CONTACT:
Hugh S. Potts, Jr.
Chief Executive Officer
(662) 289-8501

April 16, 2004

FOR IMMEDIATE RELEASE

First M&F Corp. reports first quarter 2004 earnings

KOSCIUSKO, Miss.- First M&F Corp.’s net income for the quarter ended March 31, 2004 was $2,600,914, or $.57 basic and diluted earnings per share, compared to $2,653,589, or $.57 basic and diluted earnings per share for the first quarter of 2003.

Net interest income was up by 7.53% compared to the first quarter of 2003, with the net interest margin increasing to 4.24% in 2004 as compared to 4.12% in the first quarter of 2003. The net interest margin for the fourth quarter of 2004 was 4.44% as compared to 4.47% for the third quarter and 4.26% for the second quarter. A prime rate reduction of .25% in June of 2003 precipitated a decrease in loan yields to 6.31% in the first quarter of 2004 from 6.87% in the first quarter of 2003. However, declining short-term interest rates continued to reduce the cost of funds as deposit costs fell from 2.10% in the first quarter of 2003 to 1.53% in the first quarter of 2004. Loans as a percentage of assets were 71.30% at March 31, 2004 as compared to 65.92% at March 31, 2003 and 72.46% at the end of 2003. Loan growth was flat in the first quarter of 2004. However, the Company experienced solid first quarter loan growth in the Desoto, Lee and Lafayette county markets.

Non-interest revenues, excluding securities transactions, for 2004 were up by 16.43% compared to 2003, with deposit-related income up by 3.47%, mortgage income up by 16.28%, insurance agency commissions up by 2.75% and fiduciary and brokerage income more than doubling. Profit sharing revenues in the insurance agencies, included in other income, were up by $170 thousand in the first quarter of 2004 as compared to 2003 due to very favorable claims experience in 2003. Mortgage income is expected to slow if interest rates begin moving up. Fiduciary and brokerage revenues should do well and benefit many customers this year as expertise has been added in these areas. Corporate treasury management services began being offered in late 2003, and should show steady growth in 2004.

Non-interest expenses, excluding intangible asset amortization and the effect of noncontrolling interests, were up by 10.03% in the first quarter of 2004 as compared to 2003. Salaries and benefits were up by 14.49%, reflecting the Company’s expansion activities and increased lending staff. Most of the increases occurred in revenue-producing areas such as commercial lending staff, the Olive Branch loan production office, the Memphis asset-based lending operation, corporate treasury services and trust services.

Annualized net loan charge-offs as a percent of average loans for the first quarter of 2004 were 1.23% as compared to .46% for the same period in 2003. Non-accrual and 90-day past due loans as a percent of total loans were 1.11% at the end of the first quarter of 2004 as compared to .77% at the end of 2003 and .78% at the end of the first quarter of 2003. A loan factoring company that is 51% owned by the Company experienced a significant credit deterioration in one account with a size of approximately $3.5 million. The factoring company charged off $2.0 million of the relationship and placed the remaining $1.5 million of loan balances on nonaccrual status. The factoring company expects to collect the $1.5 million in remaining balances. However, it is too early to determine whether any, or how much of, the $2.0 million charge-off will be recovered. The effect in the Company’s consolidated financial statements was to recognize an additional loan loss accrual of $1.5 million. This accrual was offset by a $1.0 million reduction in noncontrolling interest related to the other owner. The net after-tax effect of the transaction on the Company was a $314 thousand, or $.07 per share reduction in earnings. Excluding the factoring company loss, annualized net charge-offs would have been .20% in the first quarter of 2004. Non-accrual and 90-day past due loans as a percentage of loans would have been .91%.

Total assets at March 31, 2004 were $1.096 billion as compared to $1.078 billion at the end of 2003 and $1.062 billion at March 31, 2003. Total loans were $781.740 million compared to $781.321 million at the end of 2003 and $700.200 at March 31, 2003. Deposits were $851.989 million compared to $820.226 million at the end of 2003 and $859.705 at March 31, 2003. Total capital was $111.708 million, or $ 24.48 in book value per share at March 31, 2004.

The Company opened a new branch in Flowood, a city in Rankin County, in February of 2004. The Company has plans for further expansion in DeSoto County in 2004, and will significantly upgrade its electronic banking systems in the summer of 2004.

“We are committed to earnings improvement in 2004,” said Hugh S. Potts, Jr., Chairman and Chief Executive Officer. Potts added, “Although a loan loss in a majority-owned joint venture reduced our first quarter earnings by $.07 per share, we are committed to improved revenues, credit quality and productivity. Our expansion into Olive Branch has been a success story. We expect the same from our expansion this year in Rankin County. After going through a start-up year, our asset-based lending office in Memphis is now generating profits. Revenues in our trust business have doubled over this time last year, and we have new people in place to achieve high returns in this area going forward. The mortgage business has done well in the low interest rate environment. However, rates will eventually turn upward, reducing revenues from this cyclical business. Loan growth should be strong this year, and we are targeting more deposit growth this year by focusing on obtaining and retaining the total commercial relationship as well as giving attention to the large consumer base that exists in many of our markets. We believe in hitting our profit targets for this year. That will require us to clearly define customer needs and meet those needs through seamless integration of our businesses and product lines. Meaningful referrals will be made and followed up quickly with expertise and professionalism. We will work hard to build new, profitable relationships in every market. Most importantly, we will exercise good stewardship and live by our mission to exceed expectations everyday.”

First M&F Corp. (NASDAQ:FMFC), 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 23 communities in Mississippi and Tennessee.

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 Income

[back to top]