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First M & F Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 14, 2012 02:22PM

First M & F Corp. (FMFC) filed Quarterly Report for the period ended 2012-06-30. First M & F Corporation has a market cap of $58.3 million; its shares were traded at around $6.29 with a P/E ratio of 15.5 and P/S ratio of 0.7. The dividend yield of First M & F Corporation stocks is 0.6%.



Highlight of Business Operations:

Net income for the second quarter of 2012 was $1.753 million, or $0.14 basic and diluted earnings per share as compared to net income of $1.106 million, or $0.07 basic and diluted earnings per share for the same period in 2011 and net income of $1.607 million or $0.12 basic and diluted earnings per share for the first quarter of 2012. Net income for the first six months of 2012 was $3.360 million or $0.26 basic and diluted earnings per share as compared to net income of $2.056 million or $0.13 basic and diluted earnings per share for the same period in 2011. The major factors contributing to the improvement in earnings for the second quarter of 2012 as compared to the second quarter of 2011 were (1) an increase of $1.483 million in mortgage revenues and (2) a negligible increase in noninterest expenses highlighted by a decrease of $420 thousand in salaries and employee benefits and a $186 thousand decrease in foreclosure expenses. The major factors contributing to the improvement in earnings for the second quarter of 2012 as compared to the first quarter of 2012 were (1) an improvement in the net interest margin from 3.67% to 3.72%, (2) an increase of $1.239 million in mortgage revenues and (2) decreases of $126 thousand in salaries and employee benefits and $174 thousand in foreclosure expenses.

Net interest income for the second quarter for 2012 as compared to the second quarter of 2011 decreased due primarily to trends that were prevalent throughout 2011. Earning assets decreased from the second quarter of 2011 to the second quarter of 2012 while the net interest margin decreased from 3.75% to 3.72%. A mitigating factor to the decline in net interest income from the second quarter of 2011 to 2012 has been the change in asset and liability mix. Short-term interest-bearing funds decreased from 6.67% of average earning assets to 3.24% as cash was invested for better returns with minimal reduction in liquidity. Certificates of deposit declined from 38.99% of interest-bearing liabilities to 32.96% while other interest-bearing deposits, which are the most price-sensitive liabilities, increased from 54.21% to 60.92%.

Noninterest income, excluding securities transactions, was $6.038 million for the second quarter of 2012 as compared to $4.456 million for the same period in 2011 and $4.830 million in the first quarter of 2012. For the second quarter of 2012 as compared to the second quarter of 2011: (1) deposit revenues increased by $75 thousand, (2) mortgage banking revenues increased by $1,483 thousand and (3) agency commissions decreased by $88 thousand. For the second quarter of 2012 as compared to the first quarter of 2012: (1) deposit revenues increased by $91 thousand, (2) mortgage banking revenues increased by $1,239 thousand and (3) agency commissions increased by $19 thousand.

Deposits declined during the second quarter of 2012 as public funds, primarily in NOW accounts, flowed out after having accumulated during the first quarter. Public NOW deposits decreased by $25.382 million during the second quarter of 2012 after increasing by $25.170 million during the first quarter. Certificates of deposit stabilized during the second quarter of 2012, decreasing by $1.346 million after having decreased by $25.179 million during the first quarter. The deposit declines were funded primarily from interest-bearing cash on hand and Fed funds sold. Loans held for investment reversed their downward trend during the second quarter of 2012 as agricultural loans increased by $2.290 million as a result of purchased participations, closed-end first lien residential loans increased by $2.139 million primarily through transfers from mortgages held for sale and asset-based commercial loans increased by $780 thousand. SBA loans increase by $1.071 million during the second quarter of 2012 and have increased by $2.998 million for the year. Other real estate declined during the second quarter of 2012 as $4.787 million of properties were disposed of as compared to $2.838 million in the first quarter. The first half of 2012 was dominated by asset movement as increased investments were funded by cash flows from loan portfolio net decreases and a decrease in interest-bearing bank balances and Fed funds sold. Approximately $136.027 million of securities were purchased during the first half of 2012, 32.53% of which were U.S. government sponsored entity securities and 53.16% of which were mortgage-backed securities. Approximately 58% of the purchases were funded by security sales, calls, maturities and principal payments. The security purchases were prompted by the need to redeploy excess liquidity, so the investment portfolio was used to provide better yields than the short-term cash. Most loan categories declined during the first half of 2012 with agricultural loans and other commercial real estate loans making up most of the decline from December 31, 2011. At June 30, 2012 real estate-secured loans made up 80.73% of loans held for investment as compared to 81.22% at June 30, 2011.

The primary challenge during 2012 and beyond will be the liquidation of foreclosed properties. The Company sold $4.787 million of foreclosed properties for $4.291 million during the second quarter of 2012. During the second quarter of 2011 $2.643 million of properties were sold for $2.519 million. During the first quarter of 2012 $2.838 million of properties were sold for $2.716 million. Over the past twelve months $12.893 million of properties have been sold for approximately 89.83% of their book value. As sales have outpaced foreclosure activity in 2012, the Company faces the challenge of selling the remaining properties, with the most difficult task being the disposition of raw land which makes up over 75% of the balance of other real estate owned.

Read the The complete Report



Stocks Discussed: FMFC,
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