First M&F Corp. declares dividend and loan loss

KOSCIUSKO - At its meeting Sept. 13, 2000, First M&F Corp. (Nasdaq: FMFQ declared a quarterly cash dividend of $.25 per share, payable Sept. 29, 2000, to stockholders of record as of Sept. 20, 2000, according to a Sept. 19 press release by PRNewswire.

This represents a 53.8% payout, based

In a credit-related matter, First M&F Corp. will recognize a $1-million loan charge-off involving a single credit.

First M&F Corp. CEO Hugh Potts would not indicate which of First M&F Corporation's clients had taken out the $1 million loan.

"Institutions write off credits everyday," Potts said. "That's part of the business that we're in. It was an extraordinary event, and that's why it was mentioned in the way it was."

The charge-off, according to Potts, is an isolated event, which is not indicative of the overall quality of the loan portfolio or market segment. In order to offset the charge, management is increasing the loan loss provision for 2000 by approximately $1 million.

"Loan losses in the industry over the past 10 years have been one-quarter of 1% to one-half of I%" Potts said. "We expect our losses within the end of the year to fall within that very same range."

Christopher Kelley, managing director of Morgan Keegan in Memphis, said First M&F Corporation stock has not been particularly depressed compared to other banks of their size and regionality.

"There are a lot of small community banks where stocks are down to 50% of what they were," he said.

He added that loan losses are occurring this year with more frequency than they have in the past, and blamed this partially on the higher interest rates.

"If the higher rates made that particular business slow down, the ability to repay the bank debt gets squeezed," Kelley explained. "We've seen some of that this year, and we've seen some of it in the third quarter results coming out now."

Kelley said the First M&F $1-million loan charge-off involving a single credit was "no big deal."

"I know a million dollars is a big headline-grabbing figure, but in that type of loan portfolio, it's not out of line for a bank this size to have loans that big."

Potts called the Mississippi banking industry "well capitalized," "well managed" and "historically conservative."

"The economy, though reacting to the actions of the Federal Reserve, is not as robust as it was a few years ago, but it is still a strong economy," he said. "Our assessment of the economy is that it remains strong, and you're talking about something that in the past you might have said 'very strong' and now you say 'strong.'

"The reason the Fed has taken the action it has over the past year-and-a-half is to slow it down. If you read the national press you see signs that there is some cooling in the economy. I think you'll find confirmation that there is some cooling in the Mississippi economy."

Kelley said a lot of banks have seen an' increase in bad loans in 2000.

"The fact is, interest rates are higher and interest expense can become an increasing percentage of the cost of running a business. I think, in general, you are going to see the overall credit quality probably get a little weaker for the industry. I'm not sure if in Mississippi it's going to be any better or any worse."

Some have said that the Community Federal (Tupelo) acquisition has been a drag on First M&F, and, said Potts, M&F discussed that the acquisition would be dilutive to earnings during the early stages of the merger.

"The outlook is bright, but it's going to take a while to change in a positive way what was a very good savings and loan corporation into a very good community bank," he said. "That's not done in a quarter or in a year."

First M&F is confident in itself, in the communities it serves, in the Mississippi economy and in its fundamental commitment to make Mississippi better by serving Mississippians, Potts said.

"We are confident and optimistic and have every reason to be," he said.

First M&F Corp. is a $1.01-billion bank holding company and has banking locations throughout Central and North Mississippi.

The corporation's third quarter earnings will be released within the next couple of weeks.