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First M & F Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 14, 2012 03:21PM

First M & F Corp. (FMFC) filed Quarterly Report for the period ended 2012-03-31. First M & F Crp has a market cap of $38.6 million; its shares were traded at around $4.4 with a P/E ratio of 12.4 and P/S ratio of 0.4. The dividend yield of First M & F Crp stocks is 1%.



Highlight of Business Operations:

Net income for the first quarter of 2012 was $1.607 million, or $0.12 basic and diluted earnings per share as compared to net income of $950 thousand, or $0.06 basic and diluted earnings per share for the same period in 2011 and net income of $987 thousand or $0.05 basic and diluted earnings per share for the fourth quarter of 2011. The major factors contributing to the increase in year-over-year earnings were (1) a $239 thousand increase in net interest income, (2) a $300 thousand decrease in loan loss provision accruals and (3) a $897 thousand decrease in foreclosed property expenses. Net investment gains were down by $462 thousand year-over-year.

The primary drivers of the increase in net interest income for the first quarter of 2012 over the fourth quarter of 2011 were a 3 basis point increase in the net interest margin and a $43.384 million increase in average earning assets. Average earning assets grew primarily in interest bearing bank balances, driven by first quarter deposit growth. Average yields on total loans for sale and investment remained steady at 5.74% for both quarters while the cost of deposits decreased from 1.01% during the fourth quarter of 2011 to .85% for the first quarter of 2012. Average loans for sale and investment declined as a percentage of earning assets from 72.36% for the fourth quarter of 2011 to 69.64% for the first quarter of 2012 as loan volumes continued downward. Interest-bearing deposits dominated funding, representing 81.90% of average earning assets for the first quarter of 2012 as compared to 80.94% for the fourth quarter of 2011.

Net interest income for the first quarter for 2012 as compared to the first quarter of 2011 improved due to an 8 basis point increase in the net interest margin, offsetting a $17.700 million decline in average earning assets. The improvement was dominated by declines in funding costs as deposit costs decreased from 1.31% in 2011 to .85% in 2012 and borrowing costs decreased from 3.88% in 2011 to 3.75% in 2012. The decline in deposit costs has occurred through a shift in deposit mix from certificates of deposit into NOW and money market accounts. The earning asset mix continued to shift from loans to other earning assets while the funding mix continued to shift away from borrowings and into deposits. Yields and costs followed the general interest rate environment as 10-year Treasury yields declined from 3.41% in March of 2011 to 2.17% in March of 2012. AAA corporate bond yields declined from 5.13% to 3.99% over the same term, indicating the pricing pressures in corporate bond and loan portfolios. The ability to create yield spreads also declined as the spread between 10-year Treasuries and 2-year Treasuries fell from 2.71% in March of 2011 to 1.83% in March of 2012. A positive mitigating factor for the Company has been the decline in nonaccrual loans from 3.55% of total loans at March 31, 2011 to 1.45% of total loans at March 31, 2012.

Noninterest income, excluding securities transactions, was $4.830 million for the first quarter of 2012 as compared to $4.678 million for the same period in 2011 and $5.343 million in the fourth quarter of 2011. For the first quarter of 2012 as compared to the first quarter of 2011: (1) deposit revenues decreased by $1 thousand, (2) mortgage banking revenues increased by $211 thousand and (3) agency commissions decreased by $63 thousand. For the first quarter of 2012 as compared to the fourth quarter of 2011: (1) deposit revenues decreased by $184 thousand, (2) mortgage banking revenues decreased by $51 thousand and (3) agency commissions increased by $31 thousand.

Mortgage banking income increased by 59.27% from the first quarter of 2011 to the first quarter of 2012 and decreased by 8.25% from the fourth quarter of 2011 to the first quarter of 2012. Mortgage originations increased by 142.64% from the first quarter of 2011 to the first quarter of 2012 and decreased by 26.36% from the fourth quarter of 2011 to the first quarter of 2012. Mortgage revenues were $280 thousand in retail revenues and $287 thousand in broker-referred (wholesale) revenues for the first quarter of 2012 as compared to $356 thousand in retail revenues for the first quarter of 2011. Origination volumes for the first quarter of 2012 were $17.392 million in retail and $13.081 million in wholesale loans. Origination volumes for the first quarter of 2011 were $12.559 million in retail loans. Sales volumes for the first quarter of 2012 were $16.096 million in retail and $9.605 million in wholesale loans. Sales volumes for the first quarter of 2011 were $16.217 million in retail loans. Interest on loans held for sale for the first quarter of 2012 included $94 thousand for retail and $79 thousand for wholesale loans. Other noninterest expense for the first quarter of 2012 included $203 thousand in broker fees and pricing discounts paid to originate wholesale mortgages. Conventional 30-year mortgage rates fell steadily by 91 basis points throughout 2011, ending the year at 3.95%. Rates remained flat during the first quarter of 2012. The rate decline triggered the increases in origination volumes for the first quarter of 2012. Management expects mortgage origination volumes to remain steady until economic pressures push mortgage rates back up.

Read the The complete Report



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