First M&F Corp, Kosciusko, MS (FMFC)

The Case of a Registration Statement That Doesn't Mean What You'd Think

If you're thinking of selling or avoiding FMFC stock because First M&F filed a Registration Statement on April 3, 2012, think again: 

According to bank Chairman and CEO Hugh Potts, First M&F has no intentions of selling additional shares. The bank simply renewed the March 2009 Registration Statement as required for its TARP warrants. So there's little risk of a big dilutive capital raise to anything like the 37 million registered shares, which at today's market could have brought book value down from over $10 to something under $6.

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Disclosure: As of this posting, I own shares of FMFC and may subsequently either dispose of them or purchase more.

Prospective Buyers	Although it doesn't sound like FMFC would be open to selling, three banking heavyweights have a significant presence in its markets and would benefit from an acquisition of its branches: BancorpSouth, Inc, Tupelo, MS (BXS) 16 local branches with $1.1B deposits (9% of total business) Regions Financial Corp, Birmingham, AL (RF) 27 local branches with $1.3B deposits (less than 1% of total business) Trustmark, Jackson, MS (TRMK) 15 local branches with $500M deposits (5% of total business)
Financial Snapshot (as of 03/31/2012)	Total assets: $1.6B Tangible book value per share: $9.71 NPAs to assets: 4.29% Price to book: 52.4% Market cap: $49M Dividend yield: 0.8% Trailing 12-month return on assets: 0.32% Trailing 12-month return on equity: 4.57% TARP: $17.8M* *Converted to CDCI Preferred at 2% until 2018
The Crew	Hugh Potts Jr., Chairman and CEO Jeffrey Lacey, President John Copeland, Executive VP and CFO
The Skinny	- - - PLUSSES - - - - - - - - - - - - - - - NPAs are down. After peaking at $87.9M (5.4% of assets), NPAs are down to $58.9M (4.5% of assets).  Earnings are up. After four straight quarters of making pennies per share, FMFC earned $0.12 in Q1 2012.  Equity is improving. After hitting a low of $104M, equity is up to over $111M.  Insider ownership is strong. Insiders own over 24%, and there have been 12 separate insider buys in the open market this year. Still room to make a buck. Keefe, Bruyette and Woods predicts FMFC will earn $0.75 per share in 2013. If they're right, investors buying FMFC stock today could make $2 or so per share. - - - MINUSES - - - - - - - - - - - - - - - Low tangible common equity. At 5.6%, FMFC's tangible common equity is a bit thin. Truly strong banks carry 8-10%. Little chance of sale. Chairman Potts  — who's been building First M&F for the past 39 years — intends to continue building the bank.
Sources	M&F Bank website 2011 Annual Report 2012 Annual Meeting Proxy Statement SNL Financial Keefe, Bruyette and Woods Interviews with FMFC Management