Additional Real Estate-Related Impairments Result in First Quarter Loss for First...

Additional Real Estate-Related Impairments Result in First Quarter Loss for
First M&F

KOSCIUSKO, Miss., April 20 /PRNewswire-FirstCall/ -- First M&F Corp. (Nasdaq:
FMFC) reported a loss today for the first quarter ended March 31, 2009.
Earnings were a net loss of $10.277 million, or a negative ($1.14) basic and
diluted earnings per share, compared to earnings of $3.139 million, or $.34
basic and diluted earnings per share for the first quarter of 2008. The
Company continued to recognize losses in its loan portfolio by recording
almost $20 million in provision expense for the quarter.

"The continuous re-appraisal of collateral-dependent credits and the continued
stress in the market have resulted in yet another substantial extraordinary
provision for possible loan loss," said Hugh Potts, Jr., Chairman and CEO.
Mr. Potts commented further, "This is made necessary by the duration and depth
of the decline in real estate values supporting projects M&F has financed and
demands upon borrowers' capacity to meet their obligations. This is further
evidenced by the increase in non-performing credits heavily concentrated in
the acquisition, construction and development sector. Identification,
evaluation and provisioning are steps which precede charge-off and
disposition, a sequence of events in which some elements are simultaneous and
ongoing."

"Results are disappointing but the balance sheet has been strengthened to
weather the storm and several positive results were achieved during the
quarter. Deposits grew by over $50 million with non-interest deposits growing
above year-end and the year-ago quarter. Wholesale borrowings are down and
total equity, with the addition of Treasury Capital Purchase Program preferred
stock, is $20 million above year-end," said Chairman Potts.

Net Interest Income

Net interest income was down by 9.77% compared to the first quarter of 2008,
with the net interest margin decreasing to 3.33% on a tax equivalent basis in
the first quarter of 2009 as compared to 3.66% in the first quarter of 2008.
The most significant contributor to the decrease in net interest income and
the squeeze in the margin was erosion in spreads as the trend of falling loan
yields outpaced the repricing of funding sources. A secondary factor was a
changing balance sheet mix as average loans fell and were replaced by a lower
yielding mix of assets. The net interest margin for the fourth quarter of
2008 was 3.60% as compared to 3.70% for the third quarter of 2008 and 3.73%
for the second quarter of 2008. Loan yields decreased to 6.01% in the first
quarter of 2009 from 7.35% in the first quarter of 2008. Loan yields also
decreased from the fourth quarter of 2008 to the first quarter as the prime
rate fell 400 basis points during 2008 and 175 basis points in the fourth
quarter 2008 alone. Average loans were $1.174 billion for the first quarter of
2009 as compared to $1.202 billion for the fourth quarter of 2008 and $1.220
billion during the first quarter of 2008. Loans decreased by $27.343 million
in the first quarter of 2009 and fell by $29.618 million in the fourth quarter
of 2008. Deposit costs decreased in the first quarter of 2009 from the fourth
quarter of 2008 continuing a declining trend in deposit costs dating back to
the fourth quarter of 2007 as costs reflected Fed rate cuts through that
period. Deposit costs were 2.30% in the first quarter of 2009 as compared to
3.51% in the first quarter of 2008. Deposits rose by $51.774 million during
the first quarter of 2009. Management plans to continue to focus on core
deposit growth for 2009 to offset the influence that the low rate environment
may have on the net interest margin. Loans as a percentage of assets were
69.38% at March 31, 2009 as compared to 73.21% at March 31, 2008 and 73.68% at
December 31, 2008. Loans fell by 4.72% since the first quarter of 2008 while
deposits were virtually flat.

Non-interest Income

Non-interest income, excluding securities transactions, for the first quarter
of 2009 was down 5.93% compared to the first quarter of 2008, with
deposit-related income down by 9.70% and mortgage income down by 6.36%.
Insurance agency commissions were down by 3.00%.

A major part of non-interest income is from deposit sources. Deposit revenues,
although down overall, continue to be supported by debit card fee income,
which increased by 16.72% in the first quarter of 2009 over 2008. The drop in
overall deposit revenues was due to a fall off in overdraft fee income, which
decreased by 16.34% as the volume of overdrafts fell. Chairman Potts
commented, "In spite of the economic slowdown, non-interest revenues are
within 6% of their 2008 level and insurance commissions are down only
slightly."

Non-interest Expenses

Non-interest expenses were up by 4.78% in the first quarter of 2009 as
compared to the first quarter of 2008 largely due to the cost of holding and
disposing of other real estate. Salaries and benefits were down by 6.45% as
cost and headcount control initiatives took effect. Mr. Potts commented,
"Operating overhead, exclusive of foreclosed property expenses, is flat with
significant reductions in salary and benefit expenses."

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the first
quarter of 2009 were 1.13% as compared to .27% for the same period in 2008.
Non-accrual and 90-day past due loans as a percent of total loans were 4.63%
at the end of the first quarter of 2009 as compared to 1.23% at the end of the
2008 quarter. Mr. Potts further stated, "While the additional provisioning
has had an immediate impact on shareholder value, the company has positioned
itself for resolution of current issues and a profitable and solid recovery."

The allowance for loan losses as a percentage of loans was 3.59% at March 31,
2009 as compared to 1.17% at March 31, 2008. The provision for loan losses
increased to $19.840 million in the first quarter of 2009 from $.780 million
in the first quarter of 2008.

Balance Sheet

Total assets at March 31, 2009 were $1.656 billion as compared to $1.597
billion at the end of 2008 and $1.647 billion at March 31, 2008. Total loans
were $1.149 billion compared to $1.177 billion at the end of 2008 and $1.206
billion at March 31, 2008. Deposits were $1.313 billion compared to $1.261
billion at the end of 2008 and $1.314 billion at March 31, 2008. Total capital
was $155.655 million, or $ 14.01 in book value per share at March 31, 2009.
"Capital, reserves, and earning capacity, taken as a whole, continue to
demonstrate strength more than sufficient to deal with non-performing asset
and reserving trends, even those exacerbated by recession," said Mr. Potts.
"Furthermore, aggressive, early and final disposition of credit-related issues
will enable a more robust recovery."

Reorganization

During the first quarter the Company completed a structural re-organization.
In the last six months the Company has been regionalized to improve sales and
day-to-day operations and credit administration. Loan review has been
supplemented from outside and new leadership and structure have been
implemented. The Company has a new chief banking officer, a new chief credit
officer, a new appraisal officer, and a new loan review officer. A new
problem asset department has been formed overseeing the rehabilitation or
disposition of non-performing assets. Mr. Potts stated in closing, "Corporate
organization re-alignment, revision of credit policy and procedures,
re-balancing the loan portfolio, overhead adjustments and new business
development strategies are all positive by-products of such a time as this."

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)

March 31 Dec. 31 March 31
2009 2008 2008
---- ---- ----
Cash and due
from banks 35,992 47,738 52,735
Interest bearing
bank balances 14,985 6,556 8,204
Federal funds
sold 54,900 9,350 3,800
Securities
available for
sale (cost of
$280,687,
$223,882 and
$240,473) 285,752 227,145 243,250
Loans held for
sale 6,066 7,698 6,229

Loans 1,149,252 1,176,595 1,206,168
Allowance for
loan losses 41,506 24,918 14,196
------ ------ ------
Net loans 1,107,746 1,151,677 1,191,972

Bank premises
and equipment 44,827 44,642 45,185
Accrued interest
receivable 9,742 9,832 11,289
Other real estate 10,907 11,061 6,927
Goodwill 32,572 32,572 32,572
Other
intangible
assets 7,006 7,127 7,491
Other assets 45,866 41,467 37,814
------ ------ ------
Total assets 1,656,361 1,596,865 1,647,468

Non-interest
bearing deposits 191,386 178,689 187,080
Interest
bearing
deposits 1,121,774 1,082,698 1,126,495
--------- --------- ---------
Total
deposits 1,313,160 1,261,387 1,313,575

Federal funds
and repurchase
agreements 8,064 9,728 5,714
Other borrowings 140,524 151,547 143,977
Junior
subordinated
debt 30,928 30,928 30,928
Accrued
interest
payable 2,999 3,537 4,979
Other liabilities 5,031 3,770 4,867
----- ----- -----
Total
liabilities 1,500,706 1,460,897 1,504,040

Preferred stock,
30,000 shares
issued and
outstanding 28,657 - -
Common stock,
9,063,346,
9,063,346 and
9,060,080
shares issued &
outstanding 45,317 45,317 45,300
Additional paid-
in capital 31,842 30,447 30,399
Nonvested
restricted
stock awards 788 780 709
Retained earnings 48,512 60,133 66,341
Accumulated
other
comprehensive
income 538 (727) 661
--- ---- ---
Total
Company
equity 155,654 135,950 143,410
Noncontrolling
interests in
subsidiaries 1 18 18
- -- --
Total equity 155,655 135,968 143,428
------- ------- -------
Total
liabilities &
equity 1,656,361 1,596,865 1,647,468

First M&F Corporation and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except share data)
Three Months Ended
March 31
2009 2008
---- ----
Interest and fees on loans 17,273 22,155
Interest on loans held for sale 79 97
Taxable investments 2,316 2,357
Tax exempt investments 562 507
Federal funds sold 25 88
Interest bearing bank balances 6 77
- --
Total interest income 20,261 25,281

Interest on deposits 6,385 9,721
Interest on fed funds and repurchase agreements 33 60
Interest on other borrowings 1,503 1,876
Interest on subordinated debt 496 497
--- ---
Total interest expense 8,417 12,154

------ ------
Net interest income 11,844 13,127
Provision for possible loan losses 19,840 780
------ ---
Net interest income after loan loss (7,996) 12,347

Service charges on deposits 2,522 2,793
Mortgage banking income 368 393
Agency commission income 971 1,001
Fiduciary and brokerage income 116 138
Other income 1,211 1,176
Gains (losses) on AFS investments - 11
- --
Total noninterest income 5,188 5,512

Salaries and employee benefits 7,162 7,656
Net occupancy expense 1,108 1,005
Equipment expenses 755 891
Software and processing expenses 526 431
Foreclosed property expenses 756 89
Intangible asset amortization 121 121
Other expenses 3,567 3,161
----- -----
Total noninterest expense 13,995 13,354

------- -----
Net income (loss) before taxes (16,803) 4,505
Income tax expense (benefit) (6,510) 1,363
------ -----
Net income (loss) (10,293) 3,142
Net income (loss) attributable to
noncontrolling interests (16) 3
------ -----
Net income (loss) attributable to Company (10,277) 3,139
Dividends and accretion on preferred stock 154 -
--- -
Net income (loss) applicable to common
stock (10,431) 3,139
Earnings (loss) attributable to participating
securities (a) (118) 42
---- --
Net income (loss) allocated to common
shareholders (10,313) 3,097
======= =====

Weighted average shares (basic) 9,063,346 9,064,311
Weighted average shares (diluted) 9,063,346 9,100,498
Basic earnings (loss) per share (a) ($1.14) $0.34
Diluted earnings (loss) per share ($1.14) $0.34
====== =====

Return on assets (annualized) -2.53% 0.76%
Return on equity (annualized) (b) -27.76% 8.87%
Return on common equity (annualized) (b) -31.15% 8.87%
Efficiency ratio 80.41% 70.34%
Net interest margin (annualized, tax-equivalent) 3.33% 3.66%
Net charge-offs to average loans (annualized) 1.13% 0.27%
Nonaccrual loans to total loans 4.51% 0.78%
90 day accruing loans to total loans 0.12% 0.45%

First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
March 31 Dec. 31 Sept. 30 June 30
2009 2008 2008 2008
---- ---- ---- ----
Per Common
Share
(diluted):
Net income
(loss) (1.14) (0.48) 0.24 (0.05)
Cash
dividends
paid 0.13 0.13 0.13 0.13
Book value 14.01 15.00 15.55 15.38
Closing
stock price 6.12 8.46 11.58 12.55

Loan Portfolio
Composition:
(in thousands)
Commercial,
financial and
agricultural 132,812 127,704 145,743 139,933
Non-residential
real estate 720,783 745,700 759,279 752,437
Residential
real estate 204,003 209,696 208,718 210,813
Home equity
loans 45,116 45,791 46,201 45,623
Consumer loans 37,451 37,908 38,001 39,501
Other loans 9,087 9,796 8,271 6,895
----- ----- ----- -----
Total loans 1,149,252 1,176,595 1,206,213 1,195,202

Deposit
Composition:
(in thousands)
Noninterest-
bearing deposits 191,386 178,687 178,980 187,145
NOW deposits 283,521 217,334 219,612 215,521
MMDA deposits 179,313 182,364 176,199 192,372
Savings
deposits 114,529 114,281 115,041 117,645
Certificates of
deposit under
$100,000 269,865 272,463 279,389 273,213
Certificates
of deposit
$100,000 and
over 258,664 276,763 265,216 274,807
Brokered
certificates
of deposit 15,882 19,495 17,026 7,674
------ ------ ------ -----
Total
deposits 1,313,160 1,261,387 1,251,463 1,268,377

Nonperforming
Assets: (in
thousands)
Nonaccrual
loans 52,084 20,564 22,095 11,317
Other real
estate 10,907 11,061 7,191 6,545
------ ------ ----- -----
Total
nonperforming
assets 62,991 31,625 29,286 17,862
Accruing loans
past due 90
days or more 1,409 5,686 634 4,013
Restructured
loans (accruing) 3,664 3,664 - -
Total
nonaccrual
loan to
loans 4.51% 1.74% 1.82% 0.94%
Total
nonperforming
assets to loans
and other real
estate 5.40% 2.65% 2.40% 1.48%
Total
nonperforming
assets to assets
ratio 3.80% 1.98% 1.78% 1.10%

Allowance For
Loan Loss
Activity: (in
thousands)
Beginning
balance 24,918 19,618 18,901 14,196
Provision for
loan loss 19,840 10,684 2,190 6,080
Charge-offs (3,508) (5,501) (1,648) (1,516)
Recoveries 256 117 175 141
--- --- --- ---
Ending balance 41,506 24,918 19,618 18,901

First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
March 31 December 31 September 30 June 30
2009 2008 2008 2008
---- ---- ---- ----
Condensed Income
Statements: (in
thousands)

Interest income 20,261 22,123 22,479 23,405
Interest expense 8,417 9,374 9,459 10,305
----- ----- ----- ------
Net interest
income 11,844 12,749 13,020 13,100
Provision for loan
losses 19,840 10,684 2,190 6,080
Noninterest revenues 5,188 4,832 5,517 5,270
Noninterest expenses 13,995 14,241 13,229 13,460
------ ------ ------ ------
Net income (loss)
before taxes (16,803) (7,344) 3,118 (1,170)
Income tax expense
(benefit) (6,510) (2,990) 904 (707)
Noncontrolling
interest (16) 3 4 3
--- -- -- --
Net income (loss) (10,277) (4,357) 2,210 (466)
Preferred dividends 154 - - -
--- --- --- ---
Net income
(loss)
applicable to
common stock (10,431) (4,357) 2,210 (466)
Earnings (loss)
attributable to
participating
securities (a) (118) (57) 27 (8)
---- --- -- --
Net income
(loss)
allocated to
common
shareholders (10,313) (4,300) 2,183 (458)

Tax-equivalent net
interest income 12,216 13,131 13,400 13,464

Selected Average
Balances: (in
thousands)
Assets 1,645,555 1,611,444 1,599,213 1,621,565
Loans held for
investment 1,165,086 1,196,806 1,198,943 1,193,703
Earning assets 1,486,073 1,450,265 1,439,302 1,452,877
Deposits 1,304,905 1,254,382 1,253,701 1,279,024
Equity 150,128 141,330 140,333 144,068
Common equity 135,806 141,330 140,333 144,068

Selected Ratios:
Return on average
assets (annualized) -2.53% -1.08% 0.55% -0.12%
Return on average
equity
(annualized) (b) -27.76% -12.27% 6.27% -1.30%
Return on average
common equity
(annualized) (b) -31.15% -12.27% 6.27% -1.30%
Average equity to
average assets 9.12% 8.77% 8.77% 8.88%
Tangible equity to
tangible assets (c) 7.18% 6.18% 6.31% 6.30%
Net interest margin
(annualized, tax-
equivalent) 3.33% 3.60% 3.70% 3.73%
Efficiency ratio 80.41% 79.29% 69.93% 71.85%
Net charge-offs to
average loans
(annualized) 1.13% 1.79% 0.49% 0.46%
Nonaccrual loans to
total loans 4.51% 1.74% 1.82% 0.94%
90 day accruing
loans to total
loans 0.12% 0.48% 0.05% 0.33%
Price to book (x) 0.44 0.56 0.74 0.82
Price to earnings (x) N/A N/A 12.06 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)
-------------- -------------- -------------- ---------
1Q 2009 (10,277) (10,431) (10,313) (1.14)
4Q 2008 (4,357) (4,357) (4,300) (0.48)
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
1Q 2007 3,554 3,554 3,509 0.39
4Q 2006 3,739 3,739 3,694 0.41
3Q 2006 3,665 3,665 3,619 0.40

Revenue
Statistics: Non-interest Non-interest
Revenues Revenues to Revenues to Contribution
Per FTE Ttl. Revenues Avg. Assets Margin
(thousands) (percent) (percent) (percent) (d)
----------- --------- --------- --------------
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%
1Q 2007 33.7 29.96% 1.50% 61.88%
4Q 2006 33.5 28.03% 1.38% 62.47%
3Q 2006 34.0 28.63% 1.44% 62.98%

Expense
Statistics: Non-interest
Expense to Efficiency
Avg. Assets Ratio
(percent) (percent) (e)
--------- --------------
1Q 2009 3.45% 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%
1Q 2007 3.37% 67.41%
4Q 2006 3.38% 68.48%
3Q 2006 3.28% 65.11%

First M&F Corporation
Average Balance Sheets/Yields and Costs
(tax-equivalent)
(In thousands with yields and
costs annualized) QTD March 2009 QTD March 2008
-------------- --------------
Average Yield/ Average Yield/
Balance Cost Balance Cost
------- ------ ------- ------
Interest
bearing bank
balances 16,195 0.16% 9,893 3.15%
Federal funds
sold 44,819 0.22% 10,463 3.40%
Taxable
investments
(amortized
cost) 191,111 4.92% 188,424 5.03%
Tax-exempt
investments
(amortized
cost) 59,875 6.07% 52,139 6.24%
Loans held for
sale 8,987 3.56% 7,104 5.52%
Loans held for
investment 1,165,086 6.03% 1,213,121 7.36%
--------- ---- --------- ----
Total
earning
assets 1,486,073 5.63% 1,481,144 6.96%
Non-earning
assets 159,482 173,807
------- -------
Total
average
assets 1,645,555 1,654,951

NOW 263,716 1.37% 202,638 1.46%
MMDA 172,747 1.70% 165,706 2.74%
Savings 114,655 1.65% 111,973 2.76%
Certificates of
Deposit 573,579 3.04% 634,966 4.49%
Short-term
borrowings 10,163 1.31% 7,319 3.30%
Other
borrowings 176,133 4.60% 200,849 4.75%
------- ---- ------- ----
Total interest
bearing
liabilities 1,310,993 2.60% 1,323,451 3.69%
Non-interest
bearing deposits 180,207 180,161
Non-interest
bearing
liabilities 4,227 8,950
Preferred
equity 14,322 -
Common equity 135,806 142,389
------- -------
Total
average
liabilities
and equity 1,645,555 1,654,951
---- ----
Net interest
spread 3.03% 3.27%
Effect of non-
interest
bearing
deposits 0.31% 0.44%
Effect of
leverage -0.01% -0.05%
----- -----
Net interest
margin, tax-
equivalent 3.33% 3.66%
Less tax
equivalent
adjustment:
Investments 0.09% 0.09%
Loans 0.01% 0.01%
---- ----
Reported book
net interest
margin 3.23% 3.56%

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
Company) divided by (Total equity)

Return on common equity is calculated as: (Net income attributable to
Company minus Preferred dividends) divided by (Total 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)

(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 Corporation

John G. Copeland, EVP & Chief Financial Officer of M&F Corporation,
+1-662-289-8594