First M&F Corp. Investor Information

CONTACT: 
John G. Copeland
EVP & Chief Financial Officer
(662) 289-8594

January 19, 2006

FOR IMMEDIATE RELEASE

First M&F Corp. reports fourth quarter and 2005 earnings

KOSCIUSKO, Miss. - First M&F Corp. (NASDAQ: FMFC) reported today that net income for the quarter ended December 31, 2005 was $3.065 million, or $.68 basic and diluted earnings per share, compared to $2.640 million, or $.58 basic and diluted earnings per share for the fourth quarter of 2004.

Net income for 2005 was $12.592 million, or $2.80 basic and $2.79 diluted per share, compared to $10.775 million, or $2.37 basic and $2.36 diluted per share for 2004.

For the fourth quarter of 2005 the annualized return on assets was .98%, while return on equity was 10.45%. Comparatively, the return on assets for the fourth quarter of 2004 was .93%, with a return on equity of 9.34%. The return on assets for 2005 was 1.04% while the return on equity was 10.88%.

“We are very pleased with our year-to-date results,” said Hugh S. Potts, Jr., Chairman and CEO. Potts added, “In 2005 First M&F accomplished through the efforts of our associates and the confidence of our clients notable improvement in earnings per share and virtually all performance ratios, while growing the company approximately 11% for the year. In 2005 loans grew 12% over the previous year and deposits grew 11%. Earnings, year-to-year, improved almost 17% and earnings per share were up over 18%. In June, the Board increased our dividend 4%. Finally, the fourth quarter saw a continuing trend in consistent asset quality improvement….all in all a very encouraging and rewarding performance.”

Mr. Potts further commented, “Patience and discipline allowed First M&F to enter into two pending acquisitions which will open doors of opportunity in the first quarter for continued momentum and growth. Execution of our business plan, a disciplined focus on results and sensitivity to customer needs and market dynamics are the keys to an exciting year in 2006.”

Net Interest Income

Net interest income was up by 10.51% compared to the fourth quarter of 2004, with the net interest margin increasing to 4.26% in the fourth quarter of 2005 from 4.25% in the fourth quarter of 2004. The net interest margin for the third quarter of 2005 was 4.15% as compared to 4.17% for the second quarter and 4.13% for the first quarter of 2005. Loan yields increased to 6.99% in the fourth quarter of 2005 from 6.33% in the fourth quarter of 2004 while deposit costs increased to 2.47% from 1.74% for the same periods. Loans outstanding increased by 12.08% and deposits increased by 10.99% from December 31, 2004 to December 31, 2005. The primary factors in the improvement in net interest income were (1) strong loan demand through the first three quarters of 2005 resulting in growth in loans outstanding year-over-year, which improved interest revenues and (2) the growth in non-interest bearing deposits, which reduced the Company’s dependence on interest-bearing sources of funding. Earning asset yields were 6.62% for the fourth quarter of 2005, 6.38% for the third quarter of 2005 and 6.05% for the fourth quarter of 2004. Liability costs for the same periods were 2.76%, 2.57% and 2.10%. Management believes that yields and costs will increase as a result of the Federal Reserve’s efforts to raise the Fed funds target rate, which was at 4.25% at December 31, 2005 as compared to 2.25% at December 31, 2004. The prime rate on loans increased from 5.25% at the end of 2004 to 7.25% at the end of 2005. However, loans still grew by .84% during the fourth quarter of 2005 as compared to .68% during the fourth quarter of 2004 after experiencing excellent growth during the third quarters of both years. Management has focused and will continue to focus on core deposit growth going into 2006 to offset the influence that rising short-term rates and a flattening yield curve are expected to have on the cost of funds. Loans as a percentage of assets were 73.65% at December 31, 2005 as compared to 74.21% at September 30, 2005 and 72.85% at December 31, 2004.

Noninterest Revenues

Noninterest revenues, excluding securities transactions, increased by 4.98% for the fourth quarter of 2005 over the fourth quarter of 2004. Deposit revenues increased by 20.33% over the fourth quarter of 2004, with overdraft charges providing the majority of the growth. Mortgage revenues increased by 37.79% in the fourth quarter of 2005 as compared to 2004 as the number of originators increased and mortgage rates for the fourth quarter decreased from the rising-rate trend that had occurred through the first three quarters of 2005. Agency commissions were down by 2.11% for the fourth quarter of 2005 as compared to 2004. Other income for the fourth quarter of 2005 included $252 thousand in losses on sales of foreclosed properties and losses of $76 thousand on sales of loans.

Noninterest Expenses

Noninterest expenses increased by 7.54% for the fourth quarter of 2005 as compared to the same period in 2004. Salaries and benefits were up by 11.23% and occupancy expenses were up by 10.08% as the Company continued to expand in number of locations and staff. Expansion efforts during the fourth quarter of 2004 and for 2005 included a full-service branch opened in Olive Branch in November 2004, a full-service office opened in Jackson in December 2004 and a full-service branch opened in Southaven in September 2005. The number of full-time equivalent employees increased from 459 at December 31, 2004 to 472 at December 31, 2005.

Credit Quality

Annualized net loan charge-offs as a percent of average loans for the fourth quarter of 2005 were .28% as compared to .94% for the comparable period in 2004. Net loan charge-offs as a percent of average loans were .26% for the year 2005 as compared to .58% for 2004. Non-accrual and 90-day past due loans as a percent of total loans were .20% at December 31, 2005 as compared to .47% at the end of 2004. The allowance for loan losses as a percentage of loans was 1.33% at December 31, 2005 as compared to 1.40% at December 31, 2004.

Balance Sheet

Total assets at December 31, 2005 were $1.267 billion as compared to $1.143 billion at the end of 2004. Total loans were $933.080 million as compared to $832.486 million at the end of 2004. Deposits were $973.671 million as compared to $877.264 million at the end of 2004. Total capital was $117.377 million or $ 26.11 in book value per share at December 31, 2005.

Capital

The Company did not repurchase any shares of common stock during the third and fourth quarters of 2005, repurchased 10,000 shares during the second quarter of 2005 at an average price of $34.74 and purchased 10,000 shares during the first quarter of 2005 at an average price of $33.23 per share. Capital was increased in the third quarter of 2005 by stock option exercises of 2,000 shares at an average price of $26.60, in the second quarter of 2005 by stock option exercises of 1,500 shares at an average price of $26.45 per share and in the first quarter of 2005 by stock option exercises of 2,500 shares at an average price of $26.60 per share. The current repurchase program allows purchases of up to 10,000 shares per month through May 2006. Average capital as a percentage of average assets was 9.37% for the fourth quarter of 2005 as compared to 9.93% for the fourth quarter of 2004.

Stock-Based Compensation

On July 1, 2005 the Company adopted FASB Statement No. 123R, Share-Based Payment. The Company is using the modified prospective method of transition and recognized $10 thousand of compensation expense related to stock options during 2005 that it would not have recognized under the intrinsic value method. The Company also recognized $86 thousand of compensation expense in 2005 related to restricted stock awards that were granted in August and December of 2005.

Pending Acquisitions

On October 12, 2005 the Company announced the signing of definitive agreements to acquire Columbiana Bancshares of Columbiana, Alabama and Crockett County Bancshares of Bells, Tennessee. Columbiana Bancshares is the parent of the First National Bank of Shelby County which has total assets of approximately $185 million. Crockett County Bancshares is the parent of Bells Banking Company which has approximately $31 million in assets. The acquisitions will both be made for cash and are expected to close during the first quarter of 2006.

About First M&F Corporation

First M&F Corp., the parent of M&F Bank, is committed to proceed with its mission of making the mid-south better by exceeding expectations everyday in 22 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 Condition (Unaudited)
• First M&F Corporation and Subsidiary - Condensed Consolidated Statements of Income (Unaudited)
• First M&F Corporation Financial Highlights
• First M&F Corporation Average Balance Sheets / Yields and Costs (tax-equivalent)

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