KOSCIUSKO, Miss., April 18 /PRNewswire-FirstCall/ — First M&F Corp. reported solid results today for the first quarter ended March 31, 2008, with earnings of $3.139 million, or $.35 basic and $.34 diluted earnings per share, compared to $3.554 million, or $.39 basic and diluted earnings per share for the first quarter of 2007, a decline of 11.7% and 10.25% respectively.
For the first quarter of 2008 the annualized return on assets was .76%, while return on equity was 8.87%. Comparatively, the return on assets for the first quarter of 2007 was .94%, with a return on equity of 11.18%.
“First quarter results are below last year’s results and early expectations. The primary influence was the effect on the net interest margin brought about by the actions of the Federal Reserve in January and March to lower short term rates,” said Hugh Potts, Jr., Chairman and CEO. Potts added, “The Fed actions precipitated cuts in Prime which had an immediate negative impact on the margin. While we expect to recover margin as the year unfolds, its effect is evident.”
Net Interest Income
Net interest income was up by 0.9% compared to the first quarter of 2007, with the net interest margin decreasing to 3.66% on a tax equivalent basis in the first quarter of 2008 as compared to 3.94% in the first quarter of 2007. The significant contributor to the increase in net interest income and the squeeze in the margin was balance sheet growth offset by continuing erosion in spreads as loan yields reacted downward with falling Prime at a faster rate than deposits could be repriced. The net interest margin for the fourth quarter of 2007 was 3.83% as compared to 3.94% for the third quarter of 2007 and 4.00% for the second quarter of 2007. Loan yields decreased to 7.35% in the first quarter of 2008 from 7.80% in the first quarter of 2007. Loan yields also decreased from the fourth quarter of 2007 to the first quarter as the prime rate fell 200 basis points during the quarter. Average loans were $1.220 billion for the first quarter of 2008 as compared to $1.207 billion for the fourth quarter of 2007 and $1.111 billion during the first quarter of 2007. Loans decreased by $13.340 million in the first quarter of 2008 and grew by $20.975 million in the fourth quarter of 2007.
Deposit costs decreased in the first quarter of 2008 from the fourth quarter of 2007 but were higher than the first quarter of 2007, as the higher rate environment through much of 2007 gave way to Fed rate cuts in late 2007 and early 2008. Deposit costs were 3.51% in the first quarter of 2008 as compared to 3.46% in the first quarter of 2007. Deposits rose by $51.120 million during the first quarter of 2008. Management plans to continue to focus on core deposit growth for 2008 to offset the influence that loan repricing may have on the net interest margin. Loans as a percentage of assets were 73.21% at March 31, 2008 as compared to 70.87% at March 31, 2007 and 73.74% at December 31, 2007. Loans grew by 8.80% since the first quarter of 2007 while deposits grew by 8.66%. Mr. Potts stated, “We are pleased with deposit growth and especially in cash-type deposits, that is, relationship- based transaction and non-maturity type deposits, with deposits being up 4.05% since the end of the year and almost 9.00% from the year ago quarter. This results from a specific strategic focus on building these types of relationship deposit accounts.”
Non-interest Income
Non-interest income, excluding securities transactions, for the first quarter of 2008 was down 0.95% compared to the first quarter of 2007, with deposit-related income up by 11.76% and mortgage income down by 5.53%. Insurance agency commissions were down by 3.84%.
A major part of non-interest income is from deposit sources. Deposit revenues continue to be supported by debit card fee income, which has increased by 24.26% in the first quarter of 2008 over 2007, and overdraft fee income, which increased by 12.23%. Commission revenues from traditional insurance products decreased by 3.83%.
Non-interest Expenses
Non-interest expenses were up by 5.32% in the first quarter of 2008 as compared to the first quarter of 2007 largely due to de novo branching and higher salaries. Salaries and benefits were up by 5.59%.
Credit Quality
Annualized net loan charge-offs as a percent of average loans for the first quarter of 2008 were .27% as compared to .11% for the same period in 2007. Non-accrual and 90-day past due loans as a percent of total loans were 1.23% at the end of the first quarter of 2008 as compared to .38% at the end of the 2007 quarter. Mr. Potts further stated, “In an economic slowdown, beginning with and being most severe in the real estate sector, we expect some adverse trends in asset quality. M&F is proactive in risk management, loan review and credit administration. No opportunity to serve the credit needs of worthy borrowers will be missed. Furthermore, our capital and reserves are sufficient to weather this storm.”
The allowance for loan losses as a percentage of loans was 1.17% at March 31, 2008 as compared to 1.37% at March 31, 2007. The provision for loan losses increased to $.780 million in the first quarter of 2008 from $.630 million in the first quarter of 2007.
Balance Sheet
Total assets at March 31, 2008 were $1.647 billion as compared to $1.654 billion at the end of 2007 and $1.564 billion at March 31, 2007. Total loans were $1.206 billion compared to $1.219 billion at the end of 2007 and $1.109 billion at March 31, 2007. Deposits were $1.314 billion compared to $1.262 billion at the end of 2007 and $1.209 billion at March 31, 2007. Total capital was $143.410 million, or $ 15.83 in book value per share at March 31, 2008. “Capital retention from healthy earnings will provide a strong base from which to grow and adapt to the times,” said Mr. Potts.
Growth
In November, 2007 the Company opened a second full-service banking location in Okaloosa County, Florida in the community of Niceville. Mr. Potts stated in closing, “For 118 years M&F has grown, prospered, adapted to and weathered the events and trials affecting our communities and the nation as a whole. We fully expect to continue to serve with integrity the financial needs of our clients as both they and we grow and prosper.”
Tags: Growth, growth for okaloosa, growth for okaloosa county florida, growth in okaloosa florida
