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

January 16, 2004

FOR IMMEDIATE RELEASE

First M&F Corp. reports fourth quarter and 2003 earnings

KOSCIUSKO, Miss.- First M&F Corp.’s (NASDAQ:FMFC) net income for the quarter ended December 31, 2003 was $2,808,962, or $.61 basic and diluted earnings per share, compared to $2,730,161, or $.59 basic and diluted earnings per share for the fourth quarter of 2002. Earnings for the year ended December 31, 2003 were $10,892,053, or $2.36 basic and $2.35 diluted per share as compared to $10,234,949, or $2.22 basic and diluted earnings per share for 2002.

Net interest income was up by $1.891 million in 2003 compared to the year ended December 31, 2002, with the net interest margin increasing to 4.32% in 2003 as compared to 4.29% in 2002. The net interest margin for the fourth quarter was 4.44% as compared to 4.47% for the third quarter, 4.26% for the second quarter and 4.12% for the first quarter in 2003. Prime rate reductions of .50% in November of 2002 and .25% in June of 2003 precipitated a decrease in loan yields of 67 basis points from the fourth quarter of 2002 to the fourth quarter of 2003. However, declining short-term interest rates continued to reduce the cost of funds as deposit costs fell by 82 basis points from the fourth quarter of 2002 to the fourth quarter of 2003. For the year, loan yields were 6.67% as compared to 7.44% in 2002. Deposit costs for 2003 were 1.84% as compared to 2.76% in 2002. Loans grew by $102.575 million in 2003, which represented a 15.11% increase. Loans as a percentage of assets were 72.46% at the end of 2003 as compared to 65.44% at the end of 2002. The funding cost decreases have been driven by the reduction in short-term interest rates, as the Federal funds rate dropped by 26 basis points over the last twelve months. The 5-year Treasury rate increased by 24 basis points over the term of the year, indicating potential future short-term interest rate increases. Loan growth for the year came primarily in the Desoto, Madison and Lee county markets.

Non-interest revenues, excluding securities transactions, for 2003 were up by 2.07% compared to 2002, with mortgage income up by 8.12% and insurance agency commissions up by 6.36%. Service charges and fees on deposits were up by 2.25% in 2003 as compared to 2002. Non-interest income for the fourth quarter, excluding securities transactions, was $3.526 million as compared to $3.701 million for the same period in 2002.

Non-interest expenses, excluding intangible asset amortization, were up by 5.21% in 2003. Salaries and benefits were up by 3.73%, reflecting the Company’s expansion activities and increased lending staff.

Net loan charge-offs as a percent of average loans for 2003 were .43% as compared to .40% for 2002. Non-accrual and 90-day past due loans as a percentage of total loans were .77% at the end of 2003 as compared to .55% at the end of 2002.

The Company repurchased 22,500 shares of common stock in the fourth quarter at an average price of $36.48, and repurchased 169,854 shares during 2003 at an average price of $33.77. The Company issued 574 shares of common stock at an average price of $25.39 per share for stock option exercises during the fourth quarter of 2003, and 147,846 shares at an average price of $26.99 for 2003.

Total assets at December 31, 2003 were $1.078 billion as compared to $1.037 billion at the end of 2002. Total loans were $781.321 million compared to $678.746 million at the end of 2002. Deposits were $820.226 million compared to $824.024 million at the end of 2002. Total capital was $110.678 million, or $ 24.24 in book value per share at December 31, 2003.

“We are pleased by the 6.42% improvement in earnings,” said Hugh S. Potts, Jr., Chairman and Chief Executive Officer. Potts added, “We had an excellent year of loan growth and are pleased with our expansion efforts so far. Our asset-based lending operation in Memphis is exiting its start-up phase and should be contributing strong net profits in 2004. Our Olive Branch loan production office exceeded expectations to such an extent that we have decided to proceed with plans to build a full service branch there as well as in Southaven in 2004. Our Lakeland Drive branch in Rankin County should be opening in the spring of 2004 as well. We believe that the economy should improve next year and that we may see some pressure on our net interest margins if rates rise in 2004 and the competition for loans remains intense. Our non-interest revenue businesses such as mortgage and insurance did well in 2003, but we know that we must improve revenue production. We will be working diligently in 2004 to grow Trust, Discount Brokerage and Treasury Services revenues in an effort to provide a full array of financial tools and solutions to our customers.”

First M&F Corp., 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 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 Consolidated Statements of Condition
• First M&F Corporation and Subsidiary Consolidated Statements of Income
• First M&F Corporation Financial Highlights
• First M&F Corporation Supplemental Earnings Schedule - Fourth Quarter, 2003

[back to top]