KOSCIUSKO, Miss., Jan. 21 /PRNewswire-FirstCall/ -- First M&F Corp. reported today that net income for 2008 was $0.526 million, or $0.06 basic and $0.05 diluted earnings per share, compared to $14.458 million, or $1.60 basic and $1.59 diluted earnings per share for 2007. The fall in earnings was largely due to the recognition of the continuing stress in the real estate market which led to an extraordinary provision expense for the fourth quarter of $9 million.
Net income for the quarter ended December 31, 2008 was a loss of $4.357 million, or ($.48) basic and diluted earnings per share, compared to $3.561 million, or $.40 basic and $.39 diluted earnings per share for the fourth quarter of 2007.
For the fourth quarter of 2008 the annualized return on assets was a negative 1.08%, while return on equity was a negative 12.27%. Comparatively, the return on assets for the fourth quarter of 2007 was .87%, with a return on equity of 10.13%. The return on assets for 2008 was .03%, while the return on equity was .37%.
"There has been little abatement in the mounting, negative trends in credit issues related to slowing residential real estate sales at reduced prices during the 4th quarter," said Hugh Potts, Jr., Chairman and CEO. Commenting further, Mr. Potts said, "The volume of construction and development loans in our portfolio certainly is not growing except to finish projects. New commitments have virtually halted. In light of these continuing trends, we found it necessary to increase reserves in the quarter by providing $10.7 million, including a $9 million special provision, by charging down some credits by $5 million and writing down ORE by $.770 million." Mr. Potts further explained, "So asset quality issues were the major contributors to our loss of $4.357 million for the 4th quarter and 2008 earnings of only $.526 million."
Mr. Potts commented in conclusion, "2008 was a harsh year for First M&F as the economy revealed risk exposures in a significant portion of our portfolio, principally acquisition, construction and development projects. 2009 will be spent in dealing with this exposure and pursuing business opportunities, both commercial and retail, across the financial horizon. As 2009 unfolds we will take appropriate measures to stabilize and build shareholder value through both opportunistic and remedial action."
Net Interest Income
Net interest income was down by 7.11% compared to the fourth quarter of 2007, with the net interest margin decreasing to 3.60% in the fourth quarter of 2008 as compared to 3.83% in the fourth quarter of 2007. The significant contributor to the decrease in net interest income was erosion in spreads as funding costs failed to keep pace with the drop in asset yields. The net interest margin for the third quarter of 2008 was 3.70% as compared to 3.73% for the second quarter of 2008 and 3.66% for the first quarter of 2008. Loan yields decreased to 6.43% in the fourth quarter of 2008 from 7.74% in the fourth quarter of 2007. Loan yields also decreased from the third quarter of 2008 to the fourth quarter as the prime rate continued to fall in the fourth quarter. Average loans were $1.202 billion for the fourth quarter of 2008 as compared to $1.204 billion for the third quarter of 2008 and $1.207 million during the fourth quarter of 2007. Loans fell by $29.618 million in the fourth quarter of 2008 and grew by $11.011 million in the third quarter. Deposit costs fell in the fourth quarter of 2008 from the third quarter of 2008 and from the fourth quarter of 2007, as deposits were repriced throughout 2008 in the falling rate environment. Deposit costs were 2.63% in the fourth quarter of 2008 as compared to 3.67% in the fourth quarter of 2007. Deposits grew by $9.923 million during the fourth quarter of 2008. Management plans to continue to emphasize and focus on core deposit growth for 2009 by developing relationship-driven deposit gathering. Loans as a percentage of assets were 73.68% at December 31, 2008 as compared to 73.74% at December 31, 2007 and 73.49% at September 30, 2008. Loans fell by 3.51% during 2008 while deposits fell by less than 1.00%.
Non-interest Income
Non-interest income, excluding securities transactions, for the fourth quarter of 2008 was down 7.91% compared to the fourth quarter of 2007, with deposit-related income down by 2.04% and mortgage income down by 45.51%. Insurance agency commissions were down by 4.69%.
Non-interest income, excluding securities transactions, was virtually flat for 2008 versus 2007. Over half of non-interest income is from deposit sources. Deposit revenues continue to be supported by debit card fee income, which increased by 24.55% in 2008 over 2007, and overdraft fee income, which increased by 4.72% for the year. Commission revenues from traditional insurance products were virtually flat year over year.
Non-interest Expenses
Non-interest expenses were up by 9.34% in the fourth quarter of 2008 as compared to the fourth quarter of 2007. 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 by 9.76% as cost control measures began to take effect.
Non-interest expenses increased by 6.22% for 2008 as compared to 2007. Salaries and benefits were down by 1.34% for 2008. Most of the increase year over year was due to significant increases in losses on Other Real Estate and an increase in FDIC insurance assessments. The number of full-time equivalent employees at the end of 2008 was 547 as compared to 550 at the end of the third quarter of 2008 and 563 at the end of 2007.
Credit Quality
Annualized net loan charge-offs as a percent of average loans for the fourth quarter of 2008 were 1.79% as compared to .45% for the same period in 2007. Non-accrual and 90-day past due loans as a percent of total loans were 2.22% at the end of 2008 as compared to .62% at the end of 2007. Annualized net charge-offs as a percentage of average loans for 2008 were .75% as compared to .28% for 2007. The allowance for loan losses as a percentage of loans was 2.12% at December 31, 2008 as compared to 1.17% at December 31, 2007. The provision for loan losses increased in 2008 from $2.520 million in 2007 to $19.734 million in 2008 including an extraordinary provision of $9.0 million in the fourth quarter of 2008. The additional provision was made in light of continued deterioration in collateral values and the extension of projected absorption rates.
Mr. Potts commented, "Our capital remains more than adequate with our leverage ratio at 8.19%. We expect further asset quality issues will arise in 2009 but we also expect our capital to withstand that pressure. We have announced preliminary approval by the Treasury Department of our participation in the Capital Purchase Program and expect to consummate that transaction in early 2009. We will call a special shareholders meeting to make technical provisions in our articles of incorporation to authorize the issuance of Class B non-voting preferred as a condition precedent to participation in the capital program in the amount of $30 million."
Balance Sheet
Total assets fell by 3.44% in 2008, to $1.597 billion from $1.654 billion. Total equity fell to $135.950 million, a 2.95% decrease from 2007. Total loans were $1.177 billion compared to $1.219 billion at the end of 2007. Deposits were $1.261 billion compared to $1.262 billion at the end of 2007. Book value per share decreased to $15.00 per share at the end of 2008, a 2.91% decrease from 2007.
Growth
The Company opened a full-service banking location in Cordova, Tennessee in June 2007, expanding its number of Memphis metropolitan locations to four. In July 2007 the Company opened a full-service banking location in Brandon, Mississippi followed in August by the opening of an additional full-service banking facility in Ridgeland, Mississippi. The Company opened a second location in Okaloosa County, Florida during the fourth quarter of 2007. 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.
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 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) December 31 December 31 2008 2007 Cash and due from banks 47,738 54,240 Interest bearing bank balances 6,556 3,480 Federal funds sold 9,350 2,000 Securities available for sale (cost of $223,882 and $236,575) 227,145 237,138 Loans held for sale 7,698 5,571 Loans 1,176,595 1,219,435 Allowance for loan losses 24,918 14,217 Net loans 1,151,677 1,205,218 Bank premises and equipment 44,642 45,545 Accrued interest receivable 9,832 12,434 Other real estate 11,061 6,232 Goodwill 32,572 32,572 Other intangible assets 7,127 7,612 Other assets 41,467 41,709 Total assets 1,596,865 1,653,751 Non-interest bearing deposits 178,689 191,206 Interest bearing deposits 1,082,698 1,071,249 Total deposits 1,261,387 1,262,455 Federal funds and repurchase agreements 9,728 9,676 Other borrowings 151,547 201,312 Junior subordinated debt 30,928 30,928 Accrued interest payable 3,537 5,151 Other liabilities 3,770 4,131 Total liabilities 1,460,897 1,513,653 Noncontrolling interest in subsidiaries 18 18 Common stock, 9,063,346, 9,067,580 and 9,066,080 shares issued & outstanding 45,317 45,338 Additional paid-in capital 30,447 30,475 Nonvested restricted stock awards 780 643 Retained earnings 60,133 64,395 Accumulated other comprehensive income (727) (771) Total equity 135,950 140,080 Total liabilities & equity 1,596,865 1,653,751 First M&F Corporation and Subsidiary Condensed Consolidated Statements of Income (Unaudited) (In thousands, except share data) Three Months Ended Twelve Months Ended December 31 December 31 2008 2007 2008 2007 Interest and fees on loans 19,327 23,421 81,487 89,796 Interest on loans held for sale 58 86 299 439 Taxable investments 2,130 2,360 9,023 9,514 Tax exempt investments 557 458 2,164 1,798 Federal funds sold 38 41 182 144 Interest bearing bank balances 13 48 133 225 Total interest income 22,123 26,414 93,288 101,916 Interest on deposits 7,119 9,673 32,255 36,632 Interest on fed funds and repurchase agreements 68 145 327 609 Interest on other borrowings 1,682 2,367 6,717 8,644 Interest on subordinated debt 505 504 1,993 1,991 Total interest expense 9,374 12,689 41,292 47,876 Net interest income 12,749 13,725 51,996 54,040 Provision for possible loan losses 10,684 630 19,734 2,520 Net interest income after loan loss 2,065 13,095 32,262 51,520 Service charges on deposits 2,927 2,988 11,692 10,962 Mortgage banking income 188 345 1,202 1,491 Agency commission income 934 980 4,125 4,148 Fiduciary and brokerage income 132 154 585 598 Other income 650 779 3,521 4,016 Loss on extinguishment of debt - - - (126) Gains (losses) on AFS investments 1 (37) 6 (37) Total noninterest income 4,832 5,209 21,131 21,052 Salaries and employee benefits 6,761 7,492 28,954 29,348 Net occupancy expense 1,095 1,074 4,210 3,841 Equipment expenses 923 930 3,594 3,629 Software and processing expenses 597 374 2,072 1,463 Intangible asset amortization 121 121 484 547 Other expenses 4,744 3,034 14,970 12,277 Total noninterest expense 14,241 13,025 54,284 51,105 Net income before taxes (7,344) 5,279 (891) 21,467 Income taxes (2,990) 1,716 (1,429) 6,988 Noncontrolling interest in earnings (losses) of subsidiaries, net of income taxes of $2, $3, $7 and $12 3 2 12 21 Net income (4,357) 3,561 526 14,458 Weighted average shares (basic) 9,061,862 9,066,096 9,061,730 9,060,137 Weighted average shares (diluted) 9,061,862 9,107,391 9,087,155 9,109,117 Basic earnings per share ($0.48) $0.40 $0.06 $1.60 Diluted earnings per share ($0.48) $0.39 $0.05 $1.59 Return on assets (annualized) -1.08% 0.87% 0.03% 0.92% Return on equity (annualized) -12.27% 10.13% 0.37% 10.78% Efficiency ratio 79.29% 67.78% 72.77% 67.07% Net interest margin (annualized, tax-equivalent) 3.60% 3.83% 3.67% 3.93% Net charge-offs to average loans (annualized) 1.79% 0.45% 0.75% 0.28% Nonaccrual loans to total loans 1.74% 0.53% 1.74% 0.53% 90 day accruing loans to total loans 0.48% 0.09% 0.48% 0.09% First M&F Corporation Financial Highlights QTD Ended QTD Ended QTD Ended QTD Ended December 31 September 30 June 30 March 31 2008 2008 2008 2008 Per Common Share (diluted): Net income (0.48) 0.24 (0.05) 0.34 Cash dividends paid 0.13 0.13 0.13 0.13 Book value 15.00 15.55 15.38 15.83 Closing stock price 8.46 11.58 12.55 14.50 Loan Portfolio Composition: (in thousands) Commercial, financial and agricultural 127,704 145,743 139,933 165,605 Non-residential real estate 745,700 759,279 752,437 737,964 Residential real estate 209,696 208,718 210,813 211,205 Home equity loans 45,791 46,201 45,623 45,796 Consumer loans 37,908 38,001 39,501 39,478 Other loans 9,796 8,271 6,895 6,120 Total loans 1,176,595 1,206,213 1,195,202 1,206,168 Deposit Composition: (in thousands) Noninterest-bearing deposits 178,687 178,980 187,145 187,080 NOW deposits 217,334 219,612 215,521 210,295 MMDA deposits 182,364 176,199 192,372 182,824 Savings deposits 114,281 115,041 117,645 117,532 Certificates of deposit under $100,000 272,463 279,389 273,213 289,531 Certificates of deposit $100,000 and over 276,763 265,216 274,807 299,394 Brokered certificates of deposit 19,495 17,026 7,674 26,919 Total deposits 1,261,387 1,251,463 1,268,377 1,313,575 Nonperforming Assets: (in thousands) Nonaccrual loans 20,564 22,095 11,317 9,472 Other real estate 11,061 7,191 6,545 6,927 Total nonperforming assets 31,625 29,286 17,862 16,399 Accruing loans past due 90 days or more 5,686 634 4,013 5,451 Restructured loans (accruing) 3,664 - - - Total nonaccrual loan to loans 1.74% 1.82% 0.94% 0.78% Total nonperforming assets to loans and other real estate 2.65% 2.40% 1.48% 1.34% Total nonperforming assets to assets ratio 1.98% 1.78% 1.10% 1.00% Allowance For Loan Loss Activity: (in thousands) Beginning balance 19,618 18,901 14,196 14,217 Provision for loan loss 10,684 2,190 6,080 780 Charge-offs (5,501) (1,648) (1,516) (1,041) Recoveries 117 175 141 240 Ending balance 24,918 19,618 18,901 14,196 First M&F Corporation Financial Highlights QTD Ended QTD Ended QTD Ended QTD Ended December 31 September 30 June 30 March 31 2008 2008 2008 2008 Condensed Income Statements: (in thousands) Interest income 22,123 22,479 23,405 25,281 Interest expense 9,374 9,459 10,305 12,154 Net interest income 12,749 13,020 13,100 13,127 Provision for loan losses 10,684 2,190 6,080 780 Noninterest revenues 4,832 5,517 5,270 5,512 Noninterest expenses 14,241 13,229 13,460 13,354 Net income before taxes (7,344) 3,118 (1,170) 4,505 Income taxes (2,990) 904 (707) 1,364 Noncontrolling interest 3 4 3 2 Net income (4,357) 2,210 (466) 3,139 Tax-equivalent net interest income 13,131 13,400 13,464 13,475 Selected Average Balances: (in thousands) Assets 1,611,444 1,599,213 1,621,565 1,654,951 Loans held for investment 1,196,806 1,198,943 1,193,703 1,213,122 Earning assets 1,450,265 1,439,302 1,452,877 1,481,144 Deposits 1,254,382 1,253,701 1,279,024 1,295,443 Equity 141,312 140,315 144,050 142,371 Selected Ratios: Return on average assets (annualized) -1.08% 0.55% -0.12% 0.76% Return on average equity (annualized) -12.27% 6.27% -1.30% 8.87% Average equity to average assets 8.77% 8.77% 8.88% 8.60% Net interest margin (annualized, tax-equivalent) 3.60% 3.70% 3.73% 3.66% Efficiency ratio 79.29% 69.93% 71.85% 70.33% Net charge-offs to average loans (annualized) 1.79% 0.49% 0.46% 0.27% Nonaccrual loans to total loans 1.74% 1.82% 0.94% 0.78% 90 day accruing loans to total loans 0.48% 0.05% 0.33% 0.45% Price to book (x) 0.56 0.74 0.82 0.92 Price to earnings (x) N/A 12.06 N/A 10.66 First M&F Corporation Financial Highlights Historical Earnings Trends: EPS (in thousands) (diluted) 4Q 2008 (4,357) (0.48) 3Q 2008 2,210 0.24 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 Non- Non- Revenue Statistics: interest interest Revenues Revenues Contribu- Revenues to Ttl. to Avg. tion Per FTE Revenues Assets Margin (thousands)(percent) (percent)(percent) 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% 2Q 2006 33.1 26.31% 1.28% 61.35% Expense Statistics: Non-interest Expense to Efficiency Avg. Assets Ratio (percent) (percent) 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% 2Q 2006 3.27% 66.99% 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 December 2008 QTD December 2007 Average Yield/ Average Yield/ Balance Cost Balance Cost Interest bearing bank balances 9,086 0.56% 4,616 4.18% Federal funds sold 19,568 0.78% 3,656 4.34% Taxable investments (amortized cost) 161,999 5.23% 191,632 4.89% Tax-exempt investments (amortized cost) 57,598 6.13% 46,488 6.24% Loans held for sale 5,208 4.44% 6,089 5.56% Loans held for investment 1,196,806 6.44% 1,200,977 7.75% Total earning assets 1,450,265 6.17% 1,453,458 7.30% Non-earning assets 161,179 172,298 Total average assets 1,611,444 1,625,756 NOW 214,154 1.49% 181,676 1.43% MMDA 179,120 2.25% 137,052 2.82% Savings 114,742 2.02% 105,331 2.88% Certificates of Deposit 568,279 3.30% 621,897 4.65% Short-term borrowings 13,127 2.08% 12,977 4.41% Other borrowings 194,655 4.47% 227,435 5.01% Total interest bearing liabilities 1,284,077 2.90% 1,286,368 3.91% Non-interest bearing deposits 178,088 188,496 Non-interest bearing liabilities 7,967 11,454 Capital 141,312 139,438 Total average liabilities and equity 1,611,444 1,625,756 Net interest spread 3.27% 3.39% Effect of non-interest bearing deposits 0.35% 0.50% Effect of leverage -0.02% -0.06% Net interest margin, tax- equivalent 3.60% 3.83% Less tax equivalent adjustment: Investments 0.09% 0.07% Loans 0.01% 0.01% Reported book net interest margin 3.50% 3.75% First M&F Corporation Average Balance Sheets/Yields and Costs (tax-equivalent) (In thousands with yields and costs annualized) YTD December 2008 YTD December 2007 Average Yield/ Average Yield/ Balance Cost Balance Cost Interest bearing bank balances 6,954 1.92% 4,693 4.80% Federal funds sold 9,810 1.86% 3,388 4.24% Taxable investments (amortized cost) 176,284 5.12% 197,167 4.83% Tax-exempt investments (amortized cost) 55,990 6.16% 45,875 6.25% Loans held for sale 6,170 4.85% 8,161 5.38% Loans held for investment 1,200,628 6.80% 1,148,275 7.83% Total earning assets 1,455,836 6.51% 1,407,559 7.33% Non-earning assets 165,867 166,071 Total average assets 1,621,703 1,573,630 NOW 211,006 1.50% 191,092 1.40% MMDA 177,582 2.35% 133,557 2.58% Savings 115,027 2.30% 101,367 2.78% Certificates of Deposit 587,695 3.79% 599,393 4.62% Short-term borrowings 13,860 2.36% 12,445 4.89% Other borrowings 186,978 4.66% 208,738 5.09% Total interest bearing liabilities 1,292,148 3.20% 1,246,592 3.84% Non-interest bearing deposits 179,237 182,598 Non-interest bearing liabilities 8,312 10,357 Capital 142,006 134,083 Total average liabilities and equity 1,621,703 1,573,630 Net interest spread 3.31% 3.49% Effect of non-interest bearing deposits 0.39% 0.49% Effect of leverage -0.03% -0.05% Net interest margin, tax- equivalent 3.67% 3.93% Less tax equivalent adjustment: Investments 0.09% 0.08% Loans 0.01% 0.01% Reported book net interest margin 3.57% 3.84%
