Published:
First M&F Corp. Reports a Loss But Fortifies Balance Sheet
KOSCIUSKO, Miss., July 18 /PRNewswire-FirstCall/ -- First M&F Corp.
(Nasdaq: FMFC) reported today that net income for the quarter ended June 30,
2008 was a loss of $.466 million, or $(.05) basic and diluted earnings per
share, compared to $3.535 million, or $.39 basic and diluted earnings per
share for the second quarter of 2007. Excluding the $5 million extraordinary
loan loss provision announced June 20, the Company earned $2.669 million, or
$.29 for the quarter.
For the second quarter of 2008 the annualized return on assets excluding
the effect of the extraordinary provision was .66%, while return on equity was
7.45%. Comparatively, the return on assets for the second quarter of 2007 was
.92%, with a return on equity of 10.69%.
Hugh Potts, Jr., Chairman and CEO commented, "As previously reported on
June 20th, an extraordinary provision of $5 million was made to the allowance
for possible loan loss. This was a recognition of both the economic and
market impact on primarily our residential construction and development
portfolio. It was also a precautionary action reflecting the uncertainty in
the economy, sales and values of finished projects. We believe this provision
to be adequate and reasonable. Regular quarterly provisions have also
increased, reflecting the increased risk in our portfolio as the economy
continues to drag. These increases in the provision return the reserve to
levels more in line with historic levels than to recent lower levels while the
economy was growing and real estate values were climbing. This higher level
of reserves bolsters the strength of the balance sheet while still leaving a
strong capital position."
Mr. Potts further commented, "The core earnings of the company exclusive
of the special provision was almost $2.7 million for the quarter which, while
lower than the same period a year ago due to higher regular quarterly
provisioning, margin compression and higher non-interest expenses, still
reflects a promising earnings stream."
Net Interest Income
Reported net interest income was down by 3.1% compared to the second
quarter of 2007, with the net interest margin decreasing to 3.73% on a tax
equivalent basis in the second quarter of 2008 as compared to 4.00% in the
second quarter of 2007. The significant contributor to the decrease in net
interest income year over year was the erosion in spreads as prime dropped
through the third and fourth quarters of 2007 and the first quarter of 2008.
The net interest margin for the first quarter of 2008 was 3.66% as compared to
3.83% for the fourth quarter of 2007 and 3.94% for the third quarter of 2007.
The margin did improve in the second quarter of 2008 as deposit repricing
opportunities widened spreads. Loan yields decreased to 6.85% in the second
quarter of 2008 from 7.88% in the second quarter of 2007. Loan yields also
decreased from the first quarter of 2008 to the second quarter as the prime
rate dropped through the first and second quarters. Average loans were $1.194
billion for the second quarter of 2008 as compared to $1.213 billion for the
first quarter of 2008 and $1.122 billion during the second quarter of 2007.
Loans decreased by $11 million in the second quarter of 2008 and fell by $13.3
million in the first quarter. Mr. Potts stated further, "Loan volume has
declined during the year and each quarter. This is a reflection of economic
activity and certain credits moving out of the bank or paying off as planned.
We believe this fortifies and bolsters the balance sheet."
Deposit costs decreased in the second quarter of 2008 from the first
quarter of 2008 and from the second quarter of 2007, in response to the
overall fall in rates as the higher rate environment through much of 2007 gave
way to Fed rate cuts in late 2007 and early 2008. Deposit costs were 2.99% in
the second quarter of 2008 as compared to 3.53% in the second quarter of 2007.
Deposits fell by $45.2 million during the second quarter of 2008, including
$20 million in brokered certificates of deposit with the remaining decrease in
higher priced retail certificates offset by healthy growth in demand deposits.
Management plans to continue to focus on core deposit growth for 2008 to
encourage relationship-driven deposits as a stable source of low cost funding.
Mr. Potts added, "Deposits have remained steady with slight growth over last
year. More expensive funding sources and deposits have been allowed to exit.
Our focus on core deposits has significantly increased this lower cost funding
source."
Loans as a percentage of assets were 73.90% at June 30, 2008 as compared
to 72.38% at June 30, 2007 and 73.74% at December 31, 2007. Loans grew by
4.21% since the second quarter of 2007 while deposits grew by 4.64%.
Non-interest Income
Non-interest income, excluding securities transactions, for the second
quarter of 2008 grew by 6.95% compared to the second quarter of 2007, with
deposit-related income up 8.60%. Insurance agency commissions were up by
2.88%.
A major part of non-interest income is from deposit sources. Deposit
revenues continue to be supported by debit card fee income, which increased by
23.45% in the second quarter of 2008 over 2007, while overdraft fee income
increased by 7.22%.
Non-interest Expenses
Non-interest expenses were up by 7.12% in the second quarter of 2008 as
compared to the second quarter of 2007 largely due to increases in de novo
branches, Other Real Estate losses, debit card fraud and robberies. Salaries
and benefits were flat year over year.
Credit Quality
Annualized net loan charge-offs as a percent of average loans for the
second quarter of 2008 were .46% as compared to .30% for the same period in
2007. Non-accrual and 90-day past due loans as a percent of total loans were
1.27% at the end of the second quarter of 2008 as compared to .55% at the end
of the 2007 quarter. The allowance for loan losses as a percentage of loans
was 1.58% at June 30, 2008 as compared to 1.31% at June 30, 2007, reflecting
increased provisioning. The provision for loan losses increased to $6.08
million in the second quarter of 2008 from $.630 million in the second quarter
of 2007 due to increased quarterly provisions and an extraordinary $5 million
provision in June, 2008. The increased provision expense was a reaction to
continued distress in real estate markets, and in construction and development
loans in particular, as sales of existing inventory continued to slow. Mr.
Potts commented, "With regard to underwriting, standards have been tightened
and exceptions have been reduced. Concentration risks are being managed
down."
Balance Sheet
Total assets at June 30, 2008 were $1.617 billion as compared to $1.654
billion at the end of 2007 and $1.585 billion at June 30, 2007. Total loans
were $1.195 billion compared to $1.219 billion at the end of 2007 and $1.147
billion at June 30, 2007. Deposits were $1.268 billion compared to $1.262
billion at the end of 2007 and $1.212 billion at June 30, 2007. Total capital
was $139.373 million, or $ 15.38 in book value per share at June 30, 2008.
Mr. Potts further added, "Capital levels are strong. By all measures the
capital of First M&F remains solid and adequate to support reasonable growth
and to absorb the effects of a real estate market in the doldrums and related
credit issues."
Growth
In June 2007 the Company opened a full-service banking location in
Cordova, Tennessee, the fourth branch in theMemphis metro market. Mr. Potts
added in closing, "With regard to growth, M&F remains engaged in pursuing
business opportunities which serve our communities and the companies and
individuals that serve as the engines of economic growth throughout our
service area. We realize the combination of real estate declines and economic
slowdown have affected First M&F. We believe the negative reaction by the
market, or over-reaction, to the financial services sector is unwarranted as
prudent underwriting and the gradual work out of residential inventories will
eventually show the sector to be healthy and vibrant. We remain focused on
service, risk management, building core funding, improving profits and the
value proposition of increasing shareholder value."
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 inMississippi,Alabama,Tennessee and
Florida.
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)
June 30 December 31 June 30
2008 2007 2007
Cash and due from banks 52,983 54,240 47,966
Interest bearing bank balances 1,378 3,480 19,390
Federal funds sold - 2,000 -
Securities available for sale (cost
of $238,072, $236,575 and $237,571 ) 236,936 237,138 235,290
Loans held for sale 6,327 5,571 6,659
Loans 1,195,202 1,219,435 1,146,879
Allowance for loan losses 18,901 14,217 15,059
Net loans 1,176,301 1,205,218 1,131,820
Bank premises and equipment 45,022 45,545 42,920
Accrued interest receivable 11,031 12,434 12,499
Other real estate 6,545 6,232 3,652
Goodwill 32,572 32,572 32,572
Other intangible assets 7,369 7,612 7,807
Other assets 40,891 41,709 44,132
Total assets 1,617,355 1,653,751 1,584,707
Non-interest bearing deposits 187,145 191,206 187,604
Interest bearing deposits 1,081,232 1,071,249 1,024,556
Total deposits 1,268,377 1,262,455 1,212,160
Federal funds and repurchase
agreements 17,945 9,676 12,877
Other borrowings 152,367 201,312 186,762
Junior subordinated debt 30,928 30,928 30,928
Accrued interest payable 3,523 5,151 4,219
Other liabilities 4,824 4,131 5,141
Total liabilities 1,477,964 1,513,653 1,452,087
Noncontrolling interest in
subsidiaries 18 18 19
Common stock, 9,060,080, 9,067,580
and 9,061,080 shares issued &
outstanding 45,300 45,338 45,305
Additional paid-in capital 30,395 30,475 30,389
Nonvested restricted stock awards 743 643 507
Retained earnings 64,683 64,395 59,412
Accumulated other comprehensive income (1,748) (771) (3,012)
Total equity 139,373 140,080 132,601
Total liabilities & equity 1,617,355 1,653,751 1,584,707
First M&F Corporation and Subsidiary
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except share data)
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
Interest and fees on loans 20,330 22,065 42,485 43,284
Interest on loans held for sale 98 136 195 248
Taxable investments 2,357 2,367 4,714 4,851
Tax exempt investments 546 447 1,053 909
Federal funds sold 46 56 134 68
Interest bearing bank balances 28 54 105 97
Total interest income 23,405 25,125 48,686 49,457
Interest on deposits 8,149 8,848 17,870 17,519
Interest on fed funds and
repurchase agreements 101 149 161 337
Interest on other borrowings 1,563 2,114 3,439 4,084
Interest on subordinated debt 492 492 989 988
Total interest expense 10,305 11,603 22,459 22,928
Net interest income 13,100 13,522 26,227 26,529
Provision for possible loan
losses 6,080 630 6,860 1,260
Net interest income after
loan loss 7,020 12,892 19,367 25,269
Service charges on deposits 2,930 2,698 5,723 5,197
Mortgage banking income 232 358 625 774
Agency commission income 1,037 1,008 2,038 2,049
Fiduciary and brokerage income 198 150 336 287
Other income 862 829 2,038 2,435
Loss on extinguishment of debt - (126) - (126)
Gains (losses) on AFS
investments 11 - 22 -
Total noninterest income 5,270 4,917 10,782 10,616
Salaries and employee benefits 7,307 7,303 14,963 14,554
Net occupancy expense 1,026 902 2,031 1,769
Equipment expenses 898 918 1,789 1,815
Software and processing expenses 526 360 957 704
Intangible asset amortization 121 121 242 306
Other expenses 3,582 2,961 6,832 6,241
Total noninterest expense 13,460 12,565 26,814 25,389
Net income before taxes (1,170) 5,244 3,335 10,496
Income taxes (707) 1,702 657 3,393
Noncontrolling interest in
earnings (losses) of
subsidiaries, net of income
taxes of $2, $5, $3 and $9 3 7 5 14
Net income (466) 3,535 2,673 7,089
Weighted average shares
(basic) 9,060,080 9,057,948 9,062,195 9,055,302
Weighted average shares
(diluted) 9,060,080 9,116,691 9,098,024 9,110,113
Basic earnings per share ($0.05) $0.39 $0.30 $0.78
Diluted earnings per share ($0.05) $0.39 $0.29 $0.78
Return on assets (annualized) -0.12% 0.92% 0.33% 0.93%
Return on equity (annualized) -1.30% 10.69% 3.75% 10.93%
Efficiency ratio 71.85% 67.02% 71.08% 67.22%
Net interest margin
(annualized, tax-equivalent) 3.73% 4.00% 3.69% 3.97%
Net charge-offs to average
loans (annualized) 0.46% 0.30% 0.36% 0.21%
Nonaccrual loans to total loans 0.94% 0.51% 0.94% 0.51%
90 day accruing loans to total
loans 0.33% 0.04% 0.33% 0.04%
First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
June 30 March 31 Dec. 31 Sept. 30
2008 2008 2007 2007
Per Common Share (diluted):
Net income (0.05) 0.34 0.39 0.42
Cash dividends paid 0.13 0.13 0.13 0.13
Book value 15.38 15.83 15.45 15.06
Closing stock price 12.55 14.50 15.80 17.55
Loan Portfolio Composition:
(in thousands)
Commercial, financial and
agricultural 139,933 165,605 169,447 164,866
Non-residential real estate 752,437 737,964 731,595 713,619
Residential real estate 210,813 211,205 223,614 221,915
Home equity loans 45,623 45,796 45,987 44,964
Consumer loans 39,501 39,478 40,860 40,374
Other loans 6,895 6,120 7,932 12,722
Total loans 1,195,202 1,206,168 1,219,435 1,198,460
Deposit Composition:
(in thousands)
Noninterest-bearing deposits 187,145 187,080 191,206 186,123
NOW deposits 215,521 210,295 190,067 186,944
MMDA deposits 192,372 182,824 156,364 129,505
Savings deposits 117,645 117,532 105,924 105,819
Certificates of deposit under
$100,000 273,213 289,531 301,298 287,899
Certificates of deposit
$100,000 and over 274,807 299,394 289,533 292,477
Brokered certificates of
deposit 7,674 26,919 28,063 26,339
Total deposits 1,268,377 1,313,575 1,262,455 1,215,106
Nonperforming Assets:
(in thousands)
Nonaccrual loans 11,317 9,472 6,524 6,334
Other real estate 6,545 6,927 6,232 4,926
Total nonperforming assets 17,862 16,399 12,756 11,260
Accruing loans past due 90
days or more 4,013 5,451 1,093 1,955
Total nonaccrual loan to loans 0.94% 0.78% 0.53% 0.53%
Total nonperforming assets to
loans and other real estate 1.48% 1.34% 1.04% 0.93%
Total nonperforming assets to
assets ratio 1.10% 1.00% 0.77% 0.69%
Allowance For Loan Loss
Activity: (in thousands)
Beginning balance 14,196 14,217 14,941 15,059
Provision for loan loss 6,080 780 630 630
Charge-offs (1,516) (1,041) (1,905) (920)
Recoveries 141 240 551 172
Ending balance 18,901 14,196 14,217 14,941
First M&F Corporation
Financial Highlights
QTD Ended QTD Ended QTD Ended QTD Ended
June 30 March 31 Dec. 31 Sept. 30
2008 2008 2007 2007
Condensed Income Statements:
(in thousands)
Interest income 23,405 25,281 26,414 26,045
Interest expense 10,305 12,154 12,689 12,259
Net interest income 13,100 13,127 13,725 13,786
Provision for loan losses 6,080 780 630 630
Noninterest revenues 5,270 5,512 5,273 5,431
Noninterest expenses 13,460 13,354 13,089 12,895
Net income before taxes (1,170) 4,505 5,279 5,692
Income taxes (707) 1,364 1,716 1,879
Noncontrolling interest 3 2 2 5
Net income (466) 3,139 3,561 3,808
Tax-equivalent net interest
income 13,464 13,475 14,039 14,084
Selected Average Balances:
(in thousands)
Assets 1,621,565 1,654,951 1,625,756 1,580,780
Loans held for investment 1,193,703 1,213,122 1,200,977 1,166,820
Earning assets 1,452,877 1,481,144 1,453,458 1,417,310
Deposits 1,279,024 1,295,443 1,234,452 1,215,724
Equity 144,050 142,371 139,438 135,157
Selected Ratios:
Return on average assets
(annualized) -0.12% 0.76% 0.87% 0.96%
Return on average equity
(annualized) -1.30% 8.87% 10.13% 11.18%
Average equity to average
assets 8.88% 8.60% 8.58% 8.55%
Net interest margin
(annualized, tax-equivalent) 3.73% 3.66% 3.83% 3.94%
Efficiency ratio 71.85% 70.33% 67.78% 66.08%
Net charge-offs to average
loans (annualized) 0.46% 0.27% 0.45% 0.25%
Nonaccrual loans to total
loans 0.94% 0.78% 0.53% 0.53%
90 day accruing loans to total
loans 0.33% 0.45% 0.09% 0.16%
Price to book (x) 0.82 0.92 1.02 1.17
Price to earnings (x) N/A 10.66 10.13 10.45
First M&F Corporation
Financial Highlights
Historical Earnings Trends:
EPS
(in thousands) (diluted)
2Q 2008 (466) (0.05)
1Q 2008 3,139 0.34
4Q 2007 3,561 0.39
3Q 2007 3,808 0.42
2Q 2007 3,535 0.39
1Q 2007 3,554 0.39
4Q 2006 3,739 0.41
3Q 2006 3,665 0.40
2Q 2006 3,251 0.36
1Q 2006 3,270 0.36
4Q 2005 3,065 0.34
Revenue Statistics:
Non- Non-
interest interest
Revenues Revenues
to to Contri-
Revenues Ttl. Avg. bution
Per FTE Revenues Assets Margin
(thousands) (percent) (percent) (percent)
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%
2Q 2006 33.1 26.31% 1.28% 61.35%
1Q 2006 33.7 26.14% 1.32% 63.64%
4Q 2005 33.8 25.39% 1.30% 62.64%
Expense Statistics:
Non-interest
Expense to Efficiency
Avg. Assets Ratio
(percent) (percent)
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%
2Q 2006 3.27% 66.99%
1Q 2006 3.27% 64.61%
4Q 2005 3.36% 65.70%
Contribution Margin:
(Tax-equivalent net interest income + noninterest revenues
- salaries and benefits)
divided by
(Tax-equivalent net interest income + noninterest revenues)
Efficiency Ratio:
Noninterest expense
divided by
(Tax-equivalent net interest income + noninterest revenues)
First M&F Corporation
Average Balance Sheets/Yields and Costs (tax-equivalent)
(In thousands with yields and costs annualized)
QTD June 2008 QTD June 2007
Average Yield/ Average Yield/
Balance Cost Balance Cost
Interest bearing bank balances 5,627 1.96% 4,726 4.61%
Federal funds sold 6,783 2.72% 6,247 3.59%
Taxable investments (amortized cost) 182,982 5.18% 197,922 4.80%
Tax-exempt investments
(amortized cost) 56,376 6.21% 45,654 6.26%
Loans held for sale 7,406 5.29% 9,786 5.59%
Loans held for investment 1,193,703 6.86% 1,122,129 7.90%
Total earning assets 1,452,877 6.58% 1,386,464 7.36%
Non-earning assets 168,688 159,594
Total average assets 1,621,565 1,546,058
NOW 211,590 1.49% 190,049 1.35%
MMDA 186,740 2.33% 136,525 2.52%
Savings 116,720 2.32% 99,997 2.75%
Certificates of Deposit 582,841 3.87% 578,631 4.62%
Short-term borrowings 17,693 2.29% 12,069 4.98%
Other borrowings 171,600 4.82% 204,199 5.12%
Total interest bearing
liabilities 1,287,184 3.22% 1,221,470 3.81%
Non-interest bearing deposits 181,134 181,819
Non-interest bearing liabilities 9,197 10,133
Capital 144,050 132,636
Total average liabilities and
equity 1,621,565 1,546,058
Net interest spread 3.36% 3.55%
Effect of non-interest bearing
deposits 0.40% 0.49%
Effect of leverage -0.03% -0.04%
Net interest margin, tax-
equivalent 3.73% 4.00%
Less tax equivalent adjustment:
Investments 0.09% 0.08%
Loans 0.01% 0.01%
Reported book net interest margin 3.63% 3.91%
First M&F Corporation
Average Balance Sheets/Yields and Costs (tax-equivalent)
(In thousands with yields and costs annualized)
YTD June 2008 YTD June 2007
Average Average
Balance Yield/Cost Balance Yield/Cost
Interest bearing bank
balances 7,760 2.72% 4,213 4.64%
Federal funds sold 8,624 3.13% 3,576 3.83%
Taxable investments
(amortized cost) 185,703 5.11% 203,571 4.81%
Tax-exempt investments
(amortized cost) 54,257 6.22% 46,599 6.27%
Loans held for sale 7,255 5.40% 9,254 5.41%
Loans held for
investment 1,203,412 7.11% 1,112,060 7.86%
Total earning
assets 1,467,011 6.77% 1,379,273 7.32%
Non-earning assets 171,247 164,228
Total average
assets 1,638,258 1,543,501
NOW 207,114 1.48% 197,780 1.37%
MMDA 176,223 2.52% 131,938 2.42%
Savings 114,346 2.54% 98,478 2.69%
Certificates of Deposit
608,903 4.19% 582,546 4.60%
Short-term borrowings 12,506 2.59% 13,302 5.12%
Other borrowings 186,225 4.78% 199,183 5.13%
Total interest
bearing
liabilities 1,305,317 3.46% 1,223,227 3.78%
Non-interest bearing
deposits 180,647 179,900
Non-interest bearing
liabilities 9,083 9,558
Capital 143,211 130,816
Total average
liabilities and
equity 1,638,258 1,543,501
Net interest spread 3.31% 3.54%
Effect of non-interest
bearing deposits 0.42% 0.48%
Effect of leverage -0.04% -0.05%
Net interest margin,
tax-equivalent 3.69% 3.97%
Less tax equivalent
adjustment:
Investments 0.08% 0.08%
Loans 0.01% 0.01%
Reported book net
interest margin 3.60% 3.88%
SOURCE First M&F Corporation
Copyright © 2008, PRNewswire
Copyright © 2008, NewsBlaze,
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