First M&F Announces Results: Q2, 2010 $0.09 per Common Share vs. Q2, 2009 ($0.61) per Common Share Loss. YTD, 2010 Earnings of $1.239 Million vs. YTD

KOSCIUSKO, Miss., July 19 /PRNewswire-FirstCall/ -- First M&F Corp. (Nasdaq: FMFC) reported today a net profit for the quarter ended June 30, 2010 of $1.272 million. Net income for the quarter allocated to common shareholders was $.826 million, or $.09 basic and diluted earnings per share, compared to the first quarter of 2010 earnings of $.413 million, or $.05 basic and diluted earnings per share and a loss of $5.498 million, or $(.61) basic and diluted earnings per share for the second quarter of 2009

Hugh Potts, Jr., Chairman and CEO commented, "The arduous course of the last two and one half years shows signs of incremental progress and some abatement of old and new credit issues. While there remains stress upon borrowers, which causes challenges to M&F as a company, the progress in numbers is encouraging both by comparison and trend."

Net Interest Income

Reported net interest income was up by 5.62% compared to the second quarter of 2009, with the net interest margin increasing to 3.40% on a tax equivalent basis in the second quarter of 2010 as compared to 3.16% in the second quarter of 2009. The significant contributor to the increase in net interest income 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 first quarter of 2010 was 3.16% as compared to 3.28% for the fourth quarter of 2009 and 3.40% for the third quarter of 2009. Loan yields increased to 6.06% in the second quarter of 2010 from 5.70% in the second quarter of 2009, affected positively by fewer new nonaccrual loans. Loan yields increased from the first quarter of 2010 to the second quarter as well. Average loans, including loans held for sale, were $1.045 billion for the second quarter of 2010 as compared to $1.068 billion for the first quarter of 2010 and $1.138 billion during the second quarter of 2009. Loans decreased by $4.3 million in the second quarter of 2010 and fell by $15.9 million in the first quarter.  Mr. Potts stated, "The trends of interest lost to non-accrual, delinquencies and new problem credits are all improving. The credit cycle has not yet run its course, but clearly we are well advanced. The halting, tepid recovery adds to the challenges of credit remediation and growth in new business."

Deposit costs decreased in the second quarter of 2010 from the first quarter of 2010 and from the second quarter of 2009, in response to the continuing low rate environment. Deposit costs were 1.75% in the second quarter of 2010 as compared to 2.19% in the second quarter of 2009. Deposits fell by $30.2 million during the second quarter of 2010 but have grown $34.3 million since the second 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 low cost funding.

Loans as a percentage of assets were 66.19% at June 30, 2010 as compared to 68.16% at June 30, 2009 and 63.64% at December 31, 2009. Loans fell by 6.29% since the second quarter of 2009 while deposits grew by 2.62%.

Non-interest Income

Non-interest income, excluding securities transactions and impairment of investments, for the second quarter of 2010 fell by 9.28% compared to the second quarter of 2009, with deposit-related income down 8.75%.  Insurance agency commissions were down by 2.30%.  

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 flat in the second quarter of 2010 compared to the second quarter of 2009, while overdraft fee income decreased by 11.81%.

Non-interest Expenses

Non-interest expenses were down by 15.64% in the second quarter of 2010 as compared to the second 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 5.55% quarter over quarter.

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the second quarter of 2010 were 2.01% as compared to 6.87% for the same period in 2009.  Net charge-offs totaled $5.194 million for the quarter versus $19.378 million a year ago and $5.179 million in the first quarter of 2010.  Non-accrual and 90-day past due loans as a percent of total loans were 3.58% at the end of the second quarter of 2010 as compared to 7.19% at the end of the 2009 quarter. The allowance for loan losses as a percentage of loans was 1.76% at June 30, 2010 as compared to 2.83% at June 30, 2009. The provision for loan losses fell to $2.380 million in the second quarter of 2010 from $9.195 million in the second quarter of 2009 as the pace of loan impairments trended downward.  Mr. Potts commented, "Non-accrual loans have fallen to $35.6 million from $44.5 million at year end and $74.4 million a year ago. Year-to-date 2010 losses have fallen to $10.4 million from $22.6 million in 2009 and year-to-date provision expense has fallen to $4.7 million from $29.0 million a year ago." Commenting further, Mr. Potts said, "There is a clear distinction between substantive progress in a credit cycle and normal credit trends in linked quarters. There is a distinction between unsubstantiated optimism and clearing indices. We are grateful for every encouraging trend and committed to a continuation of improved performance and increasing shareholder value."

Balance Sheet

Total assets at June 30, 2010 were $1.568 billion as compared to $1.663 billion at the end of 2009 and $1.625 billion at June 30, 2009. Total loans were $1.038 billion compared to $1.058 billion at the end of 2009 and $1.108 billion at June 30, 2009. Deposits were $1.344 billion compared to $1.388 billion at the end of 2009 and $1.310 billion at June 30, 2009. Total capital was $107.7 million or $8.68 in book value per common share at June 30, 2010. Mr. Potts further added, "M&F is building capital in modest proportions. The margin for error or misstep is slight.  The difficulties facing us are not vanquished." In closing Mr. Potts said, "There is a renewing sense of accomplishment, optimism and quiet, confident focus among the M&F Family as we strive to finish the cleanup and build momentum. The building of value is real; we trust it will be rewarded sooner rather than later."

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.