%

3.30%

3.67%

Net charge-offs to average loans (annualized)

1.39%

4.50%

3.08%

0.75%

Nonaccrual loans to total loans

3.53%

4.17%

6.24%

1.74%

90 day accruing loans to total loans

0.08%

0.23%

0.57%

0.48%

QTD Ended

QTD Ended

QTD Ended

QTD Ended

September 30

June 30

March 31

December 31

2010

2010

2010

2009

Per Common Share (diluted):

Net income (loss) (including $12,867 gain)

1.49

0.09

0.05

(3.03)

Net income (loss) (excluding $12,867 gain)

0.08

0.09

0.05

(3.03)

Cash dividends paid

0.01

0.01

0.01

0.01

Book value

10.18

8.68

8.37

8.36

Closing stock price

3.38

3.86

3.15

2.21

Loan Portfolio Composition: (in thousands)

Commercial, financial and agricultural

130,596

130,657

123,476

120,415

Non-residential real estate

626,747

615,571

626,025

643,804

Residential real estate

196,299

196,547

195,862

195,361

Home equity loans

40,523

41,254

43,043

44,560

Consumer loans

45,124

44,998

44,788

44,586

Other loans

7,724

9,088

9,235

9,614

  Total loans

1,047,013

1,038,115

1,042,429

1,058,340

Deposit Composition: (in thousands)

Noninterest-bearing deposits

220,556

227,825

217,683

228,579

NOW deposits

307,533

312,828

331,066

309,545

MMDA deposits

162,955

145,798

141,203

161,570

Savings deposits

117,175

114,426

113,367

112,764

Core certificates of deposit under $100,000

267,350

278,177

289,525

290,602

Core certificates of deposit $100,000 and over

228,543

245,182

262,335

266,131

Brokered certificates of deposit under $100,000

3,005

5,322

6,033

7,284

Brokered certificates of deposit $100,000 and over

14,762

14,253

12,786

11,788

  Total deposits

1,321,879

1,343,811

1,373,998

1,388,263

Nonperforming Assets: (in thousands)

Nonaccrual loans

37,082

35,603

42,148

44,549

Other real estate

38,631

31,231

31,460

23,578

Investment securities

596

660

795

825

  Total nonperforming assets

76,309

67,494

74,403

68,952

Accruing loans past due 90 days or more

858

1,307

2,092

2,479

Restructured loans (accruing)

18,518

15,374

6,759

4,620

Total nonaccrual loan to loans

3.53%

3.41%

4.01%

4.17%

Total nonperforming credit assets to loans and ORE

6.95%

6.22%

6.80%

6.24%

Total nonperforming assets to assets ratio

4.93%

4.30%

4.58%

4.15%

Allowance For Loan Loss Activity: (in thousands)

Beginning balance

18,301

21,115

24,014

32,695

Provision for loan loss

2,280

2,380

2,280

15,761

Charge-offs

(1,485)

(5,706)

(5,928)

(24,556)

Recoveries

981

512

749

114

Ending balance

20,077

18,301

21,115

24,014

First M&F Corporation

Financial Highlights

QTD Ended

QTD Ended

QTD Ended

QTD Ended

September 30

June 30

March 31

December 31

2010

2010

2010

2009

Condensed Income Statements: (in thousands)

Interest income

17,855

18,222

18,012

19,486

Interest expense

5,561

6,324

6,771

7,299

  Net interest income

12,294

11,898

11,241

12,187

Provision for loan losses

2,280

2,380

2,280

15,761

Noninterest revenues

4,746

5,216

5,603

4,425

Noninterest expenses

13,111

13,342

13,409

34,876

  Net income (loss) before taxes

1,649

1,392

1,155

(34,025)

Income tax expense (benefit)

407

120

301

(6,715)

Noncontrolling interest

(3)

0

1

1

  Net income (loss)

1,245

1,272

853

(27,311)

Preferred dividends

(441)

(439)

(437)

(436)

Gain on exchange of preferred stock

12,867

-

-

-

  Net income (loss) applicable to common stock

13,671

833

416

(27,747)

Earnings (loss) attributable to participating securities

106

7

3

(259)

  Net income (loss) allocated to common shareholders

13,565

826

413

(27,488)

Tax-equivalent net interest income

12,563

12,180

11,554

12,537

Selected Average Balances: (in thousands)

Assets

1,553,415

1,598,285

1,638,761

1,676,504

Loans held for investment

1,046,242

1,038,148

1,056,177

1,093,694

Earning assets

1,384,289

1,438,166

1,481,335

1,518,371

Deposits

1,331,624

1,362,362

1,379,510

1,361,049

Equity

108,535

105,381

105,584

133,240

Common equity

79,547

76,582

76,715

104,471

Selected Ratios:

Return on average assets (annualized)

0.32%

0.32%

0.21%

-6.46%

Return on average equity (annualized)  (a)

4.55%

4.84%

3.28%

-81.32%

Return on average common equity (annualized)  (a)

4.01%

4.37%

2.20%

-105.37%

Average equity to average assets

6.99%

6.59%

6.44%

7.95%

Tangible equity to tangible assets  (b)

6.72%

6.56%

6.15%

5.98%

Tangible common equity to tangible assets  (b)

5.67%

4.70%

4.36%

4.24%

Net interest margin (annualized, tax-equivalent)

3.60%

3.40%

3.16%

3.28%

Efficiency ratio

75.75%

76.69%

78.16%

106.73%

Net charge-offs to average loans (annualized)

0.19%

2.01%

1.99%

8.87%

Nonaccrual loans to total loans

3.53%

3.41%

4.01%

4.17%

90 day accruing loans to total loans

0.08%

0.17%

0.20%

0.23%

Price to book (x)

0.33

0.44

0.38

0.26

Price to earnings (x)

10.56

10.72

15.75

N/A

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 2010

1,245

13,671

13,565

1.49

2Q 2010

1,272

833

826

0.09

1Q 2010

853

416

413

0.05

4Q 2009

(27,311)

(27,747)

(27,488)

(3.03)

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

Revenue Statistics:

Non-interest

Non-interest

Revenues

Revenues to

Revenues to

Contribution

Per FTE

Ttl. Revenues

Avg. Assets

Margin

(thousands)

(percent)

(percent)

(percent)  (c)

3Q 2010

34.9

27.42%

1.21%

60.41%

2Q 2010

35.1

29.98%

1.31%

60.37%

1Q 2010

34.4

32.66%

1.39%

60.22%

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%

Expense Statistics:

Non-interest

Expense to

Efficiency

Avg. Assets

Ratio

(percent)

(percent)  (d)

3Q 2010

3.35%

75.75%

2Q 2010

3.35%

76.69%

1Q 2010

3.32%

78.16%

4Q 2009

8.25%

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%

First M&F Corporation

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

(In thousands with yields and costs annualized)

QTD September 2010

QTD September 2009

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

29,023

0.31%

14,850

0.11%

Federal funds sold

28,522

0.24%

41,032

0.22%

Taxable investments (amortized cost)

235,439

3.14%

260,003

3.82%

Tax-exempt investments (amortized cost)

39,743

5.95%

54,940

5.97%

Loans held for sale

5,320

3.43%

7,235

4.13%

Loans held for investment

1,046,242

5.91%

1,100,109

6.08%

  Total earning assets

1,384,289

5.19%

1,478,169

5.45%

Non-earning assets

169,126

168,541

  Total average assets

1,553,415

1,646,710

NOW

312,167

1.04%

280,104

1.17%

MMDA

149,972

1.11%

155,665

1.18%

Savings

115,332

1.27%

112,684

1.41%

Certificates of Deposit

528,929

2.15%

576,388

2.80%

Short-term borrowings

17,583

0.33%

12,556

0.82%

Other borrowings

84,991

5.01%

165,722

4.41%

  Total interest bearing liabilities

1,208,974

1.82%

1,303,119

2.32%

Non-interest bearing deposits

225,223

190,917

Non-interest bearing liabilities

10,683

17,309

Preferred equity

28,988

28,669

Common equity

79,547

106,696

  Total average liabilities and equity

1,553,415

1,646,710

Net interest spread

3.37%

3.13%

Effect of non-interest bearing deposits

0.29%

0.30%

Effect of leverage

-0.06%

-0.03%

  Net interest margin, tax-equivalent

3.60%

3.40%

Less tax equivalent adjustment:

  Investments

0.06%

0.08%

  Loans

0.02%

0.02%

Reported book net interest margin

3.52%

3.30%

First M&F Corporation

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

(In thousands with yields and costs annualized)

YTD September 2010

YTD September 2009

Average

Average

Balance

Yield/Cost

Balance

Yield/Cost

Interest bearing bank balances

59,409

0.24%

13,457

0.12%

Federal funds sold

39,228

0.23%

36,589

0.23%

Taxable investments (amortized cost)

238,443

3.33%

233,965

4.18%

Tax-exempt investments (amortized cost)

42,635

5.98%

57,284

6.02%

Loans held for sale

7,707

2.95%

7,746

3.31%

Loans held for investment

1,046,819

5.97%

1,131,950

5.94%

  Total earning assets

1,434,241

5.12%

1,480,991

5.46%

Non-earning assets

162,266

153,606

  Total average assets

1,596,507

1,634,597

NOW

321,618

1.06%

274,984

1.32%

MMDA

146,859

1.11%

166,746

1.41%

Savings

113,870

1.29%

113,706

1.52%

Certificates of Deposit

555,037

2.35%

567,377

2.94%

Short-term borrowings

14,029

0.46%

10,587

1.05%

Other borrowings

109,245

4.86%

166,264

4.51%

  Total interest bearing liabilities

1,260,658

1.98%

1,299,664

2.46%

Non-interest bearing deposits

220,272

185,319

Non-interest bearing liabilities

9,066

8,464

Preferred equity

28,929

23,919

Common equity

77,582

117,231

  Total average liabilities and equity

1,596,507

1,634,597

Net interest spread

3.14%

3.00%

Effect of non-interest bearing deposits

0.29%

0.31%

Effect of leverage

-0.05%

-0.01%

  Net interest margin, tax-equivalent

3.38%

3.30%

Less tax equivalent adjustment:

  Investments

0.07%

0.09%

  Loans

0.01%

0.01%

Reported book net interest margin

3.30%

3.20%

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)  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)

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

Note 1: On September 29, 2010 the Company issued 30,000 shares of Class B, Series CD, par value $1,000 preferred stock to the U.S. Treasury to acquire its 30,000 shares outstanding of Class B, Series A, par value $1,000 preferred stock. The Series CD preferred stock issued has a dividend rate of 2.00%. The estimated fair value of the Series CD preferred stock as of September 29, 2010 was $16,159,000. The Series A preferred stock carried a dividend rate of 5.00% and had a book value of $29,026,000 as of September 29, 2010. The acquisition of the Series A shares in exchange for the Series CD shares resulted in a gain of $12,867,000 which was recorded as a credit to retained earnings.

SOURCE First M&F Corporation



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