<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1996
Commission File Number 0-9424
FIRST M&F CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi 64-0636653
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization Identification no.)
221 East Washington Street, Kosciusko, Mississippi 39090
-------------------------------------------------- ------
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (601) 289-5121
No change
____________________________________________________________________
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- -------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at April 26, 1996
----- -----------------------------
<S> <C>
Common stock ($5.00 par value) 3,390,900 shares
</TABLE>
<PAGE> 2
INDEX
FIRST M&F CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of condition
March 31, 1996 and December 31, 1995 3
Condensed consolidated statements of income - Three months ended
March 31, 1996 and 1995 4
Condensed consolidated statement of stockholders' equity - Three months
ended March 31, 1996 and 1995 5
Condensed consolidated statements of cash flows - Three months ended
March 31, 1996 and 1995 6
Item 2. Managements' Discussion and Analysis of Financial Condition
and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
FIRST M&F CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION> March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 20,580,725 $ 18,823,519
Interest bearing bank balances 4,065,257 314,603
Investment securities, market value of
$54,695,000 (1996) and $53,210,000 (1995) 54,775,540 52,814,271
Securities available for sale 126,443,738 128,189,968
Federal funds sold 23,200,000 1,000,000
Loans 312,823,289 306,516,205
Unearned discount (14,384,673) (14,513,713)
Reserve for possible loan losses (4,406,355) (4,250,000)
------------- --------------
Net loans 294,032,261 287,752,492
Bank premises and equipment 8,026,729 7,536,916
Accrued interest receivable 5,133,245 4,975,448
Other real estate 85,214 148,176
Intangible assets 2,816,428 2,859,099
Other assets 1,806,414 1,392,666
------------- --------------
$540,965,551 $505,807,158
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest bearing $ 53,440,475 $ 52,160,180
Interest bearing 394,626,172 353,702,646
------------- --------------
Total deposits 448,066,647 405,862,826
------------- --------------
Securities sold under agreements to
repurchase and other short-term borrowings 40,024,038 48,293,668
Long term debt 2,951,926 3,005,497
Accrued interest payable 2,289,642 2,529,304
Other liabilities 2,159,393 1,346,902
------------- --------------
Total liabilities 495,491,646 461,038,197
============= ==============
Stockholders' equity
Common stock of $5.00 par value. 5,000,000 shares
authorized, 3,394,656 issued and outstanding 16,973,280 16,973,280
Additional paid-in capital 10,653,316 10,653,316
Retained earnings 17,759,012 16,492,206
Market valuation for securities available for sale,
net of income taxes 137,125 698,987
------------- -------------
45,522,733 44,817,789
Less treasury shares, 3,756 shares, at cost (48,828) (48,828)
------------ -------------
Net stockholders' equity 45,473,905 44,768,961
============ =============
$540,965,551 $505,807,158
============ =============
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. The accompanying notes
are an integral part of these financial statements.
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
FIRST M&F CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 7,273,856 $ 6,216,194
Interest on interest bearing bank balances 58,629 32,755
Taxable income on investment securities 2,055,882 1,608,035
Tax-exempt income on investment securities 502,213 594,078
Interest on Federal funds sold 229,614 136,083
------------ -------------
Total interest income 10,120,194 8,587,145
------------ -------------
Interest expense:
Interest on deposits 4,351,608 3,213,418
Interest on securities sold under agreements
to repurchase and other short-term borrowing 552,890 643,683
Interest on long term debt 45,500 57,194
------------ -------------
Total interest expense 4,949,998 3,914,295
------------ -------------
Net interest income 5,170,196 4,672,850
Provision for possible loan losses 256,486 333,298
------------ -------------
Net interest income after
provision for possible loan losses 4,913,710 4,339,552
Other operating income:
Service charges on deposits 845,321 751,246
Credit insurance income 109,227 123,264
Gains on sales of investment securities 0 0
Gains (losses) on AFS Investments 27,316 10,000
Other income 134,769 360,953
------------ -------------
Total other operating income 1,116,633 1,245,463
------------ -------------
Other operating expenses:
Salaries and employee benefits 1,932,368 1,617,637
Net occupancy expense 271,755 215,152
Equipment and data processing expenses 420,181 458,507
Regulatory insurance and fees 12,772 220,618
Other expenses 878,050 1,013,716
------------ -------------
Total other operating expenses 3,515,126 3,525,630
------------ -------------
Income before income taxes 2,515,217 2,059,385
Income taxes 672,015 554,251
------------ -------------
Net income $1,843,202 $1,505,134
============ =============
Earnings per share $0.54 $0.48
============ =============
</TABLE>
Note: The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
FIRST M&F CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED
COMMOM PAID-IN RETAINED TREASURY LOSS ON AVAIL
STOCK CAPITAL EARNINGS STOCK FOR SALE SEC. TOTAL
----------- ------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $15,623,280 $8,493,316 $12,248,289 ($48,828) ($1,607,233) $34,708,824
0
Net income 1,505,134 1,505,134
Cash dividends paid
$0.107 per share (333,904) (333,904)
Net change unrealized loss on 812,739 812,739
availiable for sale securities
----------- ----------- ----------- --------- ----------- -----------
Balance, March 31, 1995 $15,623,280 $8,493,316 $13,419,519 ($48,828) ($794,494) $36,692,793
=========== =========== =========== ========= =========== ===========
Balance, January 1, 1996 $16,973,280 $10,653,316 $16,492,206 ($48,828) $698,987 $44,768,961
Net income 1,843,202 1,843,202
Cash dividends paid,
$0.17 per share (576,396) (576,396)
Net change unrealized gain on
available for sale securities (561,862) (561,862)
----------- ----------- ----------- --------- ----------- -----------
Balance, March 31, 1996 $16,973,280 $10,653,316 $17,759,012 ($48,828) $137,125 $45,473,905
=========== =========== =========== ======== =========== ===========
</TABLE>
Note: The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
PART I. FINANCIAL INFORMATION
FIRST M&F CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $1,843,202 $1,505,134
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 262,959 295,752
Provisions for possible loan losses 256,486 333,298
(Decrease) Increase in interest receivable (157,797) 632,711
Net (Increase) in accounts payable (239,662) (64,495)
Other, net 751,389 (783,619)
----------- -----------
Net cash provided by operating activities 2,716,577 1,918,781
----------- -----------
Cash flows from investing activities:
(Increase) in interest bearing bank balances (3,750,654) (3,042,992)
Investment securities-H/M, net (1,961,269) (3,806,617)
Securities availiable for sale, net 894,924 5,545,253
Net (increase) decrease in Federal Funds sold (22,200,000) (16,350,000)
Net increase in loans (6,536,255) (3,323,745)
Net increase in bank premises and equipment (710,341) (641,255)
----------- -----------
Net cash used in investing activities (34,263,595) (21,619,356)
----------- -----------
Cash flows from financing activities:
Net increase deposits 42,203,821 25,531,088
Net increase (decrease) in securities sold
under agreements to repurchase and other
short-term borrowings (8,146,997) 1,043,470
Net increase (decrease) in long term debt (176,204) 30,203
Proceeds of Sale of Common Stock 0 0
Cash dividends (576,396) (333,904)
Treasury stock sales, net 0 0
----------- -----------
Net cash provided by financing activities 33,304,224 26,270,857
----------- -----------
Net increase in cash and due from banks 1,757,206 6,570,282
Cash and due from banks at January 1 18,823,519 16,325,586
=========== ===========
Cash and due from banks at March 31 $20,580,725 $22,895,868
=========== ===========
</TABLE>
Note: The accompanying notes are an integral part of these financial statement.
6
<PAGE> 7
FIRST M&F CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The condensed consolidated financial
statements of First M&F Corporation include the financial statements of
Merchants & Farmers Bank, a wholly owned subsidiary, and its wholly owned
subsidiaries, First M&F Insurance Co., M&F Financial Services, Inc. and M&F
Bank Securities Corporation. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
NOTE 2: BUSINESS COMBINATION
On December 31, 1995, Farmers and Merchants Bank of Bruce, Mississippi was
merged with the Company. The stockholders of Farmers and Merchants received
450,000 shares of common stock of the Company in exchange for all of the issued
and outstanding common shares of Farmers and Merchants. All financial data of
the Company has been restated to reflect the business combination using the
pooling of interest method of accounting. There were no material adjustments
to the net assets of Farmers and Merchants as a result of adopting the same
accounting methods as the Company. See Note 2 to the consolidated financial
statements for the year ended December 31, 1995 as contained in the annual
report to stockholders.
7
<PAGE> 8
FIRST M&F CORPORATION AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1996, was $1,843,202, a 22.5%
increase over the same period in 1995. The following is a summary of the net
change in several broad categories of income and expense.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995 $ Change % Change
---- ---- -------- --------
<S> <C> <C> <C> <C>
Net interest income $ 5,170,196 $ 4,672,850 $ 497,346 10.6%
Provision for loan loss 256,486 333,298 (76,812) (23.0)%
Other operating income 1,116,663 1,245,463 (128,830) (10.3)%
Other operating expense 3,515,126 3,525,630 10,504 0%
----------- ------------ ----------- -------
Net income before tax $ 2,515,217 $ 2,059,385 $ 455,832 22.1%
------------ ------------ ---------- -------
Net income after tax $ 1,843,202 $ 1,505,134 $ 338,068 22.5%
------------ ------------ ---------- -------
</TABLE>
8
<PAGE> 9
Net interest income continues to reflect the growth in earning assets
occurring during 1995 and continues to remain a positive indicator into the
first quarter of 1996. Net interest income as a percent of earning assets
(net margin) has increased to 4.25% at March 31, 1996, as compared to 4.24% for
the year 1995 and 4.29% for 1994. The Company's yield on earning assets during
the quarter increased to 8.33% versus 7.97% for the year 1995 and 7.31% for
1994. Cost of funds at March 31,1996 was 4.07% versus 3.72% for the year 1995
and 3.02% for 1994. The Company generally matched competitive lending and
deposit product rates throughout the quarter. The provision for possible loan
losses was decreased approximately $20,000 per month during the 1996 quarter as
compared to 1995. Generally this level of loan loss provision was considered
adequate given the excellent results of collection and past-due efforts during
1995 and the continued excellent condition of the allowance for loan losses
during the first quarter of 1996. The allowance for loan loss as a percent of
total loans, increased to 1.48% at March 31, 1996 versus 1.45% at December 31,
1995. Management has approved an approximate $75,000 provision per month for
the second quarter of 1996.
Other operating income and other operating expense continue to reflect
management's emphasis on improvements in overall efficiency within the Company.
The efficiency ratio at March 31, 1996 was approximately 55.8% versus 58.9% for
the year 1995. The single largest factor affecting this ratio has been the
reduction of the FDIC assessment for deposit insurance. Other noninterest
income and expense has generally been held within projected 1996 budgeted
operations as management continues to emphasize the improvement of noninterest
income and the reduction of noninterest expense within the Company.
FINANCIAL CONDITION
At March 31, 1996, loans net of unearned discount were $298,438,616, a 2.2%
increase over December 31, 1995. Investment securities held to maturity and
securities available for sale remained approximately the same levels as those
at December 31, 1995. Federal funds sold of approximately $23,200,000 reflect
the historical levels associated with deposits of public taxing authorities and
other increases in deposits. Total assets at March 31, 1996 totaled
$540,965,551 as compared to $505,807,158 at December 31, 1995, an approximate
$35 million increase. Of this, deposit related products account for the bulk
of the increase. During the first quarter of 1996, a CD campaign produced
approximately $14 million in new funds. Additionally, there have been
increased levels of deposits by public entities which increased the overall
level of deposits at March 31, 1996.
9
<PAGE> 10
CAPITAL ADEQUACY
As discussed in the consolidated financial statements contained in the annual
report to stockholders for 1995, as a result of the stock offering completed
May 10, 1995, and the acquisition completed December 31, 1995, capital adequacy
is in excess of 8% (leverage ratio), which places the Company's capital over
peer bank levels. The Company, through normal banking relationships, has
superior relationships with its correspondents and also is a member of the
Federal Home Loan Bank of Dallas. These relationships provide additional
funding levels should the need arise.
The Company has complied with all risk-based capital ratios as required by its
various regulators.
10
<PAGE> 11
FIRST M&F CORPORATION AND SUBSIDIARY
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No new legal proceedings occurred in the first quarter.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Statement re computation of earnings per share
11
<PAGE> 12
FIRST M&F CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST M&F CORPORATION
--------------------------------
(Registrant)
DATE: MAY 10, 1996 /s/ HUGH S. POTTS, JR.
------------------------------------
Hugh S. Potts, Jr.
Chairman and Chief Executive Officer
DATE: MAY 10, 1996 /s/ SCOTT M. WIGGERS
------------------------------------
Scott M. Wiggers
Wiggers President and Chief
Accounting Officer
12
<PAGE> 13
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------- -----------
11 Statement re Computation of Earnings per Share
27 Financial Data Schedule
<PAGE> 1
FIRST M&F CORPORATION AND SUBSIDIARY
EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31
1996 1995
<S> <C> <C>
Net Income $1,843,202 $1,505,134
Weighted Average Shares Outstanding 3,390,900 3,120,900
Earnings Per Share $0.54 $0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS AT MARCH 31, 1996 FOR SUBMISSION IN FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,581
<INT-BEARING-DEPOSITS> 4,065
<FED-FUNDS-SOLD> 23,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 126,444
<INVESTMENTS-CARRYING> 54,775
<INVESTMENTS-MARKET> 54,695
<LOANS> 298,439
<ALLOWANCE> 4,406
<TOTAL-ASSETS> 540,966
<DEPOSITS> 448,492
<SHORT-TERM> 40,024
<LIABILITIES-OTHER> 4,449
<LONG-TERM> 2,952
<COMMON> 16,973
0
0
<OTHER-SE> 28,501
<TOTAL-LIABILITIES-AND-EQUITY> 540,966
<INTEREST-LOAN> 7,274
<INTEREST-INVEST> 2,558
<INTEREST-OTHER> 288
<INTEREST-TOTAL> 10,120
<INTEREST-DEPOSIT> 4,351
<INTEREST-EXPENSE> 4,950
<INTEREST-INCOME-NET> 5,170
<LOAN-LOSSES> 256
<SECURITIES-GAINS> 25
<EXPENSE-OTHER> 3,515
<INCOME-PRETAX> 2,515
<INCOME-PRE-EXTRAORDINARY> 2,515
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,843
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 7.34
<LOANS-NON> 351
<LOANS-PAST> 735
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,250
<CHARGE-OFFS> 156
<RECOVERIES> 56
<ALLOWANCE-CLOSE> 4,406
<ALLOWANCE-DOMESTIC> 4,406
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,406
</TABLE>
